Digital online platforms -which we are familiar to, such as Google, Amazon, App Store- and their counterparts have been smoothly penetrating to our daily lives whether personal or business related. These mediums stand out with their practical offers which provide for easier, faster and secure access to information and various goods and services. Since these platforms became an inseparable part of our lives, we started to automatically benefit from them without noticing how they work and how they are regulated. Therefore, it becomes harder to realize the legal consequences and situations which they evoke. In this article, regulatory needs and requirements of digital platforms, along with the ongoing defective applications and the measures taken so far in this manner will be pointed out and discussed in order to bring a broader perspective and awareness to what we use on a daily basis.
To grasp the functioning of the digital platforms, wrongful practices conducted should be primarily revealed. The main branch that we will be focusing on while analyzing this subject should be asserted as “Competition Law”. What we encounter with when we dive into the digital platform industry is, certain breaches of competition law. These platforms function as tools for searching, ranking and matching specific items, goods, and services and so on, for the users’ favor. The goods and services and certain items and information listed and presented to the user are provided by the suppliers. In that perspective, it might be said that the platforms and suppliers are operating in mutually exclusive markets and therefore they cannot engage in an infringing relationship in terms of competition law. However, the term “vertical integration” will guide us to disclose the infringing structure of the platforms. Vertical integration expresses the situation in which the platforms produce their own goods and services, and insert these in their own platform. The most suitable example for the application of this term would be Apple establishing Apple Music and becoming a competitor with other digital music platforms such as Spotify, Tidal and so on.
The platforms that started to apply vertical integration, demonstrated certain behaviors which are damaging the competition balance that should be maintained in the market. The goods and services produced by the platforms are rendered to be privileged amongst the other goods and services of the suppliers. Hence, the platforms tend to exclude the suppliers from the market by using certain algorithms for their searching and ranking results which are in favor of their own products. They also tend to reach to the same conclusion by applying margin squeeze over the commissions. Therefore, along with the application of vertical integration, suppliers and platforms started to operate in the same market and suppliers have incapacitated by the platforms in competition environment. The consequences of the exclusionary actions of these platforms are similar with the results of any other unfair competition instance; decline in innovation and increase in prices, decrease in platform quality and restrictions in consumer choice.
There are several approaches to this issue; this market can be subject to regulations on competition (pro-intervention) or it can be a market which is free of intervention (anti-intervention). Ex ante and ex post regulations and interventions provided by competition law have fatal importance for the survival of independent enterprises and honest business transactions, therefore, it must be supported that regulations should be brought on platforms. However, these regulations should not be in a casuistic manner which will restrict the area of motion in the industry. A framework preparation which will define the main basis and elements of the problem and solution would be adequate. The digital industry has a rapid growth rate which can be observed on the frequency of the updates brought to these platforms. Therefore, implementing strict rules and sanctions will be restrictive for the innovations and the expansion of the industry and it may cause unforeseeable results.
The preparation studies and regulations that European countries and European Union follows, exhibit the requirements of the market. All of these exercises mutually gathered around the following grounds; transparency, neutrality, non-discrimination and fairness. By focusing on these principles, the defected structure of the market can be regulated properly through the adoption of competition law to the extent it is applicable. These notions accompany certain obligations which will be implied on the platforms. The obligations mainly set forth that platforms; should not change the rankings in their own favor unless it is for the favor of the users, should share their algorithms with suppliers, should prepare an equal environment for suppliers in terms of access.
Protecting and maintaining competition in any market has an undeniable importance for the enterprises, market structure and consumers. By doing so, the quality of the production will rise due to the fair competition between enterprises. Because innovation will be promoted and the enterprises would be more enthusiastic to grow knowing that they are competing in a fair environment. The notions propounded above and aforementioned regulations should be applied to the digital platform market to maintain a healthy competition environment and to enhance the inferior position of suppliers. Besides consumers will also benefit from the positive developments by having more choice, using quality products and by enjoying consumer surplus.
Bostoen, Friso. “Neutrality, Fairness or Freedom? Principles for Platform Regulation.” Internet Policy Review, 31 Mar. 2018, policyreview.info/articles/analysis/neutrality-fairness-or-freedom-principles-platform-regulation.
European Commission. Fairness in Platform-to-Business Relations. 6 Aug. 2018, ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-5222469_en.
Fioretti, Julia. “EU Moves to Regulate Tech Giants’ Business Practices.” Reuters, Thomson Reuters, 26 Apr. 2018, www.reuters.com/article/us-eu-tech/eu-moves-to-regulate-tech-giants-business-practices-idUSKBN1HX13T.
European Parliament. REPORT on Online Platforms and the Digital Single Market – A8-0204/2017. www.europarl.europa.eu/sides/getDoc.do?type=REPORT&reference=A8-2017-0204&format=XML&language=EN.
Author: Aybike Hotomaroğlu