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Statement by Executive Vice-President Margrethe Vestager on the launch of a Sector Inquiry on the Consumer Internet of Things

Met dank overgenomen van Europese Commissie (EC), gepubliceerd op donderdag 16 juli 2020.

Before getting to the topic of today's press conference, a few words on yesterday's annulment by the General Court on the Commission's 2016 decision finding that Ireland granted State aid to Apple through selective tax breaks. The court concluded that the Commission failed to establish to the necessary legal standard that Ireland's tax treatment gave Apple an economic advantage.

At the same time, the Court once again confirmed that Member States must set their tax laws in respect of EU law, including State aid rules. The Court also confirmed the Commission's approach to assess whether a measure is selective and whether transactions between group companies give rise to an advantage under EU State aid rules based on the so-called 'arm's length principle'.

We will decide on next steps once we have concluded our assessment of the judgment.

But one thing is clear - the fight against aggressive tax planning is a marathon and not a sprint, and it takes place on very hilly ground.

Our State aid enforcement work continues: if Member States give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the European Union. It also deprives the public purse and citizens of funds for much needed investment - the need for which is even more acute during times of crisis.

And we have to use all tools at our disposal to ensure companies pay their fair share of tax. We need to put in place the right legislation to address loopholes and ensure transparency. Just yesterday, the Commission adopted a new tax package to ensure that EU tax policy supports Europe's economic recovery and long-term growth. And there's more work ahead - including to make sure that all businesses, including digital ones, pay their fair share of tax where it is rightfully due.

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Today, the European Commission has launched a sector inquiry into the markets for consumer products and services linked to the Internet of Things.

Imagine the situation: you're out shopping one afternoon and you forgot your shopping list. With your smartphone you can check what's in your fridge and make one on the spot. When you get home, you unlock the door with a word. Then you unpack the shopping, sit down in front of your smart TV, and ask it to stream your favourite show. Your fitness tracker checks your heart rate, and finds that you're finally relaxed.

This kind of technology - the consumer Internet of Things - has been science fiction for quite a long time. Now, it's becoming reality. In other words, the Internet is increasingly embedded in the objects that we use every day.

In Europe, the total number of smart home devices was around 108 million at the end of 2019 and is forecast to reach 184 million devices by 2023. And the value of the smart home market is expected to almost double in the next four years to more than 27 billion Euros.

That includes smart home appliances - like TVs, fridges or lights - that are connected to the Internet. So we can control them from a distance, and they can talk to each other, and even learn to anticipate our needs.

It includes wearables, like smartwatches and fitness trackers. They monitor our exercise and our wellbeing, and could even help us spot health problems early.

And at the centre of it all, there are voice assistants, like Apple's Siri, Google Assistant, Amazon's Alexa or Deutsche Telekom's Magenta. Those voice assistants allow us to control our smart devices without us having to look at a screen. You can get information from the Internet, manage calendars or buy products.

The potential is incredible. But we'll only see the full benefits - low prices, wide choice, innovative products and services - if the markets for these devices stay open and competitive. And the trouble is that competition in digital markets can be fragile. When big companies abuse their power, they can very quickly push markets beyond the tipping point, where competition turns to monopoly. We've seen that happen before. If we don't act in good time, there's a serious risk that it will happen again, with the Internet of Things.

And one of the key issues here is data. Voice assistants and smart devices can collect a vast amount of data about our habits. And there's a risk that big companies could misuse the data collected through such devices, to cement their position in the market against the challenges of competition. They might even use their knowledge of how we access other services to enter the market for those services and take it over.

We have seen this type of conduct before. This is not new. So we know there's a risk that some of these players could become gatekeepers of the Internet of Things, with the power to make or break other companies. And these gatekeepers might use that power to harm competition, to the detriment of consumers. It could be familiar behaviour like “self-preferencing” - directing users towards their own products or services. Or it could be exclusive deals with other companies, to send you to a certain, “preferred” provider of products and services. Whether that's for a new set of batteries for your remote control or for your evening takeaway. In either case, the result can be less choice for users, less opportunity for others to compete, and less innovation.

We also know that interoperability is one of the keys to open and competitive markets in the digital age. For us to get the most out of the Internet of Things, our smart devices need to communicate. So if the devices from different companies don't work together, then consumers may be locked in to just one provider. And be limited to what that provider has to offer.

Right now, the appliances in our homes do not need to be connected to each other. We feel free to buy the best smart speaker we can find on the market, without worrying about whether it will work with our smart lighting system. And we want to keep it that way - which is why it's important to make sure that smart devices are truly interoperable.

This doesn't change the huge potential of the Internet of Things. But it shows that there's a risk that these markets could develop in a way that harms competition and consumers. And that is why we've launched this sector inquiry - so we can spot these problems, and take action while there's still time.

We're asking for input from companies that sell smart home appliances, wearables and voice assistants, as well as businesses that offer services that you can access through these devices. In all, we're sending questionnaires to about 400 companies, big and small, based in Europe, Asia and America.

We're asking about the products they sell, and how the markets for those products work. We're asking about data - how it's collected, how it's used, and how companies make money from the data they collect. And we're asking about how these products and services work together, and about possible problems with making them interoperable.

This makes for a lot of questions. So I would like to take this opportunity already now to thank the companies for their cooperation, their efforts and their time to provide us with answers to our questions. Based on the replies that we get, we plan to present a preliminary report for public consultation by spring next year.

The results of this inquiry should help us to spot situations where companies may have broken the competition rules. But the inquiry will do more than this. It will contribute useful information that can feed into the Commission's regulatory initiatives that affect the Internet of Things - just as our last sector inquiry, into e-commerce markets, contributed to the rules against unjustified geoblocking. And it also sends an important message to powerful operators in these markets that we are watching them - and that they need to do business in line with the competition rules.

And this will be good news for businesses across Europe. Because, with a combination of competition enforcement and targeted regulation, we can help to build a better market for the exciting new products and services that the Internet of Things will make possible. We can make sure that companies of all sizes have the benefit of a level playing field, where any business with a great idea and competitive culture has a real chance to succeed on its own merits.


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