Designing future-proof platform regulation

Just as platforms must manage an ecosystem of contributors, the regulation of platforms requires management of diverse stakeholders, from platform businesses to the general public. Getting regulation right demands a nuanced approach that meets a broad range of needs. Identifying platforms’ social and economic effects can help us understand some of those needs; engaging both lawmakers and practitioners in debate can foster mutual understanding and help unlock the full potential of the platform economy for all.

Max Beverton-Palmer, Director, Internet Policy Unit, The Tony Blair Institute, Stéphanie Yon-Courtin, Member of European Parliament, Professor Annabelle Gawer, Chaired Professor in Digital Economy, University of Surrey, and Oliver Bethell, Head of Competition EMEA, Google, debated how to design future-proof platform regulation at the Platform Leaders event on the 15th of April 2021.

 

Public perceptions and preferences

For insight into the views of the general public on platform regulation, we can turn to experts like Max Beverton-Palmer of the Tony Blair Institute, a non-profit that works to support inclusive, prosperous, and open societies.

The Tony Blair Institute recently collaborated with YouGov to explore specific questions around tech regulation. Their online survey, polled people across 25 countries about their assumptions of the present state of online regulation and their ideal regulatory futures. As proxies for the platform economy, Max points to survey data on social media and online search regulation.

The results are clear: most people are uncertain about what they want to see. ““Our study shows that this is a highly complex world where regulatory solutions aren’t easy things to talk about and aren’t easily understood,” Max explains. Broadly speaking, the UK is more interventionist, whereas countries with a history of liberal markets, such as Japan, have stronger support for no regulation.

Around the world, the public has differing perceptions of digital regulatory needs, and the platform industry comes with highly unique challenges. Based on the data that Max and his team have compiled, regulation may be out of sync with where the public thinks it should be. Max summarises: “What we can see from this is that there’s a need for better collaboration, better cooperation to find that regulatory sweet spot.”

 

Drafting a regulatory solution

Interest in the challenge of digital platforms stretches across the globe, but is managed differently depending on the geopolitical regulatory environment. Stéphanie Yon-Courtin is a Member of the European Parliament and the Vice-President of the Economic and Military Affairs Committee. She welcomes the two digital regulation proposals from the European Commission.

The Digital Services Act (DSA) and Digital Markets Act (DMA) both tackle cross-sectoral issues and loopholes in European regulation. The goal of the DMA is to ensure contestability in online markets, while the DSA aims to regulate online content moderation. 

Stéphanie underlines how complex the proposals have been to draft, particularly with the DSA. “The DSA might be the most sensitive issue, actually, in the European Parliament because we have to strike the right balance between regulation, liability, consumer protection and freedom of speech and, in some aspects, transparency of algorithms,” she says.

The proposed regulations are not coming as a surprise and should be implemented as soon as possible, Stéphanie says. “There is no time to waste because in this digital market, in digital platforms, time is of the essence.” She supports the position of the European Parliament on the need for legislation because the digital platform sector has reached a point at which it can no longer self-regulate, especially since it is dominated by a minority of powerful companies. As far as the DMA is concerned, Stéphanie reminded us that regulatory obligations will be focused on so called gatekeepers: “We are talking about a handful of companies, let’s say around 10, the biggest ones, the ones we cannot avoid to operate online, whether you are a consumer or a business user – only these companies will have very strict rules apply to their behaviour and practices.”

Even with the need for action, Stéphanie acknowledges the equal need for careful consultation and follow-through. “At the same time, we should make sure that we design a future-proof instrument. Regulation is good, but it has to be enforced properly to be efficient,” she adds. “As the European Commission delayed twice the advancement of the proposal, the European Parliament [also] takes the necessary time to ensure that relevant committees will be able to work on this crucial topic and provide their input.”

The European Parliament believes that the proposed legislation will improve the interactions between all stakeholders. The goals of the regulations walk a fine line on consumer protection, competition, data protection, and intellectual property rights. Achieving the right balance -without jeopardising the ecosystem and undermining innovation- is no easy task. Stéphanie recognises that there will always be room for improvement and discussion: “We definitely see that regulation is one solution, but it’s not everything.”

 

A new social and economic centrality

Researchers like Professor Annabelle Gawer of the University of Surrey provide us with further understanding of current-state dynamics between platforms and the larger social and economic context. Her recent report, Online Platforms: Economic and societal effects, which was drafted for the European Parliament, not only focuses on antitrust and competition, but also looks at the effects that all kinds of digital platforms have on society and particularly on work and employment. 

“There are very different types of business models,” Annabelle clarifies. “There are different types of online platforms. But they do have something in common, which is that they facilitate innovation and transactions amongst a very large number of users using the digital economy infrastructure.”

The positive effects of digital platforms are myriad, going beyond the innovation and network creation that healthy platforms naturally encourage. There is also value created in the emergence of new business models and positive investment in research and development. “In general, online platform firms invest about three times more than other firms in research and development. Google, for example, invests about 15% of its revenue in R&D,” Annabelle explains. Both consumers and businesses benefit from positive effects such as these.

