New CEPR Policy Insight - Google/Fitbit will monetise health data and harm consumers

Wednesday, September 30, 2020

The looming Google/Fitbit merger is causing widespread consternation that allowing Fitbit’s data gathering capabilities to be put in Google’s hands creates major risks of ‘platform envelopment’, extension of monopoly power and consumer exploitation. 

Furthermore, the combination of Fitbit’s health data with Google’s existing data could create unique opportunities for discrimination and exploitation of consumers in healthcare, health insurance and other sensitive areas, and also has major implications for data privacy.

A new CEPR Policy Insight suggests that the European Commission and other authorities should be very sceptical of this deal, and realistic about their limited ability to design, impose and monitor appropriate remedies. The unchecked expansion by Google into the Health Tech Sector will likely cause future complications which will be difficult to reverse.

Marc Bourreau, Telecom Paris, Institut Polytechnique de Paris; Cristina Caffarra, Charles River Associates  Zhijun Chen, Monash University; Chongwoo Choe, Monash University; Gregory S. Crawford, University of Zurich and CEPR; Tomaso Duso, Technical University Berlin, DIW Berlin, and CEPR; Christos Genakos, University of Cambridge and CEPR; Paul Heidhues, DICE, Heinrich-Heine University of Düsseldorf and CEPR; Martin Peitz, University of Mannheim, MaCCI, and CEPR; Thomas Rønde, Copenhaagen Business School and CEPR; Monika Schnitzer, Ludwig-Maximilians University Munich and CEPR; Nicolas Schutz, University of Mannheim, MaCCI, and CEPR; Michelle Sovinsky, University of Mannheim and CEPR; Giancarlo Spagnolo, SITE-Stockholm School of Economics, EIEF, U. of Rome Tor Vergata, and CEPR; Otto Toivanen, Aalto University School of Business and CEPR; Tommaso Valletti, Imperial College London and CEPR; Thibaud Vergé, ENSAE ParisTech and CEPR

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"The interest of Google in this deal is not in Fitbit’s wearable itself – but only in the wearable as a source of valuable complementary health metrics which Google can correlate with an enormous wealth of other data.”

Google’s modus operandi is by now well understood. Its history of systematic acquisitions across a vast array of disparate activities, bolted onto its original Search engine, are unified by a common aim: to enhance and protect its unique data empire, and enable its monetisation in ever-expanding applications. What is concerning is the prospect of Google becoming dominant in ‘health tech’, uniquely combining its existing data with that gathered from Fitbit and undermines the ability of others to compete. 
This Policy Insight, written by a set of leading economists who have wide-ranging experience in competition policy,  highlights why the acquisition of FitBit by Google raises such unease for the future of the Health Tech sector. It considers remedies for regulatory intervention, and calls on the European Commission to remain a driving force in the enforcement and creation of merger policy in the digital era. 

“This deal enables Google to strengthen its ability to gather and exploit health data, and undermines the ability of rivals to do so, in order to leverage its power into health and insurance markets”

Google’s dominance does not generate ordinary market power: its essence is that of a discriminating monopolistic presence across multiple markets, capable of harming consumers through personalisation of advertising and by enabling targeted product offerings, accompanied by a record of leveraging its power both into adjacent markets and to protect its existing dominance. This discriminatory power, supported by Google’s unmatched data, is the dimension of the proposed acquisition of Fitbit that creates the greatest concern. 

Google’s interest in this deal is not in Fitbit’s wearable itself, but in the wearable as a source of valuable complementary health metrics, which Google can correlate with an enormous wealth of other data. Gathering health data that can be spliced with its existing data assets adds a whole new level of concern around using a massive informational advantage to profitably exploit consumers and put employees at risk. In particular, combining health and other data allows for personalisation of offers in fields such as insurance, health, and even employment, that is incomparable and, as the authors stress, “absolutely not benign or efficient”.

The merger also further cements Google’s already dominant position in online advertising markets. Correlating health data could well be valuable to pharmaceutical or health product suppliers interested in targeted advertising, and would enable Google to extract further value from them in search advertising. Google’s promise to “not to use Fitbit data for advertising” is also hardly reassuring given their track record and the difficulties involved in monitoring such an assurance.

“Fitbit is one more essential piece in this puzzle: it provides the capability of harvesting health data directly, and at the same timef undermining rivals’ progress. There can be little doubt that the opportunity available in health tech dwarfs the size of the wearables market.”

What are the remedies?
While there are some remedies that can mitigate the risks to competition and long-run consumer harm, they are complex, at risk of circumvention in multiple dimensions, and will continue to require constant monitoring. The consequences of failing to prevent a harmful combination in digital markets have been documented time and time again, the only appropriate approach to merger control in this space is to prevent harmful mergers from happening. Putting a break on Google’s ambitions in this space is, in the view of the authors, the price one should be willing to pay for the prospect of more innovation over time from others, as well as less consumer exploitation. A bad merger with bad remedies remains a bad merger for society


You can also read a Vox Column here >>>

Find a full list of CEPR's Policy Insights here >>>