European Commission expresses competition concerns with consumer Internet of Things sector

The European Commission has published its final report in its inquiry into the consumer Internet of Things (IoT) sector, confirming its preliminary concerns (as reported in our previous Lens post).

In the words of Executive Vice-President Margrethe Vestager (the EC's Commissioner of Competition), the consumer IoT sector is characterised by “high barriers to entry, few vertically integrated players and concerns about access to data, interoperability or exclusivity practices amongst others”. Based on feedback from over 200 companies active in the consumer IoT sector (and 26 submissions from other stakeholders), the report highlights in particular:

• Barriers to entry / expansion as a result of the high costs of technology investment (particularly for voice assistants) and difficulties in competing with vertically integrated companies (e.g. Amazon, Apple) that have their own digital ecosystems within and beyond the consumer IoT sector.
• Exclusivity / tying practices relating to voice assistants e.g. requiring customers to purchase other types of software / applications alongside voice assistants.
• The scope for voice assistants and smart device operating systems to influence consumers and control customer relationships (for example, through self-promotion or promotion of certain third parties)
• The extensive access to user data that voice assistant providers have – allowing them to improve their market position and to leverage more easily into adjacent markets.
• The lack of interoperability in the consumer IoT sector due to the prevalence of proprietary technology – with a few providers of voice assistants and operating systems considered to unilaterally control interoperability and integration processes.

While the sector inquiry has now completed, the EC has been clear that the information it has gathered in the context of the inquiry could lead to standalone enforcement action (e.g. into potential anticompetitive activity) based on a case-by-case assessment; while more generally, the EC will also take into account the report’s conclusions as part of the ongoing debate around proposals for the Digital Markets Act.