On January 20, 2022, the Commission published its final report (the “Report”) in the consumer Internet of Things (“IoT”) sector inquiry. The Report identifies antitrust concerns relating to consumer IoT, and sets out policy implications stemming from these concerns.
IoT products are available in both industrial and consumer contexts. Consumer IoT products—an industry due to grow to a value of over €400 billion by 2030—are already prevalent in houses, cars, and pockets in Europe. The Commission launched a sector inquiry into consumer IoT in July 2020 to examine, notably, barriers to entry, the role of standard-setting, and interoperability and data concerns.
The inquiry focused on consumer IoT and, in particular, on smart home devices, wearable devices, consumer services accessible via such smart devices (e.g., music, fitness, or search services), and voice assistants, “the fastest developing interface” through which customers can access such services on smart devices, such as those provided by Amazon (Alexa), Google (Google Assistant), Apple (Siri).
On June 9, 2021, the Commission published its preliminary findings, focusing on the gatekeeping role of voice assistants and operating systems providers. The final Report published last month confirms these preliminary findings.
Antitrust concerns with consumer IoT
The Report highlights five key antitrust concerns in consumer IoT:
Lack of interoperability. The Report finds that because Amazon, Google, and Apple are the leading providers of voice assistants and operating systems, they can determine independently the requirements for interoperability through their standard terms and conditions, technical requirements, and certification processes. The Report also expresses a concern that these companies can use this power to preference their own smart devices and consumer IoT services by limiting the functionalities of third parties through technical constraints. These concerns are allegedly exacerbated by high barriers to entry, which the Report finds are driven notably by the prohibitively high cost of the technology investment required to build a voice assistant capable of matching these vertically integrated companies.
Unilateral standard-setting. The Report considers that the leading providers of voice assistants and operating systems could potentially impose new technology standards. This could lock in users and threaten inter- system communications, which would in turn fragment the technology landscape and therefore negatively impact the growth of potential consumer IoT segments.
Concentration of valuable data. Through the central position of voice assistants, these leading providers allegedly have access to large amounts of data. The Report claims that these companies could limit third parties’ access to data, while using their own access to provide themselves an advantage in adjacent markets.
Tying/exclusivity. The Report alleges that certain companies may engage in the pre- installation, default-setting, and prominent placement of their own voice assistants on their operating systems. The Report also identifies concerns regarding practices of only licensing voice assistants together with other software, as well as concerns regarding attempts to secure exclusivity of a given voice assistant on a given device or service.
The role of leading providers of voice assistants and smart device operating systems as intermediaries between users and consumer IoT devices. The Commission formulates multiple concerns flowing from the intermediary role of voice assistants and operating systems, such as other companies’ loss of brand recognition and a direct relationship with customers, as well as the leading providers’ control over valuable data and technical support.
A sector inquiry does not necessarily imply antitrust enforcement is inevitable. That said, the Report suggests the Commission may be preparing for enforcement action in these areas for three reasons. First, the Commission’s recent trend following sector inquiries—if the energy, pharmaceuticals, and e-commerce sector inquiries are anything to go by—is to use the sector inquiry findings as a springboard for multiple cases. Second, the theories of harm outlined above are, according to Commissioner Vestager, “practices we know too well” that dovetail with the Commission’s enforcement priorities. Third, the companies name-checked in the Report—Amazon, Apple, and Google—are all already under scrutiny by the Commission.
Another open question is whether the Commission will use traditional competition law tools to address the Report’s concerns, or whether it will seek to resolve them through the Digital Markets Act. Current proposed amendments to the draft Digital Markets Act—which aims to address concerns of the sort identified in the Report—would bring voice assistants into the scope of the Act.
Regardless of the enforcement toolbox the Commission ultimately relies upon, the Report serves as another reminder of the Commission’s continued focus on the conditions of competition in digital markets.
Editors: Conor Opdebeeck-Wilson and Thorsten Schiffer
 Report from the Commission to the Council and the European Parliament, Final report – sector inquiry into consumer Internet of Things, SWD (2022) 10 final of January 20, 2022 (“IoT Final Report”). See also Commission staff working document accompanying the document Report from the Commission to the Council and the European Parliament, Final report – sector inquiry into consumer Internet of Things, COM (2022) 19 final (“Working Document”).
 IoT Final Report, para. 2.
 Working Document, p. 13.
 Margrethe Vestager, EVP Vestager on the initial findings of the Consumer IoT, Brussels, June 9, 2022, SPEECH/21/2926.