Identifying the patterns: Towards a systematic approach to digital platform regulation

Abstract

Digital platforms have proven to be efficient matchmakers in our networked economy and society. However, their tremendous potential is a double-edged sword, and concerns about their malpractices and negative impact have risen remarkably. In the light of practical relevance, research on digital platform regulation (DPR) did not contribute very much. Especially information systems (IS) which, as a discipline, seems predestined to explain the problems at the confluence of technology–economy–society, has barely grazed the issue of DPR. Particularly, a contribution is missing that at least explores the problems with digital platforms systematically and comprehensively. In response to this aim, we pursue a two-step approach: First, we apply qualitative meta-analysis of 211 cases as well as a number of regulation papers and actual regulation endeavors to identify and conceptualize the problem scope and potential regulatory approaches for platform problems. Second, we condense our findings into a conceptual model. Our findings show that digital platforms exploit both platform- and monopoly-related problems to assert themselves in different markets. Through their impactful platform governance, they even have become serious challengers to the regulator in controlling market access, key conditions, and resources. At this, they rely on the efficient use of data and digital technologies to effectively orchestrate platform agents and their transactions. The outcome of the paper is a set of two structured instruments that fill a void in interdisciplinary research and provide support to DPR practitioners for a systematic approach to regulation.

Keywords

Digital platforms and ecosystems digital platform regulation qualitative research information society ICTs and society IS management and governance

Introduction

Digital platforms have not only radically changed our work, private and social lives, but also the economy as a whole: They enable users to find and get what they (believe to) need. At the same time, they offer companies or even governments an exclusive, carefully targeted access point to customers and citizens, acting as a gatekeeper. Thus, digital platforms affect the way how other organizations create value, define their value propositions, or conduct customer interaction (*Pousttchi et al. 2019*; *Pousttchi and Gleiss, 2019*).

Particularly, Google, Apple, Facebook, Amazon, and Microsoft (GAFAM)—as the most successful platforms and most valuable companies in the world (van der Aalst et al., 2019)—build upon consumer data from their personalized services and products. The respective datasets they collect are unprecedented in breadth, depth, and overall quantity. On the one hand, this makes them perfect matchmakers among the most diverse participant groups. On the other hand, it implies enormous economic, political, and societal power, not only challenging the authority of national states but also entailing unprecedented dependencies. Recent events included European efforts to monitor COVID-19 infection chains (Vincent, 2020) proving to be impossible without Apple’s and Google’s cooperation (and resulting in ad-hoc integration of full and uncontrolled end-user contact tracing into both smartphone operating systems) or suspension of former US President Donald Trump on Twitter (Sparrow, 2021).

As a consequence, public concerns and debates about power and influence of digital platforms have risen, and governments around the world attempt to catch up on their neglects in the past decade to curb platform dominance, including the EU with the Digital Markets Act (DMA) and Digital Services Act (DSA), as well as the UK, Russia, Australia, or the US (Nylen, 2020). However, given the dynamics of digital and networked markets, we require comprehensive and sustainable regulatory approaches that understand the full impact and successfully address the concerns with digital platforms on the one hand while maintaining their matchmaking efficiency on the other hand.

Interdisciplinary literature provides a bouquet of contributions that address digital platform regulation (DPR). At this, leading articles zero in on certain aspects, such as economic dynamics and antitrust issues (e.g., Parker et al., 2020; Gawer, 2022), socio-economic implications (e.g., Zuboff, 2015), or distinct regulatory concepts (e.g., Cusumano et al., 2021). However, a comprehensive approach that ties these strings together, is yet missing. Particularly, there is no contribution that systematically explores the underlying problems with digital platforms systematically. Controversially, the IS research community has humbly effaced itself so far from the academic discourse on DPR (Gozman et al., 2020a), which is noteworthy and surprising for three reasons: First, information technology and systems (IT/IS), including users, data, and digital technologies, have played a great part in contributing to the growth of digital platforms (Zuboff, 2015). Second, IS research has yet put much effort into understanding the very nature of digital platforms but omitted the aspect of regulation (de Reuver et al., 2018; Tilson et al., 2012; van Veldhoven and Vanthienen, 2021). Third, the realm of IS at the confluence of technology–economy–society and its interdependencies has all the makings to valuably contribute to describing, explaining, and designing DPR.

