Automotive and competition: the new challenges of the digital world

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10 January 2020

As for all “traditional” industrial sectors, the automotive industry is not exempted from the many technological challenges arising from the digital world, from automated or autonomous vehicles to the access to platforms, data and digital services that are rapidly innovating the aftersales market.

Modern vehicles are, in fact, IoT devices. They use digital sensors and geolocation services whose data can be used and processed to offer a wide range of services. Digital platforms are becoming the place where product and service providers meet users and clients and identify their preferences.

Vehicle data can be used for different types of ancillary or non-ancillary services, from navigation, maintenance and diagnostics, to the offer of customized infotainment and insurance services leading to the“C-V2X” (Cellular Vehicle to Everything) technology which will allow 360° vehicle connectivity services (V2V, V2I, V2P, V2C).

In this context, users data play a key role not only from the demand side, definitively influencing certain customer choices towards vehicle manufacturers capable of offering the best digital and non-digital services at the most competitive price, but also from the supply side, given that control and access to said data could lead to a significant market power and to the development of new business models and digital platforms.

It suffices to say that, as highlighted in the Joint Research Center 2018 technical report on “Access to digital car data and competition in aftersales services”, several operators would like to access said data to extract their value, from car and spare parts (original and equivalent) or components (digital and non-digital) manufacturers to authorized or independent repairers. Vehicle manufacturers and OEMs could design a vehicle’s data architecture to maintain exclusive control over the access to their respective data.

Software interoperability may be difficult where the underlying hardware and operating systems cannot guarantee the necessary updates or safety standards. Following the purchase, users would likely find themselves bound by the specific hardware and software combination (including connectivity services with telecommunication operators) like smartphone buyers. Considering the significant costs of vehicles (from the most expensive cars to modern and increasingly sophisticated trucks), buyers would not easily pass from one vehicle to another and, for security reasons, would not switch to an equivalent but not original, combination.

On the other hand, aftersales providers will be interested in the hardware and software combination. As noted, in fact, in the pre-digital era, OEMs usually had a very limited leverage in the aftersales services such as navigation, media and entertainment, insurance or integrated warranty systems. Whereas, in the digital world, maintenance and diagnostic services grant access to sensor data stored in vehicles. Navigation services are based on GPS tracker data that are combined with digital maps allowing navigation service providers to have traffic, weather and parking information in the immediate proximity of the vehicles on which they are installed.

Insurance can be purchased according to the “pay-when & how-you-drive” principle, requiring a constant and detailed input of navigation data. Multimedia and infotainment devices accessible through HMI and the s.c. connected cars can connect vehicles to cloud-based multimedia services and to drivers’ mobile and domestic devices without considering the developments introduced by the use of 5G technology applied to this sector.

The data thus acquired can be used to influence users’ decisions on aftersales services and affect the normal price, quality and choice dynamics of these services, remodeling and innovating said markets without considering the platform providers’ use of the information so collected for purposes or the offer of customized services even completely disconnected from the world of transport and mobility.

In addition, digital platforms will increase significantly their importance in offering B2C products and services through sophisticated algorithms that will influence pricing, positioning and matching of supply and demand using the access to customers’ data and preferences as a new form of compensation.

From this new digital frontier, new markets could arise that are significantly different from the traditional ones analysed so far by national and European competition laws and covered by the various block exemption regulations that have followed over the years (most recently Reg. 330/2010/EU and 461/2010/EU). Also the analysis of the same markets could be influenced by variables and dynamics totally different from those hitherto considered that had led to consider the issue of access to technical information on a non-discriminatory basis or access to after-sales services on a qualitative (in any case non-exclusive) basis with respect to independent operators, or the use of compatible spare parts in order to avoid dominance or market foreclosure effects by original spare parts manufacturers.

New concentration projects could take place to integrate apparently independent markets, similarly to what happened in other sectors already subject to scrutiny by the European competition authorities (see the recent cases of the European Commission Google/Android and Google/DoubleCLick until the recent opening of investigations by Italian Antitrust Authority against Google for exclusionary practices against Enel from Android Auto) and new market tests are likely to be used to assess the definition and market power of digital platforms operating in these areas.

Also in this context, the interaction between data protection and antitrust law will play a key role which should not be underestimated in order to analyse new markets and possible competition distortions or efficiency gains resulting from the combination of these factors.

Access to data that the vehicle will generate (or in any case related to it) will become a “strategic” factor for operators, at all levels and in multiple ancillary or non- ancillary markets. It will be able to represent a competitive advantage for the owners or a barrier to entry for those who are excluded.

While vehicle manufacturers consider the safest way to manage and process data through combinations of hardware, software and telecommunication services (see, for example, on 2016 the “CDSP” option; Central Data Service Platform which takes up the Extended Vehicle Standard option proposed by ACEA (European Automobile Manufacturers’ Association) which would allow the interaction between diagnostic data and telematics aspects), as well as important regulatory issues in terms of type approval for certain devices (e.g. the recent Swedish Tesla case concerning the s.c. “SOTA” software over the air), the same safety reasons could give rise to market access restrictions by influencing price variables or creating network effects.

Once interoperability standards between devices are defined by the industry, potential competitors could be excluded in the same way as if intellectual property rights were involved. If this were to happen again, competition authorities would have to be similarly vigilant as in the case of SEPs (standard essential patents) in order to ensure FRAND (on fair, reasonable and non-discriminatory terms) access to these standards for independent operators.

In this context, purchasers themselves could influence part of the processes on access flows to such data in terms of the portability foreseen by the GDPR considering that several of the information generated by the vehicle could be personal data if linked to an identification with the owner or driver. This without considering the multiple cyber security and profiling aspects and risks that will need to be carefully assessed before their implementation.

It will not take long to assess the first effects of this transformation. There will be multiple implications for all operators. And if ACEA published on December 3, 2019 its legislative roadmap to adapt the legislation to automated vehicles, the technological, economic and legal framework, together with experience gained in other sectors, will hopefully have to be used by the competition authorities to prevent anticompetitive effects within markets concerned so as to allow a true technological development for the benefit of  consumers and users.

Article filed under: Automotive & Mobility, Regulatory
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