Platform regulation at a crossroads

The digital realm was once a modern-day wild west, but today, platform regulation is at a crossroads. With the arrival of new regulatory packages in Europe – the Digital Services Act (DSA) and Digital Markets Act (DMA) – and the formation of a new Digital Markets Unit at the Competition and Markets Authority (CMA) in the United Kingdom, the landscape is changing quickly.

“We’ve been talking about platform regulation […] for many years now, but it’s actually finally arrived, and we are moving from debate to action, execution and implementation,” says Richard Feasey, Inquiry Chair at the CMA and Senior Adviser at the Centre on Regulation in Europe (CERRE).”

Vanessa Turner, Senior Advisor at the European Consumer Organisation (BEUC), agrees. “We are seeing a new regulatory paradigm emerging for platforms and digital markets, certainly in Europe,” she says. This shift has implications for regulators, businesses and consumers alike, as well as for the future of platforms within this new environment.

 

“Engineering for compliance” with more changes to come

At the CMA’s newly formed Digital Markets Unit, Director Euan MacMillan is awaiting legislation to move through the UK Parliament that will allow his team’s work to begin in earnest. “We are basically trying to designate a small handful of firms that have substantial and entrenched market power and a strategic position in the UK as having strategic market status in particular digital activities, ,” he explains. “That will then allow us to impose ex ante behavioral constraints on those companies to open up the markets to competitors, but also where competition isn’t practical, to be able to constrain behaviour in the best interests of people, businesses and the economy.”

In the meantime, companies are considering how new European legislation already affects their strategy and processes. According to Google’s Head of Competition EMEA, Oliver Bethell, new regulation necessitates change to internal processes. At Google, he says, the competition legal department is no longer simply performing “checks and balances at the end of a product development” process, but is more “closely intertwined with product decisions as they’re being taken day-to-day.” These days, Oliver notes, “there’s much more of an ethos now within Google to be engineering for compliance.”

Framing the debate: resources, participation and coordination

As global companies like Google are already reacting to the changes in regulation in Europe, Vanessa is weighing up how the evolving situation will affect consumers. “We see a key issue in this new platform regulation landscape: whether this new regulation can be effectively enforced in practice to realise the intended benefits for platform users, whether businesses or consumers,” she says.

With this in mind, Vanessa identifies three elements that she thinks will define successful regulation in practice:

1. Sufficient resources for regulators – Due to the information asymmetry between regulators and companies, regulatory bodies will need additional staff and ongoing support. Regulators will also need to involve third-parties like businesses, consumers and civic organisations.

2. Avenues for collective redress/class action – In Vanessa’s opinion, consumers need the ability to participate in collective litigation against companies that violate regulations. This would serve to counteract the inequality of legal arms that tech companies and individual consumers have at their disposal.

3. Coordinated enforcement – This applies not only domestically among competition, consumer and data protection regulators, but also internationally.

“The future of platforms is…an opportunity for innovation in compliance. It doesn’t have to be a thicket of restrictions and constraints. It can be an opportunity to move fast and to innovate if you understand the rules better than your competitor.” – Oliver Bethell

Sufficient resources – of the right kind

“I think people have, perhaps, a perception that within Google we have limitless resources,” Oliver says wryly. But even at a tech company of Google’s size, resources of time and expertise are not to be taken for granted, according to Oliver. “I can tell you if you’re trying to ask for engineering time at the moment to work with regulators, and those engineers are working on AI, that is not a straightforward conversation!”

Meanwhile, the trope of understaffed, slow-moving government is one that Euan aims to avoid as Director of the DMU, and he has already identified staffing as one of the primary resources that his unit needs moving forward into this new regulatory environment. Still, Oliver points out that it’s not just a matter of having enough people, but the right ones. “We’re very happy when we see teams being staffed up — it’s great to see lawyers, and it’s great to see economists, but these days it’s even better to see computer scientists and people who have a behavioural UX background. They speak a common language with the type of people that I’m trying to introduce at those conversations,” he says.

Oliver explains that some of the challenges regulators and companies like Google face come down to communication. “On both sides of this, there is definitely a need to make sure that you have the right people available and engaged to have these kinds of quite technical conversations,” he says. “There’s another myth, perhaps, that all of these things are impossible for everyone to understand – no, that’s not the case. You can understand how Search works by getting reasonable computer scientists from within Google and from outside Google together. It’s not impossible, but it does take time and it does take resources.” The benefits of dedicating those resources are ultimately worthwhile, he thinks, adding, “I think you can trust more in a process like Privacy Sandbox when there are technical people discussing technical options for addressing quite difficult and complicated technical problems.”

