The role of regulation in facilitating new business models driven by digital platforms: creating regulatory ecosystems

ABSTRACT

Digital platforms are facing a wave of regulatory activity in the UK and EU, primarily targeting their dominance, anti-competitive nature, and misconduct facilitated by their networks. Implementation of the new regulatory regimes is heavily reliant on the cooperation of the platforms themselves and use of their digital architecture, highlighting a potential weakness in the efficacy of the regulatory approach adopted. Though reference is made to the desire to deliver growth, innovation, and competition while minimising burdens on business, the prevalent regulatory tone is one of command and control with a punitive regulatory pitch targeting platforms’ financial interests. This paper presents the hypothesis that pitching towards the more practical motivations of regulatory targets, with a cooperative tone, will yield more successful and economically beneficial outcomes. A context-specific mix of regulatory modes combined with an understanding of the specific characteristics of digital platforms should be the foundation for regulation.

KEYWORDS:

• Platform economy
• e-Commerce
• regulatory ecosystem

Acknowledgements

I would like to thank Professor Andrew Campbell for his guidance and advice, and Professors Emyr Lewis and Ryszard Piotrowicz for their input and continued support. My thanks also to the external reviewer and editorial team at IRLCT. Any errors and omissions remain my own.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 While the activities associated with platforms, community sharing and irregular working arrangements have been present for decades, if not centuries, the ‘newness’ under discussion in this paper refers to the more recent and ongoing impact of platforms enabled by their leveraging of technology, network effects and their exponential growth in terms of reach and value. This, in tandem with the very real prospect of new entrants to markets devising new platforms and deploying the technology in new ways results in a perpetual and rapidly evolving set of ‘new’ challenges for the regulator.

2 The EU Digital Services Act and Digital Markets Act, and Online Safety Bill (UK). More generally, see the European Commission’s Digital Strategy https://digital-strategy.ec.europa.eu/en/policies/online-platforms-and-e-commerce and ‘Observatory on the Online Platform Economy’ https://digital-strategy.ec.europa.eu/en/policies/eu-observatory-online-platform-economy. Also, the OECD on the Digital Economy, Innovation and Competition https://www.oecd.org/innovation/digital-economy-innovation-and-competition.htm. The UK activity examining digital markets, here: https://www.gov.uk/guidance/digital-regulation-overview-of-government-activity – dc . And the Digital strategy for Wales here: https://gov.wales/digital-strategy-wales-html

3 Such as the ‘verified purchase’ indicator on Amazon.co.uk. https://www.amazon.co.uk/gp/help/customer/display.html?ref_=hp_left_v4_sib&nodeId=G75XTB7MBMBTXP6W

4 In France Uber protests led to the introduction of criminal sanctions intended to specifically target UberPop https://www.theguardian.com/world/2016/jan/26/french-taxi-drivers-block-paris-roads-in-uber-protest Op. cit. fn 20. Disputes driven by the spillover effects on incumbent actors resulted in resolution at the CJEU. See Case C–434/15 Asociación Profesional Élite Taxi v Uber Systems Spain SL (Dec. 20, 2017), and C–320/16 Uber France SAS v Nabil Bensalem (Apr. 10, 2018). Case C-62/19 Star Taxi App SRL v UATMB (Dec. 3, 2020)

5 Article 31 of the Digital Services Act does mandate the provision of data to the Digital Services Coordinator or the Commission, but this is limited to ‘ … data that are necessary to monitor and assess compliance with this Regulation.’

6 MEP and DSA rapporteur Christel Schaldemose seeking to ‘take back control’ and Nadine Dorries targeting individuals such as Mark Zuckerberg in discussions on regulation. See https://www.euractiv.com/section/digital-single-market/news/leading-meps-bid-to-take-back-control-of-big-tech/ and https://news.sky.com/story/online-safety-bill-three-new-criminal-offences-to-be-added-as-government-cracks-down-on-revenge-porn-hate-crime-and-fraud-12533204

7 See most recently Computer Associates UK Ltd v The Software Incubator Ltd [2018] EWCA Civ 518 (since referred up to the ECJ by the SC. See also Case C–434/15 Asociación Profesional Élite Taxi v Uber Systems Spain SL (Dec. 20, 2017), and C–320/16 Uber France SAS v Nabil Bensalem (Apr. 10, 2018).

8 See for example Airbnb’s engagement with various governmental bodies in Thailand including Tourism and Sports Ministry https://thethaiger.com/hot-news/tourism/airbnb-welcomes-new-thai-tourism-minister-support-of-short-term-accommodation, and the Tourism Authority of Thailand (TAT) https://news.airbnb.com/airbnb-and-tourism-authority-of-thailand-empower-travel-beyond-big-cities/

9 The discussion of liability for software/AI errors is beyond the scope of this paper. For an insight in to just one element of the debate See Doshi-Velez, Finale and Kortz, et al. ‘Accountability of AI Under the Law: The Role of Explanation’ (November 3, 2017). Berkman Center Research Publication, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3064761 or http://dx.doi.org/10.2139/ssrn.3064761.

10 It is noted that the new OFCOM role under the Online Safety Bill will be funded by a clawback piece of secondary legislation provided for in Schedule 10 s.2. A contrast to the collaborative approach to funding under the ASA model.

11 As we see with Uber’s ‘local cab’ business initiative. Such adaptation also illustrates the capacity of the platform to adapt and innovate, even to apparently hostile environments. Such entrepreneurial innovation needs to be fostered and encouraged. The regulatory environment and tone can either facilitate or stifle such developments. https://www.uber.com/en-GB/blog/local-cab/

12 This approach to data sharing should be contrasted to that prescribed in the Online Safety Bill which only appears to deal with compliance with those regulations without elements of positive added value for forward development.