It all sounds familiar. In a world of increasing connectivity, voice assistants such as Siri, Alexa and Google Assistant could become one of the main gateways through which consumers interact with the Internet of Things (IoT) and online applications and marketplaces. That creates a fear of leveraging and self-preferencing, similar to the concerns raised against Google Search, Google Android and Amazon’s Marketplace in the past.

So just another market with the same old problems and the usual suspects? Perhaps. But the impact of the constant flow of data through consumer IoT-related products and services on our daily lives and on our interactions with businesses of all kinds should not be underestimated.

The Preliminary Report: five groups of potential competition concerns for further inquiry

The use of consumer IoT products is increasingly becoming part of our everyday life. IoT products include smart TVs and games consoles – already common features of many homes – but may soon include smart fridges and cleaning devices – a tantalizing prospect for many.

Voice assistants play an important role in this growing space. They are quickly becoming a key way for consumers to access online applications (such as music streaming services and online marketplaces), to use and control smart devices and access consumer IoT services. They are also potentially the cornerstone of the “smart” homes of the future, allowing companies to establish interoperability and to build a smart home environment based on products from different manufacturers.

According to Statista, the global market for voice assistant devices is expected to double from 4.2 billion to 8.4 billion devices between 2020 and 2024. The leading providers of voice assistants in the EU are Amazon (Alexa), Google (Google Assistant) and Apple (Siri). Despite the growing popularity of voice assistants, mobile devices and their operating systems (Google's Android and Apple's iOS) remain to date the most used user interface to access online applications, smart devices and consumer IoT services. As such, mobile operating systems may also come to play an important ‘gatekeeping’ role in the consumer IoT sector.

To ensure fair competition remains in the fast growing IoT segment, the EC launched a sector inquiry last summer. On 9 June, the EC released its preliminary findings, singling out five main potential competition concerns that are focussed on the gatekeeping role of voice assistants and operating systems providers. The EC will explore these concerns in more depth in the second stage of its sector inquiry.

1. Lack of interoperability – would be gatekeepers? The EC is concerned that a handful providers of leading proprietary voice assistants and operating systems (Amazon, Google and Apple) are crucial for integration and interoperability of smart devices for consumer IoT. By creating their own consumer IoT ecosystems, centred around their proprietary technology, they allegedly ‘guard the gate’ through unilaterally governed terms and conditions, technical requirements and certification processes. In particular, the EC is concerned that they may use their rule-setting power to preference their own smart devices and consumer IoT services over those of independent competitors: limiting, for example, the functionalities of third-party smart devices and consumer IoT services through technical constraints, such as limited APIs, in comparison to their own smart devices.

2. Standard setting – the power of rule setting:  Beyond basic enabling technologies (such as connective standards like WIFI or Bluetooth), the EC is concerned that proprietary technologies of the leading providers of operating systems and voice assistants are setting the new technology standards. Although there are a number of active bodies seeking to ensure standards that ensure an open, independent and interoperable environment, the EC is concerned that the leading players in the consumer IoT sector are also involved in these initiatives and may impose their technology solutions. This, in turn, may hamper the willingness of other smaller companies to invest in collaborative innovation.
3. Extensive access to and concentration of valuable data: The pervasiveness of smart devices and consumer IoT services in users’ homes and personal lives is expected to increase the value of consumer IoT data. The EC is concerned that this will allow leading voice assistant providers to accumulate large amounts of data and potentially leverage these advantages into adjacent markets (the provision of other consumer IoT products and services). More specifically, the EC is concerned that the leading voice assistant providers, by virtue of their position in a consumer IoT system, can impose standard terms and conditions that limit data use for third parties, while reserving extensive data use possibilities for themselves: issues reminiscent of the Commission’s ongoing inquiries in the data space.
4. Exclusivity and tying practices: The EC is also concerned that the major players may be using default pre-installation and/or prominent placing of their voice assistants on brands of smart devices (such as Smart TVs and their remotes). Playing into the EC’s wider concern that digital voice assistants may be prone to “tipping” to a single provider. Moreover, in return for the often vital licence to a voice assistant’s operating system, device manufacturers have submitted that they face ‘package’ obligations, including having to source other types of proprietary software, technology or applications from the voice assistant provider; with the EC concerned that this may be closing down greater avenues for competition.
5. Voice assistants – sitting in the middle: Finally, voice assistants act as intermediaries between the user and the smart devices or consumer IoT services that are controllable and accessible through the voice assistant. This results in a multi-faceted concern on the part of the EC, namely that: it drives intermediation between business providers, including brand owners, and their customers (with uncertain effects) and accentuates the “power of defaults” as voice assistants often default to their own offering (or that of a commercial partner) or the in-house service, All of which plays into the EC’s wider concerns that the rise of consumer IoT may make smaller businesses ever more dependent on a new set of alleged potential gatekeepers.

Yet another episode in the EC’s ambitious quest to ensure fair digital competition, and not the end of the story

The EC does not have the power to adopt measures aimed at remedying a situation under investigation in a sector inquiry. However, the preliminary results of this consumer IoT sector inquiry will undoubtedly prove a very valuable source of information to further fuel both the EC’s ambitious antitrust and sector-regulation agenda. Commissioner Vestager has highlighted that the sector inquiry may well lead to targeted enforcement cases in the next years, mirroring a strategy that the EC has followed over the last decade following previous inquiries into the pharma and e-commerce sectors.

The results will also feed into the ongoing debates on the proposed Digital Markets Act, which is (meant to be) dealing within similar concerns, including interoperability, data accumulation, default settings, barriers to switching and the pre-installation of apps and services. Personal voice assistants are not (yet) specifically included in the proposed list of core platform services that is at the heart of the DMA. However, as part of the legislative process, some EU Member States and lawmakers are pushing to have voice assistants covered by the scope, with the sectoral inquiry potentially acting as a catalyst to drive their inclusion.

Across the Atlantic, Google and Amazon are also facing questions from US lawmakers regarding the security of consumer data, competition in the markets for smart home technologies, and the companies’ commitment to interoperability. At a hearing on 15 June, US Senator Richard Blumenthal captured the concerns as follows: "The Internet of Things threatens to become a vehicle for anticompetitive steps when these behemoths weaponize it. (…) We have here conflicts of interest where gatekeepers and operators of online platforms and marketers of their products have dual and conflicting roles, and it's an environment as a result that is rife with exploitation and appropriation every bit as serious as in the days of the oil well titans or the railroad behemoths even though it’s a lot less visible". It shows increasing convergence of views among enforcers on both sides of the Atlantic regarding the importance of ensuring that competition thrives in the IoT market.

What is next?

The EC has now opened a public consultation, seeking views from interested public and private stakeholders until 1 September 2021. On that basis, the IoT sector inquiry’s final report is expected for the first half of 2022.