Platform Economies need more Platform Neutrality, less Break-Up

2018 has been the start of some reckoning for Big Tech. The world is looking for a remedy. But it’s not that easy. Let me explain why.

This essay is split into three parts: The first will tackle what made digital platforms so powerful. The second will show the problems that arose from the dominance. The third part will take a look at proposed solutions.

Part I: Background

Platforms build an economical market inside the common market which is able to operate more efficiently than the external one. Or as famous investor Bill Gurley puts it:

marketplaces are a direct extension of the productivity enhancers first uncovered by Adam Smith and David Ricardo. Free trade, specialization, and comparative advantage are all enhanced when we can increase the matching of supply and demand of goods and services as well as eliminate inefficiency and waste caused by misinformation or distance. As a result, productivity naturally improves.

Great marketplaces do not simply aggregate a market; they enhance it. They leverage the connective tissue to offer the consumer a user experience that simply was not possible before the arrival of this new intermediary.

What Big Tech enabled are marketplaces in the sense of connecting supply and demand. The desired object of exchange can be manifold:

• Material goods (Amazon, Airbnb)
• Digital goods (Netflix, Apps)
• Attention (Google, Facebook)

Business Model Toolbox

Software businesses feature a low marginal cost due to their no asset-strategy: The first customer costs a lot in R&D, the millionth customer costs almost nothing.

Most of these platforms are heavy profiteers of network effects. Once the balance is tipped to their favor, we can witness a flywheel effect of compound growth.

these businesses depend on network effects, which means that the company that gets to scale first is likely to stay on top. So, for startups, this strategy typically involves raising lots of capital and moving quickly to dominate a new market, even when the company’s leaders may not know how they are going to make money in the long term.

And critically: While conglomerates of old aggregate supply, Big Tech aggregates demand.

One insight Tech had, is to cater to the demand side first. In the platform interplay of three actors, they clearly favor a specific hierarchy of importance:

1. Demand side
2. Platform intermediary
3. Supply side

In putting the interests of the demand side even before their own interests, they are beloved by customers — who flock to them.

(That’s what old industries are trying to copy with ‘customer centricity’ and other case study buzzwords.)

NetBase Brand Passion Report 2017

The supply side has advantages, too. It reaches audiences (with goods or ads) that it wouldn’t reach without the platform. Consider selling home stitched masks before Etsy or even eBay.

Another benefit: The lowered barriers of entry. Taylor Pearson:

All of the internet aggregators, including Amazon, Facebook, and Google, enabled new service providers by creating a market and standardizing the rules of that market to reduce transaction costs. […] It’s easier to become an Uber driver than a cab driver, and an Airbnb host than a hotel owner. It’s easier to get your product into Amazon than Walmart. It’s easier to advertise your small business on Yelp, Google or Facebook than on a billboard, radio or TV.

The participants pay some form of tax to the enabler. In theory everything is in a happy balance — if the platform owner would overcharge the platform participants, they would leave the service for good. Network effects create rocket-like growth, but they also can collapse with the same speed. It’s in the platform owner’s interest to make dealing with the platform as simple and fruitful for all. Benefits outweigh the detriments in comparison to the common market.

Part II: Problems

It only gets problematic when the platform owner decides to act (for one reason or the other) against its own long term interests.

As soon as one platform got the (customer mindshare) monopoly, it’s comprehensible that some market participants have a “love/hate” relationship with it: You are (maybe with your whole income) dependent on it, but leaving the platform is worse.

Benedict Evans asks about the harm we need to address. It got pretty easy to define the harm:

• Amazon established a shadow economy where the welfare of lots and lots of dealers depends solely on intransparent Amazon jurisdiction
• Google increasingly shifts incoming search traffic to own properties or ‘Featured Snippets’ where you don’t need to leave Google
• Most artists can’t make a living from Spotify streaming payouts
• News publishers get de-ranked on Facebook
• Grubhub used downright shady and fraudulent practices to get themselves in between restaurants and users
• Uber takes on court battles to not give drivers insurance
• Apple is leveraging their monopoly on iOS hardware into adjacent markets for rent-seeking purposes

In the long run most of markets will consolidate around one winner takes all for a given segment. (That’s also what’s behind the Softbank-approach, which may seem from the outside sillier than it really is.)

