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Google and Fitbit said ‘I do,’ but the marriage could still be annulled

Google and Fitbit Inc. announced last week that their merger had closed, but Alphabet Inc.'s antitrust woes may make the megadeal far from complete.

1/22/2021 12:16:00 PM

'It would not surprise me in the least to see it raised as an issue in the antitrust lawsuit,” one expert said. Google and Fitbit announced that their merger had closed, but Alphabet's antitrust woes may make the megadeal far from complete.

Google and Fitbit Inc. announced last week that their merger had closed, but Alphabet Inc.'s antitrust woes may make the megadeal far from complete.

The controversial acquisition’s conclusion sparked immediate pushback from Sen. Amy Klobuchar, D-Minn., ranking member and possible future chair of the Senate’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, as well as several privacy-rights organizations, who object to the personal information that Fitbit could feed into Alphabet’s GOOGL, +0.22% GOOG, +0.23% data machine.

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“While Fitbit is firstly a personal health appliance, it gathers information, and highly personal information at that,” St. John’s University law professor Anthony Sabino told MarketWatch. “I can see Justice being deeply concerned about Google having access to such intimate customer information via Fitbit, and it would not surprise me in the least to see it raised as an issue in the antitrust lawsuit.”

For its part, the U.S. Justice Department maintains it has not given formal clearance to the deal and it is still under scrutiny, even though it let the deadline pass on formal opposition last week, according to a Wall Street Journal report. Next steps may depend on who President-elect Joe Biden installs in key positions. headtopics.com

Antitrust experts are keenly following who will lead the Justice Department’s antitrust efforts in the Biden administration — candidates range from Terrell McSweeney, who is considered corporate-friendly, to the progressive Jonathan Kanter. Federal Trade Commission Chairman Joseph Simons, set to step down Jan. 29, oversaw antitrust investigations of Facebook Inc. FB, +2.02% and Amazon.com Inc. AMZN, +1.34%. His replacement will not only “play a big role in how investigations are done,” but will face pressure from the two Democrats on the five-member commission who say Simons wasn’t aggressive enough, said Duane Pozza, a former assistant director in the Division of Financial Practices at the FTC.

Such are the stakes as the federal government and state attorneys general press on with antitrust investigations of Google, and a Democratic-controlled White House and Senate takeover.Legal actions against other members of Big Tech are gaining steam. Last week, Connecticut Attorney General William Tong disclosed that state “has an active and ongoing antitrust investigation into Amazon regarding potentially anticompetitive terms” in distribution agreements the company has for electronic books with some publishers.

For now, however, the focus is on Google, which has been sued by the DoJ, a group of state AGs led by the state of Texas, and another group led by the AGs of Colorado and Nebraska in recent months. Google and antitrust: Big Tech’s first target is facing mounting legal action

Google has maintained — as it does for most of its actions — that the Fitbit deal will greatly benefit consumers and has been properly vetted by regulators.“Google will continue to protect Fitbit users’ privacy and has made a series of binding commitments with global regulators, confirming that Fitbit users’ health and wellness data won’t be used for Google ads and this data will be kept separate from other Google ad data,” Fitbit Chief Executive James Park said in a letter to Fitbit users Thursday. headtopics.com

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But could the Justice Department or the two state suits undermine the deal’s status under a new administration and Democratic-controlled Senate? “Technically, yes, though it would be highly unusual since it has already been approved,” said Douglas Gansler, an expert in antitrust law and former attorney general of Maryland.

According to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, deals can proceed if no official objection is received from the Justice Department during the waiting period. Google completed the waiting period, and is thus within its rights to close the deal. By the same token, the Justice Department can also maintain its investigation after the waiting period. It is unusual for regulators to undo a transaction after the waiting period, but there is a certain risk that it might happen, according to Miller.

A theory floated by Bhaskar Chakravorti, dean of global business at Tufts University’s The Fletcher School, is that Democrats could apply a plan for a Glass-Steagall Act for the internet. The 1933 law forced banks to separate their commercial and investment banking activities to ensure the combinations did not dampen competition. In the context of tech, that could mean forcing social-media companies to run their platforms separately from applications and businesses that profit from user data.

“Any deal that Google makes, especially with a device maker, has some instability built into it,” he said.Still, the Justice Department passed on the opportunity to file an objection before the deal closed, making it extremely difficult to reverse course, say legal scholars. headtopics.com

Sabino of St. John’s University said it is “highly unlikely” the DoJ will rescind its approval of the deal. It passed on opposition even as it was conducting an investigation that led to its antitrust lawsuit in October, and the European Union gave the acquisition an OK last month. “It would simply be inequitable to go back now,” Sabino told MarketWatch.

He added, however, that the purchase of Fitbit “shall have implications in the pending [DoJ] antitrust lawsuit. After all, a linchpin of the federal government’s litigation (as joined in by about two dozen or more states now) is Google’s ability to gather information about users from Google searches, YouTube usage, and so forth.”

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And then there is the matter of the historic pandemic and economic mess inherited by the Biden administration, which could put antitrust cases against Big Tech on the back burner.“Tech antitrust issues are not going to get the necessary pushing and prodding from the White House, so the entire agenda may be on simmer even if there are many House Democrats — and prominent senators, such as Amy Klobuchar — keen to pursue it,” Chakravorti said.

Klobuchar does seem very keen on going after the deal.“Google’s announcement that it is closing its acquisition of Fitbit while the transaction is still under review by the Justice Department is yet another sign of the company’s troubling lack of concern for complying with the antitrust laws,” Klobuchar said in a statement last week.

“The rush to complete its deal before Biden administration enforcers take charge is all the more disturbing,” said the senator, who opposes large tech acquisitions. “Despite the premature completion of this merger, I continue to urge the department to seek all appropriate remedies under the law to protect competition and consumers from any anticompetitive effects caused by this transaction.”

The appetite to challenge the merger over antitrust concerns also remains high among privacy advocates, who fear the repercussions of megadeals like Fitbit.“The Justice Department’s failure to stop Google’s acquisition of Fitbit is not only incoherent and embarrassing, it is also dangerous. This deal poses serious security risks to Fitbit consumers’ personal data,” said Sarah Miller, executive director of the American Economic Liberties Project. “Google uses its vast portfolio of internet services to spy on its users and profit off of highly personal information. There is no reason to believe they will not do the same thing with Fitbit.”

“In fact, Google has lied to antitrust enforcers about data before. As a blockbuster antitrust suit against Google explained last month, the company made promises to both the Federal Trade Commission and Congress about how it would manage its acquisition of DoubleClick, which Google then ignored,” added Miller.

Read more: MarketWatch »

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