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> Alternatively, on devices running Android 8.0 (API level 26) and higher, you can use the CompanionDeviceManager to perform a scan of nearby companion devices on behalf of your app without requiring the location permission. For more on this option, see Companion device pairing.
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The location permission wouldn't work if apps could just look at nearby cell towers, Wi-Fi networks and Bluetooth devices without the permission. Being able to detect nearby Bluetooth devices allows location tracking. These apps COULD use Bluetooth scanning to track users...
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The app needs to be granted access to use the Play Services contact tracing API. Play Services needs to have location access to scan nearby, which it does by default. The app needs location to be enabled for the device. It's not requesting location access. If the user already...
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... has location enabled for the device, they're only going to see a prompt about contact tracing access. The reason they need to enable location access for the device is because Play Services is doing a form of location tracking but then only providing the app with limited info.