Against this backdrop, we aim to draw on empirical evidence, DPR research from different disciplines, and IS knowledge to explore and understand the problems with digital platforms in order to systematically derive and develop regulatory options. Precisely, our research question is: How can we classify the problem patterns of digital platforms and relate them to appropriate regulatory measures? To answer the questions, we apply qualitative meta-analysis of 211 cases as well as a number of regulation papers and actual regulation endeavors to identify and conceptualize the problem scope and potential regulatory approaches for platform problems. Finally, we condense our findings into a DPR ontology of taxonomic relationships.

The remainder of the paper is structured as follows: In Section 2, we present the interdisciplinary foundations of DPR and describe our methodical approach. In Section 3, we systematically explore and classify the problems related to digital platforms. In Section 4, we systematize impact, indicate regulatory options to the identified problems, and discuss our results. In Section 5, we conclude with implications, limitations, and future research avenues.

Background

Research foundations on digital platforms

Digital platforms are modular architectures with core and boundary components that federate constitutive agents to jointly innovate and compete (Gawer, 2014). They basically consist of three building blocks (Figure 1): platform owners with their degree of power centralization and core functionalities; platform agents (two or more agent sides) with their degrees of participation, contribution, and autonomy; and platform value-creating mechanisms for facilitating and governing transaction or innovation (Gawer, 2014; Hein et al., 2019). Owners are reliant on efficiently matchmaking the complementors by providing and governing infrastructures for direct interaction, that is, transaction or innovation (Parker and Van Alstyne, 2008). Agents need to be affiliated with the platform, while owners control the transactions’ key terms (e.g., pricing or quality of traded goods). Interaction and affiliation entail usage and membership externalities of two kinds: First, network effects, which arise from pairing up agents. A platform’s usefulness (and therefore value) is subject to size and fitness of other agents or goods. Second, homing and switching costs that make agents bound to the platform through (perceived) lock-in effects or comparative benefits (Evans and Schmalensee, 2013; Rochet and Tirole, 2003). Especially, industry platforms provide interfaces for a potentially unlimited pool of external capabilities that extend the functionality of the platform ecosystem and increase value for agents. Platforms that exploit all these effects for tremendous growth in (economic/technological) power and value are referred to as big digital platforms, for example, Google or Apple (van der Aalst et al., 2019).

Figure 1.

Platform Ecosystem of a Two-Sided Platform.

DPR: literature review

IS research has broadly theorized on digital-platform, but only few contributions focus on DPR. Here, most contributions focus on negative effects of platform governance and activities, such as high market dominance, anti-competitive behavior, or harm to competitors, complementors, and consumers (e.g., Clemons and Madhani, 2010; Foerderer et al., 2018), illegal or immoral behavior of platform owners or agents (e.g., Zhang et al., 2017), and concerns about data privacy, ownership, or portability (e.g., Blaseg et al., 2020; Fadler and Legner, 2020). Other contributions provide evidence that governmental regulation can diminish platform dominance (e.g., Bazarhanova et al., 2020) or affect negative externalities and innovation (e.g., Yu et al., 2020). Hermes et al. (2020a) explored platform ecosystem growth in both the USA and China to derive three regulatory strategies for similar systems in the EU, including fertile breeding grounds for European enterprises, new regulatory approaches for fairness in platform markets, and intense European cooperation for common infrastructures. Further research points out that governments have to find ways between over- and under-regulation to maintain the efficiency of digital platforms (Zhang et al., 2018), also through agent sensitization (Baccarella et al., 2020).

Altogether, holistic regulatory approaches that build upon the underlying problems caused by digital platforms are missing in IS research. Beyond IS research, other disciplines have already tackled the issues of DPR to a broad extent alongside three relationship types of digital platform ecosystems (Figure 2).

Figure 2.

Regulation and Government in a Digital Platform Ecosystem.

