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Smart Consumer Devices at the Centre of the EU Internet of Things (IoT) Sector Inquiry

The European Commission published the preliminary results of its IoT sector inquiry and tech giants come under pressure for the alleged “gatekeeper” role that their voice assistant apps (such as Siri, Alexa, and Google Assistant) play in smart homes and with other connected consumer devices. The EU sector inquiry has so far collected over 200 responses from IoT market players from across the world.

The key issues highlighted by the European Commission include the following:

  • Contractual tying, exclusivity terms, preferential placement

  • First mover advantage from services being pre-installed, whether on own devices or through contractual arrangements on, for example, smart TVs and their remotes

  • Use and sharing of data — the European Commission highlights “very broad rights” over data generated by connected devices

Many of these concerns are familiar and echo the issues raised in recent and ongoing EU and national antitrust investigations into big tech companies.

A sector inquiry is not a probe into individual conduct and alleged wrongdoing. It is an information gathering exercise (pursuant to Article 17 of EU Regulation 1/2003) where “the rigidity of prices or other circumstances suggest that competition may be restricted or distorted within the common market.” However, it is a powerful tool for the European Commission to put the spotlight on potential sector-wide competition issues and it often spurs into follow-on individual investigations. Previous EU sector inquiries included energy, telecoms and e-commerce, amongst others. In all of these sector inquiries, the European Commission has subsequently opened individual investigations against specific companies.

What is potentially different this time is the European Commission pushing a new piece of legislation — the Digital Markets Act (DMA) — that could resolve many of the concerns flagged in the sector inquiry’s preliminary report. That DMA (if adopted) will prevent digital markets “gatekeepers” from adopting a list of black-listed conducts, including “walled garden” operating systems, data accumulation, default settings, barriers to switching and the pre-installation of apps and services.

The prohibitions apply to a limited set of digital services known as “core platform services,” which include app stores, social networks and instant messaging apps (called “Number-Independent Interpersonal Communications Services” using the definition contained in the new EU Electronic Communications Code). However, voice assistants are not explicitly in the scope. This does not necessarily mean the DMA will not apply to smart consumer devices. The definition of core platform services is broad and some studies have already estimated that it could include many false positives, such as large cloud computing providers. For example, the definition includes “online intermediation services” and this may arguably catch a voice assistant app. Moreover, the DMA is still subject to amendments by the EU co-legislators (European Parliament and Council) and some lobbying groups are pushing to have voice assistants covered by the scope of the DMA explicitly.

There is no set timetable for the adoption of the DMA but it could happen as soon as the first half of 2022, just as the European Commission might be ready to publish the final version of its findings in the IoT sector inquiry. By then, the sector could be on the cusp of profound changes.

Next Steps: public consultation will now follow the publication of the Preliminary Report. The public consultation will run for a period of 12 weeks until 1 September 2021.

© Copyright 2021 Squire Patton Boggs (US) LLPNational Law Review, Volume XI, Number 169
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About this Author

Francesco Liberatore Competition Attorney Squire Patton Boggs London, UK & Brussels, Belgium & Milan, Italy
Partner

Francesco Liberatore advises clients on all aspects of the application of competition law, in particular in technology driven and digital economy sectors. His experience also focusses on communications law and he coordinates the firm’s EMEA Communications Practice.

He regularly represents clients in investigations before regulatory and competition authorities, as well as managing internal investigations, dawn raids and counseling on compliance issues and various commercial agreements. Francesco handles merger control due diligence and filings, as well as coordinating...

44 207-655-1505
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