(Source: European Commission)
“Check against delivery”
Today, the Commission has published the preliminary findings of its competition inquiry into the consumer “Internet of Things”.
Sector inquiries help us identify potential competition concerns in markets where early intervention may be needed. This is all the more important in markets with strong network and scale effects that are growing and developing.
The consumer Internet of Things is a relatively new sector and it is booming. For example, more than half of European citizens watched their favorite shows on a smart TV in 2020. Revenues from smart home appliances are predicted to double and reach almost 40 billion EUROS by 2025.
It is precisely because the Internet of Things is developing fast that we need to ensure it does so in a competitive way. All firms in this growing sector should have the same opportunity to innovate and bring new products and services to market. We saw indications that some practices that we know too well may lead to tipping and to the emergence of gatekeepers. This is why we launched our sector inquiry less than a year ago. And from the preliminary results published today, it appears that our concerns are shared by many players.
It is too early to say but if some practices are confirmed, this could lead to new competition cases being opened in the future.
So far, the results of the sector enquiry confirm the central role of operating systems and voice assistants in the interconnection of different smart devices and services. Respondents flag that this may give providers of operating systems and voice assistants opportunities to engage in behaviors that negatively affect competition.
In the EU, Google Assistant, Amazon’s Alexa and Apple’s Siri are the leading voice assistants. In addition, Google, Amazon and Apple provide the main operating systems for smart home and wearable devices, they offer digital services and they manufacture smart devices.
In practice, these companies determine how the different devices and services can communicate and inter-operate with one another. In addition, voice assistants learn a lot about their users. Smart devices and Internet of Things services generate a huge amount of data about what we do in our homes.
Four main concerns have been reported in the enquiry so far. First, there can be restrictions on multi-homing; second, there are concerns about default settings and pre-installation on voice assistants; third, there are concerns about data accumulation and finally, there are interoperability concerns.
Let me describe these four points in more detail.
First, there are concerns about attempts to restrict the number of voice assistants accessible on smart devices. For example, this means that producers of smart devices can be prevented from installing a second voice assistant on one device. If this was indeed the case, the consumers’ choice would be restricted.
Second, there are concerns that voice assistant providers could take over the direct relationship with users. The reason is that users control and access their devices and services via the voice assistant. Voice assistant providers can then promote their own services or the services of third-parties of their choice. This can be done with default settings or giving prominence to specific services.
Third, voice assistants collect enormous amounts of data. This could be data about the average temperature measured in your kitchen, the time you get up in the morning, your favourite newspaper, or even how you like to drink your coffee. Having access to this data gives big advantages, especially as voice assistants accumulate data from different devices and services.
Finally, there seems to be limited interoperability between products, services and technology of different providers. This is partly due to the lack of common standards and the prevalence of proprietary technology. The limited interoperability can lock-in consumers into using devices and services of mainly one or a few providers. This reduces their choices and possibilities to easily switch raising concerns for fair competition.
Our preliminary findings are based on the input received from more than 200 companies that responded to our questionnaires and shared with us more than one thousand agreements. We had responses from companies of all sizes, from Europe, Asia and the United States. These companies offer smart devices such as smart speakers, smart TVs, smart coffee makers, fitness trackers or smart watches. We also received input from companies offering voice assistants or digital services like music and video streaming.
We are very thankful for the cooperation with all these businesses and the information already submitted. For our final report, we still need to better understand the extent of the concerns. This is why today, with the publication of the preliminary findings, we are launching a public consultation. It will run until the first of September.
We invite all businesses, interested citizens and stakeholders to share with us their feedback on the preliminary report. All this information will provide guidance to our future enforcement activity and feed into the Commission’s regulatory work. Many of the issues identified so far, such as access to data, access to users or barriers to switching, are familiar themes from our enforcement work in digital markets.
In fact, a number of the practices reported in the enquiry feature in the Do’s and Don’ts of the Commission’s proposal for the Digital Markets Act. With today’s preliminary findings and the future work to be done in the coming months, the sector enquiry will certainly contribute to the debate on the scope of the Digital Markets Act.
Through competition enforcement and complementary legislative action, we aim at creating a digital economy that works for everyone. To do so, we must make sure that our digital markets, including the consumer Internet of Things, are open and fair for consumers, with room for businesses of all sizes to innovate and grow.
This is why we look forward to the further engagement from businesses, citizens and all interested stakeholders in the coming months.