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Regulating digital platforms: Why and how?

  • Politiques, institutions et démocratie

Regulating digital platforms: Why and how?

  • Politiques, institutions et démocratie

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Key Takeaways 

  • Digital platforms are heterogeneous and complex entities. Between market and company, they incorporate three main dimensions: the intermediation and animation of exchanges, an underlying technological infrastructure, and the constitution and animation of an ecosystem of partners.
     
  • The diversity of digital platforms calls for vertical regulatory measures, complementary to competition law, to address specific issues regarding different categories of platforms.
     
  • Digital platforms raise concerns beyond the economic and competition domains alone, and may generate negative externalities in the social and political field. This must be taken into account in their regulation.
     
  • Though it may be necessary to improve competition law, it is important not to subvert it. The aim of competition law is not in itself to produce European digital champions.
     
  • The accumulation of data by dominant actors can be seen as a potential barrier to market entry, and therefore it can be argued that opening up access to data and imposing interoperability between digital platforms promotes competition. This requires agreement on a common definition of interoperability. However, interoperability is not, per se, sufficient to achieve sufficient competition; the skills and resources deployed by digital platforms contribute to their competitive advantage, not merely their volumes of data.
     
  • Existing informational asymmetries in the operation of digital platforms could be removed by requiring them to provide access to their data and/or to certain algorithms deemed central.
     
  • This would make it possible to implement regulation in real time and not ex post as is the case today, where the time taken to make decisions significantly reduces their effectiveness. It would also make it possible to address the limitations of ex ante regulation in the face of the unpredictable innovations and evolutions in the uses of these technologies. However, this approach requires strengthening the resources and competences of the regulators. Without a strong willingness on the part of the legislator to guarantee this, any regulation based on data will not bring effective results.
     
  • The definition of "structural" digital platforms must include all the dimensions present in this type of exchange organisation (multiple sides, ecosystem, technological infrastructure) and specify the negative externalities beyond the economic domain that require these platforms to be considered differently from other economic actors, and thus necessitate a separate regulatory approach. Without a precise definition, the legal construction to define this type of actor will remain fragile.
     
  • The regulation of "structural" digital platforms could be similar to the type of prudential supervision that can be found in financial markets, given that most of the financial flows on these platforms are real-time advertising flows that can be observed using APIs, to which the regulator could impose access.
     
  • As co-creators of the value of digital platforms, users must be included in their regulation. This regulation could rely on two complementary approaches. The first would be to require platforms to include a representation of users in their governance and decision-making bodies, as can be the case for companies with employees. The second would consist of the "platformization" of the regulator, through the organization of user participation mechanisms (a digital platform) and the construction of adequate regulatory tools (indicators, algorithms, etc.).

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