On November 1, 2019, Google announced its acquisition of FitBit, Inc. for $2.1 billion. The transaction, expected to close in 2020, makes Google a formidable competitor in a booming smartwatch market where industry-wide revenue is set to double by 2023. The deal supplements Google’s recent acquisitions in wearable tech, including a $40 million purchase of technology and personnel from watchmaker Fossil Group earlier this year. Google hopes the FitBit acquisition will help to advance Wear OS, Google’s existing smartwatch software, by leveraging FitBit’s expert personnel, AI, software, and hardware. Although Rick Osterloh, Google Senior Vice President of Devices & Services, claimed Google’s acquisition of FitBit may “help spur innovation in wearables,” the acquisition has also raised data privacy and antitrust issues.
Some users worry that Google targeted FitBit to access its formidable health database of 28 million active users. Although FitBit claims user data will not be sold or used for advertising, Google already collects information on its users — including names, search history, hobbies, and location data — for advertising purposes. Members of Congress are also concerned about Google’s access to FitBit’s health data. Representative David Cicilline, D-RI, released a statement claiming Google would receive “deep insights into Americans’ most sensitive information…threatening to further entrench [the company’s] market power online.”
Google’s acquisition of FitBit also invited antitrust questions from lawmakers, including Senator Josh Hawley, R-MO. As reported in Bloomberg, the companies expect to face a lengthy regulatory review and have each budgeted one year for antitrust clearances, which could be extended through May 3, 2021. Previous acquisitions by Google, including DoubleClick in 2007 and ITA Software in 2010, took eight and nine months for regulatory clearance, respectively. The acquisition agreement also stipulates that Google will pay $250 million to FitBit if the deal is blocked by antitrust regulators. Experts predict Google will justify the merger by emphasizing the relative unpopularity of its software for other companies’ wearable devices and that Google has never built its own smartwatches. Google’s FitBit acquisition comes during a period of immense scrutiny for large tech companies. Google is also currently undergoing a “second look” review for its acquisition of Looker, a cloud services company, in June 2019.
If the merger is approved, Apple and Google will control over half of the global smartwatch market. Apple had a forty-six percent market share and FitBit had a ten percent market share at the end of the second quarter in 2019. These dominant tech firms will possess an even larger market share domestically because FitBit concentrates most of its sales within the United States. In addition to market share, antitrust regulators also analyze how a merger could facilitate conduct that is harmful to consumers. Advocates for stronger antitrust scrutiny suggest that data accumulation can implicate anticompetitive concerns. Sally Hubbard, Director of Enforcement at Open Markets Institute, believes that Google may use FitBit’s data to strengthen its existing dominance in targeted advertising. Nevertheless, how data privacy fits into antitrust doctrine is open for debate, and so a merger challenge on data privacy grounds would present novel issues.
Google’s acquisition of FitBit may provide higher-quality wearable devices to consumers, but the viability of the transaction is threatened by significant data privacy and antitrust concerns. Consumers are worried that their personal health data may now be subject to controversial data collection or may even be used in advertising. Google faces a challenging task as it attempts to assure both regulators and the public that it can successfully and legally acquire FitBit. Whatever the outcome, this transaction presents antitrust and consumer protection agencies with novel questions, and any answers will only become increasingly relevant in the digital economy.