Platform Neutrality

Platforms have become gatekeepers in a number of communications industries. Facebook and Google are the gatekeepers for audience access to the publishers’ content through searches newsfeeds, and so on. Google is the gatekeeper for the publishers’ access to advertisers. Google and Apple are the gatekeepers for app developers’ access to their customers. There are increasing calls to regulate such gatekeeping positions.

All intermediation activities are prone to conflicts of interest, suspicion, and abuse. There is always suspicion that the intermediary is unduly benefiting the other side of the market. US advertisers were outraged when they discovered that ad agencies were receiving commission from publishers. There is the suspicion that the intermediary is benefiting competitors sending them more business, for instance because they pay a higher commission. An intermediary that works for more than one party and, at the same time works for supply and demand, has a fundamental conflict of interest that must be managed in the most transparent way.

Platforms are no different. As intermediaries active in many different markets, they are prone to the same conflicts of interest. Intermediated companies fear discrimination and being excluded from the market. The large scale of the intermediation, with millions of intermediated parties, increases the relevance of the conflicts of interest. The use of algorithms to automatize intermediation reduces transparency. Intermediated companies do not understand the logic behind the algorithmic decision-making and the sudden changes introduced to it, which can exclude companies from the market and even ruin them in a matter of hours.

Furthermore, there is always the suspicion that intermediaries tend to reinforce their position, provide the service for their own benefit, and extract excessive value out of the market. That has been the case, for instance, of excessive charges in payment cards, as described in Chapter 2. There is now an outcry from app developers, such as Spotify and Epic Games (producers of the game Fortnite), regarding the 30 percent fee charged by Apple’s app store, as described in Chapter 8. This is also the case with content producers such as newspapers, music record labels, and book publishers in relation to the platforms intermediating their services (Chapter 9). And it was certainly the case of freelancers, musicians, and writers against the traditional intermediaries. This is increasingly happening with large media platforms as well. Content producers complain about value appropriation by the platforms. The high margins of Facebook and Google demonstrate that they are not sharing a fair portion of their profits with the intermediated parties: YouTubers and professional content producers.

Furthermore, the largest platforms have grown to achieve such market power that they are in a position to drive the market in the direction of their choice, defining the type of content they prefer at each point of time. Platforms originally preferred usergenerated content over professionally produced content, such as family pictures over news in Facebook’s newsfeed, or amateur videos or professional music videos in YouTube. This type of content was cheaper and often even free for the platforms. As large advertisers grew wary of user-generated content, fake news, and so on, platforms evolved to prefer safer professional content. It is the interest of the platform to determine whether one type of content is privileged and “goes viral” over another. Content producers are totally dependent on platforms’ changes in strategy.

The concern is particularly acute when platforms vertically integrate and intermediate their own services provided in competition with other companies. This is becoming an issue around all the large platforms. The European Commission imposed a fine on Google for abusing its dominant position in the search market for self-preferencing the Google Shopping service against comparison services provided by competitors (Chapter 3). Similar claims have been made by other companies providing specialized search services, such as travel (Chapter 12). Apple has been accused of self-preferencing its own music service in the management of the app store (Chapter 8), while Amazon has been accused of self-preferencing its own products against third parties in the Amazon Marketplace (Chapter 3).

Platformization might be the unavoidable evolution of the communications industries due to the power of network effects. Traditional communications might have to adapt to being intermediated by digital platforms. In any case, it seems clear that digital platforms, particularly those with market power, have a special responsibility to be fair in their relations with the underlying service providers. This is the scope of the intervention of the European Union in Regulation 2019/1150 on promoting fairness and transparency for business users of online intermediation services.7 We will analyze this Regulation in Chapter 22.

< Prev   CONTENTS   Source   Next >