The Era of Big Tech Acquisitions Could Be Over…Maybe

Adriana Lee
8 min read
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Two main themes in the House of Representatives’ antitrust hearing last week revolved around the data privacy policies of large technology companies and their penchant for gobbling up smaller businesses. Now the European Union is taking up the mantle with its latest probe into Google’s $2.1 billion bid to buy Fitbit.

Rick Osterloh, Google’s head of devices and services, cast the acquisition as a matter of “devices, not data” in a blog post, but the European Commission doesn’t buy it. Margrethe Vestager, the commission’s lead antitrust regulator, believes the company wants a “data advantage” and is buying Fitbit to get it.

Clearly the corporate shopping spree for tech acquisitions has become increasingly fraught, as regulators at home and abroad catch up to practices that have been allowed to run amok for years.

Facebook’s 2012 acquisition of Instagram got plenty of attention during the Congressional hearing last week, amid accusations that the social network bought companies to stifle competition.

Now it’s Google’s turn, as the Fitbit deal lands under the EU’s microscope. And it’s not the only concerned party. Last month, as many as 20 advocacy groups — including Public Citizen in the U.S., Europe’s Access Now and the Brazilian Institute of Consumer Defense — filed complaints, hoping to block the sale.

It’s natural to see the Fitbit purchase as more of a play for data, rather than any desire on Google’s part to become a wrist gadget maker. The Mountain View, Calif.-based company had already purchased another tech player that made smartwatches, Motorola, then promptly sold it to Lenovo in 2014.

Fitbit also doesn’t come with obvious competitive hardware advantages at this point: While it was once considered one of the market’s top wearables companies, today it ranks in fifth place behind Apple, Xiaomi, Samsung and Huawei, according to IDC’s latest Worldwide Quarterly Wearable Device Tracker. Last year, Fitbit accounted for less than 5 percent of the wearables market.

But the acquisition target sits on health and fitness data covering 28 million people, enough to supercharge Google’s digital advertising and search platforms. The information could allow for a more fine-tuned targeting of ads, while giving Google’s own Android health apps valuable insights.

The potential interplay matters. Fitbit would become part of a sprawling organization, alongside YouTube, Android and Chrome browser development, as well as divisions for Wear OS, smart homes, Google Pay, Google Fit and AdSense, among many others. When taken together, the contours of the business take on epic proportions, and they’re slotted in next to parent company Alphabet’s other groups, including an early-stage venture arm and a growth equity investment fund.

Critical pieces of this empire started as Google acquisitions, including YouTube, Android and Nest. The roster seems to be growing by the day: On Tuesday, the company revealed that it nabbed a $450 million stake in home security firm ADT, which will help boost Nest.

Google’s ad business seems to float above or beyond its other array of products and services, like a north star for the operation. In the last quarter, advertising pulled in $29.9 billion out of its total revenues of $38.3 billion — a dip compared to other quarters, but still the majority of the company’s overall haul.

Now Vestager contends that Fitbit would give Google’s already enormous ad business an unfair advantage.

This is what keeps the commission up at night, and it has for years. Since 2017, Google has been penalized numerous times, to the tune of some $9.5 billion, by EU antitrust regulators. And through it all, for better or for worse, the company’s business practices remain resilient.

Google is far from alone. Apple was hit with roughly $15 billion in back taxes, after breaks it received in Ireland were deemed unfair, although that ruling was overturned by the EU’s second-highest court last month. Facebook’s 500,000-pound fine by the U.K.’s Information Commissioner’s Office over the Cambridge Analytica scandal seems relatively small in comparison, but it follows a 5 million euro fine by Italy’s Competition and Markets Authority and a $5 billion penalty imposed by the Federal Trade Commission in the U.S., to name just a few.

Amazon’s not off the hook, either, as it faces antitrust charges in Europe over its treatment of data from third-party sellers. The e-commerce giant could face penalties amounting to tens of billions of dollars, expressed as a percentage of its annual revenue. In fact, all of these companies are still under investigation in the EU, as well as the U.S.

Whether such punitive measures actually change things is another matter, and that may take the sting out of this latest probe.

The European Commission relies on penalties and forced mandates. The General Data Protection Regulation, which took effect last year, made a big impression, largely because of its broad adoption and the sweeping powers it gave end-users to control their own data. But other piecemeal efforts seem less effective in actually curbing Big Tech’s behavior.

For the world’s most valuable technology companies, huge fines wind up being a cost of doing business. A few policies may change, but core business practices typically don’t — even when executives make direct promises.

Case in point: During the House Judiciary hearing, U.S. Rep. Val Demings (D., Fla.) skewered Sundar Pichai, chief executive officer of Google parent Alphabet, about a similar pledge the company made when it bought DoubleClick, an online ad services firm, in 2008. At the time, the company said it wouldn’t combine DoubleClick’s cookie data with Google account data.

The acquisition was before Pichai became ceo of Google in 2015, but what followed happened during his tenure.

With concern about connecting people’s identities with their browsing activities, Demings said, “Google chief’s legal adviser testified before the Senate Antitrust Subcommittee that Google wouldn’t be able to merge this data even if it wanted to, given contractual restrictions. But in June of 2016 Google went ahead and merged this data anyway — effectively destroying anonymity on the Internet.”

It sounds like hyperbole, but consumer harm could be incalculable at such a grand scale. For search alone, Google has an 86 percent global market share, as of April 2020.

Now Google’s making a new pledge, saying, according to Osterloh, that “We’ve been clear from the beginning that we will not use Fitbit health and wellness data for Google ads. We recently offered to make a legally binding commitment to the European Commission regarding our use of Fitbit data.”

But Vestager’s simply not buying it.

The fact that sensitive records are involved doesn’t help. Fitbit data could deliver health information, location data, even certain behavioral patterns. Meanwhile, in a separate deal, Google is making a play for financial data as well.

Google unveiled six banking partnerships last week, bringing the total to eight banks that will provide digital checking and savings accounts to Google Pay users sometime next year. In doing so, the company stated that it won’t host the accounts, but it will have access to the data necessary to give customers insights into their finances.

A company spokesperson explained, “We had confirmed earlier that we are exploring how we can partner with banks and credit unions in the U.S. to offer digital bank accounts through Google Pay, helping their customers benefit from useful insights and budgeting tools, while keeping their money in an FDIC or NCUA-insured account.”

The institutions will serve U.S.-based users, so the partnerships are not part of the European Commission’s scope. But it’s notable that Google is actively expanding its services — and the type of user information it can collect — while it knew that both the U.S. and Europe were investigating antitrust concerns and its use of data. It’s a bold move, if nothing else.

Vendors and partners have some ability to block their data from being used in ad targeting. Subsidiaries much less so.

European investigators are on a three-month timeframe, so the findings of the probe into the Fitbit deal are expected in December. What happens after that may not give critics any real satisfaction, though, because regulators may be limited in what they can do. The commission won’t, and likely can’t, block an agreement between two U.S.-based companies. And while it can enforce its rules on Google, violations may simply amount to more fines.

For Google and its tech cohorts, however, this investigation and others should be seen as more evidence that regulators won’t look the other way — whether abroad or at home.

“Break up big tech” has become a drumbeat among elected U.S. officials on both sides of the political aisle. While that would be a messy, complicated affair, it may pose enough headaches to compel the search giant and others to rethink how they approach privacy, competition and any potential attempts to consolidate power.

The likes of Google or Facebook haven’t actually faced such consequences in decades. But if one giant does, the sheer shock could make for a seismic wake-up call for the rest.

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