Economía English

The Platform Economy

Digital platforms are best described as a technology based space which facilitates the meeting and matching of individuals or businesses that would not have otherwise met. For example, a digital platform, using its data driven infrastructure and operations, is able to then more effectively bring together sellers and consumers who have the same interests and are suited for each other.

There are two types of digital platforms: transaction and innovation and below are listed the companies that fall in those categories. Either type though depends largely on mining data in order to grow. The bigger digital platforms have a clear advantage on this end.

As digital platforms grow bigger, they gain more access and control and hence more power. As the UNCTAD states, “Global digital platforms are in a privileged position to collect data at a massive scale when their many users access their services. This gives them a significant competitive advantage. In the absence of a proper international system of global data governance, this advantage in data collection directly translates in these platforms being able to capture most of the monetary gains of the data-driven digital economy and thereby also of cross-border data flows. Network effects, combined with access to data and economies of scale and scope, have led to monopolistic trends and increased market power of the world’s largest digital platforms, which are mainly based in the United States and China.” [23] As illustrated below, one can see the market capitalization of the 100 global digital platforms dominating the global market.

Not even the pandemic disrupting the global economy has shaken the top technology firms as evidenced by the research of PriceWaterHouseCoopers (PWC). The top 20 in the top 100 of the list of PWC in 2019 is exactly the same in the most recent findings for 2022. See below

Market Capitalization as defined by Investopedia

Market capitalization, or “market cap”, is the aggregate market value of a company represented in a dollar amount. Since it represents the “market” value of a company, it is computed based on the current market price (CMP) of its shares and the total number of outstanding shares.
Market cap is also used to compare and categorize the size of companies among investors and analysts.

Market capitalization is the total dollar value of all outstanding shares of a company at the current market price. Market cap is used to size up corporations and understand their aggregate market value.
Companies may be categorized as large-, mid-, or small-cap depending on their market capitalization.
Blue-chip companies are often large- or mega-cap stocks, while the very smallest are referred to as micro-caps.

All this power also comes with influence. As governments race to agree on policies and rules to regulate the digital economy and digital platforms in particular, the technology corporations have also sent in teams of lobbyists to ensure that their interests are protected in these policies.

In a recent investigative report by organizations in Brussels, they found that BigTech is heavily invested in this lobbying process. “The digital industry as a whole spends over € 97 million lobbying the EU Institutions per year and employs 1452 lobbyists on its behalf. This vast firepower indicates that the industry sees a lot at stake in the current policy discussions, and it is notable that the tech firms are outspending all other sectors in terms of lobbying.” [24] These are the top ten spenders.

There is an inherent problem with the corporations that have the most money and power, lobbying governments to pass policies and regulations that will not truly keep these big technology corporations in check. These “relationships” need to be ended and new transparent conversations made open to other stakeholders such as the people and civil society watchdogs who have been putting together proposals that can protect people’s privacy, prevent human rights violations, and banning surveillance based advertising and algorithms.

As the digital economy grows, so does the platform economy, and so do these technology firms. It is with great urgency that policies and regulations are put in place and implemented to hold these corporations accountable and prevent any further misuse, manipulation and violation of privacy and rights.

In this vein, the European Union has, after almost three years of negotiations, recently issued the EU Digital Services Act [25]. Reviews from civil society and activist organizations that focus on technology and digital rights, have been mostly cautiously optimistic. It sets out new rules and regulations with the aim of protecting individuals using the internet. Access Now, “a global organization that defends and extends the digital rights of users at risk around the world” [26], has reviewed the Digital Services Act and has provided a brief summary of the new regulations below. The question now then is if these new regulations will serve as a standard for other countries outside the EU in establishing their own legislation on this issue. And most importantly, will Big Tech implement these rules.

An overview of the changes that will be made in the law in the EU by Access Now

What does the law change in the EU?

The Digital Services Act (DSA) brings significant outcomes that will safeguard fundamental rights online.

• Legally binding transparency and algorithmic accountability: Enhanced transparency rules require online platforms to disclose the number of removal orders issued by national authorities and all notices about the presence of illegal content trusted flaggers submit or obtain by automated means. The DSA requires all online platforms to publicly report on how they use automated content moderation tools, the tools’ error rates, and information about training and assistance they provide to their content moderators.

• Harmonised response to illegal content online: For the first time in EU history, the DSA sets forth unified criteria for so-called notice-and-action procedures, the system that determines when and if platforms should be held liable for dissemination of illegal content. The law maintains and enhances an important legal principle. The conditional model of intermediary liability defines how online platforms should act when they detect illegal content. The DSA brings more clarity and certainty regarding how to do this diligently and in good faith. Second, the DSA reinforces the prohibition of general content monitoring, which keeps a distinction between knowing about specific illegal content and trying to remove that on the one hand, and scanning everything to fish for any and every piece of illegal content on the other.

• No to “dark patterns” (deceptive design) —at least to some extent: In a win for people’s rights and online experience, the DSA has a measure addressing deceptive design. On paper, it should prevent all online platforms from designing and operating their interface design in a deceptive and manipulative way. While this is an important protection intended to ensure people can make “free and informed decisions”, the final wording does not add much to already existing standards in consumer protection and data protection rules.

• Ban on targeting and amplification using special categories of sensitive data: Another landmark measure in the DSA is its strict regulation of online advertising. Together with our partners, we have been fighting against surveillance-based advertising that exploits people’s vulnerabilities and results in serious human rights abuse. The DSA goes beyond pure transparency requirements on targeting. It establishes a ban on advertising based on profiling and using special categories of sensitive data (e.g. sexual or political orientation). This is a real turning point that opens the pathway to effectively tackle surveillance-based advertisement in the future. It is important to acknowledge that this is only a partial victory because there are targeting techniques that are not based on sensitive data that remain highly intrusive.

• More control over information flow to people: In the current online ecosystem, it is close to impossible for individuals to understand how and why content is being distributed to them. The DSA obliges all online platforms to disclose parameters of their content recommender systems to explain why people see some information more regularly than others. This information should be easily accessible via their terms of service. Importantly, people will have the right to modify content recommender systems and to have access to at least one option that is not based on profiling.

• Special due diligence obligations for Very Large Online Platforms (VLOPs): Probably the most novel and groundbreaking element of the DSA is the duty-of-care obligation for VLOPs that include (among others): mandatory risk assessment; deployment of mitigation of risk measures; and obligation to subject themselves to independent audits. The due diligence chapter of the DSA specifically recognizes systemic risks for fundamental rights stemming from VLOPs’ systems and operations. However, the effectiveness of these measures will be determined by future delegated acts and guidelines that are yet to be drafted by the Commission.
Source: Pirkova, Eliska, “The Digital Services Act: your guide to the EU’s new content moderation rules” July 2022

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