Lat­est probe shows EU’s re­cep­tion to data

Cir­cum­spec­tion a sur­prise de­vel­op­ment

National Post (National Edition) - - FINANCIAL POST - AOIFE WHITE

Sil­i­con Val­ley gi­ants used to snap up smaller tech firms at will, safe in the knowl­edge that an­titrust reg­u­la­tors rarely pre­vented them from ex­pand­ing into new in­dus­tries.

The Euro­pean Com­mis­sion showed on Tues­day that those days are gone, open­ing an in-depth probe into Google’s US$2.1 bil­lion takeover of Fit­bit Inc. — an in­ves­ti­ga­tion that fo­cuses on the po­ten­tially huge value of its trove of cus­tomer data.

The EU au­thor­ity will in­ves­ti­gate how Google could bol­ster its “data ad­van­tage” in online ad­ver­tis­ing with in­for­ma­tion it col­lects from Fit­bit fit­ness. The probe, which has an ini­tial Dec. 9 dead­line, raises the risk of a po­ten­tial veto.

The com­mis­sion “seems to be fi­nally seiz­ing a unique op­por­tu­nity to stand up to dig­i­tal dom­i­nance that seeks to ex­ploit our most in­ti­mate data for profit,” said Ioan­nis Kou­vakas of Pri­vacy Internatio­nal, which lob­bied for a longer EU probe. The deal would strengthen Google’s ac­cess to health data “at what might be a crit­i­cal point for the de­vel­op­ment of this in­creas­ingly im­por­tant mar­ket.”

Reg­u­la­tors are in­creas­ingly sus­pi­cious of tech gi­ants’ takeovers, aim­ing to pre­vent the al­ready pow­er­ful firms from con­quer­ing in­no­va­tive new mar­kets where data is of­ten the most prized as­set. An­titrust au­thor­i­ties have been crit­i­cized for wav­ing through deals such as Face­book Inc.’s takeover of In­sta­gram and even Google’s 2007 bid for dis­play ad­ver­tis­ing plat­form Dou­bleClick.

The EU’s wide fo­cus on online ads clashes with Google’s view that the “deal is about de­vices, not data” and that it’s adding a ser­vice — wear­able health de­vices — where it cur­rently isn’t ac­tive and faces plenty of ri­vals from Ap­ple Inc., Samsung Elec­tron­ics Co. Ltd., Garmin Ltd. and oth­ers.

Google sought to avoid an ex­tended EU re­view by promis­ing to cre­ate a so­called data silo to keep some Fit­bit data sep­a­rate from other Google data sets that built pro­files of in­ter­net users to serve them ads they might find at­trac­tive. EU reg­u­la­tors said they re­jected the offer be­cause it didn’t ad­dress their con­cerns and didn’t in­clude all Fit­bit data that could be used for ad­ver­tis­ing.

The com­mis­sion “is get­ting wise to big tech’s plat­i­tudes,” said Johnny Ryan, a se­nior fellow at the Ir­ish Coun­cil for Civil Lib­er­ties, who helped web browser Brave to file pri­vacy com­plaints over Google’s data col­lec­tion and ad­ver­tis­ing prac­tices.

“Google may have given as­sur­ances to silo the data it ac­quires from Fit­bit, but pre­vi­ous as­sur­ances have been of lit­tle value. After Google’s ac­qui­si­tion of Dou­bleClick, a huge online ad­ver­tis­ing firm, in 2007 it promised to never com­bine Dou­bleClick data with its own. But in Jan­uary 2016 it did pre­cisely this,” Ryan said.

Ad sales, which make up the bulk of sales at Google’s par­ent Al­pha­bet Inc., were US$29.9 bil­lion in the second quar­ter, down 8.1 per cent from the same pe­riod last year. It was the first-ever de­cline in the com­pany’s two-decade his­tory as the coro­n­avirus pan­demic and en­su­ing eco­nomic fall­out forced ad­ver­tis­ers to pull back spend­ing.

The EU says Google is dom­i­nant in online search ad­ver­tis­ing in most of Europe and holds a strong mar­ket po­si­tion for online dis­play ads in 20 Euro­pean coun­tries. It will also ex­am­ine ad tech ser­vices, how the deal will af­fect dig­i­tal health care and whether Google could make it harder for ri­vals to make de­vices that work well with its An­droid mo­bile phone soft­ware.

Health data from Fit­bit track­ers “pro­vides key in­sights about the life and the health sit­u­a­tion of the users of these de­vices,” said Mar­grethe Vestager, the EU’s an­titrust com­mis­sioner, a keen run­ner who used to wear a plas­tic health tracker bracelet made by another com­pany.

“Our in­ves­ti­ga­tion aims to en­sure that con­trol by Google over data col­lected through wear­able de­vices as a re­sult of the trans­ac­tion does not dis­tort com­pe­ti­tion,” she said in an emailed state­ment.

Google said it won’t use Fit­bit health data for Google ads and will give Fit­bit users the choice to re­view, move or delete their data. The com­pany will also “sup­port wide con­nec­tiv­ity and in­ter­op­er­abil­ity” of Google products with oth­ers.

EU reg­u­la­tors started a sweep­ing in­quiry into de­vices made by Google and oth­ers that col­lect con­sumer data last month. Vestager men­tioned wear­able de­vices such as Fit­bit as one of the many data-col­lect­ing products that of­fi­cials will scru­ti­nize.

Tougher ex­am­i­na­tion isn’t al­ways jus­ti­fied. Ama­zon. com Inc. fi­nally won U.K. an­titrust approval to take a stake in a food-de­liv­ery com­pany on Thurs­day after reg­u­la­tors did a U-turn. Ap­ple’s ac­qui­si­tion of mu­sic-iden­ti­fi­ca­tion ser­vice Shazam got a long EU probe two years ago that failed to iden­tify an­titrust prob­lems.

DADO RU­VIC / REUTERS FILES

The Euro­pean Com­mis­sion has opened an in-depth probe into Google’s US$2.1-bil­lion takeover of Fit­bit Inc.

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