Supporting the Observatory on the Online Platform Economy
In support of the Observatory on the Online Platform Economy, researchers produced two analytical papers discussing issues relating to approaches taken to identify online platforms with significant market power and developments concerning business-to-business platforms, and emerging cloud services.
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What is the issue?
Online platforms are online spaces that bring together users to facilitate interactions such as the exchange of information or commercial transactions. These platforms, including e-commerce marketplaces, app stores, search engines, and social media platforms, are transforming different sectors of the economy, such as e-commerce and retail, travel, leisure and hospitality. With more than one million EU businesses using online platforms to sell their goods and services, monitoring and analysing current trends and emerging issues in the online platform environment is an important task.
The Observatory on the Online Platform Economy, which comprises an Expert Group and team of European Commission officials, monitors the evolution of the online platform economy to advise and support the Commission in its policy making in relation to online platforms. The Observatory also looks into current and emerging challenges and opportunities for the EU in the online economy and in online general search.
How did we help?
The primary focus of this study, in support of the Observatory on the Online Platform Economy, was to research various aspects of online platforms, as well as their relationship to their users. RAND Europe was part of a consortium including PPMI, Open Evidence and the German Economic Institute.
RAND Europe was involved in the production of two analytical papers. Analytical paper #4 sought to examine the issues relating to approaches taken to identify online platforms that hold a significant or strategic market status. Analytical paper #8 sought to understand developments concerning business-to-business platforms, and emerging cloud services. The findings of the analytical papers were identified using targeted literature reviews, and semi-structured interviews with academic experts and industry stakeholders.
What did we find?
As we noted in analytical paper #4:
The evidence suggests that there are several approaches to identifying platforms with significant/strategic market status, although many are still at an early stage of development.
The approaches found can be broadly categorised as those that draw on traditional market share-based tests such as revenue or user share, and emerging approaches that are specifically tailored to online platforms such as the use of gatekeeper or leveraging power.
When compared to traditional market share-based approaches, emerging approaches appear to offer a more flexible instrument for market analysis but given their early stage of development there is a lack of data available to investigate these approaches in practice.
Given the complexity of the online platform ecosystem, it is likely that the use of varying approaches in conjunction with one another will prove most effective in identifying online platforms with significant/strategic market status. Policy makers should therefore consider a flexible and open approach.
As noted in analytical paper #8:
The evidence suggests that B2B platform services, their characteristics, and the regulatory issues surrounding their use are still at an early stage of discussion.
The characterisation of business-to-business platforms was found to be dependent on several factors including presence of network effects and whether business users could multi-home.
Business users of online platforms may face several challenges relating to power imbalances between themselves and the online platform; this is particularly relevant to small-and medium-sized businesses.
Where measures are introduced to increase fairness within the online platform ecosystem, ongoing investigation and analysis will be required to assess the consequences of such measures for business users.
