ACCC to consider legal action over Google seals Fitbit deal

Watchdog forced to change tack after Google completes its $US2.1bn takeover of Fitbit, despite Australian worries.

Australian regulators have concerns about Google takeover of Fitbit, which makes sports wearables.

Google’s rejection of Australian concerns about its Fitbit takeover will force the Australian Competition and Consumer Commission to suspend merger investigations and treat the matter as an enforcement probe.

Google has formally completed its $US2.1 billion takeover of Fitbit, ahead of clearance from the US Department of Justice and the ACCC.

The surprise move follows European Commission approval for the deal, after the EC accepted undertakings ensuring the availability of data.

The ACCC issued a statement late last year saying it did not accept Google’s behavioural undertakings seeking to address competition concerns about its proposed acquisition of the wearables supplier. It planned a decision on the deal on March 25.

Now, with the formal deal completed, the ACCC will treat the matter as an enforcement investigation, and will consider legal action.

The ACCC said on Friday it would continue its investigation. It continued to have serious concerns about the potential effect of the acquisition on competition, and was still seeking information from market participants.

ACCC chief Rod Sims said: “Google’s decision to complete its acquisition of Fitbit before we completed our merger review means we are now conducting an enforcement investigation.

“As a result, and depending on the results of our investigation, we will consider whether to take legal action on this matter.

“The market for wearable devices like those made and sold by Fitbit is rapidly evolving. We are concerned that Google’s acquisition of Fitbit, an innovative company with its own wearables operating system and high standards for privacy protection, could prevent or hinder future competition,” he added

The ACCC said its investigation was primarily focused on examining Google’s ability and incentive to foreclose or frustrate access by Fitbit’s rivals to some Google services, as well as elements of the Android system that allow wearable devices to work effectively.

“The ACCC is also investigating the likely impact of the acquisition on competition between wearable operating systems, and in markets that can make use of wearable user data,” it added.

Competiton watchdogs have been concerned about the impact of Google’s Fitbit takeover. Picture: AFP

In December, the ACCC decided that it would not accept a long-term behavioural undertaking offered by Google that sought to address competition concerns because of the significant difficulties in effectively monitoring and enforcing compliance with the undertaking.

The ACCC’s enforcement action is the same approach applied when Facebook acquired Giphy last year.

The US Department of Justice said in a statement last night it was still investigating the Fitbit merger. It had reached no final decision on enforcement action, and continued to investigate whether the deal may hurt US consumers, it said.

A Google spokeswoman said the DOJ had allowed the deal to close, and that the company would continue to engage with Australian authorities.

Google agreed to the Fitbit deal in December 2019 and its move to formally close the deal underlines its aggressive stance against regulators.

To appease EU regulators, Google pledged not to use Fitbit data for advertising purposes in Europe and to store such data separate from any other Google data used in ads.

It also told regulators it would allow users to link their Fitbit data to competing apps and committed to allowing wearable-device makers open access to functions of Google’s Android operating system.

“This deal has always been about devices, not data, and we’ve been clear since the beginning that we will protect Fitbit users’ privacy,” Rick Osterloh, Google’s senior vice president for devices and services, said.

Fitbit, founded in 2007, makes so-called wearables, or watches and bracelets that primarily track health information like heart rate.

The US Department of Justice last year launched a formal antitrust case against Facebook which could result in a break up of the company, and underlined its intention to maintain a hard line against the big tech platforms.

In Australia Google has proceeded with tests dropping Australian news content ahead of the formal introduction of a bargaining code to force the company to pay for content.

Treasurer Josh Frydenberg has criticised the company but its decision to proceed with the Fitbit merger shows it has confidence its deal will proceed.

With Dow Jones