Europe needs flourishing industrial data markets – the Data Act could help us get there

Data are an important source of profit and market power. Data lie at the basis for all complex analyses and the training of algorithms. Access to data, and the knowledge to exploit it, are an important input for product innovations and process optimisations. Data increases profits to the holders of the data when the results of these analyses lead to higher sales or lower costs. For example, if a company uses data to train an algorithm that reduces a machine’s electricity use by five per cent, then that data has a value equal to the costs saved.

So data is an important part of economic value creation in today’s economy. The problem is that this reality has only partially arrived in EU law. While the processing of personal data is regulated by GDPR, the many terabytes of machine-generated industrial data generated daily in factories, wind turbines or power lines are legally considered as undefined externalities of other processes.

The value of the data remains invisible. Who is allowed to access it, who is allowed to share it, i.e. who is allowed to share in its value and who is not, is not legally determined.

The legal uncertainty in sharing data and the invisibility of data-based market power ultimately lead to the fact that in the battle for data in Europe, the law of the jungle applies. Today, it’s mostly the manufacturers of connected devices that have access to its data – either because users are not informed about the options to have it or because manufacturers simply have a better leverage. This also predestines them to sell downstream digital services to the users of the product. Manufacturers of connected devices thus have an easier time with becoming monopolists in the ‘aftermarket’.

At the same time, data is also ‘invisible’ in important parts of competition law. Since they have an economic value but often no readable price, they do not show up in analyses of market dominant positions, which usually have turnover as a core criterion. This is despite the fact that access to data has an essential influence on the competitive situation in a world in which connected devices constantly collect, utilise and exchange huge amounts of information.

This is where the Data Act must come in.

It is time to make the power of data visible and to create the framework for a distribution of its added value based on fair competition. The right to share non-personal data with third parties, for money or for other purposes, must first lie with users. After all, they bought the product that generates the data.

It is of course true that manufacturers of connected products have a legitimate interest in accessing data in many cases, not least to ensure functionality and product safety.

All of this must be done via horizontal regulation: the economic problems that arise from data-based market power are not sector-specific. They exist in the automotive industry, as well as in agricultural tractors, voice assistants and paper machines. Attempts by the respective industries to carve out a special role for themselves all stem from the interest in further protecting their own market power.

Clear regulation of non-personal data rights has another important value. It ensures that in the competition for good ideas, the company with the biggest legal department does not always win.

Especially for start-ups and small companies, the unclear legal situation when sharing and acquiring data is a real barrier to market entry.

Clear rules could establish functioning data markets and thus finally break long established silo structures. Users whose products produce data could now make it available in a legally secure way to programmers and innovative start-ups that develop new and perhaps better solutions based on the data. Because they have the right to monetise this data, there is a financial incentive for users not to let this data slumber in the depths of the servers, but to share it with others. This, after all, is the goal of any data strategy: more data should be shared, for the benefit and added value of all.