Fit for a Deal?: Google’s acquisition of Fitbit coming under scrutiny

July 17, 2020

2 min read

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What's going on here?

Google’s plans to acquire fitness tracker company Fitbit have come under the scrutiny of regulators.

What does this mean?

Google’s acquisition of Fitbit, valued at $2.1bn, was forecast to be completed in 2020. However, data privacy concerns have been voiced over Google being able to access personal data, including Fitbit users’ heart rates, sleep patterns. Secondly, antitrust regulators are concerned that the deal will create a monopoly in the digital healthcare market. This is especially given the fact that Google already owns such a broad set of records from “Google” searches performed, Gmail and Maps functions. Further, the EU regulators have sent a 60-page questionnaire to Google and Fitbits rivals. The EU has set a preliminary deadline for the questionnaire on Monday 28 July, after which they will decide whether to continue investigations into the deal. However, the sheer length of the questionnaire seems to suggest that an extended investigation will soon follow.

What's the big picture effect?

The concern here is two-fold. Firstly, Fitbit’s user data is highly sensitive, and there are fears that Google will exploit such data for its marketing purposes. Fitbit’s data may be incorporated as part of the larger “Google” search engines, creating user profiling and targeted advertising. In response to this, Google has emphasised that the “deal is above devices, not data”, promising that the data will not be used for Google ads. They have also recently made a commitment to the EU Commission to that effect. In fact, their long-term target to improve the accuracy of medical diagnosis by innovating new tools for doctors is arguably a commendable effort to develop the digital healthcare industry. However, regulators will likely be wary of Google’s less-than-stellar track record in data privacy. The Google+ data breach scandal in 2018 still rings fresh (where a software leakage within Google+ resulted in five million user’s data being exposed), and perhaps regulators will be tempted to err on the side of caution by extensively investigating the deal. In an era of booming tech mergers and acquisitions (M&A), the importance of safeguarding against data security breaches is paramount.

Secondly, consumer advocacy groups assert that the deal will deprive the digital healthcare market of sufficient competition. However, Google has responded that the deal will increase, not decrease competition, as the wearable fitness device space has many diverse competitors. Moreover, Google is unlikely to hold a monopoly in the market, as Fitbit and Google are not direct competitors (according to Fortune). To put things in perspective, none of the largest players in the wearables market – Amazon (32%), XiaoMi (12%) Samsung (9%), use Google software.

 It is likely that concerns over the advertising market will be the deciding factor on whether this deal is approved or not, as Google holds 90% of the market for specific tools in online advertising. It will remain up to Google and its lawyers to convince the regulators that sensitive data will be properly safeguarded and not exploited.

Report written by Jaqueline Lee

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