“The future of platforms is…a constructive, healthy relationship with governments.” – Dr. Euan MacMillan

Participatory approaches at every stage

While Vanessa’s point about participation concerns class action litigation, Euan sees opportunities for participation much further back in the regulatory pipeline. His team intends to consult with various stakeholders and interest groups on many aspects of regulation, such as designations, conduct requirements, enforcement issues and further interventions, with Euan explaining: “We want to inculcate a culture of compliance, a culture of forward-looking and joint working.”

Designing a set of regulatory processes that account for differences in approach across companies is no small task, but the hope is that a participatory consultation process will help facilitate enforcement later on. “The best way for those companies to make sure that they are right is to engage early on in the process openly and transparently with us and other stakeholders to make sure that nothing untoward happens,” Euan says.

Oliver agrees about the benefits of involving the right stakeholders at the right time. “You can’t negotiate a solution for a consumer-facing, very significant product like Search without hearing the views of consumers who are going to be using Search,” he notes. Naturally, the risk for both regulators and companies is the potential trade-off between participation and agility. But in Oliver’s view, maintaining open channels of communication with stakeholders is key for a successful, iterative approach to product development. “Hopefully, with that transparency, you can reassure a lot of people that [even] if they weren’t there, the right things were being done.”

When it comes to the specifics of consultation between different interest groups, Vanessa is keeping an open mind. Like Euan and Oliver, she points to the attitude of companies as a decisive factor: “Is there a willingness to really engage and to look at what other parties can bring by way of evidence?” she asks. Choice architecture and UX design will be particularly important issues, in Vanessa’s view, and it will be incumbent on companies to not simply follow the letter of the law, but rather to engage with what regulation is ultimately trying to achieve. And while she agrees that it is vitally important to try dialogue as an approach, Vanessa maintains that avenues to litigation need to remain open to consumers as a backstop for situations when dialogue isn’t proving to be productive.

Creating an ethos of trust and coordination

Euan also echoes Vanessa’s call for global coordination. “Having a proliferation of different [regulatory] approaches is not good, and there shouldn’t be any — to borrow a term from the trade world — unnecessary ‘spaghetti bowl’ effects of overlapping regulations that are slightly different in different jurisdictions just for the sake of it,” he says.

Euan also shares a practical example of how the UK government has been collaborating on Google’s changes to third-party cookies, which regulators worried could have had a detrimental effect for Google’s competitors. Instead, Euan says, “We are working together [with Google] to ensure that this isn’t the case,” and adds, “that’s the kind of ethos that I think we would like to continue as we move forward.”

From a business point of view, Oliver shares Euan’s hope that coordination and collaboration can have positive outcomes. “It is about creating an ethos of trust and a willingness to take chances with new regulations and new regulatory teams. I think that you need that within Google and you need that on the side of the agency,” says Oliver. “[As a business,] you can’t really hope to — successfully, pragmatically, quickly — come to compliance and reduce your regulatory overhead if you’re not prepared to be very fast, quick and evidence-led in your discussions with agencies.”

The road ahead for platform regulation

With this multiplicity of players, much remains to be seen about how various companies react to the latest European regulations. As far as Google is concerned, Oliver says: “We are not interested in long, protracted, drawn-out litigation. We want to understand how the rules should apply.” At the same time, he hopes that regulators respond in a similar spirit. “We want [regulators] to have a good understanding of how we build the products and how they work. We want them to understand the tools that we have at our disposal when it comes to testing and understanding the impacts of the services that we’re launching,” he adds.

As he considers how platforms will progress under a new regulatory paradigm, Oliver hopes for three things from regulators: clarity in how the rules apply, equanimity in how regulators listen to and engage with all stakeholders, and parity in continuing to work with companies in good faith. 

For her part, Vanessa’s vision is two-fold. Firstly, she wants to see good, consumer-focussed regulation beyond the DMA and DSA that will address topics like data privacy and AI. And secondly, her goal is “[that we’re] making sure that this regulation actually works for consumers to generate more innovation and choice.”

“The future of platforms is…up-to-date regulation so that we can continue to benefit from innovation, whether it’s from bigger tech companies or smaller ones.” – Vanessa Turner

To go further

This panel with Richard Feasey, Vanessa Turner, Oliver Bethell and Dr. Euan MacMillan was part of the Platform Leaders event organised by Launchworks & Co on the 7th of June 2023 (full list of speakers and agenda). To watch the full event, play the video below.