Certification of Business Practices and Algorithms as a Complementary Approach to Platform Regulation

Digital platforms have transformed markets and created considerable value, mostly for their owners. As the Big Tech firms have leveraged their platforms to capture dominant market positions, concerns have been raised about their unfair business practices, abuse of market power, exploitation of stakeholders, and harm to society. Policy makers have attempted to apply antitrust law and promote regulation to constrain the dominant platforms, yet the effectiveness of this approach has been limited. We discuss the types of harm inflicted on consumers, suppliers, competitors, and society at large, and analyze the recent regulation of digital platforms in the US and the EU, pointing to its limitations. We proceed by introducing the notion of inspection and certification of business practices and algorithms as a complementary approach that relies on market incentives to encourage competition and align the mission and practices of digital platforms with the interests of stakeholders. We explain the advantages of this approach vis-à-vis regulation. Finally, we outline a plan for implementing this system, while coping with corresponding challenges, and offer practical recommendations for policy makers.

An open discussion with Dovev Lavie and Oreste Pollicino.

The paper is coauthored with Oreste Pollicino (Bocconi) and Tommaso Valletti (Imperial College London).