Taming Platform Power
Multi-sided platforms require multi-sided accountability
Platform Papers is a blog about platform competition and Big Tech. The blog is linked to platformpapers.com, an online repository that collects and organizes academic research on platform competition.
Written by Hatim Rahman, Arvind Karunakaran, and Lindsey Cameron.
Platform companies such as Apple, Amazon, Uber, and ByteDance (owner of TikTok) stand at a critical crossroad. They have amassed astronomical valuations and had an indelible impact on the way we work, interact, and live. Yet, at the same time, these companies benefit from substantial power and information asymmetries, leading to global efforts — including in the United States, European Union, China, and Africa — to address these imbalances. How these attempts progress, and how platforms respond, will be critical in determining whether platform companies continue to accrue power, or if we can begin to achieve mutually beneficial outcomes for platform companies, providers, customers, and society more broadly.
Over the years, academics across several disciplines have gained valuable insight into how to hold platforms accountable. Yet, the literature across these disciplines has remained siloed, yielding an incomplete picture of platform accountability. To bridge this gap, we conducted an integrative review of more than 250 articles from 61 different academic journals. Our review article, published in the Academy of Management Annals, advances a central insight: Multisided platforms require multisided accountability systems. That is, because platforms are multisided (i.e., they involve both customers and providers), they necessitate multisided systems for accountability to provide the necessary checks and balances in a dynamic manner.
In our review, we begin by identifying the locus and dimensions of responsibility necessary to promote accountability between platform actors, summarized in the figure below.
We then delineate how each platform actor can enforce platform accountability to promote mutually beneficial outcomes, as described in the figure below.
The Difficulty of Achieving Platform Accountability
Our review revealed several factors that hinder platform accountability, and that thus create conditions that necessitate a multisided approach. First, these companies act as both firms and marketplaces, meaning that the services they sell are provided by third party actors (e.g., Lyft drivers are not Lyft employees; iOS app developers are not Apple employees). As a result, traditional forms of oversight and external controls that target service providers directly are generally less effective when it comes to enforcing accountability for platform firms.
In addition, these firms act as intermediaries, and as a result, they avoid being subject to many of the formal and informal rules and norms that govern more traditional organizations. For example, Upwork doesn’t consider itself a staffing company; Uber calls itself a technology company, not a transportation company. As such, government bodies may struggle to apply existing regulatory frameworks to these firms, and platforms themselves are less likely to adhere to informal industry standards, since they don’t consider themselves members of those industries.
Platforms also benefit from powerful information asymmetries. After all, in many cases, these firms have visibility into all transaction data, whereas buyers and sellers alike must rely on the limited information the platform chooses to share. For instance, Amazon has famously used its exclusive access to information about high-performing product categories to introduce its own competing products, thus undercutting sellers on its platform.
Furthermore, many platform businesses operate across jurisdictions (e.g., across state or national boundaries), limiting local regulators’ ability to establish or enforce effective regulations. And finally, these firms are often characterized by substantial network effects, leading to quasi-monopolies that quickly become entrenched and difficult to control through either customer pressure or external measures alone.
Assessing Bottom-Up and Top-Down Approaches to Platform Accountability
Through our review, we found that traditional approaches to platform accountability tend to focus on either top-down efforts (e.g., legal oversight and regulations) or bottom-up ones (e.g., individual or collective action taken by gig workers or other providers). And while bottom-up efforts can be effective in enhancing procedural or rule-based fairness on platforms, and top-down efforts have made strides in advocating for distributive or outcome-focused fairness, these approaches also have clear shortcomings.
On the one hand, bottom-up efforts tend to be transient, and because of the substantial power asymmetries between platform owners and providers, their impact tends to be fairly limited. Indeed, many of the grassroots mechanisms that have helped customers, workers, and other providers hold traditional organizations accountable, such as strikes, boycotts, and other forms of protest, have been less effective when it comes to platforms.
