Comments to the European Commission on Fairness in Platform to Business Relations
On November 22, 2017, the Center for Data Innovation submitted comments to the European Commission in response to its recent impact assessment on “fairness in platform-to-business relations,” a study to investigate practices by online platforms—digital services that cater to two-sided markets—in their relations with other businesses.
Online platforms drastically reduce the costs of market entry for businesses and enable entirely new business models. However, their success at creating competition and innovation is a function of their flexibility in designing the rules and terms of their services. Policymakers should continue to allow platforms to set their terms of service because these businesses are best positioned to optimize their platforms for both consumers and producers.
The impact assessment suggests new regulation to address disputes between platforms and businesses. But proper enforcement of existing law is sufficient. Just as shopping centers can set and change their policies about who can sell what and how, platforms should be allowed to do the same. And just as shopping centers have an incentive to treat their tenants fairly, so too do platforms have it in their interests to behave fairly, lest they lose the supply side of their platform to competitors, and the demand side along with it.
The impact assessment also cites data access as a possible cause for regulation. Industry-specific rules and anti-trust enforcement will work better than comprehensive rules governing data access, because the latter would fail to account for the nuances of platform-to-business relationships in the multitude of different scenarios, and harm consumer choice and competition between platforms.