Garmin/Firstbeat – the sports technology deal that’s more than meets the eye

Whilst Google’s acquisition of Fitbit (now referred to a Phase II investigation) might be the headline news, for those with an interest in wearable technology and competition, arguably equally interesting is Garmin’s completed acquisition of the consumer technology arm of Finnish company Firstbeat that was announced and completed on 30 June 2020. Due to Firstbeat’s limited revenues it appears that no mandatory filings have been triggered.

Garmin is the leading supplier of GPS devices for endurance sports (in particular running watches and GPS bike computers). Whilst Apple has undoubtedly become the pre-eminent supplier in the more mainstream smart watch space, it has not had the same penetration amongst athletes keen for a performance device first, and a fashion statement second. To illustrate this, at the 2017 Ironman Triathlon World Championships (a collection of the fittest amateur and professional swim-bike-run athletes in the world), Garmin devices accounted for 95% of both running watches and bike computers for those surveyed. The remaining devices were from Garmin’s leading competitors such as Suunto and Polar, tellingly not a single Apple device was used. More recently, it became apparent during Garmin’s recent outage, as a result of a ransomware attack, that somewhere in the region of 50% of activities uploaded to the leading sports social network Strava originated from a Garmin device.

Sports wearables have moved a long way from their origins as a humble stopwatch and heart rate monitor to incorporate GPS and sophisticated sports and wellness analytics such as sleep tracking, recovery tracking, pulse oxygenation, training load, lactate threshold, estimated finish times, VO2 Max and other complex performance metrics previously only available in the lab. Garmin traditionally developed many of these analytical features in-house but has more recently started licensing Firstbeat’s solutions for some of these features on its devices. For example, Garmin is in the process of switching from its own sleep tracking metrics to those provided by Firstbeat.

Firstbeat does not license its software exclusively to Garmin, instead it also licenses the same technology to a number of Garmin’s closest competitors in the sports technology market, including another Finnish company called Suunto. Suunto has placed significant reliance on Firstbeat’s technology in its more recent line-up of products as it seeks to compete with Garmin’s pre-eminence in the sports technology space.

From a competition perspective, the transaction could raise some interesting questions that might be scrutinised in a jurisdiction such as the UK where it might be possible to establish jurisdiction without reference to Firstbeat’s revenue.

In particular, there are two potential theories of harm that could be explored:

1.  An innovation theory of harm which would explore whether, as a result of the transaction, Garmin will have less incentive to innovate and independently develop new performance metrics in order to compete with Firstbeat and inter alia Suunto, which could have the consequence of reducing the number of companies with the capabilities to innovate in the sports technology space from three (Garmin, Firstbeat and Polar) to two (Garmin/Firstbeat and Polar); and
2. A foreclosure theory of harm which would explore whether, as a result of the transaction, Garmin might have an incentive and ability to self-preference new technologies to its own devices, in effect reserving the latest innovations for its own products and offering for license to Suunto (or other third parties) only older developments (or license such devices on less favourable terms). This could have the effect of limiting competitors’ ability to compete in the device market, thereby potentially enhancing Garmin’s already leading position in the supply of sports technology devices.

The antirust issue in each case is whether Garmin’s strength in the sports technology sector could be further enhanced and the range of cutting edge devices and analytics available to consumers could be reduced and/or prices could increase.

 It remains to be seen whether given Garmin’s position as the leading supplier of sports technology devices, the potential impact on consumers, and its recent focus on innovation and self-preferencing in the technology space, the CMA will intervene and dig a little deeper into the overlaps between the parties for the provision analytical software as well as examine Garmin’s intentions on licensing to third parties going forward.