Platform Economy & Regulation Monitor

Platform-based marketplaces and ecosystems are new ways to organize economic activity among multiple players within and across several sectors, drive technology evolution, stimulate new product and service innovation and enhance value (co)creation for consumers.

Platform organizing, with their digital marketplaces and ecosystems of service providers, is critically changing the economics of products and entire sectors, providing new ways for companies to generate and deliver value to final customers. However, as these new platform-centric economic structures substitute for the established ones (such as traditional markets and supply chains), there are increasing concerns over the dominant role of platforms acting as market “gatekeepers”. Particularly, under scrutiny is how value is distributed among the different actors, and the extent that platform firms can entrench their position against actual and prospective competitors.

The mounting pressure on policymakers to rein in the increasing power of Big Tech companies has led to a number of legislative initiatives around the world advancing new competition rules. Accordingly, new principles of “fairness” and “contestability” are gaining traction as basis for a new regulatory framework of digital markets, with the EU’s recent Digital Markets Act (or DMA) proposal providing a reference in this area.

Fairness and contestability remain though largely undefined concepts, subject to different interpretations, and which can lead to ambiguity and uncertainty in the application of the new regulatory regime.

Some have advocated for a broad interpretation that, if applied, would de facto liken digital platforms to sort of network utilities – i.e., digital infrastructures that need to guarantee equal access to and use of data and network resources. In this view, restoring fairness through more equitable distribution of value among platform participants would imply a greater standardization of platform services, forcing gatekeepers to “open up” their ecosystems.

This view is largely based on the “allocative efficiency” logic often echoed by analysis in the economics literature. It is though, a constrained view of the platform economy and the management and governance practices implemented by platform firms. One that misses an understanding of the central “orchestration” role of platforms for innovation and value creation . An unbalanced focus on value distribution in the formulation of the fairness and contestability principles might prove an unfortunate approach; it risks fixing an issue by creating a bigger one – breaking the value creation capacity of platform ecosystems.