What Is the Underlying Rationale for the New EU Data Act? Understanding the Strategy Behind Europe’s Data Economy Shift

The strategic logic behind the EU Data Act

The EU Data Act is rooted in a simple but powerful idea: data generated by connected products should not be locked away by default. As Europe’s economy becomes more digital, more automated, and more data-driven, lawmakers believe that fair access to data is now essential for competition, innovation, and consumer choice.

Connected devices—from cars and farm equipment to smart home systems and industrial machinery—generate vast amounts of valuable data every day. Until now, this data has largely remained under the control of manufacturers and service providers. The EU Data Act seeks to rebalance that relationship by giving users stronger rights to access, share, and reuse the data generated through their own activities.

This article explains the underlying rationale for the EU Data Act, how it works in practice, and why it represents a major structural shift in Europe’s digital and economic policy.

The EU Data Act rationale: building a fair and competitive data economy

At its core, the EU Data Act  is about correcting structural imbalances in the data economy. As connected products become more complex, the data they generate increasingly determines who can innovate, compete, and create value.

The EU’s view is that data generated by usage should not be treated as a proprietary byproduct controlled exclusively by the manufacturer. Instead, it should be seen as a shared economic resource that benefits users, service providers, and society more broadly when accessed fairly and securely.

By clarifying who can access data, under what conditions, and for what purposes, the Data Act aims to reduce market concentration, lower switching costs, and stimulate new services across sectors.

What qualifies as a connected product under the EU Data Act

A key pillar of the EU Data Act is its deliberately broad definition of connected products. Any product that collects or generates data during use and can transmit that data externally is likely to fall within scope.

This includes products that communicate through Wi-Fi, Bluetooth, mobile networks, or companion apps. Importantly, the law focuses on technical capability, not frequency. Even products that connect only occasionally may still be covered.

Connected products span a wide range of sectors. Consumer devices such as smart thermostats, washing machines, and security cameras are included, as are wearables that track health or activity data. Vehicles that transmit telemetry data, industrial machines that send performance metrics, logistics systems that track goods, and agricultural equipment that collects soil or weather data are all part of the same ecosystem.

Products that never transmit data externally and lack the ability to do so remain outside scope.

Why access to connected product data matters

The EU Data Act recognizes that data generated through use is often essential for maintenance, optimization, and innovation. When only manufacturers can access this data, users become locked into closed ecosystems.

By granting users the right to access and share their data, the Data Act opens the door to more competitive repair markets, better maintenance services, and new digital offerings. This is especially important for businesses that rely on industrial equipment, transport fleets, or agricultural machinery, where performance data directly affects productivity and cost.

The aim is not to force disclosure of proprietary algorithms or trade secrets, but to ensure that raw operational data does not become a barrier to choice or competition.

Readily available data versus derived data

A critical distinction in the EU Data Act  is between data that must be shared and data that can remain confidential. Organizations are required to make available data that a product already generates during use, such as sensor readings, logs, or basic operational metrics. This is referred to as readily available data.

By contrast, insights created through further analysis, prediction, or aggregation—such as maintenance forecasts or behavioral profiles—are considered derived data. These remain outside mandatory sharing obligations.

This distinction reflects the EU’s attempt to balance openness with innovation incentives. Companies are not required to give away the value they create through advanced analytics, but they cannot withhold basic usage data that users helped generate.

Technical feasibility and product design expectations

Another important element of the EU Data Act is proportionality. The law does not require companies to redesign products from scratch or introduce insecure data flows.

Data must be shared only where technically feasible, using existing capabilities wherever possible. For many consumer devices that already connect to apps or dashboards, compliance may involve relatively modest changes, such as adding download features or permission-based data sharing.

More complex environments, particularly in industrial settings, may require additional effort. Where products lack user interfaces, manufacturers may need to provide alternative access methods, such as APIs, export tools, or service-based retrieval processes. However, companies are not expected to compromise security or introduce unnecessary connectivity.

Personal data, trade secrets, and trust

The EU Data Act  explicitly acknowledges the importance of privacy and confidentiality. The Act applies to both personal and non-personal data, but it does not override existing privacy or trade secret protections.

Where shared data includes personal information, organizations must apply appropriate safeguards. Sensitive data, such as health information from wearables, typically requires explicit user consent and enhanced security controls.

Trade secrets must also be protected. Companies may limit disclosure to what is strictly necessary and apply measures such as aggregation, masking, or controlled access. The goal is to enable access without undermining legitimate commercial interests.

Contracts, fairness, and market balance

A central concern behind the EU Data Act is the prevalence of contractual imbalances. Standard terms have often granted manufacturers exclusive control over data, leaving users with little negotiating power.

The Data Act requires that contracts do not unreasonably restrict access rights or prevent users from appointing third parties to receive data. Existing agreements may need targeted revisions, particularly where clauses prohibit data sharing outright.

To support this shift, the European Commission has developed non-binding model contract terms. While voluntary, these models provide a benchmark for fair and transparent data-sharing arrangements.

Cloud services, switching, and interoperability

The EU Data Act  extends beyond connected devices to the broader cloud and data-processing ecosystem. Customers must be able to switch providers, migrate data, or move to on-premises infrastructure without excessive barriers.

The law introduces detailed obligations around switching timelines, transparency, data portability, and interoperability. While providers may recover certain switching-related costs during a transitional period, these charges are being phased out to encourage competition.

The objective is to prevent technical lock-in from becoming a structural feature of the European cloud market.

Why the EU sees this as an economic growth strategy

The EU Data Act is not simply a regulatory measure. It is a strategic economic intervention designed to unlock innovation, improve productivity, and support the green and digital transitions.

By enabling better access to performance data, industries can optimize operations, reduce waste, extend product lifespans, and improve resource efficiency. In sectors such as manufacturing, agriculture, construction, and transport, this can translate into measurable productivity gains.

The Act also supports smaller firms and new entrants by lowering barriers to data access, helping diversify Europe’s digital economy.

The long-term significance of the EU Data Act

The rationale for the EU Data Act reflects a broader shift in how Europe views data ownership, access, and economic power. By redefining rights around data generated through use, the EU is laying the foundation for a more open, competitive, and innovative digital economy.

Success will depend on careful implementation, proportional enforcement, and continued dialogue with industry. But the direction is clear: data is no longer seen as an incidental byproduct—it is a shared economic asset that must be governed fairly.

Organizations that understand this shift early will be better positioned to adapt their products, contracts, and business models to Europe’s evolving data landscape.

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