Cherie Hu:

Studies have shown that the vast majority of industries — banking, airlines, pharmaceutical drugs, fast food, you name it — follow a predictable consolidation cycle, resulting in the top three companies in a given industry controlling up to 70% of the market.

Make no mistake, this tendency to centralise power is inherent to capitalism. The first Antitrust case ever centered around Standard Oil. John D. Rockefeller started out being a simple entrepreneur that was just a little bit smarter than everyone else. What happened next:

Rockefeller’s company got big enough that he was able to go to the railroads and start making demands. He’d be like, look, I ship a lot of oil. If you want my business, I want a discount. […] I’m also not so crazy about you carrying my competitors’ oil. But I’m going to let you do it. Just every time you do that, you also need to pay me money. […] In 1872, Rockefeller had about 30 rivals, these other refineries in Cleveland. […] If you don’t sell to me, I’m going to lower my prices more than you can. And I will crush you. […] Rockefeller was able to buy up 22 of them, six of those in one 48-hour period. They called this the Cleveland massacre.

As always, take a look at the incentives, rather the individuals running these businesses. Capitalism — or let’s say corporate cronyism (a.k.a. fake capitalism) — honors the monopoly status. Because it’s the ultimate state where profits are high thanks to no working competition.

Read this quote from Silicon Valley veteran Peter Thiel:

Competition Is for Losers. If you want to create and capture lasting value, look to build a Monopoly.

This is in stark contrast to how capitalism is supposed to work. Tyler Hogge:

competition pushes the world forward, as risk-seeking intelligent inventors and entrepreneurs find ever-ingenious ways to compete with larger, established companies, by bringing the market lower-cost and higher-quality products.

In the web economy, the pace with which the monopolization happens is much faster. This principle isn’t exclusive to Tech, but it favors the (new) incumbents because of their size.

Gavin Baker goes a level deeper and lists four reasons why “winner take most” dynamics are more at play in the web era:

1. CAC is the new rent
2. Google and Facebook auctions favor big brands
3. Repeat customers and organic traffic lets Big Tech avoid paying rent
4. AI/ML are so important on the internet and scale drives better AI/ML

The cream really rises to the top on the internet, but once it is at the top it is hard to displace. Path dependence is real within each vertical as there was an initial period where market share was up for grabs, but if you didn’t grab it during this initial state it is really hard and expensive to get it later.

One example for the glorification of monopolies: In December, food delivery company Takeaway.com bought the german business from Delivery Hero, becoming the de facto monopolist for ordering food online in Germany.

Wall Street reaction on the acquisition

The result:

1. No startup dares to question the status of the market leader. And if they did, they would get no Venture money. Good luck overcoming the hurdle of entrenched network effects.
2. Companies without working competition can raise prices and therefore their margins.

Research from De Loecker and Eeckhout

Tim O'Reilly about Google’s development:

Google is now 20 years old. One reason for its extractive behavior is that it is being told (now by Wall Street rather than venture investors) that it is imperative to keep growing. But the greenfield opportunity has gone, and the easiest source of continued growth is cannibalization of the ecosystem of content suppliers that Google was originally created to give users better access to. Growth for growth’s sake seems to have replaced the mission that made Google great.

Maybe you sensed a theme by now: It’s almost always the supply side that voices issues with given platform dynamics. Platform providers who aren’t covered with bad news (by now), are simply treating their suppliers better.

Again, this is nothing entirely new, vendors moan about brash volume discount demands from Walmart for decades.

