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Breakingviews - EU’s Google-Fitbit approval sets risky precedent

Fitbit Blaze watch is seen in front of a displayed Google logo in this illustration picture taken, November 8, 2019.

LONDON (Reuters Breakingviews) - Margrethe Vestager is sending mixed messages to big U.S. technology groups. Days after vowing to crack down on companies like Facebook and Amazon.com through a major new legislative effort, the European Commission’s antitrust tsar on Thursday approved with conditions a $2.1 billion purchase of Fitbit by Alphabet’s Google. It sets a risky precedent for future tech M&A.

At first glance Vestager appears to have drawn some meaty concessions from Google, which agreed to buy the maker of wrist-worn fitness trackers in November 2019. It has pledged to keep California-headquartered Fitbit’s user data in a separate “silo”, so that it isn’t used to augment the search giant’s existing digital-advertising business. Google will also ensure that its Android smartphone operating system is still compatible with health trackers sold by rival manufacturers, like Samsung Electronics. Smartphones and fitness devices often work in tandem.

Vestager reckons those commitments will stop Google from dominating the nascent digital-health market through its existing hoard of data and control of software for smartphones. The conditions will apply for 10 years, with the possibility of another 10-year extension, and will be monitored by an independent trustee.

Yet there may be some cracks. The Fitbit data silo means Google’s ad business can’t directly access users’ health information. But it’s unclear whether that also stops it from drawing anonymous, statistical lessons about users’ health and using that to improve the quality of its advertising. And while the company has to offer Fitbit’s rivals the same access to Android tools as it does to other developers, Google could in theory still keep some future health-software innovations to itself. In other words, Vestager’s fear that Google could use its smartphone dominance to favour its own fitness trackers may still be a risk.

The broader point is that such behavioural remedies are much harder to enforce than straightforward prohibitions. Companies are often two steps ahead: the commission in 2017 fined Facebook 110 million euros for providing what it regarded as inaccurate information as part of a 2014 merger review. According to the commission, the social-media giant said it couldn’t automatically link users’ WhatsApp and Facebook profiles, but then went on to do precisely that. The risk is that, by the time Vestager finds loopholes in her Google-Fitbit safeguards, the damage will already have been done.

Breakingviews

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