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European Data Regulators Are Worried About Google Buying Fitbit

By Evan Niu, CFA - Updated Feb 21, 2020 at 9:57AM

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The proposed acquisition carries a "high level of risk to privacy and data protection."

The European Data Protection Board (EDPB), which was established by the European Union's General Data Protection Regulation (GDPR) and oversees the application of data protection rules, has issued a stern warning regarding Google's proposed acquisition of wearable tech specialist Fitbit (FIT).

The ongoing concern is that the Alphabet (GOOG 2.36%) (GOOGL 2.39%) subsidiary is really just after Fitbit's trove of health-related user data as the search giant continues to build a digital health platform. The hardware business would just be an added bonus that will compensate for Google's weakness in the wearables market thus far, critics say, although Google maintains that the deal is all about making better wearable gadgets.

Fitbit product lineup

Image source: Fitbit.

The acquisition carries "a high level of risk"

Following a plenary session in Brussels this week, the EDPB warned that "the possible further combination and accumulation of sensitive personal data regarding people in Europe by a major tech company could entail a high level of risk to privacy and data protection." As such, the privacy body is reminding both companies that they are still obligated under GDPR to "conduct a full assessment of the data protection requirements and privacy implications of the merger in a transparent way."

The EDPB advises the European Commission, which as the primary competition regulator is the main agency that needs to sign off on proposed mergers and acquisitions. The deal will need to get the commission's blessing to proceed, since both companies do business in the European Union.

Both Google and Fitbit have vowed that Fitbit's user data would not be sold to third parties or otherwise used for ad targeting. The tech companies say that users will have ultimate control over their data and that they are committed to remaining transparent about what data is being collected and why, but regulators are still skeptical about the $2.1 billion deal.

The U.S. Department of Justice is expected to review the deal for potential antitrust concerns (as opposed to the Federal Trade Commission, which also handles antitrust investigations). Separately, the U.S. International Trade Commission is opening an investigation into Fitbit following a formal complaint by health technology behemoth Philips that alleges Fitbit and Garmin (along with distributors and manufacturing partners) are infringing on patents related to health monitoring.

In November, Google offered $7.35 per share in cash to scoop up Fitbit, yet the stock is currently trading at a 12% discount to that price. The market is effectively pricing in skepticism around whether the acquisition will be able to secure regulatory approval. Fitbit shareholders already overwhelmingly approved the deal at a virtual shareholder meeting in January, with 415.2 million votes cast in favor of the deal and just 1 million votes cast against it.

Fitbit still expects the deal to close in 2020, according to regulatory filings.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Fitbit. The Motley Fool has a disclosure policy.

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