Concerning the relationship among platform owners and other actors of the economy, literature spotlights the problems occurring from novel platform markets that undermine basic competition principles beyond the regulators’ spheres of influence. This involves antitrust constellations (Orbach, 2014) or perceptions of relevant markets (Peitz, 2020). Especially, the formation of monopolies was object of many studies, for example, Didi Chuxing in the taxi market in China (Xing and Sharif, 2020). Other contributions focus on platforms in view of antitrust and emphasize the market dominance (Srinivasan, 2019a, 2019b) or monopolies and critical digital infrastructures (Khan, 2017). Several contributions examine negative implications of mergers and acquisitions (M&A) that impede innovation and competition (e.g., Katz, 2021; Kwon and Marco, 2021). Moreover, platform markets are different from pipeline businesses, which increases competition complexity and leads to new competition paradigms in four ways (Parker et al., 2016, pp. 60 et seqq.). First, platform owners may compete with pipeline companies on their markets. However, as goods on platforms may be provided by complementors, boundary resources are outsourced while variety increases. Second, platform owners may compete with their complementors by offering similar value propositions or exclusively capturing added value potentials. Third, complementors compete against each other on platforms. Fourth, in view of network effects and switching costs, platform owners compete against each other on winner-takes-all markets.

Concerning the relationship among platform owners and end-consumers, literature on DPR mainly focuses on platform governance (Perrons, 2009) and contradictory user behavior towards data privacy (Reyna, 2018), their willingness to pay for free-to-use platform services (Sunstein, 2020), and how this affects competition and regulation in digital markets (Luguri and Strahilevitz, 2019). In view of platform–state relationship, DPR research discusses the governing role of platform owners as an emerging counterpart to state governance and regulation (Cammaerts and Mansell, 2020; van Dijck, 2020) that refers to content moderation and shaping of public opinion (De Gregorio, 2020). Here, the political theory of the firm proposes that owners tend to accumulate state(-like) capabilities and influence political, economic, and societal developments through enormous financial and technological resources. Thus, concentration of power through a handful of private firms might help them enforcing their interests, rules, and standards, which is why new regulatory perspectives are required (Zingales, 2017). Here, regulators could reassess competition and innovation within and among platform(-impacted) markets, including the role of data (Blind et al., 2017; Krämer and Wohlfarth, 2018).

Upon these reflections, extant research derives concrete DPR measures and proposals (Gal and Aviv, 2020; Rösner et al., 2020). Those include rather soft measures like fiscal assessment of platform input factors like data (Ben-Shahar, 2017), labor (Rogers, 2016) or public infrastructures (Rahman, 2018); regulation of algorithms (Di Porto and Zuppetta, 2020) and prices (Loertscher and Marx, 2020); or enforcement of platform interoperability (De Hert et al., 2018) and neutrality (Krämer and Schnurr, 2018). According to Borrás and Edler (2020), the state can approach such novel ecosystems differently (i.e., observing, enabling, gatekeeping, moderating). However, radical measures are also suggested, such as algorithms disclosure (Gal and Petit, 2021) or segregation of infrastructures and services (Khan, 2019). After all, several research contributions from multiple disciplines signpost regulatory problems with digital platform markets and provide food for thought about DPR. They indicate that digital platforms cause problems for economy and society and that governments increasingly experience difficulties in regulating these players (Staab, 2019), while learnings from regulation of traditional network or utilities industries are only partly applicable (Montero and Finger, 2021). However, comprehensive approaches that systematize the problem patterns are missing, particularly in IS.

DPR in practice

By their very nature, practical papers and reports reflect the tension between the priorities of public and private interests. Amidst these publications, we identified three major areas of regulatory action. First and most recently, many publications address competition and antitrust in digital markets and the impact on the economy at large. Such analyses guide governmental DPR and spotlight potential implications of digital platforms for economy and society. The main issues include the definition and assessment of markets, data value and sharing, interoperability, taxation, and monopoly structures (Lancieri and Sakowski, 2020). Second, many publications discuss problems and approaches of social media regulation, which zeroes in on content regulation and consumer protection (e.g., through upload filters) and tackles issues of copyrights, disinformation and fake news, social harms, polarization, or terrorism (e.g., UK Government, 2020). Third, several publications specifically address the challenges of regulating the sharing economy. Critical issues in this area relate to labor and contracting, liabilities of agents, safety and insurance, industry standards and legislation, and negative externalities to consumers, complementors, and affected third parties (e.g., Zuluaga, 2016). At this, recent discussions entail more structural solutions as, for instance, regulatory oversight by authorized agencies (Marsden and Podszun, 2020; Wheeler et al., 2020).