Antonio García Martínez calls this flipping the script: He sees them not as monopolists, but as demand monopsonists:

Supply monopolists vertically integrate to own their value chain, extracting more value, and shutting out supply rivals, and then go on to jack up prices on consumers. Demand monopsonists horizontally integrate, acquiring or copying-to-steal user demand adjacent to their existing demand at no additional cost to consumers, and that way gain leverage over their suppliers (and advertisers, if that’s the model). Facebook will never own a media production company, just as Airbnb and Uber will never own a hotel or a physical taxi company. But they’ll own every square-foot of demand that feeds those industries if they can.

Such supplier squeezing, was actually good in the world of old, where the supply is represented in form of big companies with healthy margins.

In the new world, where value creation is increasingly atomized and outsourced to the little guy — it’s called gig economy — we have to rethink the consequences.

Part III: Solutions

III a. Break it up?

Senator and presidential candidate Elizabeth Warren voiced what many are mumbling behind the scenes. This was brewing for some time.

Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.

In this tradition, my administration would restore competition to the tech sector by taking two major steps:

First, by passing legislation that requires large tech platforms to be designated as “Platform Utilities” and broken apart from any participant on that platform.

Second, my administration would appoint regulators committed to reversing illegal and anti-competitive tech mergers.

Amazon: Whole Foods; Zappos

Facebook: WhatsApp; Instagram

Google: Waze; Nest; DoubleClick

Warren again:

The problem is that’s not competition. That’s just using market dominance, not because they had a better product or because they were somehow more customer-friendly or in a better place.

I would alter her argument: Big Tech often has the better product, and ask anyone who solely orders on Amazon, they are more customer-friendly. But they began to abuse their market dominance — the balance isn’t warranted anymore.

Now Warren’s proposal is unfortunately full of historic misunderstandings and unintended consequences:

About splitting platform utilities from platform participants

• First of all, it would help to be more precise. As of now, we can only guess what that would mean. “ Is Amazon not allowed to sell on its own behalf at all and still have Marketplace — so it has so kill half of the business? Or does this only apply to private-label products?”
• From TruthOnTheMarket: “take a look at your water, electricity, and sewage service. Have you noticed any improvement (or reduction in cost) in those services over the past 10 or 15 years? How about the roads? Amtrak? Platform businesses operating under a similar regulatory regime would also similarly stagnate.”
• Such a proposal would favor the ‘traditional’ business model (I sell you something for amount of X). Much of what the Internet enabled in prosperity wouldn’t work: “Why is Amazon Prime Video bundled with free shipping? Because the marginal cost of distribution for video is close to zero and bundling it with Amazon Prime increases the value proposition for customers. Why is almost every Google service free to users? Because Google’s business model is supported by ads, not monthly subscription fees. Each of the tech giants has carefully constructed an ecosystem in which every component reinforces the others.”
• As an utility, platforms should be under fair, reasonable and nondiscriminatory jurisdiction from the government. But “right now there are a lot of trollish people who are insisting that being banned from Facebook, Twitter or YouTube is unfair, unreasonable and discriminatory. Certainly, at the very least this would lead to a huge burst of such lawsuits, as Warren’s plan allows basically anyone to sue over this”
• Dividing Big Tech is unfair in comparison to other industries, where cross-leveraging also happens. Ben Erwin in the comments section: “Yes, break of conglomerates in every industry, but focusing on Big Tech, when Big Food, Big Agriculture, Big Medical, Big Financial, Big Comms and Big Media have been a worse problem for longer.”
• We can only speculate about the loopholes which would appear. Companies know how to dismantle a ruling that isn’t airtight. Again, this is how it has always been.

