CLIP of the month: Internet of Things sector inquiry

28.08.2020

This month’s CLIP is the decision of the European Commission to begin a sector inquiry for consumer Internet of Things related products and services.  The decision was adopted in July and as explained in the accompanying press release, the Commission is currently collecting information from a range of companies.  A preliminary report on the consultation responses is due in the spring of 2021 before a final report in the summer of 2022.

The decision notes that by the end of 2019, the total number of smart home devices across the EU was approximately 108 million, and this is expected to reach 184 million devices by 2023.  A smart home device is interpreted broadly to cover any device used by a consumer that is connected to a network and used in a smart home context, e.g. fridges, washing machines, TVs, speakers, and even voice-activated lighting systems. The inquiry will also consider wearable devices such as smart watches, and will collect information on services such as music and video streaming services that are available on smart devices.  The Commission also intends to collect information on the voice assistants used to access these services.

The Commission is particularly interested in the flow of data through these products and services.  It notes that companies are able to observe consumer habits, trends, and even states of health, enabling some prediction of consumer behaviour, and says that this data is key to the development of artificial intelligence.  We have written before about the emerging importance of data to the Commission in the context of platforms (here) and mergers (here). The Commission warns that there are already indications of potential structural distortions of competition, particularly relating to restrictions of data access and interoperability, self-preferencing, and standards.  It is concerned about the potential for markets to tip.  The Commission opened several new investigations after its sector inquiry into e-commerce concluded in 2017, and so it would not be surprising for the same to happen here, particularly considering how rapidly the markets for connected devices are expected to develop and become of huge importance to consumers.

This will be the first Commission sector inquiry to take place since the UK has left the European Union.  It is therefore an early opportunity for divergence between the Commission and CMA over the approach to regulating data, and technology companies more generally.  Although UK companies that don’t operate in the EU might be grateful to avoid dealing with detailed requests for information from the Commission, the CMA is also interested in these topics, and separate action by the CMA to investigate these markets also seems possible. Regardless of what happens in the UK, for anyone involved in this sector, the Commission’s inquiry will be worth keeping an eye on.

Matthew Hunt

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