Winners of the COVID-19 crisis

Many online platforms have grown significantly during the COVID-19 crisis: retail platforms such as Amazon and Bol.com are posting record sales. Microsoft’s collaboration platform Teams has experienced a growth spurt thanks to remote work. The financial sector is no exception. Apple Pay, Apple’s mobile payment service, is growing by partnering with well-known credit and debit cards from major financial institutions. Google, too, is continuing to expand its services toward becoming a digital banking platform. The concentration of power among tech giants has increased even further during the COVID-19 crisis. And that is sparking growing resistance in the U.S. and Europe. Is there still a level playing field in the world of online platforms?

Power is becoming concentrated

Ask yourself this: Can advertisers still do without Google? Even if Google raises its advertising fee by 20%? Or: Do users see alternatives to the social network they’ve built up over ten years on Facebook? Are they able—and willing—to store a decade’s worth of photos somewhere else? Chances are the answer is “no.” If consumers or suppliers can no longer bypass a company, this has a negative effect on healthy competition and Innovation, economic growth, and price balance in various markets. This applies, of course, to online platforms as well. If a platform’s dominant position grows too strong, the ecosystem surrounding it can become unbalanced.

A Counterargument from the United States

The global call for new rules to protect fair competition is growing louder. One political response to the growing influence of Big Tech is a desire to curb this dominant position. Notable this summer are the antitrust hearings held by the U.S. Congress. The CEOs of Apple, Amazon, Facebook, and Google are being questioned about allegations of market dominance and unfair competition. In the coming weeks, we can expect a report detailing allegations of misconduct by each of these companies. However, strict laws and regulations are not expected in the short term, as the big tech companies wield significant influence over the U.S. economy. The Economist therefore describes the hearings as more of a show than a genuine focus on competition law. So, if the outcomes in the U.S. are uncertain, can Europe take the lead on this issue?

Europe’s new legislation

In some areas, Europe is a pioneer in legislation—take privacy laws, for example. Steps are also being taken now to promote fair competition among online platforms. In the summer of 2019, a European investigation was launched into alternative regulatory approaches for companies with these new Revenue Models. This summer, new European Platform-to-Business legislation went into effect. As the European Commission itself states: “the first regulations aimed at creating a fair, transparent, and predictable environment for smaller businesses and merchants on online platforms.” In particular, this legislation sets requirements for a transparent method of “ranking” sellers on a platform. In addition, the Dutch government intends to implement regulations requiring platforms to handle consumer complaints themselves, rather than passing problems on to the sellers on the platform. These are promising developments. However, more is needed than just laws and regulations to promote economic growth and fair competition.

Unintended effects

In fact, laws and regulations can also have the opposite effect: the so-called “waterbed effect.” A good example of this is described in the book *The Platform Revolution*. California Assembly Bill 5 was enacted in 2019 to protect freelancers working for platforms by granting them employee status if they perform core functions for the platform. Think of Uber and Lyft drivers. The result of this legislative change was that many freelancers in the music and journalism industries lost their clients. Meanwhile, Uber did not hire any drivers but instead made adjustments to its app.

A New Playing Field: Online Platforms

We believe that regulators play a key role—including in the financial sector. Current laws and regulations have not yet been sufficiently adapted to account for the existence of a few large, influential platforms. In the past, regulators focused primarily on one side of the platform: consumer protection. Are financial institutions actually delivering on their promises to customers? Do consumers sufficiently understand the financial products they’re purchasing? The rise of online platforms is now also creating issues on the supplier side. What requirements can Apple impose on app developers to gain access to the App Store? And to Apple Pay?

It is extremely complex for local regulators to effectively regulate platforms that operate globally. Nevertheless, this is absolutely necessary to create a level playing field with clear rules. This is in the interest of all of us—as consumers, as suppliers, and as platform owners. We expect to see significant changes in this area in the coming years and look forward to continuing to share our insights.