Never mind that plenty of other big companies were already sharing data between products and that since then others have done the same, including Facebook recently, which can now share data with Instagram and the other way around.
One lawsuit filed over the policy was dumped by the judge who failed to see any actual harm coming from the changes. The lawsuit was dismissed over specific problems, i.e. the plaintiffs failed to prove that they had been harmed in any way by the changes.
But the decision also made it clear that, unless users can prove that the policy changes harmed them in any way, the court won't do anything against them, for better or for worse.
Most of the people got upset of what they imagined Google could do with the data. The truth is, Google already had plenty of liberties even without the changes.
The key is not what Google could theoretically do with your data, which is a lot just like any other web company, not to mention internet provider, government and so on, but what it does do with your data.
This doesn't mean that it's not happening, but the law doesn't work like that, it requires actual proof not just speculation. Common sense should probably do the same, though common sense so rarely enters the discussion in any of these "outrages."