Industrial Data Sharing: The Unintended Consequences of the EU’s Data Act

The Data Act is a new law forthcoming in the European Union that regulates access to the data produced by IoT devices, especially in an industrial context such as smart manufacturing or smart farming. It aims at facilitating the emergence of new, innovative data-driven services that ultimately yield more efficient market outcomes and higher consumer surplus. We offer a first analytical study of the economic consequences of the Data Act. 

Our analysis suggests that due the broad application scope of the Data Act, in many situations, the Data Act may likely reduce, and not increase market efficiency. In particular, the Data Act runs potentially contrary to its policy objective when new data-driven services are substitutes to the IoT device manufacturer's own service, and the IoT manufacturer only has limited market power; or when the new service is a complement to the IoT device manufacturer's own service, irrespective of market power. Our analysis suggests that the Data Act should adopt a more targeted approach, depending on the type of data-driven service seeking access to data, and the market power of the IoT manufacturer that is required to provide data access. 

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Georgios Petropoulos is a research associate at the Initiative on the Digital Economy of the MIT Sloan School of Management and a digital fellow at the Digital Economy Lab of Stanford University. His research focuses on the implications of digital technologies on innovation, competition policy, and labor markets. He is studying how we should regulate big digital platforms as well as how the adoption of robots and artificial intelligence affect labor productivity and work.

In the Plamadiso Talks series, the research group “Digital Economy, Internet Ecosystem, and Internet Policy” invites experts to discuss topics relating to Platforms, Markets, and the Digital Society.