About reversing M&A activities

• It’s very problematic to undo what has already been in effect for years. We’re talking about a ex post intervention in existing incentives. Companies build their strategy partly with extreme far-sightedness, just to be denied the fruits of their labor. Imagine being Merck, invest a lot in a new drug, just to be told it has be free of patents. How would you “roll back” YouTube to its customer base it had back when Google bought it?
• The few startups that are trying to take on Goliath, are doing so with a very good exit option: Being swallowed by the incumbent. If this option goes away, so does Venture funding and therefore the number of startups.
• You can ask Snap what happens when you don’t want to be bought. Big Tech, in this case Facebook, tried everything to let them bleed to death.
• If “Social Networks aren’t allowed to buy other Social Networks”, what defines a social network and how would it have helped in the mentioned case where Amazon buys WholeFoods?
• Splitting up companies would hurt some more than others. Mike Masnick: “Amazon loses Zappos? Meh. It’ll still sell lots of shoes and maybe ramp up its efforts there in a way that ends up making Zappos tough to sustain by itself. Google loses Waze? Well, it already has Google Maps which probably has more users anyway.” Contrast that to Facebook, where the growth is clearly in Instagram.
• If you break up one of them, you’ve just eliminated one of the only viable alternatives to the others.
• If you break up all of them, the two largest tech companies in the world by far are Tencent and Alibaba. An uneven fight for the future.

Value of platform companies by continent

Regulating the ‘Warren way’ would definitely create new problems that are bigger than current ones. Telling, that even the most arrogant/ignorant president of all time (who also hates Big Tech) hasn’t proposed breakup plans yet.

The thing is, it looks like these rules are written for specific companies. We have seen that playbook before. You should overhaul the system instead. When you have already targets in mind while constructing rules, bad policy follows inevitably.

Remember Rockefeller? Standard Oil was split in 33 different entities. But they were still orchestrated through him — he grew richer than ever.

Nevertheless, as most tech pundits agreed on: It’s good to start the discussion what could be done — but this is hopefully not it.

III b. Let the market sort things out?

As always, it’s easier to criticise others than to come up with a better alternative.

To a degree, that was the point of the exercise: If you don’t understand the complex inner workings of an industry, its very different business models (to other industries and between each other) and aren’t 100% sure what would happen in case of a consolidated break-up, then maybe, just maybe, the sledge hammer isn’t the best option to begin with.

Furthermore, the nature of legislature is — especially compared to fast-moving tech — slow. That Microsoft lost the Browser Wars in court didn’t help Netscape at all.

Actually the Microsoft/Netscape case is the most valuable lesson from history we got. Bill Gates was maybe the first to truly leverage the platform game in Tech by creating an ecosystem that was all about Windows. Ben Thompson called it the Bill Gates line:

platforms are powerful because they facilitate a relationship between 3rd-party suppliers and end users; aggregators, on the other hand, intermediate and control it.

But Gates turned on his own long term thinking, though:

The problem with the blitzscaling mentality is that a corporate DNA of perpetual, rivalrous, winner-takes-all growth is fundamentally incompatible with the responsibilities of a platform. Too often, once its hyper-growth period slows, the platform begins to compete with its suppliers and its customers. Gates himself faced (and failed) this moral crisis when Microsoft became the dominant platform of the personal computer era.

The rest is history.

Noteworthy that Microsoft is back as one of the most valuable companies despite having the Antitrust ruling and having failed to play a leading role in web, mobile & social.

But did the DOJ lawsuit create an opening for Google to get in the door? Warren thinks so, I don’t.

The best form of Antitrust is an asymmetric business model. Steven Sinofsky:

the best competitors are not aiming for the existing business with the same value proposition or dollars (or customers).[…] Google and Microsoft were competitors but only by virtue of being tech companies hiring engineers. After that almost nothing about what was being made or sold was similar even if things could ultimately be viewed as substitutes. That is literally the definition of innovation.

The market mechanism is the source of most beneficial developments.

So the argument that — as last time — the free market will bring todays giants down, holds some water.

It’s certainly possible. But we have to wait at least till the next technology shift arrives (if it arrives at all): Crypto has at least an asymmetric business model where the conglomerates have no ready-made answer.

Just for the sake of the argument, let’s assume this: Every decade the top 0.1% of companies completely disrupt the incumbents and therefore collect the vast majority of the profits. Is it fair that those companies can use their monopoly status to disadvantage the remaining 99.9% — even for only 10 years? (Not mentioning that inside those winner companies, rewards are not shared equally.)

Basically old tycoons get switched for new ones. Statistically your company will always be in the bottom 99.9% — you don’t really care which ruler is dwarfing you, as long as you get dwarfed.

