Regulating Platforms, again?!

Rather than following its commitment to embracing non-legislative but self regulatory solutions, the Commission is about to undertake a second attempt in clamping down on platforms.

Platforms are recognised for a while now as the prevailing model for the digital economy. Finally entrepreneurs can spend time doing what they do best without having to be part-accountants, salesmen, IT-experts, web-developers or part-whatever. Building a business pre-platform was like digging out your house from snow before you actually could go in. Every day.

Platforms triggered an explosion of new startups who benefit from lower entry barriers and fractional costs when launching a business. We see new platforms emerging and even platform to platform (P2P) solutions.

Not only entrepreneurs, but also users are becoming very aware of what they are good at and start to focus, in a nonchalant way, on what they do best and chose the most convenient way to buy a ticket or save their documents. As individuals we are becoming more aware of our strengths and skills. This seems like a very logical continuation of the separation of labour. Not everyone has to do everything.

While startups and entrepreneurs across the planet are still in the buzz of grasping the opportunities they now have to change the world, the conversation policy makers have is taking a different turn.

‘Fairness in Platform-to-business relations’ reads the European Commission’s work programme for 2018. Search results reveal that P2B is a term solely used in the political Europe and its notion is imminent, impending and even threatening if we attend to some of the stories around. The motivation seems less like a solid legal concept but more like a feeling; a feeling that something must be wrong. If we do something about fairness we presume that the current situation is unfair.

The motivation of the proposal limps for several reasons. First of all it highlights how the European Commission has pivoted and adapted their story over the years, changing its position more than once. A wide-ranging consultation in 2015 and 2016 resulted in no justification for sweeping legislation on platforms.

Part of the reason at the time was that the lawmakers did not manage to define what they were talking about. Considering platforms as matchmakers in multi sided markets, the Commission was not able to find evidence that there are structural problems. On the contrary, benefits of platforms overweight and the Commission committed to embracing non-legislative but self regulatory solutions .[1]

Rather than following this commitment the Commission undertook a second attempt in clamping down on platforms. This time it follows a “problem based approach”.

Licenses and copyright protected content would not be sufficiently protected on online platforms, so the lawmakers say. The draft legislation[2] that followed goes by far beyond its declared scope, obliging crowdfunding platforms, blogs, online shops or developer platforms to restrict parts of their content and conclude licenses similar to those of Spotify or Youtube for the rest of it.

This is by far the only area where “government comes after platforms”. Policy makers are quick in pushing responsibility on platforms about all kinds of controversial content or use or make often unrealistic demands[3].

All in all, the discussion often seems polarised and naive. It is true that technology can achieve more than eyes and hands, but this mustn’t mean that long established and enshrined principles of power and responsibility have to be shifted to technology. Many of the policy advances seem half-assesses and are sending mixed messages.

Coming back to platforms. We should ask ourselves if we really want to adopt regulation clamping down on e-commerce like asos, Zalando, HelloFresh, Lieferando, Deliveroo, payment platforms like Adyen, Klarna, Stripe or Transferwise? Platforms as business model brings producers, consumers, partners and owners together in ways that go far beyond what some of our political elites feel uncomfortable with Amazon, Google, Booking, ebay or Apple?

Is it all new? Part of the accusation is that a handful of platforms, which happen not to be founded or headquartered in Europe, abuse their position, do not provide enough transparency, push unfair contractual arrangements and keep valuable insights from data to themselves.

If we look back in time or into other sectors like retail supermarkets, we find that such practises are neither new nor necessarily abusive. The question arises: Why does the European Commission now want to intervene and not before. Or did we ever speak about where a “fair” position for products in a supermarket is or if it’s “fair” if Delhaize launches own brands on those products that sell well?

What’s the logic? It might seem easy and opportunistic to give in to the immediate picture of “big platform abuses power vs small business,” but such behaviour would not make sense in reality. As a platform you don’t only care about but you rely on business users. If there is no trust and users are unhappy with the product they will leave, regardless how big a platform is.

But let’s be clear, apart from some individual stories the image of platforms as malicious black boxes has never been supported by evidence.

Missing the point? So why is it that startups launch much faster today than before? Why do we experience a democratisation of entrepreneurship and a “wave of European innovative startups,” as President Juncker put it? For one part it is because we have the technology at our fingertips, i.e. startups as well as their users can easily afford the devices they need to interact on a marketplace.

Secondly it is because technology allows us to offer products of scale. Once a startup develops a software product or service, the majority of the sales, marketing and subscription service can be automated. So if we give in to one of the assumptions of the European Commission, that business clients cannot negotiate fair contracts with platforms — that actually is for a good reason because obliging them to put a lawyer behind every contract would do nothing less than rendering the entire advantage of technology useless.

Is it all about B2P? It seems evident that the Commission wants to stick up for businesses that have experienced issues with platforms. If such issues exist and deserve attention, first and foremost by the platform itself. Digital savvy consumers, startup entrepreneurs and pretty much anyone reacts to bad customer service and redress.

And if choice is limited that this might actually be a case for competition authorities rather than for legislators. The legislator rightfully envisaged this as one of the policy options which seems the most adequate and least invasive for startups in Europe and across the world as they offer the most efficient and speedy solution to problems when they arise. Startups don’t want to wait month or years for regulation and its enforcement to see it unfit for current realities and technologies.

(This blog-post first appeared in TheDigitalPost on 11 December).

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