It's been about nine months since Google officially announced plans to acquire Fitbit. The deal was expected to close in Q2 2020, but antitrust concerns from U.S. and E.U. regulators have so far stalled the purchase.
That delay will likely run a fair bit longer with the European Commission announcement that its preliminary probe of the purchase will now expand into a full-scale investigation slated to conclude by Dec. 9.
“The use of wearable devices by European consumers is expected to grow significantly in the coming years," Margrethe Vestager, EVP responsible for competition policy for the European Commission, said in a statement. "This will go hand in hand with an exponential growth of data generated through these devices. This data provides key insights about the life and the health situation of the users of these devices. Our investigation aims to ensure that control by Google over data collected through wearable devices as a result of the transaction does not distort competition.”
The chief concern cited by the Commission is whether or not Fit-collected data will provide Google an insurmountable advantage in online search and display advertising sales, or in digital advertising analytics services.
"This deal is about devices, not data," Rick Osterloh, SVP of devices and services at Google, wrote in a blog post update on the investigation. "We’ve been clear from the beginning that we will not use Fitbit health and wellness data for Google ads. We recently offered to make a legally binding commitment to the European Commission regarding our use of Fitbit data. As we do with all our products, we will give Fitbit users the choice to review, move or delete their data. And we’ll continue to support wide connectivity and interoperability across our and other companies’ products."
The regulator also said in its notice that it is interested in examining the impact Google and Fitbit's joined efforts would have on Europe's digital health sector, and whether Google could move to hamper rival wearables' functionality on Android operating systems.
WHAT'S THE IMPACT?
The Commission's full-scale review is, at minimum, a further delay for Google. On the other end of the spectrum, it's possible the investigation could end in a full block of the deal.
Google has so far promised the Commission that it would silo wearable-collected data, thereby restricting the user data from use in advertising.
But that pledge wasn't enough for the regulator, which said that the commitment was "insufficient to clearly dismiss the serious doubts identified at this stage as to the effects of the transaction. Among others, this is because the data silo remedy did not cover all the data that Google would access as a result of the transaction and would be valuable for advertising purposes."
With this stance in mind, it isn't too far a stretch to imagine that the Commission's investigation will result in some level of restriction being imposed on the deal, particularly in regard to Google's use of Fitbit data. Whether or not it will provide fuel for device- or digital health-minded action is still up for grabs.
THE LARGER TREND
Regulator scrutiny of big tech's role in the competitive market has been a recurring theme on both sides of the pond. Alphabet CEO Sundar Pichai was one of four executives called to testify in front of the U.S. Senate Judiciary Committee. M&A and data use alike were frequent areas of contention between lawmakers and the CEOs.
Fitbit, meanwhile, has been pushing forward during the M&A limbo. The company has launched a wearables-based return-to-work offering for employers, and has found its wearables at the heart of a handful of other COVID-19 detection projects. However, it did report reduced revenue during its first-quarter earnings summary (Its second-quarter results are being shared tomorrow.)