Discussion Papers

No. 471: Consumer IoT in Germany – applications and possible need for regulation

Authors: Julian Knips, Christin Gries, Christian Wernick

(full version only available in German)


The consumer IoT sector is highly dynamic. The number of connected products for consumers is continuously increasing and offers new possible applications and thus additional benefits compared to conventional products. There is considerable potential for innovative solutions due to progress in sensor and AI technologies, cameras, microphones and processes.

This opens up fundamentally new market opportunities for numerous players in the extended ecosystem. In most of the product categories within the application fields relevant to consumer IoT, in particular smart home and tracking/monitoring, low barriers to market entry have led to the development of strong competition with established manufacturers and start-ups competing with each other.

However, a high concentration of suppliers can be observed in some areas of consumer IoT. Here, some players take on gatekeeper roles, which impact the selection of services and may cause problems relating to competition and consumer protection. In addition, there is a risk of lock-in effects in the ecosystems of global corporations, which especially affects the areas of entertainment and wearables.

Connected devices collect large amounts of personal and sometimes sensitive data that are worth to be protected. Nevertheless, Data protection and IT security are often in need for improvement. In addition, some devices can be designed for spy purposes due to specific equipment features (in particular microphone and camera), which are prohibited according to § 90 TKG.

It must be assumed that further and even new problems will arise in the dynamic consumer IoT sector as more and more areas of life are affected. Even though the established legal and regulatory instruments seem appropriate to address sector-specific consumer issues and market failure, it is necessary to continuously and carefully monitor new market players and products and to evaluate the resulting changes in the market conditions.

Discussion paper is available for download.

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