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SA’s competition watchdog approves Google’s deal to buy Fitbit

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Competition commissioner Tembinkosi Bonakele.
Competition commissioner Tembinkosi Bonakele.

South Africa’s regulator the Competition Commission (CompCom) has conditionally approved the proposed merger whereby Google intends to acquire Fitbit.

In a statement, the competition watchdog says this is a global merger, notified in several jurisdictions, including the EU, US, Australia, Canada and Japan.

It notes that Google is active in a wide range of areas, including online search, online advertising, other online services such as YouTube, Google Maps and Gmail as well as cloud computing services.

In addition, says the CompCom, Google maintains and develops the Android ecosystem which includes an open source mobile operating system (OS) and a suite of mobile apps and services.

“Google’s business in South Africa relates to the provision of local support and marketing services internally for Google. Google does not sell any wearable devices or hardware in South Africa. The main products and services relevant to this transaction are Wear OS, Google Fit, The Play Store, Google Search and Google Ads,” the regulator says.

It points out that Fitbit develops, manufactures and distributes wrist-worn wearable devices and smart scales as well as software and services designed to give its users tools to help them reach their health and fitness goals.

The main Fitbit products available in SA are fitness trackers, smartwatches and the Fitbit mobile app.

The Commission found that the proposed transaction is likely to result in a substantial prevention or lessening of competition.

The Commission was concerned that as a direct result of the proposed merger, Google will exclude Fitbit’s competitors in the market for wrist-worn wearable devices.

As a direct result of the proposed merger, Google will be able to exclude competing suppliers of wrist-worn wearable devices from accessing its Android operating system for smartphones, says the Commission.

It explains that Android is a dominant mobile OS and, unlike the Apple ecosystem, it is not vertically integrated into the production of wrist-worn wearable devices prior to the merger.

“This makes Android an important input for third-party smartwatch manufacturers that compete with Fitbit. Bearing in mind the integral connectivity between smartwatches, companion apps to the wrist worn wearable device as well as smartphones, and given the significant market shares enjoyed by Android, the proposed merger will give Google the ability to exclude competitors of Fitbit or frustrate the functionalities of competitors’ companion apps from operating optimally on Android OS.

“This will significantly alter the market structure for the supply of wrist-worn wearable devices in SA and increase barriers to entry for potential entrants in the market,” the watchdog says.

The Commission was also concerned that as a direct result of the proposed merger, Google will entrench its dominance in the online advertising and online search market.

“As a direct result of the proposed merger, Google would acquire (i) the database maintained by Fitbit (about its users’ health and fitness); and (ii) the technology to develop a database similar to that of Fitbit. The Commission was concerned that the acquisition of Fitbit’s database may provide an important advantage in online advertising markets to Google and allow Google to entrench its dominance in the market,” it says.

The Commission was also concerned that as a direct result of the proposed merger, Google will restrict access to health data collected by Fitbit

The Commission was concerned that, as a direct result of the proposed merger, Google will be able to use Fitbit’s health data to enter the digital health market or other health services markets (for example the market for health insurance) and exclude other players and potential entrants in the market by restricting access to health Fitbit health data.

“This merger affirms the need for regulatory interventions in digital markets. Regulatory authorities need to look closely at mergers and acquisitions in these rapidly changing markets, particularly when large global technology firms that operate across multiple jurisdictions are involved,” says Competition Commissioner Tembinkosi Bonakele.

“The remedies we have agreed ensure that the transaction does not raise barriers to new entrants in the wearable technology and nascent health data markets. In that way we would be assured of inclusive growth and equal distribution of wealth in rapidly growing digital markets.”

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