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THE GOOGLE/FITBIT ACQUISITION: A WOLF IN SHEEP'S CLOTHING?

Updated: Nov 29, 2020

This post is authored by Bodhisattwa Majumder, a 5th-year student of B.A. LL.B (Hons.) at the Maharashtra National Law University, Mumbai.


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Introduction

The Competition regime of every jurisdiction across the world operates biologically, constantly evolving with each passing minute in tandem with the evolving markets. Along with the evolution of technology, the terminologies of Competition, namely, ‘players’, ‘dominance’, ‘market’, and ‘product’ are also evolving simultaneously. Earlier, where a player was considered dominant on the economic factors of assets, liabilities, and brand value, the age of technology has brought in new factors in the game namely ‘data’ or the digital equivalent of information. Data has been considered the new petroleum which is sought by every player in the market to provide a personalised experience and also understand the nitty-gritty of the prevailing market. Data has become the most important resource for any player which gives an edge over the other players in understanding the market, calculating its moves, understanding the consumer demand among other things.


With the onset of such a setup, this year saw the deals between tech giants which has been said to be the game-changer in each of the markets. One of them being the acquisition of Fitbit by Google (European Market) which has been under the lens of the EUMR due to the immense personal data related to the Wellness industry which can be utilised by Google in furtherance of its online advertising supply industry. The article aims to link the use of data by the players in furtherance of establishing their dominance in the aforementioned transaction. It also critiques the inability of the existing competition regime to consider data as a factor of dominance, thereby, treating data privacy as an isolated issue. The author in this article refers to Google in the context of its Supply Advertising function (product market) in the European Union (geographic market).


Acquisition of Fitbit by Google

In the European Union (“EU”), the competition law regime is governed by the European Union Merger Regulation (“EUMR”), which was brought into force for regulating the structure of EU market.[1] Apart from EUMR, there are implementing regulations that deal with the procedural aspects of EUMR. The European Commission operates in a similar fashion as the Indian Regime and it assesses certain M&A transactions that exceed certain thresholds.[2] This duty of the commission lies in order to prevent transactions that would lead to accumulations impacting competition in the EEA.[3] Under EUMR, any concentration that falls within the quantitative thresholds provided in the law requires the players to notify the commission.[4] Only after the merger is approved by the commission, the merged entity is recognised by law to enter the market. The EUMR empowers the National Competition Authorities to have jurisdiction over ‘concentrations’ and ensure that these do not cause anticompetitive effects in EU Markets. ‘Concentration’ means a change of control due to a merger, acquisition, or joint venture.[5] This year witnessed major deals of acquisition of smaller tech companies by Giants which raised eyebrows of the competition watchdogs. One of the major deals which made the headlines was the acquisition of Fitbit by Google. The European Commission (“EC”) conducted Phase-II investigation in the month of August. Fitbit dealt with the manufacture of fitness trackers which can be worn by users which obtained health-related information such as calorie, pulse, sleep, blood pressure, etc. According to Google, this acquisition will benefit consumers as it will allow the direct integration of Fitbit with the Google Fit software.


Critical Analysis of the acquisition in the context of the Competition Framework

Contrary to the popular elements to measure AAEC of an Acquisition, this investigation was triggered due to the immense user data Fitbit held. The data held by Fitbit provides personal information about the users, their lifestyle, their daily habits and their basic needs which can be used by Google for enhancing its personalized services as an operating system/search engine/associated app. Google, an established tech giant in the market, generates its revenue through advertisement in its online ventures for which it relies on user data. The revenue generation is directly proportional to the personalization of the advertisement, enhancing the consequential interaction with the ad by the target audience. The commission in its preliminary investigation found that Google holds a dominant position as a supplier of online search advertising services. Further, due to its position in the social-network display of ads in the European communities, it also holds a strong market position. The primary concern is that although Google is not a dominant player in the Health/Wellness wearable product market, it might use Fitbit’s data to acquire dominance over time.


