Key findings of preliminary report
On 9 June 2021 the European Commission published its preliminary report as part of its inquiry into the consumer Internet of Things (IoT) sector. The report confirms the rapid growth of this sector but also identifies potential concerns put forward by the respondents to the sector inquiry.
The scope of the sector inquiry encompasses the "consumer IoT", which is a growing sector consisting of consumer products that are connected to a network and can be controlled at a distance through, for instance, a mobile device or a voice assistant. The European Commission is concerned that the behaviour of some companies in this sector could structurally distort competition within and for the sector.
The European Commission wants to use the sector inquiry to further its understanding of:
- the sector;
- its competitive landscape;
- emerging patterns; and
- possible issues surrounding competition.
In preparing the preliminary report, the European Commission drew on input from over 200 consumer IoT companies, including large corporations and small and medium-sized enterprises. The European Commission also examined around 1,000 agreements passed to it by these companies. Companies contacted by the European Commission for evidence include those participating in the consumer IoT devices (also known as "smart devices") markets (eg, wearable devices and connected consumer devices markets), as well as companies that provide services available through smart devices (eg, music streaming services). The European Commission also consulted relevant industry and standard-setting organisations.
Key findings of preliminary report
The preliminary report suggests that consumer IoT devices are becoming increasingly popular. General-purpose voice assistants are playing an increasingly significant role in the customer experience of the IoT owing to their ability to allow connectivity of all of the elements of different consumer IoT devices and services in a single, integrated environment. That being said, smart mobile applications remain the most popular user interface to access consumer IoT devices and services; the operating systems that provide a platform to these mobile applications are key players in the operating system market for smart mobile devices.
The preliminary report says that due to the popularity of the voice assistants and operating systems mentioned above, for a large number of respondents, the inability to compete with the main players is an obstacle to developing new products and services. Another significant obstacle to expansion in the consumer IoT sector includes the cost of the technology investment required. Most respondents said that their business model focused on harnessing the existing and leading general-purpose voice assistants to access their consumer IoT devices and services.
The preliminary report examines standards and the standard-setting process in the development of technologies used by consumer IoT devices and services. The preliminary report says that although standardised technologies dominate at the basic enabling-technology level (eg, Wi-Fi), formal standards are not in a position to compete with the highly prevalent proprietary technologies of the leading operating systems and voice assistants for technologies such as:
- user interfaces;
- application layers; and
- device definitions.
The preliminary report also highlights the collection and potential monetisation of vast amounts of data by consumer IoT devices as an emerging issue.
The preliminary report highlights several potential areas of concern from a competition perspective, including in relation to:
- pre-installation, default setting and prominence;
- exclusivity, concurrency and tying concerns in relation to voice assistants;
- standardisation and interoperability; and
The European Commission has launched a public consultation to gather views on the preliminary report's findings and collect additional information that is relevant to the sector inquiry. The public consultation will run until 1 September 2021. The European Commission is expected to publish its final report on the consumer IoT sector during 2022. Its findings will no doubt prove useful in shaping the European Union's proposed Digital Markets Act.
For further information on this topic please contact Charlotte Walker-Osborn or Ros Kellaway at Eversheds Sutherland by telephone (+44 20 7919 4500) or email ([email protected] or [email protected]). The Eversheds Sutherland website can be accessed at www.eversheds-sutherland.com.