Some regulators have recently addressed DPR. In the US, the Committee of the Judiciary initiated investigations to examine the dominance and malpractices of Google, Apple, Facebook, and Amazon. The recently published majority report recommends legislative action to strengthen antitrust and competition laws (Nadler and Cicilline, 2020). Meanwhile, the EU approached issues of data privacy (General Data Protection Regulation: GDPR), copyright infringements (Directive on Copyright in the Digital Single Market), distribution of illegal content (Digital Services Act: DSA), and competition in digital markets (Digital Markets Act: DMA). Also, the Australian government developed a roadmap to strengthen the position of traditional media over Google (ACCC, 2020). However, criticism has been voiced that such interventions are isolated and draw on vague definitions and imperfect understandings of platform markets. Thus, they cannot address the core of the problems comprehensively (Broadbent, 2020).

Applicable perspectives and rationales of regulation

In understanding and explaining regulatory deficiencies with platform markets, we underpin our research with applicable perspectives and rationales of regulation. Basically, we draw on interest-based perspectives. Here, public-interest perspectives assume that monopolies and externalities can cause market failures in open markets, while governments are willing and capable to correct these failures—in pursuit of the public interest—through regulation (Baldwin et al., 2012, p. 15; Shleifer 2005). As markets with platform participation exhibit problems and imperfections that call for an external corrective, public-interest rationales might explain different kinds of market failure (Table 1).

Table 1.

Traditional market failure rationales (Baldwin et al., 2012).

Market failure	Description	Regulation
Monopolies	One company supplies an entire market	Prohibitive
Windfall profits	Significantly cheap access to valuable resources for one actor	Prohibitive
Externalities	A good’s price does not reflect the true costs of production/consumption	Prohibitive
Information inadequacies	Actors have information advantages over other actors	Prohibitive
Anti-competitive behavior	Unhealthy competition through illegal or irrational company behavior	Prohibitive
Moral hazard	Disproportionate consumption of public goods and infrastructures	Prohibitive
Unequal bargaining power	Abuse of a negotiating party’s plight	Prohibitive
Goods unavailability	Unequalled socially desired levels of continuity and availability of goods	Facilitative
Scarcity and rationing	Necessary regulatory allocation of goods in short supply	Facilitative
Inefficient coordination	Necessary centralized regulation of inefficient transaction	Facilitative

If public interest is blur, regulatory failure might be explained by private-interest perspectives, which assume that actors are selfish and interested in maximizing their own benefits. As a result, regulation is seen as processes characterized by collective action problems that drown out diffuse interests (Baldwin et al., 2012, pp. 43 et seqq.). In other cases, regulatory failure might be explained by ideas-based rationales, which propose that regulators make false assumptions about underlying cause–effect relationships, or institutional rationales, which assume flaws in the (inter-)institutional structures, arrangements, and processes (Baldwin et al., 2012, pp. 77).

Methodical approach: qualitative meta-analysis

On the one hand, IS research clearly lacks theorizations on DPR. On the other hand, there is a rich amount of evidence in practice about the malpractices of digital platforms and their implications for the economy and society (e.g., Nadler & Cicilline, 2020). Against this background, we applied a qualitative meta-analysis to explore and conceptualize the problems with digital problems and link them to purposeful regulatory action from a public-interest stance. Qualitative meta-analysis is still an exception in IS and business research despite its huge potential for theory development and evidence-based management support (Combs et al., 2019; Hansen et al., 2022). It is an interpretive approach that allows the focused analysis and consolidation of existing case studies to develop new knowledge and identify “more powerful explanations than that seen in a single study, thereby generating increased levels of understanding of a given phenomenon and greater research finding generalizability” (Skinner et al., 2022). The method requires a careful consideration of the cases’ contexts and “translation” by the researchers to ensure comparability. If recognizing these principles, this method allows to use case study data for the purpose of reinterpretation and comparison, employ these insights to gather a fresh inductive perception, and develop explanatory theories or models (Noblit and Hare, 1988). This way, we were able to integrate both an IS and regulatory perspective into our research endeavor and bridge gaps among the concerned research disciplines and between research and practice. Basically, we followed the principles from Hoon (2013) to build theory from aggregating, interpreting, and synthesizing appropriate case studies as detailed in the following paragraphs.