Apart from competition law, it is feared that this acquisition also violates the General Data Protection Regulations (“GDPR”). Fitbit in recent years has acquired its competing Wearable companies namely FitStar, Pebble, Vector, and TwineHealth. It holds a vast amount of personal information of users from more than fifteen countries of the European Union. Post this acquisition, Google will have the ability to merge data from its Search Engines, its operating systems and other digital platforms which will further improve its third-party tracking abilities.[6] Lastly, regardless of the advertisement perspective, the personal data acquired through Fitbit deal will help Google optimize its own Wearable in a way better than any other player. Further, as Google Inc. is the owner of Google Fit (the application which uses fitness wearables as an interface), there is an inherent fear of barring other players from using the application. As Google operates in a plethora of sister applications that are associated with wearables such as Google Maps, Google Analytics, Google SEO, Drive, Playstore etc., there lies a fear among the competitive wearable companies that there will be an exertion of this dominance. The features of Google such as voice control, GPS, transfer and storage of user data, etc. are used by the competing players which form a quintessential component of their operation. Google can bar the other players in the Wearables market from using these features and in turn acquire dominance in the wearable market.


The Google-Fitbit acquisition raises a number of questions and perhaps the inquiry results due in December will pave the way for the evolution of the EU regime. The primary question that lies before the commission is the definition of the market. In order to assess a transaction, it is quintessential that the dominance of the player is taken into consideration in the relevant market (both product and geographical markets). In this deal, Google holds substantial dominance in the online advertising supply market however it is not a player in the wearable market. Post the acquisition, regardless of Fitbit’s economic benefits, Google will also own the immense customer information which has huge potential to turn Google into a dominant player in time. Furthermore, the current users of Fitbit, who have provided their personal data based upon a certain agreement of privacy will be subject to a different set of terms under Google. It will not be the first time when Google will be turning the tables in its favour. Post its acquisition of DoubleClick in 2006, Google had changed the privacy policy to allow personal information, thus violating its commitment. Furthermore, even if we proceed with the assumption that Google would abide by its commitment and would not use the data for itself, there lies no guarantee that the data will not be sold to third parties.


The Indian Framework in the context of Data Dominance

While India is witnessing a huge tide of protection of privacy since the landmark ruling in Puttaswamy,[7] where privacy was held to be a fundamental right, the protection of privacy in data still has a long way to go. In Vinod Kothari,[8] the bench disregarded the issues related to data privacy while adjudicating on Competition stating that the Information Technology Act, 2000 (“IT Act”) exists for that purpose. However, the author strongly believes that the competition in the tech market cannot be adjudicated in isolation without considering the issues related to data privacy. The data privacy regime in India has been forever on the backfoot due to lack of stringent and exhaustive legislations. While the Personal Data Protection Bill (PDPB) is soon to be enacted, but that too has been full of loopholes.


The lack of proper executive bodies or judicial forums makes the adjudication of data-related issues or even identification of the same a herculean task. In such a scenario where even identification of data theft/misuse is a question, establishing dominance based upon the user data is indeed a utopian idea. The existing tests provided by the Competition Act, 2002 for establishing the relevant market in order to analyse the dominance do not hold water when it comes to data. For the sake of argument, the criterion provided regarding the price of the services[9] is irrelevant for Google’s online supply of advertisement as it is entirely costless. The entire tech-market is currently trading its free services in exchange for advertisements which generate revenue for the operating search engines. However, it is a relief to see cases[10] where the Commission is giving regard to the value of data in barring competitors. Despite so, it is still too early to say that the current competition regime has truly understood the value of user data and the game played by the tech giants.

[1] Economic Concentration Regulation 139/2004. [2] Article 1, Merger Regulation, Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (“EUMR”), Official Journal L 24, 29.01.2004, pp. 1-22. [3] Nicholas Levy and Patrick Bock, EU Merger Control, Merger Control Review, (11th Edition, 2020). [4] Article 1 of EUMR. [5] Article 3 of EUMR. [6] Reuben Binns, Ulrik Lyngs, et al., Third Party Tracking in the Mobile Ecosystem, Department of Computer Science, University of Oxford, Volume XIV, Published on 18th October 2018. [7] Justice K. S. Puttaswamy v. Union of India, (2019) 1 SCC 1. [8] Vinod Kothari v. Whatsapp, Competition Commission of India, Case No. 99 of 2016. [9] Section 19 (4) of the Competition Act, 2002. [10] Vinod Kothari v. Whatsapp, Competition Commission of India, Case No. 99 of 2016.