Internet of Things: How Competition Scrutiny Could Lead to Other Policy Responses

Taso Advisory
Jul Wed, 2020
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  • The European Commission has launched a sector inquiry into anti-competitive practices used in consumer-related Internet of Things (‘IoT’) technology. Its work focuses on wearables, smart speakers, and other home appliances, as well as services like streaming which are accessed via IoT devices. 
  • EU sector inquiries are thorough exercises which can lead to formal competition investigations or contribute to other policy responses before their conclusion. 
  • The European Commission has already indicated that it has witnessed anti-competitive practices and the inquiry will shine light on a sector with vast potential for business growth but also room for policy interventions.

THE SCOPE OF THE EUROPEAN COMMISSION’S WORK

The European Commission’s Directorate General for Competition (‘DG COMP’) is entitled to carry out sector inquiries if they witness anti-competitive practices or see risks of breaches taking place. In announcing its work, DG COMP provides examples of market distorting behaviour that it has observed, including: restrictive data access policies, limited interoperability between ecosystems, forms of self-preferencing and the use of proprietary standards to block market entrants.

The scope of DG COMP’s work centres around ecosystems that weave IoT devices together with large tech giants and their additional services. Think of Amazon/Alexa, Google/Google Home, Apple/HomePod and the shopping or streaming services that each company offers within their ecosystems. Other smart home appliances like fridges and TVs are also included in the scope.  

Data forms a central element of the inquiry which acknowledges how digital companies adapt their products and services based on consumer behaviour (and in some cases anticipated behaviour). Here the European Commission appears most interested in how anti-competitive practices can restrict market access for competitors, harm consumers and lead to dominant ecosystems.

THE IMPLICATIONS

The importance of IoT devices for the future digital economy means that the European Commission is unlikely to take a transitory glance at this sector. The Commission notes the growth potential for IoT and will want to ensure that its development is not controlled by a handful of tech companies.

Sector inquiries are thorough and can unearth all sorts of information leading to extensive implications for corporates even before the conclusion of DG COMP’s work. For example, an inquiry into e-Commerce which began in 2015 led to bans on the use of certain most favoured nation clauses and eventually led to the introduction of the ‘Platform to Business Regulation’ and by extension elements of the upcoming Digital Services Act

The inquiry also adds to the broader regulatory and political interest for the development for the sector. For example, the European Telecommunications Standards Institute (ETSI) recently published cybersecurity standards for consumer devices, focusing on 13 provisions to improve the resilience of consumer IoT devices from attack. Furthermore, wearables and smart devices are already in the crosshairs of DG COMP as it is scrutinising the takeover of smartwatch producer Fitbit by Google (Alphabet) for potential competition concerns. 

The scope for engagement with the inquiry is not limited to smart watches and speakers. IoT is a nascent sector which raises complex policy questions that have yet to be fully appreciated, like ensuring consumers get clear information when shopping through smart speakers or providing interoperability when deciding between two replacement smart fridges. The potential for corporate engagement covers any IoT operation that includes a consumer facing element, including device manufacturers, software developers or service providers.

NEXT STEPS

  • Q3 2020: The Commission will collect feedback from stakeholders in the coming weeks and corporates who have not been contacted yet should reach out directly.
  • Q2 2021: An interim report is expected from the European Commission.
  • Q2/Q3 2022: A full report is expected from the European Commission.
  • Ongoing: Policy responses, whether formal competition investigations or other policy action, can take place before the inquiry’s conclusion.

Taso Advisory supports clients with the political, policy, and regulatory challenges they face, and helps them to design and deliver credible responses to mitigate risks and seize opportunities. We make complex challenges simple, give actionable advice, and support in delivery. You can find out more about what we do and who we work with.

For a confidential discussion about how we can support your public policy and public affairs work in relation to the IoT sector, and keep you informed of developments, please get in touch by emailing [email protected] or by calling +44 (0) 20 3488 4489.

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