A new sector inquiry has been launched by the European Commission into the Internet of Things for services and consumer-related products in the EU. EC is collecting extensive information to understand how systems of internet-connected, interrelated objects transferring data over a wireless network impacts businesses. This will assess whether anticompetitive practices are being carried out in the digital economy sector. The outcomes would range from recommending ante regulation to opening proceedings against companies.
IoT services and products are part of consumers’ lives and are tend to increase with technology advances and improved connectivity offered by 5G networks. The European Commission hopes to identify potential problems and take steps towards maximising the number of companies in the competitive space. Also, any law infringements need to be detected and stopped. The gathered information will be useful to parallel consultations of the commission on market regulation and gathering power. Let’s look at the inquiry in detail.
Table of Contents
- Sector Inquiries
- Scope
- Actions
- Next steps
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Sector Inquiries
Sector Inquiry is an in-depth review of a market with opportunities for stakeholder participation and working groups. A sector inquiry leads to the re-examination of industry practices and is a source of a major revolution in enforcement against distribution arrangements. It also influences the commission’s guidelines. The European Commission announced a sector inquiry linked to the Internet of Things on 16 July 2020. The inquiry is aiming to cover any consumer-facing system connecting virtual or physical objects to the Internet or other objects like wearables and smart home appliances. The commission believes voice assistants are the interface between products and consumers. The commission will also see the complete benefits of IoT in competitive and open markets. Although market tipping may be beneficial, the commission wants to act quickly before reaching tipping points. A new competition tool is needed to support the concept and key areas of concern. Data is the key competition ingredient in the wider technology sector. The commission is concerned with collecting vast amounts of data, misuse of data to cement market power, self-preferencing and interoperability between devices.
Scope
IoT is spread across a variety of devices ranging from wearables like fitness trackers and smartwatches to smart home appliances like lights and TV. The EC is looking for information on how voice assistants and music and streaming services such as Siri and Alexa access smart devices. The EC is sending out requests to EU, Asia and America based companies. The digital markets are global in nature and this might offer a look into activities worldwide. The inquiry’s scope appears to be narrow as it focuses only on digital space across industries like finance, pharmaceuticals and energy. The commission will invite comments from businesses selling smart devices and also services that access these devices. 400 companies are being sent questionnaires about their products, market dimensions, data collection/monetization, how services work to make problems interoperable. The questionnaire is designed according to the e-commerce inquiry experience and is lengthy. Deadlines are tight and the commission would follow up with companies that do not respond.
A final report will be published 2022 after a preliminary report in spring next year. The inquiry will identify potential law breaches and information that affects IoT initiatives. This is also a message to companies that the Commission is watching them. Areas which are the ‘speed of the essence ’ would see enforcement action before the inquiry is concluded. The commission can undertake announced inspections against companies which are familiar with sector inquiry to validate the internal processes are up to date. Individual investigations are supposed to start after sector inquiry has concluded as it did with the e-commerce sector. Thus, it is an important opportunity for companies to modify their existing business practices for verifying antitrust compliance.
Actions
As a part of sector inquiry, the Commission would be taking up the following actions:
1. Restricting data access– EC views large amounts of user data essential for success in the digital sector. The smart devices and voice assistant pose concerns as the huge data collected about big companies and user habits can be misused. Companies can benefit from the data to enter the market and take over. The EC is also looking at how data collected by smart devices are used, monetized and shared across devices and third parties along with data portability of devices.
2. Restricting interoperability– Interoperability is considered to be a prerequisite by EC to maintain competitive and open markets in the digital age. The concerns arise due to the incompatibility of smart devices across platforms. This limits the consumer to what the provider has to offer. Interoperability needs to be taken into account before deciding on buying even though home appliances do not need to be connected yet. The commission is looking for solutions for interoperability of smart devices and related services at both a contractual and a technical level.
3. Self-preferencing -EC is concerned that some players can lead from the front and direct users towards their services and products. The EC has tackled self-preferencing practices but hasn’t provided many details. The EC aims to look into practices of dominant companies leveraging their position to downstream other competitions.
4. Exclusivity– If some players become gatekeepers of IoT, EC fears that there could be exclusive deals between companies and users would be sent to certain preferred providers such as takeaway providers or online marketplaces. This can deter innovation and affect competition. EC aims to draw out exclusivity clauses to prevent users from multi-homing.
EC hasn’t issued details on practices linked to proprietary standards, it is expected to collect information on standard-essential patents (SEPs) and IoT technology standards, their creating process, relevance and join standard-setting organizations and licensed royalties. IoT technology is covered by SEPs and the EC will verify IoT makers are in the standard-setting process.
Next steps
Software developers, related service providers and smart device manufacturers come under concerned companies. The commission can require trade associations and companies to produce statements or documents as a part of sector inquiry. The Internet of Things market is growing and so is the demand of a Certified Internet of Things Expert and Certified Internet of Things Developer. If you wish to be one go for the Internet of things certification.