Systematization of problems and regulatory remedies

First, we aimed to explore and conceptualize the problems with digital platforms from existing case studies to attain a comprehensive picture. At this, we could rely on the rich amount of publicly available online sources such as newspaper articles, policy reports, and academic papers that examined and discussed distinct cases with platform-related problems. Thus, we conducted an online search to attain cases within our focus (i.e., platforms caused trouble or damage to economy or society). Concretely, we trawled Google, Google News, and Google Scholar in both English and German in an inductive and iterative search process which started with the combination of generic search terms (e.g., (“platform” OR “sharing economy”) AND (“legal issues” OR “regulation”)) and culminated in concrete instantiations after several iterations (e.g., “Google” AND “tax”; “Uber” AND “competition”) to identify concrete and proper cases. Case studies were selected when the studied company complied with the definition of digital platforms, distinct stakeholders were damaged, and other sources could corroborate the case study by means of data triangulation (Rothbauer, 2008). We conducted this query until theoretical saturation; that is, adding more cases would not yield further insights (Sandelowski, 2008).

We applied qualitative content analysis to identify and inductively code the actual problems caused by digital platforms. The method is particularly suitable to explore the underlying and causal relationships of social and economic phenomena. While this method is interpretive, it is useful for extracting both conscious and unconscious messages within documents. (Mayring, 2000) To increase reliability and objectivity, two independent coders developed the categories separately, and coding deviations were extensively discussed within the research group until consensus. First, we conducted a within-case analysis to inductively develop and categorize problem types (“What is the problem?”), underlying problem causes (“How could the problem occur?”), control dimension (“How could the platform exert power”), impact (“Who was affected and how?”), and the role of IT/IS (“How did IT/IS provoke or amplify the problem?”). Second, we conducted a cross-case pattern analysis to identify differences and to calibrate and consolidate our constructs (Schreiber, 2017). In proceeding with the conceptualization of the problems, we put special emphasis on analyzing the role of IS in provoking or increasing regulatory issues. This step led to an initial classification of platform- and monopoly-related problem classes, which we collated with well-known market and regulatory failure rationales in theory (Baldwin et al., 2012, pp. 16 et seqq., pp. 72 et seqq.).

To corroborate the differences among certain problem classes, and to theorize on potential dependencies, we extended our analysis by a causal-pathway case-sampling (Gerring, 2007, p. 5). At this, we first analyzed the business models of the 15 largest (Western) digital companies by market capitalization (as of November 2020) for the problems to find that these particularly apply to the five largest digital platforms (i.e., GAFAM). Thus, we proceeded with an in-depth analysis of the GAFAM platforms from a regulatory perspective to understand the growth history, the actual market power scope of GAFAM platforms, and the regulatory problems in greater detail. Here, we first analyzed their business portfolios including their M&As from business reports. Then, we reviewed both the majority and minority staff report on the investigations of competition in digital markets that comprise a synthesis of 1,287,997 documents and communications, testimonies from 38 witnesses, hearing records that span more than 1,800 pages, 38 submissions from 60 antitrust experts from across the political spectrum, and interviews with more than 240 market participants, former employees of the investigated platforms, and other individuals totaling thousands of hours (Nadler and Cicilline, 2020). As Microsoft was not part of this investigation, we refer to other online accessible reports for this company. Based on these insights, we refined our constructs and classified the digital platform problems.

After having conceptualized the problems, we aimed to explore regulatory remedies. Again, we conducted qualitative meta-analysis and content analysis as depicted above. This time, we relied on historical regulation cases, contemporary policy and expert papers that propose solutions for platform problems, and actual international regulatory approaches and objectives pursued by governments. Triangulation from different sources helps to increase validity, credibility, and completeness (Given 2008, p. 10; Rothbauer, 2008). Altogether, we could systemize six problem classes (consisting of 50 problem types and 17 problem causes) that affect four stakeholder groups and three control dimensions (with three control units each) that help platforms to enforce their interests. Beyond that, we could conceptualize three regulation classes that can help address platform-related issues.

