For big tech regulation, a hammer may not be the answer

Breaking up tech companies is an approach that’s commonly tossed around — and it’s one Andrei Hagiu, associate professor of information systems at the BU Questrom School of Business, argued against.

Tech giants, such as Google and Amazon, often play a dual role as platform provider, where they own and operate the marketplace, and retailer, selling their own products and services within that marketplace. One concern voiced “Unfortunately, one of the most prominent policy remedies that has been advanced and actually implemented in a couple countries around the world — including India — has been to say you are not allowed to function in this dual mode,” Hagiu said. “You have to choose: Either you’re a pure marketplace or you’re a pure retailer. I think this is one of the most misguided policy approaches to platforms.”

Instead, Hagiu argued for more nuanced “behavioral remedies,” where a company could be impartially evaluated for how its algorithms perform, rather than using a “blunt hammer of structural remedies.” Hagiu suggested the use of third-party audits could help address concerns about whether tech giants are operating fairly.

“A proposal I’ve seen is to ask the platforms to have public APIs, which would be accessible to approved outsiders, which would allow these outsiders to audit what the algorithm does,” he said. “I don’t want them to disclose the algorithm to make it open source, but it should be possible for an outside regulator or researcher to say, ‘For this given product category, does it truly give me the best product or does it favor Amazon?'”

Fiona Scott Morton, Theodore Nierenberg professor of economics at the Yale School of Management, offered a different approach to regulation, noting that regulators already have a powerful tool at their disposal: interoperability.

Scott Morton argued that just like competing email applications, electric plugs and DVD players have achieved universal communication, so, too, can digital platforms.

Requiring platforms like Facebook to be interoperable with other social networks encourages competition and is simultaneously a “light touch” approach to regulation, she said.

“Interoperability is super common in the modern economy,” she said. “If a platform is required to be interoperable, that opens access to the platform, that lowers entry barriers and then, suddenly, you have more competition.”