The possible negative effects of the platform economy are similar to those in other sectors: antitrust violations, killer acquisitions, or abuse of market dominance. It’s with the goal of mitigating such negative effects that Annabelle supports clearer regulation of digital platforms. Even though she broadly supports the DMA and the DSA proposals, she foresees some difficulties going forward: “The devil will be in the details.”

Beyond the pieces on antitrust and competition, Annabelle’s report holds interesting findings about platform effects on employment and society. It finds that platforms generate a shift in employment modes, creating new jobs but also sometimes transferring risk to individuals and avoiding the traditional social costs borne by employers. There is a lack of collective organisation but an increase in individual control and efficacy. At a societal level, we are certainly confronting concerns about surveillance, privacy risks, and a lack of accountability in platform ecosystems. Annabelle points out how the diversity of effects creates further hurdles when it comes to regulation: “The challenges in terms of regulation is that you see that none of these issues falls neatly within one body of regulation. Not everything can be solved by updating antitrust; not everything can be solved by just looking at privacy rules.”

Despite the challenges, Annabelle’s report does take a firm stance on the importance of thoughtful regulatory policy. “The report proposes that the regulation is built on the basis of positive principles that are pro-competitive, ensuring freedom of competition, strengthening competition rules for merger control in joining fairness of intermediation, [and] sovereignty of decision-making.” One further suggestion from her report is a more flexible approach that recognises variance between platforms: “Instead of having a monolithic code of conduct, […] it would be a lot better to follow the UK route, to have a code of conduct that will be customised for each of those gatekeeper platforms. Because where interoperability would make a lot of sense on some issues for one particular platform, it really wouldn’t make sense for another.”

 

A regulatory environment where innovation can thrive – closer than we think?

In a debate on regulation, the expectation of many is that digital platforms are libertarian and anti-regulation. But Oliver Bethell, Head of Competition EMEA at Google, offers a less antagonistic perspective. He agrees that, with regulation, the devil is in the details, but adds that we shouldn’t be put off by the uncertainties. 

In the discussion about regulation, particularly when it comes to the DMA, Oliver sees three main opportunities for companies like Google:

1. The ability to make faster decisions earlier in the lifecycle of a product
2. The chance to engage in debate and help shape the regulatory framework
3. The building of a foundational value system that could be adapted globally

On the first point, Oliver notes that Google ran around 600,000 experiments last year. A strong regulatory framework narrows the boundaries and there are opportunities to cut out some noise so that businesses can choose more quickly where to focus their product development. 

When speaking about policy debates, Oliver notes that positions are often reduced to slogans. “The public discourse around some of these issues often feels like it’s, on all sides, led by a tweet,” he says. With policy like the DMA, we have a chance to both build a regulatory framework and foster opportunities for dialogue.

Lastly, the European debate takes place within a global context, and regulation in Europe could be a model for the rest of the world. “The value systems may vary jurisdiction by jurisdiction,” Oliver says. “But there will be places where the functional aspects of what we can build can be exported. They can be flexible. They can be used in other environments.” The question for global companies becomes: can we learn things in Europe that we want to workshop quickly and then roll out globally?”

Diving deeper, Oliver suggests several aspects of regulation that warrant further work and discussion, especially relating to categorising concerns that businesses may have. “I think we have to build a framework for assessing those things. […] How do we deal with uncertainty? What kinds of discussions would we like to have happen between the agencies and the companies? How do we best deliver choice and transparency? What kinds of compliance organisations would we want to have? These are all practical questions that I think we should wrestle with,” he says.

 

Within and beyond Europe’s borders

Plenty of practical questions like these remain when it comes to the strength of the European platform economy. How can regulation be pro-competitive and encourage development of platforms in Europe, without creating barriers for smaller players? Policies like the DMA and DSA are designed to be flexible and future-proof tools; as Stéphanie Yon-Courtin says, “It’s not a regulation against companies, it’s a regulation for all the companies to be able to compete online as they do offline.”

Looking outward, there could also be risks of highly divergent regulatory environments. Annabelle Gawer is not optimistic about regulatory alignment between China, Europe and the US, for example. These diverse regions all have different objectives, and global platform businesses are left to navigate the inconsistencies. She notes, “But in a way, the big online platforms, they are the most globally aligned organisations all across the world. They’re facing the difficulty of misaligned regulatory regimes.”

Annabelle goes on to observe that, in this unclear environment, companies become governors of their own industries. The digital start-up mavericks that disrupted global industry are now in the position of being private regulators. And, she says, “society looks to platforms to sort out issues that they weren’t built or equipped to sort out. […] Some of these companies have been victims of their own success.”

These issues can’t be only solved by private regulators, in Annabelle’s opinion. The case may be that some issues are best governed by democratically elected representatives and political institutions, while others are better resolved within the governance systems of private companies. 

What we can say for certain is that lines are shifting. And considering the conclusions of Annabelle’s report, the possible consequences mean that platform regulation is too important not to talk about. In Max Beverton-Palmer’s view: “We are all regulators now.”

 

To go further 

 

This panel with Max Beverton-Palmer, MEP Stéphanie Yon-Courtin, Professor Annabelle Gawer and Oliver Bethell was part of the Platform Leaders event organised by Launchworks & Co on the 15th of April 2021 (full list of speakers and agenda). To watch the full event, play the video below.