Smart devices and digital voice assistants in the European Commission's sights

By Decision of 16 July 2020, the European Commission (the ‘Commission’) initiated a sector inquiry into the Internet of Things (‘IoT’) for consumer-related products and services in the European Union.

The sector inquiry is broad in scope: It covers all products and services that are connected to a network and can be controlled remotely. Specifically named are wearable devices (such as smart watches or fitness trackers) and ‘smart home devices’ (such as internet-connected fridges, smart TVs and washing machines). In the area of services offered through smart devices, the focus is on digital voice assistants and music and video streaming services.

The Commission’s antitrust concerns are mainly based on the extent and continuity of the flow of data that smart devices collect from consumers. Access to this data can play a key role in the development of market power and competitive structures not only in the IoT sector, but also, for example, in the development of artificial intelligence. Market participants should not abuse their control over this data to distort competition or otherwise exclude competitors from (newly arising) markets.

The sector inquiry also focuses on the relation between digital voice assistants and home hubs on the one hand and IoT devices on the other. There will be an examination of how interfaces and communication standards between the two sides arise and work. In particular, the Commission seems to be concerned that digital voice assistants could become ‘digital gatekeepers’ of the consumer-related IoT. As such, they could set market standards, thereby excluding potential competitors and hindering competition in innovation.

A sector inquiry is one of the investigative methods available to the Commission to pursue potential infringements of European antitrust law. Where an inquiry is launched, this does not yet indicate that an infringement exists. A sector inquiry is also not directed against any particular company. However, in the past, the Commission has used the findings gained in a sector inquiry to initiate individual proceedings. In addition, the results of sector inquiries often influence new legal acts of the European Union.

The Commission will first ask market participants for information. These requests may also be mandatory. A preliminary final report is currently planned for spring 2021.

Launching this sector inquiry is a further step for the Commission towards a “Europe fit for the Digital Age”, as the new remit of Executive Vice-President and Competition Commissioner Margrethe Vestager is titled (see our Competition Outlook 2020). It fits into a broad agenda of digital issues currently being dealt with by both the Commission and national competition authorities, such as Germany’s Federal Cartel Office (Bundeskartellamt), and should therefore be closely monitored.