Smart Home - Part 1: Challenges for the smart home market

Products with smart home functions can be found in more and more private households. Therefore the market for smart home technology has considerable potential and is influenced by various factors. At the same time, the business with smart home products brings legal challenges. This is especially true with regard to the innovations in sales law, which already apply from January 1st, 2022 and require, among other things, a differentiation of the new consumer contract for digital products from the purchase of goods with digital elements.

Wide range of applications

There is a wide range of applications for smart home products. This is especially true in the area of household appliances. For example, a smart refrigerator is now able to order missing groceries, or a robot vacuum cleaner navigates independently through the home. Another central field of application is the entertainment sector, for which the voice assistance systems Alexa (Amazon) and Siri (Apple) are prominent examples. These are devices that the user sets up at home and that perform a function (e.g. playing music) in response to a verbal request from the user.

Challenge: Data protection

The mentioned voice assistance systems in particular highlight the first legal challenge that has a significant impact on the smart home sector. The reason for this is that these devices only function if the environment is monitored by the microphones integrated in the device. This shows that smart home products often rely on the extensive exchange of mostly personal data between individual devices via the internet, which means that data protection plays - or should play - a key role. At the same time, it is clear that the issue of IT security in the smart home sector must not be neglected.

Challenge: Contractual classification

Given the wide range of applications, it is not surprising that the term smart home is not defined by law or otherwise. Nevertheless, the purchase of smart home products must be classified in terms of contract law. Here, the new sales law presents a further legal challenge. This is because the legislator differentiates between the purchase of goods with digital elements (new § 327a (3) s. 1 BGB) and the purchase of digital products (new §§ 327 et seq. BGB), for which it provides separate rules in each case. In this context, goods with digital elements are those "that contain or are connected to digital products in a way that the goods cannot fulfill their functions without these digital products." Voice assistance systems, which are useless without their digital function, serve as an example. But not all smart home products are clearly to be considered goods with digital elements. For example, a refrigerator with a smart reorder function fulfills its essential cooling function even without the digital function and would thus rather have to be considered in a legally differentiated manner. All in all, the necessary case-by-case consideration in view of the wide range of smart home products will therefore cause difficulties in practice in terms of contractual classification.

Challenge: Technology

Smart home technologies are heavily dependent on technical factors. Technological progress in the form of the development of high-performance and at the same time cost-effective hardware in the smallest possible space is a key influencing factor. This is because small devices can be used "smart" in a power-saving and thus cost-saving way. Since the smart home is dependent on the internet, the development of broadband and fiber-optic expansion is also of central importance. Finally, the introduction of IPv6 to solve the problem of the scarcity of IPv4 addresses should be mentioned. This is because the expansion of the IP address range makes it possible to assign an individual IPv6 address to all smart home devices that need to be networked. Thus, further technical development also poses a challenge for the smart home market.


The broad smart home market is influenced by various factors and faces different challenges. These include data protection and IT security issues. In addition, a discussion of the new sales law is unavoidable. In the continuation of my article, you can read about the questions that still arise in the smart home market - apart from the classification under contract law.

Eva Ametsbichler