Ontology development

In a final step, we synthesized our findings into a conceptual model. First, we applied morphological analysis, a highly systematic method to structure multi-dimensional problems (Ritchey, 2013; Zwicky, 1966), to define and structure the relevant classes and their instantiations, and to develop an initial model. Second, given the solution-oriented character of the mode, we challenged it with existing literature of (platform) regulation and the platform cases for model evaluation in terms of completeness, simplicity, elegance, understandability, and ease of use (March & Smith, 1995). At this, we employed the cases from our first research part of problem classification. To raise validity, three researchers independently assessed for each case, what control dimension and what regulatory option would apply (Creswell & Miller, 2000). Consequently, we could reiteratively refine our model and add more semantics by extending the classes by their core relationships in the sense of a business-oriented ontology (Ushold & Gruninger, 1996). Ontologies can prove useful to systemize core elements and their relationships for purposeful regulation and thus lend utility to practice (Wand and Weber, 2004; Butler and Brooks, 2017). Altogether, our ontological model factors in the problem dimension (i.e., problem classes, control dimensions, and affected parties) and connects it to appropriate regulatory action. The model is based on—in total of all iterations—128 contemporary platform-problem cases, 83 historical and discrete government-regulation cases, 23 policy and expert papers with DPR proposals, and 5 topical international regulatory approaches (EU: Digital Markets Act, Digital Services Act; USA: Digital Markets Investigation; UK: Digital Markets Strategy; Australia: Digital Advertising Services Inquiry).

Systemizing the problems with digital platforms

Classification of problems

First, we explored and conceptualized the underlying problems induced by digital platforms. Our analysis revealed that we need to distinguish two basic problem-class dimensions: (1) platform-related problems that arise from imperfect behaviors and interactions among the platform, the regulator, and the agents, and thus enable platform owners to play off their strengths or exploit external deficiencies, and (2) monopoly-related problems that arise from the increased market power of digital platforms in their core markets and beyond, and foster further anti-competitive platform-owner behavior (Table 2).

Table 2.

Overview of conceptual problem class dimensions.

	Problem class	Description
Platform-related	Regulator behavior	Deficiencies of the regulatory system that platform owners have exploited to enforce their interests
	Platform-owner behavior	Any conduction of purportedly undue activities by the platform owners
	Agent behavior	Any agent activity that strengthens the platform owner’s position over the regulator, its competitors, or the agents
Monopoly-related	Core-market monopoly	Significant market domination in the platforms’ primarily affiliated markets
	Cross-market monopoly	Additional gatekeeper positions in other markets (or market segments) beyond the platform’s core market
	User-base monopoly	Gatekeeper positions towards the end-user bases that spreads above markets

Platform-related problems

Many problems within the analyzed cases arise from platform-related problems, which means problems stem either from the exploitation of deficient regulator behavior, undue platform-owner behavior, or unmindful agent behavior.

Regulator behavior comprises all deficiencies of the regulatory system that platform owners exploit to enforce their interests (e.g., growth, popularity, cost savings). Here, we identified and categorized three different problem causes (Table 3).

Table 3.

Problems through regulator behavior.

Problem cause	Typical resulting problems	Failure
Weak cross-border cooperation	Localization of value creation; cross-border taxinspection and transparency; competition amonggovernments	Regulatory {collective action; inter-institutional structures; false assumptions}; market {information inadequacies; anti-competitive behavior}
Legal loopholes	Taxation of data collection; valuation of datapools; precarious working conditions
Ineffective law enforcement	Slow inspection by authorities; data privacy violations; youth protection violations; mild penalties

First, as digital platforms often operate globally, weak cross-border cooperation impedes transnational regulation. Instead of addressing platform-related problems through joint applicable laws, countries sometimes even compete for platforms to settle down. Problems here include taxation of locally generated user data (Grindberg, 2020), little cooperation of international law enforcement agencies (Greive and Riedel, 2019), or the impact of American laws on private governance of globally acting digital platforms (Bloch-Wehba, 2019). The spatial and temporal ubiquity of IS helps platform owners to easily offer their services globally (*Pousttchi et al. 2019*), and our cases show how this hampers cross-national regulation (OECD, 2018). Here, private-interest theories help explain weak cross-border cooperation as a result of inter-institutional problems of collective action (Baldwin et al., 2012, p. 77).

