On December 17, 2020, the European Commission approved the purchase for US $ 2,100 billion of the company dedicated to the commercialization of smartwatches, Fitbit, by Google, under terms such as:
- Google's commitment to maintaining a technical separation between Fitbit user data and the absorbing company's digital advertising business. Along the same lines, it ensures that users in Europe will be able to deny the use of their health data in their Google account.
- Google will ensure that your operating system for Smartphones, Android, continue to be compatible with smartwatches sold by competing manufacturers, such as Samsung Electronics.
- Likewise, it was agreed that the conditions set forth will have an application term of 10 years, and may be extended for an equivalent period.
- Finally, compliance with the conditions agreed for the approval of the merger will be supervised by an independent trust.
In this regard, the European Commission has considered that by agreeing to the aforementioned conditions, Google will be prevented from dominating the digital health market either, by accessing the Fitbit database, or by controlling the software of the smartphones However, we consider that the approval of the aforementioned merger presents two problems.
On the one hand, the conditions adopted by Google for the approval of the purchase of Fitbit present gaps that could lead to the commission of acts of abuse of dominance position. On the other hand, the approval of the merger by the European Commission sets a risky precedent for future procedures for prior control of mergers and acquisitions in the technology market. We detail below.
Acts of abuse of dominance position
Regarding the first, we consider that there are the following gaps in the conditions adopted by Google to proceed with the merger with Fitbit:
First, Google has made a commitment to the European Commission to limit the advertising business 'direct access to Fitbit users' health information. In this regard, does this condition prevent Google from accessing Fitbit statistics to improve the quality of its advertising business? From the wording of the condition in question, it seems that no. Thus, this represents a potential problem, since Google finds itself in the possibility of exploiting this void and using it to its advantage to increase its dominant power in the digital health and digital advertising market.
Second, in relation to Google's commitment to give the same access to Android tools to other competitors in the Android market. smartwatches, could the company reserve innovations on the software health of the smartphones. Obviously, there is still the risk that Google favors its own smartwatches, and exclude other competitors from the relevant market.
Thus, the problem regarding the conditions agreed between Google and the European Commission is that it is difficult to monitor the compliance of companies. Also, if Google uses the gaps, the damage to the market has already occurred. In other words, any sanction or measure that the European Commission is going to impose will not be able to remedy the damage produced and the social cost incurred. Such damages are better prevented than remedied by lengthy and expensive procedures. ex post.
Precedent for prior control procedures for mergers and acquisitions in the technology market
Regarding the second, the merger between Google and Fitbit not only represents a serious risk for the right market operation, but also represents a serious threat to the protection and integrity of the sensitive information of thousands of users. Thus, there is a risk for the proper functioning of the markets, while Google, already having a dominant position in the digital market, will increase its market power.
Likewise, Google will participate in the market for smartwatches, with which an ideal scenario will be presented to carry out acts of abuse of dominance position between both markets. This could lead to the exclusion of competitors from both markets, thus atomizing the structure of the markets in question.
Along the same lines, when we are faced with an atomized market with a high degree of concentration in which economic agents compete with a large percentage of participation, there is a negative incentive for the entry of new competitors. Thus, we would move further and further away from the "perfect competition" model.
However, as mentioned in previous lines, the merger approved by the European Commission represents a serious risk for the sensitive information of thousands of users. Thus, we find information related to people's health in between. This information could be used illegitimately by Google, to increase its market share, generating direct damage to the regulatory advances in recent years on the protection of personal data.
Now, Google has committed to maintaining a technical separation between the Fitbit database and the advertising business. However, what guarantees us that the company will comply with this condition? As has been mentioned, it is difficult to ensure compliance with the agreed conditions. Many companies will find it more efficient to breach the conditions and undergo a procedure ex post, given the long term that the definition of a measure takes in that instance.
Based on the above, it is worth asking, is it better to prevent or “put out fires”? It is definitely better and more efficient to prevent, even more so since the risks arising from the concentration of Google and Fitbit are so evident, and goods as fundamental as the personal data on the health of thousands of people are involved. In this sense, we find ourselves in disagreement with the decision adopted by the European Commission, and even worse with the way it was carried out.
*The opinions expressed in this article are those of the author and do not necessarily reflect the views of the administrators of The Crypto Legal blog or the Lawgic Tec association.