At the same time, due to the gap between law-in-the-books and law-on-the-ground, top-down processes (while certainly important) are also relatively ineffective in isolation. Furthermore, research has shown that these top-down approaches can often have major unintended consequences, with regulations meant to support providers sometimes actually hurting their businesses instead. Similarly, regulators have demonstrated limited ability to make a meaningful impact on powerful platform firms.
Toward a Multi-sided Framework of Platform Accountability
By emphasizing how each actor must take responsibility for implementing multisided checks and balances, a multisided accountability framework helps move from a static and localized to a dynamic and distributive view of accountability.
For workers and providers on these platforms, this means enforcing existing platform rules that promote procedural and distributive fairness, adhering to the terms and services they’ve agreed to, and reporting any violations by customers or fellow providers. It also means providing accurate information about the products and services they provide, and preventing extractive opportunism by giving their customers fair, unbiased, timely ratings.
Customers also have an important role to play. As users on these platforms, customers can be proactive about resolving any misunderstandings with providers and being sure to share accurate information about their ability to pay for services as well as the status of payments made. They, too, have a responsibility to adhere to platforms’ stated terms and services, and to make sure to give providers ratings in a fair, unbiased, and timely fashion.
Of course, while all sides can help drive accountability, platforms themselves bear the lion’s share of this responsibility. Specifically, there are a few important ways in which platforms can provide accountability, prioritizing the interests of both customers and complementors.
First, platforms must enforce their own rules by providing infrastructure for customer interactions and transactions, and by leveraging automated bots and helpdesks to detect and address any anomalies. In addition, they can maintain a level playing field by creating a robust, accurate customer verification process; suggesting unbiased, appropriate matches between providers and customers; and acting as an honest broker for those transactions.
Platforms can also prevent extractive opportunism by facilitating a just process for arbitration and dispute resolution, and by imposing penalties for undercutting or bundling providers’ products and services. And finally, platforms should avoid undercutting complementors on their platforms, ensuring that the providers who rely on them to reach their customers are not competed away.
Looking Ahead: What’s Next?
Our review provides several directions for future inquiry. For example, most research on top-down and bottom-up platform accountability has focused on single states, countries, or regions, predominantly in the Global North. Many platforms’ rapid growth, however, has in part been due to their global scale and reach. Sellers from almost anywhere in the world can list their products on Alibaba, Amazon, or eBay; developers who list their mobile applications on Apple or Google’s app stores can reach users in nearly 200 countries.
This global nature presents important challenges and opportunities for practitioners, policymakers, and researchers. For example, how platform companies address competing (and often contradictory) regulatory interests between different countries related to competition, censorship, and transparency will be a defining issue going forward. In light of platforms’ ongoing struggle to address these issues in mutually beneficial ways, we hope that multiple actors and stakeholders can come together to shape the answers to these and other critical questions.
This blog is based on Hatim, Arvind and Lindsey’s research, which is published in the Academy of Management Annals and is included in the Platform Papers references dashboard:
Rahman, H. A., Karunakaran, A., & Cameron, L. D. (2024). Taming platform power: Taking accountability into account in the management of platforms. Academy of Management Annals, 18(1), 251-294.
Platform-Paper Updates
The program for the second summit of the European Digital Platform Research Network (EU-DPRN) is now live! The conference will start with a doctoral workshop on June 27 followed by the main event on June 28. Both functions take place on the level 50 facilities at the UCL School of Management (Canary Wharf, London). Presentations will cover such topics as platform power and regulation, growth strategies for emerging ecosystems, and ecosystem information asymmetries. The program furhter includes a policy panel featuring leading lawyers and economists as well as a keynote speech and a best-PhD presentation. While the doctoral workshop is already at capacity, there are still a few empty seats for the main event on June 28th. Anyone interested in attending the conference can contact me directly.
Platform Papers is curated and maintained by Joost Rietveld.