Takeaways
- According to conversations with one practitioner, who represents third-party rivals to Fitbit before the DOJ, a Texas-led group of state attorneys general recently began surveying third parties about the deal. The group of states is conducting its investigation in cooperation with the DOJ, the practitioner said.
- According to this and another practitioner following the Fitbit/Google transaction, the DOJ has continued gathering further information from the merging parties in recent weeks as part of the agency’s second request for information.
- Both practitioners predicted that the merging parties are unlikely to fully comply with the DOJ’s second request before the end of the summer. Reports suggest the agency and state attorneys general could bring a separate monopolization lawsuit against Google by that time.
The U.S. Department of Justice has continued gathering further information from the merging Google and Fitbit in recent weeks as part of the agency’s second request for information, according to two antitrust practitioners following the companies’ transaction.
According to conversations with one practitioner, who represents several rivals to Fitbit’s smartwatch, a Texas-led group of state attorneys general has recently begun working with DOJ staff in its Fitbit deal investigation.
Staff for Texas Attorney General Ken Paxton contacted third parties, including the practitioner’s clients, in recent weeks and said they were in the initial phases of gathering information about the transaction at that time, the first practitioner said.
Texas regulators have mostly sought information on preliminary matters related to potential constraints to competition in the smartwatch industry if Google were to own Fitbit, according to the practitioner. Noting earlier interactions with DOJ staff who previously asked preliminary questions about the transaction and the smartwatch market, the practitioner speculated that these are signs the merging parties have yet to fully comply with the DOJ’s second request.
The practitioner added that the DOJ had not further contacted the practitioner’s clients since this last interaction, which the practitioner said was abnormal given the market presence of their clients. “That indicates to me that the companies still haven’t complied with the second request,” said the first practitioner, noting that it is typical for agency staff to circle back to third parties upon receiving additional information from the merging parties.
According to a former DOJ official, the Fitbit/Google transaction presents several unusual circumstances. First, with respect to U.S. investigations into Google’s monopolization, the Federal Trade Commission previously examined company business practices and resolved that investigation without a lawsuit. Historically, there has not been duplication between the FTC and DOJ in examining a company’s business, the former official said.
Second, with U.S. elections later this year, there are questions related to political motivations and whether Republican and Democratic state attorneys general can form a cohesive group that also collaborates effectively with the DOJ. The working assumption is that antitrust investigations are insulated from politics, the former official said. However, as evidenced by the Sprint/T-Mobile case, there is a possibility that political views may influence enforcement decisions.
Third, there is interplay between U.S. and E.U. antitrust enforcement agencies on Google matters. The European Commission, which historically has been much tougher on Google, is also investigating the Fitbit/Google transaction. Typically, the DOJ would proceed on its own schedule and not be affected by the European timeline, but as in the FTC/DOJ dynamic, it is not clear whether the DOJ will depart from its past practices, the former official said.
Last month, various reports suggested that the DOJ and a Texas-led group of state attorneys general planned to bring a monopolization lawsuit against Google by the end of the summer. In light of this possibility, it may be that the company holds off complying fully with the DOJ’s second request until a decision is made regarding the possibility of a monopolization suit, according to a third practitioner.
“If I were representing Google in this, I would want to know what the outcome of that [investigation] is going to be before complying,” said the third practitioner, who previously worked in antitrust cases involving the company. “A case like that would make me rethink my strategy for the Fitbit situation.” This practitioner added that a monopolization lawsuit against Google would likely last close to “a whole year” if brought to trial.
The practitioner, who previously worked on antitrust cases involving Google, noted that the company is “notorious” for being “flatfooted” in cooperating with government staff in investigations. As widely reported earlier this year, staff for the Texas AG had difficulties working with Google as part of its monopolization investigation.
The DOJ and state attorneys general began issuing civil investigative demands to Google as part of its monopolization investigation in August 2019, Google disclosed in
financial filings.
Google and Fitbit declined to comment. The companies
announced their transaction in November 2019. The companies most recently stated that they expect to close the deal by the end of 2020.
Reorg’s previous coverage of this transaction can be found
HERE.
--Matt Tracy and Ryan Lynch