Please ensure Javascript is enabled for purposes of website accessibility

European Consumer Group Bashes Google-Fitbit Deal

By Evan Niu, CFA - May 14, 2020 at 9:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The BEUC is urging antitrust regulators to scrutinize the deal very closely.

It's been over six months since Alphabet (GOOG 1.17%) (GOOGL 1.16%) proposed its $2.1 billion acquisition of wearables maker Fitbit (FIT). The deal has attracted criticism and underscored ongoing antitrust scrutiny of large powerful tech companies. Earlier this year, the European Data Protection Board (EDPB) argued that the acquisition would represent "a high level of risk" to consumer data.

Another group is now warning of adverse consequences if the deal is allowed to go through.

Fitbit Charge 4

Image source: Fitbit.

A potential game-changer

The BEUC, a consumer advocacy organization in Europe, recently expressed concerns that the proposed deal could be "detrimental to consumers" by hurting competition and enhancing Google's market power through data.

"If Google acquires consumers' data generated by the use of Fitbit wearables, including now COVID-19 related data, it would be able to use that data for its own benefit and could undermine the ability of other companies to bring new products to consumers," according to BEUC. "This could harm innovation and consumer choice in several markets such as online advertising, search, health and wearables."

The organization is urging the European Commission, which will ultimately decide whether to approve the deal, to "consider it very carefully" since the acquisition "has the potential to be a game-changer" for both digital platforms and health data. Fitbit has amassed a huge trove of health-related data, and Google's advertising business is built on leveraging user data for ad targeting.

BEUC is skeptical about Google's and Fitbit's assurances that health data will not be used for advertising purposes, noting that the search tech giant made similar commitments when it bought DoubleClick way back in 2007, only to walk back on those commitments years later.

"The merger analysis should therefore consider all possible uses of this data asset not only from a horizontal perspective but also as a vertical input, and should not rely on any usage restrictions that Google may promise," the BEUC writes. The group also points to Facebook's acquisition of WhatsApp as another example of a large tech company changing its mind regarding data-sharing policies after closing a major acquisition.

Furthermore, that type of data is becoming increasingly important for companies competing in the wearables market, so the deal could effectively increase barriers to entry for potential rivals.

Still expected to close this year

The news comes following Fitbit's first-quarter earnings release last week, which showed revenue falling over 30% to $188.2 million, while unit volumes also declined by nearly 25% to 2.2 million. The wearables specialist continues to transition its business from basic trackers to smartwatches, and Fitbit is also trying to grow its premium subscription business.

Fitbit and Google still expect to secure regulatory approval and close the deal in 2020, but they note that COVID-19 may impact the approval timeline.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,304.27 (1.17%) $26.53
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,291.44 (1.16%) $26.18
Fitbit, Inc. Stock Quote
Fitbit, Inc.
FIT

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
323%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.