European Data Act Explained
14 January 2022

Data is a non-rival good. They can be consumed many times without the fear that the supply can be dwindled. The volume of data is growing perennially. It was estimated that 33 zettabytes of data were generated in the year of 2018, and it is expected to reach around 175 zettabytes in 2025. It is an under-exploited and tapped prospect. Research shows that 80% of industrial data is never used. With the aim to bolster a sturdy and fair data-driven economy as well as to guide the Digital transformation by 2030, the EU Commission on 23 February 2022 proposed harmonized rules on fair access to and use of data known as the Data Act. These rules will ensure that data generated by Internet of Things (IoT) devices are used and distributed fairly between the relevant actors, and clarify at the same time as to who can create value from data and under which conditions. By creating opportunities for different actors involved in creating and keeping data, to earn incentives, the EU is expecting to create EUR 270 billion of additional GDP by 2028.

The proposed Data Act

  1. provisions to allow the users of connected devices to have access to data generated by them, which is mostly seen to be garnered by the manufacturers unilaterally, to share such data with third parties for the purpose of providing aftermarket and/or other data-driven innovative services. This will enable the manufacturers to invest in high-quality data generation and claim incentives for the transfer accordingly which will obviously exclude the use of shared data in direct competition with their product.
  2. measures to allow SMEs to rebalance negotiation power by preventing them from the abuse of contractual imbalances in data-sharing contracts. SMEs are often found to be on the weaker side as regards data sharing contracts and/or pre-contractual negotiation of data sharing contracts. The Commission, in this regard, has vowed to draft and negotiate fair data-sharing contracts in order to eradicate intricacies and help such companies.
  3. provisions to allow public sector bodies to access and use data that are held by private sector entities. This will help public sector entities to acquire data that are necessary for exceptional circumstances such as floods, wildfires, and pandemics, where it could sometimes be seen that the data are not otherwise available.
  4. provisions that will allow the customers to effectively switch between different cloud data-processing service providers that will also put the necessary protections in place for the customers against any unlawful data transfer.

The Data Act will enable consumers and businesses to have access to the data of their devices to use it for aftermarket and value-added services such as predictive maintenance which will be a great help for consumers such as farmers, airlines, or construction companies in taking better decisions for buying higher quality or more sustainable products and services especially to contribute to the Green Deal objectives. By virtue of this legislation, Business and industrial players will be predisposed towards having more data available and thus be able to benefit from a competitive data market.

Aftermarket service is one of the most crucial mentions of the Act. Aftermarket service providers, by dint of this Act, will be able to provide more personalized services and make them able to compete on an equal footing with other manufacturers or service providers who provide equivalent services. This Act, without a doubt, will create many economic opportunities for consumers, businesses, public sector entities, and private sector entities.

What this means

As Thierry Breton, Commissioner for Internal Market stated:

“It is an important step in unlocking a wealth of industrial data in Europe, benefitting businesses, consumers, public services, and society as a whole. So far, only a small part of industrial data is used and the potential for growth and innovation is enormous. The Data Act will ensure that industrial data is shared, stored, and processed in full respect of European rules. It will form the cornerstone of a strong, innovative, and sovereign European digital economy.”