Second, platforms do also benefit from regulatory deficiency on a national level when exploiting legal loopholes. As their business differs from traditional ones, breaches of rules or ethics remain uncovered by regulators. They may disregard legal requirements that apply to traditional market actors, resulting in competitive advantages. Consequently, legal systems fail to cover anti-competitive behavior, which either (a) could be illegal following a different legal interpretation (e.g., Uber as a chauffeur service in Germany), (b) would be illegal in another context or industry (e.g., Facebook disregards journalistic due diligence), or (c) should be illegal according to other market participants’ views (e.g., hotel owners complain about Airbnb practices). Also, the case analysis supports existing literatire that platforms benefit from ambiguous definitions of the relevant market (Russo and Stasi, 2016), the inapplicability of existing legal systems (Rogers, 2016), and extensive lobbying (Haenschen and Wolf, 2019). From an IS view, the novelty, velocity, complexity, and mutability of digital and data-based markets, and networks may complicate the work of the legislative body (Constantinides et al., 2018; Lee et al., 2021). In regulation theory, such loopholes might be explained by blackspots through false assumptions about market mechanisms or the regulatees’ practices (Baldwin et al., 2012, p. 77).

Third, platforms benefit from ineffective law enforcement. Here, we distinguish two different types: (1) Regulatory systems exist, but platforms can break them without being prosecuted. Regulators either do not comprehend potential violations or simply run out of capacities. For instance, some cities require legal permission to offer flats on short-term rental platforms like Airbnb or ban such practices at all. Although flats are visible online, actual bookings are not, which results in information asymmetries in favor of the platform. The mere number of flats makes regulators incapable of consequent prosecution. Hence, IT/IS play an important role in causing and addressing the problems (Gozman et al., 2020b). (2) Regulatory measures are effectuated but the fines leave the platforms unimpressed. For instance, Facebook was highly profitable in 2019 despite a $5bn fine for the Cambridge Analytica scandal. This regulatory ineffectiveness is also issued in literature (van Dijck 2020) and theory, that is, imperfect institutional structures and arrangements (Baldwin et al., 2012, p. 77).

Platform-owner behavior entails any conduction of purportedly undue activities by the platform owners. Here, we identified and categorized three different problem causes: information asymmetries, network and lock-in effects, and platform governance (Table 4).

Table 4.

Problems through platform-owner behavior.

Problem cause	Typical resulting problems	Failure
Information asymmetries	Third-party access to platform data; bargaining powerover complementors; opacity about platformdecisions	Regulatory {false assumptions}; market {anti-competitive behavior; externalities; information inadequacies; coordination; rationing}
Network + lock-in effects	Transfer of social costs and risks to platform agents;reinforcement of polarization tendencies
Platform governance	Undue preference of specific content or goods; prevention of complementors’ participation and interests

First, platform owners benefit from information asymmetries. Especially, non-transparency of platform governance (Perscheid et al., 2020) affects agents and impedes regulators (e.g., taxation or consumer protection). Digitalization can complicate information asymmetries (Ghose, 2009) and platforms can exploit this for anti-competitive behavior (Zhu and Liu, 2018). It is not entirely graspable to what extent data is collected, proceeded, or even sold. Particularly, Apple and Google have created powerful ecosystems by collecting and processing a plethora of user data with their smartphone operating systems (Zuboff, 2015) and recent investigations show that “Google used the Android operating system to closely track usage trends and growth patterns of third-party apps” (Nadler and Cicilline, 2020, p. 378). Plus, platforms do not conventionally create value but do “only” intermediate, making their share in value creation and capture arbitrary and hardly quantifiable (Hein et al., 2019). According to regulation theory, the exploitation of information asymmetries to achieve competitive advantage can result in market failure. Both our cases and interdisciplinary research indicate that platform owners employed IT/IS to obfuscate their activities and processes (Dolata, 2017).

Second, our cases support the notion that platforms benefit from network and lock-in effects. Current research refers to “tipping points” when these effects lead to monopoly positions and create market failure (Liebowitz and Margolis, 1995). Platform owners leverage these effects through elements of design, dark pattern or gamification, making the agents dependent and causing externalities (MacGuineas, 2020). Uber exploits such manipulation techniques to make their drivers working longer and harder (Scheiber, 2017), and other platforms make multi-homing unattractive for their agents through a plethora of services (Hill, 2020), fostering anti-competitive behavior. Apple provides pre-installed apps on iOS (Nadler and Cicilline, 2020, p. 352), and Google introduced a new widget for Meet inside Gmail after Zoom entered the market (Bergen, 2020). Consequently, the platforms’ employment of IT/IS has highly contributed to such problems.