More importantly, I think Facebook is different from MySpace and Apple is different from Nokia and Google is different from Yahoo:

• Truly global scale
• Very deep pockets
• Most importantly: They haven’t become comfortable yet, they’re still paranoid

All three ingredients lead to the mantra:

If in doubt buy or copy the competition.

That’s powerful. While I wouldn’t be as sure as Thompson that no paradigm shift is around the corner, I certainly see the power dynamics in favor of the new incumbents.

Therefore I agree with the notion that “don’t touch it” isn’t working anymore and I’m with Fred Wilson on this:

I am sympathetic to Warren’s position. I particularly don’t like the way that Google, Apple, and Amazon use their market power in search and in their app stores to display their own products.

The best analogy I’m aware of is the case of employee rights: You could argue that employer’s can treat workers as they wish — at last it’s their company. And if one employer is so bad, then the employee will surely go to a better company (the market sorts things out).

It’s still easier to switch jobs than to find an alternative to Amazon, Google or the App Store (the last one has no alternative).

We’ve been there and everybody agrees: It didn’t work out. Now it’s repeated with (often small and medium-sized) suppliers: Their livelihood depends on these platforms. Telling those merchants it’s their fault is like telling an employee it’s their fault to get into a job.

Looking at Uber drivers trying to unionise, the analogy becomes the exact same thing.

III c. Antitrust rulings?

Here are general characteristics of effective regulation:

• Least deviation from the norm
• Easy to understand
• Simple to implement
• Simple to control & punish
• Least amount of exceptions possible

What could be done in terms of Antitrust regulation?

The United States and European Union have, at least since the Reagan Administration, differed on this point: the U.S. is primarily concerned with consumer welfare, and the primary proxy is price. In other words, as long as prices do not increase — or even better, decrease — there is, by definition, no illegal behavior.

The European Commission, on the other hand, is explicitly focused on competition: monopolistic behavior is presumed to be illegal if it restricts competitors which, in the theoretical long run, hurts consumers by restricting innovation.

Both mindsets are partially right, but partially miss the point: The US obviously by only looking at the demand side. The EU has the better angle with competition, yet fails to see cases which aren’t on top level.

EU commissioner Margrethe Vestager

E.g. they managed to look into how Google used Android to push Google services. Yet they missed to look into iOS as well — officially because Android has the bigger market share. (My hunch is that the EU is slightly quicker to attack ad-driven business models.)

Say you are in the supply side (developer studio) on iOS. Your options to get your app in front of the customer boils down to precisely one— through Apple. The market share of iPhones could be 5% — it doesn’t matter if you’re trying to selling an app to iPhone owners.

To that end, we could agree on Antitrust should look at customer harm (only), but then the customer should be defined as both sides of a two-sided market. Antitrust needs to look at all participants and detect if one side would be worse after a potential merger.

One example: Facebook was already the Number two in advertising for suppliers. Buying another attention getter — Instagram — would have been at least questionable from that perspective.

Which is the best transition to the Spotify case: Because Apple Music is owned by Apple, who also controls iOS, it has a huge advantage over Spotify. Do you think Apple Maps would win against Google Maps if they were the same on all other fronts?

Owen Williams picks the back and forth between Apple and Spotify apart quite thoroughly.

Spotify isn’t demanding anything different: they’re demanding the same business model as Apple Music, and the same rules applied to them as everyone else on the platform… including Apple.

And about the power dynamics in the App Store:

prominent app developers, such as Marco Arment, have expressed fear of even talking publicly about Apple practices for fear of damaging this relationship

Now, because Apple is beloved by its customers (see hierarchy of interests), their fans go to great length to explain why Spotify has to pay 30% while Spotify’s gross margin is barely at 25%. No wonder the EU will take a look into it.

Spotify is by far not the only casualty — the number of unreported cases can only be estimated.

