Why Internet Platforms Don't Need Special Regulations

The main value of an Internet platform is in providing a common place for other market participants to find each other and easily conduct transactions. These companies create value in several ways: 1) improving resource use; 2) increasing competition; 3) reducing transaction costs; 4) reducing asymmetric information between buyers and sellers; and 5) bringing new buyers and sellers into the market. The danger is that, because these often enormous benefits are hard to quantify, policymakers will discount them and only look at the perceived market power of the platform.

Antitrust regulators still need to be watchful, but they cannot merely assume that a platform is behaving in an illegal manner and harming consumers just because it is doing something that they don’t like or understand. Instead, regulators need to make detailed, case-by-case determinations about whether total social welfare has been harmed. Standard antitrust orientations and tools may be of limited use. Given the value created and the existing market constraints, there are few reasons to fear that Internet platforms pose a unique challenge to markets and competition. Moreover, regulators already have sufficient legal powers to act against the most likely problems. The question is whether they will instead divert their attention to unlikely ones, and in the process risk reducing Internet platform innovation.