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How to Rein in Monopoly-like Network Platforms?
Thu, 05/07/2015 - 13:59
The latest issue of Boston Review has a lively forum on the growing power of network-based businesses such as Amazon, Uber and Airbnb. These companies may not be monopolies in the strict conventional sense of the law, but they nonetheless use their market dominance and network platforms to extract all sorts of advantages from competitors, suppliers and consumers.
K. Sabeel Rahman, a professor at Brooklyn Law School, presented his assessment of the situation, and then nine people of various persuasions (including me) responded. Rahman stated the problem succinctly:
The kinds of power that Amazon, Comcast and companies such as Airbnb and Uber possess can’t be seen or tackled via conventional antitrust regulations. These companies are not, strictly speaking, monopolies; Urban and Airbnb, in particular, do not engage in the kind of price-fixing or market dominance that is the usual target of antitrust regulation today. These companies are better understood as platforms or utilities: they provide a core, infrastructural service upon which other firms, individuals and social groups depend.
The problem is that conventional antitrust regulation isn’t really equipped to deal with information economy platforms, which tend to connect buyer and sellers in more efficient ways while offering very low prices. What’s the problem with that? Well, the problem is open networks paradoxically result in "power law" outcomes in which a minority of players tend to dominate the universe of users. Some companies have used this network-based advantage to limit competitors' access to the market, impose unfair conditions on consumers or producers, and evade consumer and labor-rights laws.
Rahman calls for a re-purposing of Progressive era policies from a century ago that tamed large monopolies like railroads by subjecting them to public utility regulation. Is this the way to go? Juliet Schor of Boston College agrees that there is a problem, but considers the regulatory approach nostalgic and unimaginative. She argued:
“Peer-to-peer structure and peer ownership of capital undermine the argument for private ownership of platforms and, by extension, for the public utility model. This is not to say there isn’t a strong public interest in this sector – there is. But the compelling feature of these entities is that most of the value in the market is produced by the peers, not the platforms. This suggests that platforms can and should be owned and governed by users. If they are, we can worry less about rent extraction, concentrations of political power, and the other concerns Rahman raises.”
Economist Dean Baker of the Center for Economic and Policy Research is similarly skeptical of a return to conventional utility regulation. He argues that companies like Amazon and Uber should simply be forced to observe the same laws that their smaller, conventional competitors do – such as paying the same sales tax, paying observing the same minimum wage and hour rules for drivers, and adhering to safety and health standards.
Here are some excerpts from my response (link to full statement is here), in which I suggest that “innovative schemes for cooperative self-provisioning and decentralized local control, also known as the commons,” can act as an antidote to market power: "All sorts of quasi-autonomous, user-managed systems can provide shared rights of access outside the dominant market system and conventional government, [and] can mitigate the problem of network-based monopolies while mobilizing a diverse and politically consequential constituency.”
My brief note response continues:
….the rapidly diversifying world of open design and manufacturing holds promise for “out-cooperating” such companies in electronics, furniture, farm equipment, and other industries. Arduino is a vast global community of open source computer boards at the heart of wearable technologies, 3D printers, drones, and consumer electronics. The open design Wikispeed car gets a hundred miles per gallon of fuel, and the volunteers building it are pioneering new manufacturing techniques. The Farm Hack community has produced dozens of models of affordable farm equipment. The Open Prosthetics Project is designing innovative body limbs that major medical suppliers lack the creativity or profit incentive to develop. The recurrent theme: globally shared modular design that can be manufactured locally and inexpensively.
I do not wish to suggest that technology can solve all the problems of dysfunctional politics and policy. We still need government to use the antitrust and regulatory tools in its arsenal, and we would benefit from a resurgence of Progressive reform. But in the commons, individuals and groups collaborate in ways that, over time, can help remake our politics and policy. We saw a glimpse of this in the campaign for net neutrality, as a motley swarm of digital communities committed to an open Internet improbably prevailed (for now) over the cable and telecom giants, including Comcast.
As part of the forum there are also comments by Adam Thierer, a libertarian-minded tech policy expert at the Mercatus Center ("public utility regulation has discouraged competition and innovation"); Robin Chase, the cofounder of Zipcar (peer producers should share power and the value they create); and Arun Sundararajan of the Social Cities Initiative at NYU (rethink government’s role in the market); Sofia Ranchordas of Yale Law School (platform benefits are overstated); Mike Konczal of the Roosevelt Institute (try worker cooperatives); and Richard White, an author about railroads (historical perspectives on Gilded Age reforms).
It’s great that there is a new dialogue in a prominent magazine about how regulatory approaches for abusive market power need to be reinvented for the digital age. The comments are insightful, but the outlines of a new regulatory structure that could be effective, politically achieveable and mindful of network dynamics, remain elusive.
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