Like I said earlier, ex-post interventions have their own shortcomings, because nobody knows what would’ve happened. Antitrust as we know it is by definition ex-post. That’s why I think foresightful ‘rules’ are what we should strive for.

Platform Neutrality

After this very long prologue, I like to present a possible solution without the downsides mentioned above.

I call it Platform Neutrality. It should be a thing, just like Net Neutrality is a thing that people (rightfully) root for. It consists of four central points:

1. For every cross-leveraged integration there must be an API for others to connect to

Cross-leveraged integrations happen all around you:

• It’s Cortana being the default voice assistant in Windows while there’s no choice to set some other voice assistant. (SiriKit is actually a not perfect but good counter-example: Developers can integrate it in their app.)
• It’s Apple not obeying to their own App Store guidelines and advertising Apple Music with Push Notifications.
• It’s Gmail having the option to insert files from Google Drive, but not from other cloud storage providers.

• It’s Kindle’s support for buying ebooks only in the Amazon store.

My proposal is to ban every one of these exclusive integrations. You shouldn’t be able to use Product A to push your own Product B. Product B should win on its own merits.

But we shouldn’t go overboard with this. After the Microsoft monopoly case, we had “choice”. Look at this cumbersome and bureaucratic welcome screen we got thanks to the Netscape ruling:

‘Browserchoice’ screen after the Netscape ruling

It ruins the (first-time) experience. We don’t need this.

(The whole ruling is kind of ironic given that you could install an alternative browser on Windows if you’d wish to. There’s no possibility to do that on iOS.)

A switch deeply buried in the Settings app does the job as well. So Apple would still have the power to set Apple Mail as the default email client. People don’t change their defaults so this is a very powerful feature. But it could be switched to every app that supports it.

The benefits of this low-key integration: More open platforms don’t need to change at all: E.g. you can already integrate Dropbox in Gmail.

In case you follow Stratechery, I can put in other words: Aggregators should be mandated to become platforms.

I understand the downsides of such an open approach. Platforms need headspace to evolve. And we want them to evolve, not to stagnate. Ben Evans:

*Everything* a platform does could be a competing company. Adding bluetooth killed the business of selling $100 bluetooth cards. […] When I bought PDAs in the early 2000s, they didn’t have bluetooth. When they added it, they were competing on their platform.

But what’s the consequence? Any sort of “sherlocking” is allowed?

Proponents of the “can’t compete”-clause will argue that the platform’s terms are set once 3rd party comes on board. If the platform vendor wants to alter the deal, e.g. integrating a part like Bluetooth into its platform, well they can make a new platform.

I wouldn’t go as far. All things considered it’s clear that PDA’s and their ecosystem got a better future implementing this (in hindsight) low level technology.

So, where do we draw the line?

I guess a good rule of thumb would be look at the business model of the integration taken place. Does the platform owner make money directly with the competing offer? Then others should be getting the chance to compete. Does the platform owner only use the new feature to bolster its existing offering and is not asking for extra money? Then it’s OK.

Keep in mind that “making money” includes revenue generated by Ads. Maybe we would have some arguments in front of courts, since lines are a little blurry. But this would be way better than the current way of things. Name me a platform integration and I’m pretty sure I can sort it one of those two camps.

• Apple Music getting preferred access? Not allowed, since Apple Music costs extra.
• Apple implementing a specific chip inside the Mac’s? Allowed, since the Chip is no separate position on the invoice.
• Apple offering Nightshift in their OS? Fine, since they’re not asking money for it.
• Apple only allowing to back up to iCloud? Not allowed, since iCloud is a freemium feature.

Keep in mind, the only thing happening here is competitors given at least an entry to compete. Most users will stick to their defaults and most features make use of internal knowledge to build a tightly integrated and therefore better product.

2. Integrations can’t be bought or given out exclusively

Contracts with Exclusivity clauses are more common that one would think. For example, companies that sign up for the german rewards program Payback, aren’t allowed to create their own point-based loyalty program.

I don’t think this fosters competition.

