ACCC warns on Google’s Fitbit buy

Google’s $US2.1bn buyout of Fitbit has hit a hurdle, with Australia’s competition regulator not convinced it won’t squeeze others out of the market.

The Fitbit Sense smartwatch features sensors to measure skin temperature and stress levels.

Less than a week after the European Commission gave Google’s $US2.1bn acquisition of Fitbit the green light, the Australian competition regulator has thrown a spanner in the works, saying it’s worried the deal could squeeze competitors out of the market.

The Australian Competition and Consumer Commission also said it “will not accept a long-term behavioural undertaking offered by Google’’ which sought to allay concerns around competition and market power.

Google, the ACCC said, had sought to address these concerns “by offering a court enforceable undertaking that it would behave in certain ways towards rival wearable manufacturers, not use health data for advertising and, in some circumstances, allow competing businesses access to health and fitness data’’.

Google had made similar commitments to the European Commission, which last week approved the deal, subject to “full compliance” with a range of competition measures.

“We can approve the proposed acquisition of Fitbit by Google because the commitments will ensure that the market for wearables and the nascent digital health space will remain open and competitive,’’ European Commission executive vice-president Margrethe Vestager said in a statement.

Smartwatches are about much more than just step counts and heart rate these days.

“The commitments will determine how Google can use the data collected for ad purposes, how interoperability between competing wearables and Android will be safeguarded and how users can continue to share health and fitness data, if they choose to.”

But the ACCC is not yet convinced.

“While we are aware that the European Commission recently accepted a similar undertaking from Google, we are not satisfied that a long term behavioural undertaking of this type in such a complex and dynamic industry could be effectively monitored and enforced in Australia,” ACCC chair Rod Sims said.

“We recognise we are a smaller jurisdiction and that a relatively small percentage of Fitbit and Google’s business takes place here, however the ACCC must reach its own view in relation to the proposed acquisition given the importance of both companies to commerce in Australia.”

One of the ACCC’s key concerns is that Fitbit’s rivals, other than Apple, could be squeezed out of the wearables market as they are reliant on Google’s Android smartphone operating system and other Google services to make their devices work effectively.

There are also concerns about Google’s dominance with regard to the collection of user data “which supports its significant market power in online advertising and is likely to have applications in health markets’’.

“We are also continuing to investigate the acquisition’s potential impact on wearable operating systems,’’ Mr Sims said.

“The acquisition may result in Google becoming the default provider of wearable operating systems for non-Apple devices and give it the ability to be a gatekeeper for wearables data, similar to the position it holds for smartphones which licence the Android operating system.

“Wearable devices such as smart-watches are becoming more important in Australians’ online lives, and the user data these devices collect is likely to become increasingly valuable. The competition impacts of Google acquiring Fitbit to expand into these important markets needs to be very carefully considered.”

The European Commission said last week that Fitbit had a limited market share of the smartwatch sector in Europe, where many larger competitors such as Apple, Garmin and Samsung are present.

The Commission said that following its investigation, it had concerns that the deal would harm competition in several markets including:

Advertising: “By increasing the already vast amount of data that Google could use for the personalisation of ads, it would be more difficult for rivals to match Google’s services in the markets for online search advertising, online display advertising, and the entire ‘ad tech’ ecosystem. The transaction would therefore raise barriers to entry and expansion for Google’s competitors for these services to the detriment of advertisers, who would ultimately face higher prices and have less choice’’.

Access to Web Application Programming Interface (‘API’) in the market for digital healthcare: “A number of players in this market currently access health and fitness data provided by Fitbit through a Web API, in order to provide services to Fitbit users and obtain their data in return. The Commission found that following the transaction, Google might restrict competitors’ access to the Fitbit Web API. Such a strategy would come especially at the detriment of start-ups in the nascent European digital healthcare space.

Wrist-worn wearable devices: “The Commission is concerned that following the transaction, Google could put competing manufacturers of wrist-worn wearable devices at a disadvantage by degrading their interoperability with Android smartphones’’.

To address these concerns Google made commitments to the Commission not to use Fitbit data for Google Ads, and to maintain a “technical separation’’ of relevant Fitbit user data.

Users would also be given an “effective choice” to allow or deny their data to be used by other google applications.

A Google spokesman told The Australian the company was disappointed but would continue to work with the ACCC.

“We have been working constructively with regulators around the world to close the acquisition of Fitbit and to start building new helpful devices for users,’’ the spokesman said.

“Last week, the European Commission approved the acquisition, recognising how the commitments fully address any competition concerns. As we’ve said from the beginning, this deal has always been about devices, not data, and we are committed to protecting Fitbit users’ privacy.”

While the European regulator has cleared the deal, several other jurisdictions including the US are yet to do so.

The ACCC said it would continue its investigation into the proposed acquisition and has set a new decision date of March 25, 2021.