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COVID-19 could prolong Google, Fitbit's 'complex' EC review

The already complex European Commission review of Google LLC's proposed acquisition of Fitbit Inc. could be delayed by logistical challenges posed by the coronavirus, lawyers said.

The $2.1 billion deal, announced Nov. 1, is conditional on merger control approval from authorities in the U.S., Europe and Australia. It has been notified in the U.S. — where it has reportedly been subject to a second request from the Department of Justice — but is yet to be filed with the EC.

A lengthy pre-notification period is normal for deals of this size and nature, lawyers said. Regulators and applicants may take their time filing if they "have a feeling that a deal may be complex" to review, said Daisy Walzel, partner and head of competition (Germany) at law firm DWF. It is not uncommon for such cases to take up to a year, Walzel said. On announcing the deal, the companies said they expect it to close in 2020.

The coronavirus crisis could further complicate the process. "From my own experience, and that of my colleagues, the EC is artificially prolonging reviews by asking additional questions in order to buy time during a difficult period when much of its staff is working from home," Walzel explained.

Once the deal is filed, the EC will have 25 working days to conduct a phase I investigation, and a further 90 working days if it decides to open an in-depth, or phase II, probe.

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The EC will define the relevant markets that Fitbit operates in and the share of the market it holds and will examine any overlaps it has with Google's business. However, the Alphabet Inc. unit's handling of data is not expected to form part of the review, lawyers said.

While both the European Union's data advisory arm and consumer group BEUC have raised fears regarding the deal's potential implications for data protection, this falls outside of its jurisdiction and under the ambit of national regulators as outlined in Europe's GDPR guidelines.

Instead, the EC is likely to probe the "combination of health data sets" held by Google and Fitbit under the merger as part of its efforts to define any overlaps in the areas where the companies operate, said Jay Modrall, competition partner at law firm Norton Rose Fullbright, who is involved in the case on behalf of a third-party competitor to Fitbit. Modrall said his client had been in touch with the EC during the pre-notification stage of the review to discuss their concerns.

"The key with Fitbit is health data," Modrall said, "that is much more difficult to substitute with other data compared to advertising data, which can be found on phones, web browsers and even streaming services.

"If I'm a commission or antitrust authority looking at Google, I would ask what do they want the data for?" Modrall said. "Well, they want it for their [Verily] health data analytics business. From that perspective it is very difficult to find substitutable data for Fitbit, which tracks its users activity around the clock. The only other substitutes are rival fitness trackers."

Google is likely to argue that the overall data from Fitbit's 25 million users equates to a "small drop in a bucket" compared to the broader ad data market, Modrall said. "That may be true if you only look at volume, but Fitbit's data is health-related and that is much more difficult to get," he said.

Google last year announced a partnership with U.S. healthcare provider Ascension to access patient information. The agreement gives it access to datasets that could help it tune its potentially lucrative artificial intelligence tools designed to track diseases. "The Fitbit acquisition is like the Ascension deal on steroids," Modrall said.

A Google spokesperson said it will never sell personal information, never use Fitbit data for Google ads, and give Fitbit users control over their data.

Alphabet's Verily life sciences unit also produces a clinical smartwatch that was cleared by the U.S. Food and Drug Administration in January to offer an irregular pulse monitor that is key to tracking heart health. A similar function is offered by Apple Inc.'s bestselling Apple Watch, while Fitbit revealed in May that it had completed a "pivotal clinical trial" of its new electrocardiogram feature, with plans to seek review by the FDA.

But Walzel said technically it will be hard to pinpoint a "theory of harm" caused by the Google-Fitbit deal from both a data and hardware market perspective. "From a competition law standpoint, they are not direct competitors," she said, pointing to the fact that Google does not sell a consumer wearable device.

"Neither is it a typical angle to look at whether the data Fitbit is gathering is relevant to Google," she said. "How do you assess that? So far, that is a potential, but you cannot put a clear outcome to that."