The European Commission announced Tuesday that it has opened an investigation to assess the proposed acquisition of Fitbit by Google.
The probe into the $2.1 billion deal, which was agreed on last November, is taking place because the executive arm of the EU was concerned that Google could “further entrench” its market position in the online advertising business if it uses Fitbit data to help personalize the ads it shows users.
Margrethe Vestager, vice president for the European Commission, responsible for competition policy, said in a statement: “Our investigation aims to ensure that control by Google over data collected through wearable devices as a result of the transaction does not distort competition.”
A verdict on the deal is expected by December 9.
Headquartered in San Francisco, Fitbit has become one of the leading wearable device manufacturers in the world since it was founded in 2007. The company has sold more than 100 million devices and it boasts 28 million users. Acquiring Fitbit would help Google to take on rivals like Apple, Samsung, Huawei, and Garmin in the wearables market.
The EU probe could derail the Fitbit purchase entirely. In an effort to address the EU’s antitrust concerns, Google said last month that it would not use the fitness tracker’s data for advertising purposes.
“This deal is about devices, not data,” said Google’s devices chief Rick Osterloh in a blog Tuesday. “We’ve been clear from the beginning that we will not use Fitbit health and wellness data for Google ads.”
Osterloh added: “There’s vibrant competition when it comes to smartwatches and fitness trackers, with Apple, Samsung, Garmin, Fossil, Huawei, Xiaomi and many others offering numerous products at a range of prices.”
“We don’t currently make or sell wearable devices like these today. We believe the combination of Google and Fitbit’s hardware efforts will increase competition in the sector, making the next generation of devices better and more affordable,” Osterloh said.
As of the end of 2018, Apple owned about half of the global smartwatch market in terms of units shipped, according to Strategy Analytics. Google currently licenses its Wear operating system to companies such as Fossil but does not make its own smartwatch.
Leo Gebbie, a senior analyst at CCS Insight, said Fitbit has a rich pool of historical user data, and this will be of huge value to a data-driven company like Google.
“The sheer number of regulatory cases currently lined up against Google across countries shows that the company has a trust problem with some regulators, who are not inclined to take this rationale at face value,” he said.
“Fitbit has struggled to keep pace in an intensely competitive wearables market, and has become stuck in an uncomfortable middle ground between premium and budget players. Its proposed acquisition by Google would provide some benefits including greater scale and financial backing, and uncertainty over the deal is an additional challenge for the company.”
Sources from: CNBC
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