Antitrust Law Daily EC launches antitrust investigation into Internet of Things consumer sector
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Thursday, July 16, 2020

EC launches antitrust investigation into Internet of Things consumer sector

By Peter Reap, J.D., LL.M.

The sector inquiry will focus on consumer-related products and services that are connected to a network and can be controlled at a distance.

The European Commission (EC) announced today the launch of an antitrust competition inquiry into the sector of Internet of Things (IoT) for consumer-related products and services in the European Union. The sector inquiry will focus on consumer-related products and services that are connected to a network and can be controlled at a distance, for example via a voice assistant or mobile device. These include smart home appliances and wearable devices. The EC hopes to enhance its enforcement of competition law in this sector through knowledge about the market gained through the inquiry.

Despite the relatively early stage of development of the sector for the IoT for consumer-related products and services in the European Union, the EC noted that there are indications that certain company practices may structurally distort competition. These relate to restrictions of data access and interoperability, as well as certain forms of self-preferencing and practices linked to the use of proprietary standards. IoT ecosystems are often characterized by strong network effects and economies of scale, which might lead to the fast emergence of dominant digital ecosystems and gatekeepers and might present tipping risks. The Commission will gather market information to better understand the nature, prevalence and effects of these potential competition issues, and to assess them in light of EU antitrust rules.

In the coming weeks, the Commission will send requests for information to a range of players active in the IoT for consumer-related products and services throughout the EU. The sector inquiry will cover products such as wearable devices (e.g. smart watches or fitness trackers) and connected consumer devices used in the smart home context, such as fridges, washing machines, smart TVs, smart speakers, and lighting systems. The sector inquiry will also collect information about the services available via smart devices, such as music and video streaming services and about the voice assistants used to access them.

If the Commission identifies specific competition concerns as a result of the inquiry, it could open case investigations to ensure compliance with EU rules on restrictive business practices and abuse of dominant market positions. The inquiry complements other actions launched within the framework of the Commission's digital strategy, in particular regulatory initiatives related to artificial intelligence (AI), data and digital platforms. The IoT inquiry follows a number of other antitrust sector inquiries carried out in recent years in fields including financial services, energy pharmaceuticals, and e-commerce

Timeframe of inquiry. The Commission expects to publish a preliminary report on the replies for consultation in the spring of 2021. The final report would follow in the summer of 2022.

Vestager statement. Executive Vice-President Margrethe Vestager, in charge of competition policy, said: "The consumer Internet of Things is expected to grow significantly in the coming years and become commonplace in the daily lives of European consumers. Imagine a smart fridge making your grocery list, you pulling up that grocery list onto your smart device and order a delivery from a shop that sends the groceries to your door that unlocks automatically with a word. The possibilities seem endless. But access to large amounts of user data appears to be the key for success in this sector, so we have to make sure that market players are not using their control over such data to distort competition, or otherwise close off these markets for competitors. This sector inquiry will help us better understand the nature and likely effects of the possible competition problems in this sector."

In her separately released speech, Vestager expounded on the details the EC is seeking: "We're asking for input from companies that sell smart home appliances, wearables and voice assistants, as well as businesses that offer services that you can access through these devices. In all, we're sending questionnaires to about 400 companies, big and small, based in Europe, Asia and America. We're asking about the products they sell, and how the markets for those products work. We're asking about data – how it's collected, how it's used, and how companies make money from the data they collect. And we're asking about how these products and services work together, and about possible problems with making them interoperable." She added that the inquiry "sends an important message to powerful operators in these markets that we are watching them – and that they need to do business in line with the competition rules."

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