Google faces a fine of up to $400m if it takes over Fitbit before the Australian competition regulator completes an investigation into the transaction.
The Australian Competition and Consumer Commission (ACCC) on Tuesday rejected an offer from Google to enter into a court-enforceable undertaking limiting the way it would use data gleaned from the wrist-worn fitness tracking devices.
The watchdog’s chair, Rod Sims, said the ACCC would instead continue to investigate the transaction and aimed to make a decision by 25 March.
Last month, Google agreed to buy Fitbit for US$2.1bn (A$2.8bn) in cash in an acquisition that would give the search group access to 27 million users of the monitoring wristbands.
The ACCC decision puts it at odds with the European Union, which last week decided to accept a similar undertaking, but is in line with concerns expressed by the US Department of Justice in the home jurisdiction of both Google and Fitbit.
Sims said the ACCC was worried about “what’s termed vertical foreclosure, which means that Google may have the incentive, and the ability, to harm competitors if it gets hold of Fitbit by just making it harder for them to interface with Android devices”.
“It could, as I say, have the ability and incentive to discriminate against other players and so the result of that would be you’d have in wearables an Apple device and an Android device – you get the same duopoly that you’ve got in apps, for example, and you’ve got in mobile.”
Sims said that if the US justice department approved the deal and Google pushed ahead with the Fitbit takeover without getting ACCC approval, the regulator would consider whether it had any legal powers it could use to block the deal.
If it could not block the deal, the ACCC would consider bringing legal action for breaching competition law. That would be punishable by fines of up to 10% of Google’s estimated Australian turnover of about $4bn a year.
“The penalties could be very large,” Sims said. “So, you know, we have a range of options here and we’re doing the best we can with the options we’ve got in front of us.”
A Google spokesman said the company was disappointed by the delay but “we will continue to engage with the ACCC to answer their questions”.
“We have been working constructively with regulators around the world to close the acquisition of Fitbit and to start building new helpful devices for users,” he said in a statement. “This deal has always been about devices, not data, and we are committed to protecting Fitbit users’ privacy.”
The move is not directly related to ACCC action against Google and other tech companies over search advertising and the use of news content without payment to media companies.
However, it comes amid increasing concern from regulators and governments around the world about the power wielded by companies such as Google and Apple, which together already control the mobile phone and app markets.
Sims said Australian law meant the ACCC faced a high bar in blocking mergers but it was not too late to disrupt the emerging Google-Apple duopoly.
“I know one of the main criticisms of the ACCC is we do not block mergers. I just have to point out, it is tricky to do so,” he said.
“I guess the second thing I’d say is that if you look at the recent actions in the US, you look at the three consumer actions we’ve got here, you look at the legislative responses in Europe, there’s a lot happening. So I don’t think it’s too late at all.”