FTC's Revolv investigation

Last week, the FTC issued a closing letter to Nest Labs, officially ending its investigation into the company's bricking of Revolv devices. If you are hazy on the details here, the Revolv was a $300 home automation hub that was sold with a "lifetime subscription." In late February, however, Nest announced its intention to kill the device. As it told Revolv owners: "As of May 15, 2016, your Revolv hub and app will no longer work."

In response to the initial wave of consumer outrage and bad press, Nest made vague and not particularly reassuring noises about "case by case" resolution of consumer complaints. Within a couple of weeks though, it was offering Revolv owners full refunds.

Why the change of heart? I'd guess it had more than a little to do with the launch of an FTC investigation. Coincidentally, I met with the FTC to talk about the issues surrounding the "Buy Now" button the morning the Revolv story broke. When I brought it up, the lawyers at the FTC were, no surprise, already very familiar with Nest's decision. And an expression of concern by the FTC, to say nothing of an ongoing investigation, carries considerable weight.

Here's how the FTC described its initial worries and its decision to close the investigation:

The FTC staff was concerned that reasonable consumers would not expect the Revolv hubs to become unusable due to Revolv Inc.'s actions, and that unilaterally rendering the devices inoperable would cause unjustified, substantial consumer injury that consumers themselves could not reasonably avoid. Nevertheless, upon review of this matter and confidential information Nest provided during our investigation, we have decided not to recommend enforcement action at this time. We considered a number of factors in reaching this decision, including the limited number of units sold; Nest's practice of providing full refunds after the Revolv system shutdown was announced; and its announcements - via the Revolv website, in-app notifications to Revolv system users, and emails to Revolv purchasers - that it will refund Revolv customers the purchase price ofthe Revolv hub. Thus, it appears that no further action is warranted at this time and the investigation is closed.

The FTC secured a positive outcome for consumers. In fact, short of requiring Nest to continue to support these devices, it's the optimal outcome for most Revolv owners. Some, I'd wager, would prefer to adapt the code that runs their device and extend its useful life. Unfortunately, the current state of copyright law calls that right into question. 

It's no surprise that the FTC acted. The Revolv incident was an egregious abuse of the power the Internet of Things cedes to device makers. By stepping in here, the FTC sends a strong signal that may prevent other companies from pressing the remote self-destruct button in the future. It has also offered some helpful questions makers of smart devices should consider. But the key question remains. What kinds of injury—short of explicitly rendering a device inoperable—will the FTC take seriously?