Focusing on the regulatory challenges in digital markets, algorithms and platform competition, the second annual Conference and Policy Forum of the Berlin Centre for Consumer Policies (BCCP) was held in Berlin on June 1st, 2017.
Touching upon an issue at the forefront of current European and US policy debates, over 100 participants, including academics from law and economics, policy makers, professionals, BCCP Fellows, and the interested public came together at the Wissenschaftszentrum Berlin für Sozialforschung (WZB).
The tremendous growth of digital transactions – mainly through online platforms - has profoundly affected the way we interact and has opened vast opportunities to improve our lives. The disruptive impact of this process is driven by one core feature: its ability to reduce inefficiencies. Consumers have benefited from an unprecedented proliferation of new services and products that previously were simply too costly to be developed and marketed to customers. At the same time, network effects in platform business models have brought market power concerns back to the front stage.
The conference panelists and participants discussed the need for and appropriateness of policy interventions in such quickly evolving markets, focusing in particular on regulatory issues related to the development of sharing economy platforms and the use of algorithms by online platforms.
The third annual BCCP Conference on Regulatory Challenges in Digital Markets: Product Variety, Information, and Consumer Choice will take place on June 8, 2018.
In the opening policy roundtable about platform markets and the arising issues in consumer and competition policy, panelists Andrea Coscelli (UK Competition and Markets Authority), Christian D’Cunha (Office of the European Data Protection Supervisor), Konrad Ost (German Federal Cartel Office), and moderator Amelia Fletcher (Centre for Competition Policy, University of East Anglia) engaged in a lively discussion about the potential of and challenges arising from the emergence of online platforms. On the one hand, online platforms can decrease transaction costs, increase price transparency and hence enable consumers to more easily compare and purchase products and services. On the other hand, in these online platform markets data and privacy protection issues as well as market power concerns may arise. Challenges in understanding the overlap between consumer and competition policy in digital markets persist and regulatory action varies, sometimes depending on the structure of national regulatory and competition agencies. While some agencies have long been charged both with consumer and competition policy, others are beginning to undergo structural changes. For example, the German Federal Cartel Office will begin carrying out consumer policy inquiries next year. In general, the panelists agreed that existing competition and consumer protection laws and regulations are flexible enough to deal with the issues arising in digital markets.
In the first afternoon session, Michael Baye (Indiana University) and Arun Sundararajan (New York University) presented their research on the sharing economy. While sharing is of course not new, what is new in the so-called “sharing economy” is that individuals are providing these services to strangers for money. In most cases, the sharing economy relies on online platforms to bring together the providers and consumers of goods and services. While Michael Baye focused on how online platforms compete and set prices in these two-sided markets characterized by direct and indirect network effects, Arun Sundararajan stressed how these new digital technologies transform business models and the way firms compete. What will be the major future challenges for the sharing economy, regulators, and consumer policy if economic activity moves towards what Arun Sundararajan calls “crowd-based capitalism”?
Following the first afternoon session, State Secretary Gerd Billen (Federal Ministry of Justice and Consumer Protection) was awarded the BCCP Distinguished Policy Fellow Award by Gerhard Wagner (Humboldt University Berlin).
In the second afternoon session, Maurice E. Stucke (University of Tennessee) and Catherine Tucker (MIT) discussed how digital markets are characterized by consumer targeting and customization of products and services. Firms such as Amazon, Facebook, or Google use algorithms to increase their product quality, such as search results or the targeting of advertising. These algorithms rely on past consumer search and browsing behavior to learn and improve results in real-time. However, the use of algorithms could also harm consumers by behavioral discrimination and lead to biases – not only in the things we buy but also in the news and entertainment we receive – in ways which may not be in the interests of society. Maurice E. Stucke highlighted that the amount of personal data collected by super platforms not only raises concerns about potential abuse of market power and market tipping due to data driven network effects but also important data protection and consumer privacy questions. The research presented by Catherine Tucker showed how the use of such algorithms can lead to unintended consequences, such as gender-based discrimination in the type of advertisements displayed to men and women.
The conference program and further information about the speakers can be found at the conference website.