Tales of the Sausage Factory

Using The Cost of Exclusion to Measure The Dominance of Digital Platforms.

This is the third blog post in a series on regulating digital platforms. A version of this first appeared on the blog of my employer, Public Knowledge.

 

In my last blog post, I explained my working definition for what constitutes a “digital platform.” Today, I focus on another concept that gets thrown around a lot: “dominant.” While many regulations promoting consumer protection and competition apply throughout a sector, some economic regulations apply to “dominant” firms or firms with “market power.” Behavior that is harmless, or potentially even positive when done by smaller companies or in a more competitive marketplace, can be anticompetitive or harmful to consumers when done by dominant firms — regardless of the firm’s actual intent.

For reasons discussed in my previous blog posts, defining what constitutes “dominant” (or even identifying a single market in which to make such a determination), presents many challenges using the traditional tools of analysis favored by antitrust enforcers and regulators. I therefore propose that we use the cost of exclusion (“COE,” because nothing in policy is taken seriously unless it has its own acronym) as the means of determining when we need to apply regulation to “dominant” firms. That is to say, the greater the cost to individuals and firms (whether as consumers or producers or any of the other roles they may play simultaneously on digital platforms), the greater the need for regulations to protect platform users from harm. If a firm is “too big to lose access to,” then we should treat that firm as dominant.

 

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Posted in Digital Platforms, Tales of the Sausage Factory | Also tagged , , , , , , | 2 Comments (Comments closed)

Tales of the Sausage Factory

So What The Heck *IS* A Digital Platform?

This is the second blog in a series on regulating digital platforms. A (less snaky) version first appeared on the blog of my employer, Public Knowledge.


In Part I, I explored the challenges of regulating digital platforms to promote competition, protect consumers, and encourage news production and civic engagement. Today, I plan to dive into the first set of challenges. First, I define what I mean when I talk about digital platforms. I will argue that platforms that (a) provide a two-sided or multi-sided market; (b) are accessed via the internet; and (c) have at least one side that is marketed as a “mass market” service, share a set of characteristics and raise a similar set of concerns so that we should consider them as a distinct set of businesses.


Let me stress at the outset something that I will repeat multiple times. First and foremost, describing the common attributes of platforms does not make value judgments about whether these attributes are bad or good. Indeed, many of the attributes I describe have enormous positive effects for consumers, competition, and civic discourse. At the same time, however, the implications of these specific attributes give rise to a number of unique concerns that we read about every day, ranging from companies using targeted advertising to stalk people to extremists using social media to radicalize and recruit.


Equally important, nothing in sector-specific regulation replaces antitrust or consumer protection laws of general applicability. Nor does it suggest that digital services that do not meet the definition of a “digital platform” do not need oversight. Rather, both the definitions I propose below and the sector-specific recommendations that flow from them (discussed in future blog posts) complement each other. The fact that many platform attributes complicate existing antitrust analysis does not mean that antitrust law has now lost its utility as an important tool for protecting competition. But even embracing a broader view of antitrust law and its goals, there remains an important role for sector-specific regulation to address concerns that arise from the unique nature of digital platforms (as unique from other sectors of the economy).


Finally, before diving in, I must caveat this with the recognition that this is a field very much in flux. I have identified what I think are the important elements which, taken together, make digital platforms different from other lines of business or even other “internet companies.” Nor is this the only potentially useful distinction. In the past, for example, I have argued that we should also distinguish between “public utility” concerns (services so important the government has an affirmative responsibility to ensure affordable access for everyone) and services that, while important, do not rise to this level. Deputy Director of Georgetown Law’s Center on Privacy and Technology Laura Moy, in testimony before the House Energy and Commerce Committee, provides an excellent distinction between “essential services” and “unavoidable services,” i.e., services so ubiquitous they are virtually impossible to avoid in one form or another. Others have different definitions of platforms, and/or different distinctions among them.


The definition I propose here is therefore not intended as a final conclusion, but an initial working definition to debate and refine over time. 

 

With all that out of the way, lets move on to the good stuff . . .



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Posted in Digital Platforms, Tales of the Sausage Factory | Also tagged , | Comments closed
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