Commission initiates sector inquiry on the consumer internet of things

On 16 July 2020, the European Commission adopted a decision initiating a sector inquiry on the consumer internet of things, i.e. devices used by consumers that are connected to a network and are used in the smart home context, such as fridges, washing machines, smart TVs, smart speakers and lighting systems.

By way of background, sector enquiries are investigations into a certain sector (which includes sending out requests for information to numerous companies and organisations) carried out by the European Commission when it considers that competition in such sector is not working as it should be. This apparent malfunctioning of a sector may be the result of structural issues that require regulatory intervention to solve and/or breaches of competition law that require antitrust investigations to solve. The most recent sector inquiry regarding e-commerce has resulted in a number of investigations and is likely to have an impact on the on-going review of the Vertical Block Exemption Regulation.

The announced sector inquiry regarding the consumer internet of things is part of the digital strategy that was adopted by the European Commission in 2018. It will cover products such as wearable devices (e.g. smart watches or fitness trackers) and connected consumer devices used in the smart home context, such as fridges, washing machines, smart TVs, smart speakers and lighting systems. The European Commission will also collect information about the services available via smart devices, such as music and video streaming services and about the voice assistants used to access them. In its decision, the European Commission refers in particular to the importance of data in this sector, considered to allow companies to predict consumer behaviour and to be a key input to artificial intelligence.

The European Commission indicates in this respect that internet of things ecosystems are often characterised by strong network effects and economies of scale that could result in the emergence of dominant digital ecosystems, dominant gatekeepers and tipping risks. The European Commission is therefore particularly interested in discovering:

• practices relating to restriction of data access;
• practices relating to restriction of interoperability;
• practices relating to certain forms of self-preferencing; and
• practices relating to propriety standards.

Companies and organisations concerned can expect to receive requests for information in the weeks to come. In addition, companies and organisations not receiving a request for information may equally consider submitting their views to the European Commission. They should closely monitor this sector inquiry as it may impact them as well (e.g. companies that are planning to become active in the internet of things). The European Commission intends to have a preliminary report ready in the spring of 2021 to be finalised in the summer of 2022.

Should you need assistance, have any further questions regarding this client alert or competition law generally, please do not hesitate to contact any of the individuals listed or your usual contact at Simmons & Simmons.