Drivers shouldn’t be tied to Uber or Lyft exclusively by contract. Multihoming (drivers can choose if they want to fulfil the request from Lyft or Uber at a moment’s notice) has to be possible.

Google pays $9 billion yearly to stay the default search engine on iOS. This shouldn’t be an auction to begin with — cementing those with deep pockets.
No browser (aka platform) ever should be able to sell out.

It should be illegal to buy advantages of any kind. Let the best product win. This would also remove antitrust complaints.

I think this would hurt Apple more than Google

3. Non-discriminatory pricing for all participants

One platform shouldn’t be able to have a say in what the platform participant does outside its ecosystem. For example, Amazon didn’t let its ebook suppliers publish the same book on other platforms for less money. Then came the EU and made them remove these clauses:

The MFN clauses, a particular point of focus during the investigation, required publishers to give Amazon either similar or better terms to those of its rivals and to inform Amazon what those terms were.

That’s the way. These so-called “Most favored nation”-contracts are to be abandoned, completely. The same goes for

• not allowing apps to link to their website to purchase the service directly
• not allowing “to mention that services are available for less money elsewhere”

Apple would argue that this is only in the interest of the user to not be scammed. Yet, “security and openness may need to be balanced, but neither needs to come at the sacrifice of another”.

A difficult topic are store brands, like AmazonBasics. The suppliers got stabbed in the back twice: The platform knows what is being sold at which price — it’s easy to reason what products they could do themselves. And of course they don’t have to pay seller fees or marketing for that.

First of all, all the integrations in form of ads or else shall be available to every dealer. So, if Amazon markets its Echo lineup on the front page, the very same slot has to be bookable by third party merchants.

I hear you, Amazon would set the marketing value at an arbitrary, high number. But then they have to proof that the item they are selling is still profitable. That calculation can be tuned to be as low as possible, sure. But going back to the Apple vs. Spotify case: I would be surprised if Apple could subtract their marketing activities and the 30% cut and still be in the black.

4. Governmental escalation path

In case a supplier has reason to subject the offer I don’t expect Apple and others to release calculations to the public — but to a governmental entity.

This mediation body is also needed in case a merchant account got blocked or suspended. Given that a supplier tried the platform path and are still being denied, the agency can look into the case as the last resort.

The sole fact of the existence of such an escalation path should nudge platforms to behave accordingly.

It’s not enough to a have an escalation path inside the company that hosts the platform under scrutiny. The conflict of interest should be obvious.

And now the kicker: Remember that we are searching for rules with the least amount of exceptions. So all those above are applicable to every industry, “offline” as well. And I don’t see a reason why this shouldn’t be the case. Digital is the new normal and can’t be clearly separated from analog anyway.

Cab drivers are currently tied to one cab company, why should this be OK if it isn’t for Uber? Walmart should get the same treatment regarding store brands. A car manufacturer shouldn’t be able to bundle only one specific brand of car radios with his cars. Printers shouldn’t be able to reject ink that isn’t original.

Sure, it’s an intervention in a lot of existing business models. It would have been better to have these rules in place already. But the second best time is now.

Please, if you see a case where the cons outweigh the pros, don’t hesitate to tell me. This framework has evolved since its inception and is still evolving.

It seems clear to me, that rules like those would diminish the customer experience slightly in the short term. In the long term, it should look different.

I see it this way: Platform companies wouldn’t be hurt by such regulation, they’re just pushed in the right direction they should have chosen anyway if they would see the long term consequences. This is regulation that doesn’t destroy their economics, rather it is enabling others to build on top of their platforms, therefore increasing the total ecosystem valuation. Competition is encouraged thanks to a leveled playing field.

In the meantime these rules don’t disadvantage todays Tech incumbents against other industries or other nations.

I’ve written a lot, but would all this help the privacy issues that came up with Facebook’s malpractices? Not at all. Mixing privacy with these economic questions is one mistake I tried to avoid. Of course we need to deal with privacy and societal impact as well — externalities that need to be factored in like security or environmental protection. We can talk about the success or failure of Certified Emission Reduction Units, but that’s for another day.