The European Commission is expected to use Google LLC's acquisition of Fitbit Inc. as a test case for its approach to data-driven acquisitions, lawyers told S&P Global Market Intelligence.
The companies expect the $2.1 billion deal to close in 2020, subject to regulatory approval from the European Commission and U.S. authorities. While Google's limited market share in wearables suggests technology overlap will not be an issue in obtaining regulatory approval in Europe, the authority will heavily scrutinize the search engine's acquisition of data, lawyers said.
Data protection will "clearly be an issue," Partner and Co-Chair of Clifford Chance's Global Antitrust Group, Thomas Vinje, said.
Google may have to make certain commitments to secure approval, such as keeping Fitbit's data separate for Google's own stash of personal data, Vinje said.
Imposing such a restriction on the deal would require the EC to make a link between its remit – competition law – and data protection law, said Partner and Head of Competition (Germany) at law firm DWF Daisy Walzel. This would represent a widening of the EC's jurisdiction, and thus the case would be challenging for the body, she said.
Forcing Google to keep Fitbit's data separate is also an ineffective solution if the EC wants to deprive Google of sensitive healthcare data, said a Brussels-based competition lawyer who did not wish to be named. The search engine already owns a significant amount of such data in its life sciences unit Verily, this lawyer said.
Despite this, the EC will likely use the Google-Fitbit transaction to try out so-called "theories of harm" – ways in which competition could be negatively impacted – for data-driven deals, the lawyer said. These could include the "accumulation of data" and whether data is an "essential facility" and so a concentration of data within a single company can harm competition, the lawyer said.
This could make Google-Fitbit an important precedent, Walzel said. "Generally health data is considered the most sensitive data of all. But the question is whether it should be for the EC in this merger case to assess whether this deal is harmful to competition and therefore that the health data involved should be protected," Walzel said.
The issue would normally be examined by data protection regulators, she said. One exception is the German competition authority in February imposing restrictions on Facebook Inc.'s collection of WhatsApp Inc. data. The EC approved the social media company's acquisition of the messaging app in 2014.
U.K. Member of Parliament and Deputy Leader of the Labour party Tom Watson reportedly called for Google Fitbit to be examined by the country's data protection regulator, the Information Commissioner's Office. Watson, who also had a prominent role in the political campaign to block 21st Century Fox's acquisition of Sky, has since announced he will stand down and not run in the U.K.'s Dec. 12 general election. Watson's departure from parliament makes it less likely that the UK will feel pressured to ask to intervene in the Fitbit deal.
This is not the first time the EC has scrutinized a data-driven transaction. Apple's acquisition of Shazam in 2018 could be the best precedent, lawyers said. The EC approved the deal but after conducting an in-depth investigation. The EC has 25 working days to review a transaction under "Phase I" and a further 90 working days if it opens an in-depth, or "Phase II", investigation.
On opening the probe, the EC said it was "concerned that, following the takeover of Shazam, Apple would obtain access to commercially sensitive data about customers of its competitors for the provision of music streaming services in the EEA [European Economic Area]."
"Access to such data could allow Apple to directly target its competitors' customers and encourage them to switch to Apple Music."
For the Google-Fitbit deal, the EC will examine whether the search company's competitors can easily access the sort of data Fitbit specializes in, Vinje said. The EC will also ask how relevant Fitbit's health data is in the online advertising market, Vinje said. It is likely "highly relevant," he said.
Google is aware of this. In a blog post confirming the deal, Rick Osterloh, Google's senior vice president of devices and services, said the company will not sell users' personal information to anyone, and Fitbit's health and wellness data will not be used for Google ads. Fitbit users also will be able to review, move or delete their data whenever they choose, according to the blog.
Aside from Apple-Shazam and Facebook-Whatsapp, the EC also examined Microsoft Corp.'s acquisition of LinkedIn in 2016. The workplace social media company's acquisition by Microsoft underwent the same level of EC scrutiny as Shazam's acquisition by Apple. Microsoft had to offer concessions to get the deal through, including allowing users to uninstall LinkedIn if it came preinstalled on Microsoft devices.
Debate about whether the EC's remit extended to data protection concerns was occurring around the time of the Microsoft-LinkedIn deal; however, theories of harm such as accumulation of data were less developed at that time, the Brussels-based competition lawyer said. The EC is trying to change the way these transactions are viewed so that data protection can be better scrutinized before the parties combine, the lawyer said.
Questions around the place of data protection concerns in EU antitrust law make the outcome of the Google-Fitbit case hard to predict.
"I wouldn't be surprised if the EC were to block [Google Fitbit], but I am not predicting that," said Clifford Chance's Vinje.