Third, problems result from platform governance. Purposeful employment of data and technologies is critical for successful platform governance (Gorwa et al., 2020) to orchestrate the agents’ interactions, define sets of rules, monitor their compliance, and enforce penalties. In a weak form, this may entail auto-play functions at YouTube and thus the decision on what consumers watch next (MacGuineas, 2020). More severely, social media platforms decide who may publish what content and thus privatize public duties (Belli et al., 2017), for example, the blocking of the former US President Donald Trump. Consequently, platform owners exert power over terms and conditions, access to distinct agents and resources (Perscheid et al., 2020), and over participants and markets (Halckenhaeusser et al., 2020). In this regard, platform owners function as regulators themselves (Dolata, 2017; Gawer, 2022), which makes platform governance a complex issue for the actual regulator (Croitor and Adam, 2020).

Agent behavior contains any unmindful agent activity that strengthens the platform owner’s position over the regulator, its competitors, or the agents themselves (Table 5). Here, we identified and categorized three different problem causes.

Table 5.

Problems through agent behavior.

Problem cause	Typical resulting problems	Failure
Frivolousness	Undermining of official ID card monopolies; undifferentiated and unilateral consent declarations	Regulatory {false assumptions}; market {externalities}
Subjective norm	Low support for privacy-compliant alternatives; contracts with underage platform users
Misuse	Uncontrolled distribution of copyright violations; integrity and security of services and products

First, platform owners benefit from the frivolousness of their agents. The free provision of many platform services constitutes a low inhibition threshold for usage (Sunstein, 2020), leading to unmindful, shortsighted, or laziness-driven usage and data provision of platform services. Our cases show that end-users act quite unmindful with the platform services, for example, by sharing data or content, which supports IS research findings (Hey Tow et al., 2010). This mindlessness may be supported manipulated (Thatcher et al., 2018) and exploited by platform owners (e.g., Zuboff, 2015). However, even if users are aware of the consequences, they contravene these concerns with their laziness, in particular when using mobile devices (*Pousttchi and Goeke, 2011*). For example, they unconsciously strengthen platform power through increased usage time, which again attracts more users (von Briel and Davidsson, 2019; Zuboff, 2015).

Second, end-users are bound to subjective norm when using IT or platform services (Eckhardt, 2009), especially in a mobile context (*Palka et al., 2009*). Particularly, young people increasingly transfer their interactions to social media (Decieux et al., 2019). At this, platforms leverage network and lock-in effects. For instance, WhatsApp users are reliant on the service to reach their peer groups (Nguyen, 2021). As a result, more privacy-compliant alternatives (e.g., Threema) have difficulties to catch up.

Third, platforms benefit from deliberate misuse by their agents. In such cases, agents exploit the opacity of digital platforms and thus promote platform popularity and growth. For instance, uncontrolled content distribution and copyright infringements are major regulatory issues (Else, 2018). This problem cause is confirmed by existing research from IS (e.g., Chai et al., 2020) and media and law (e.g., Marique and Marique, 2020). The pervasiveness of digital devices, applications, and services (and thus IT/IS) has boosted the socio-economic impact and relevance of agent behavior. From regulation theory, we can refer to externalities of the platforms’ products and services, which do not reflect the actual costs to the society (Baldwin et al., 2012, p. 18).

Monopoly-related problems

Our analysis shows that agents, regulators, and platform owners have jointly provoked platform-related problems. With significant market power, monopoly-related problems appear, first through core-market monopoly, then through cross-market monopoly until user-base monopolization.

Core-market monopoly implies significant market domination in the platforms’ primarily affiliated markets (e.g., Airbnb in the short-term home rental market). This allows for anti-competitive behavior and thus might cause market failure. Here, we identified three problem causes (Table 6).

Table 6.

Problems through core-market monopolies.

Problem cause	Typical resulting problems	Failure
Skim-off effects	Unfair behavior against complementors	Market {anti-competitive behavior; unequal bargaining power}
Undue privileging	Undue preference of in-house goods/services; failure to ensure the freedom of speech	Market {coordination; anti-competitive behavior}
Cross-subsidization	Impossible valuation of data pools; strong monopolization tendencies	Market {anti-competitive behavior}

First, a dominant market power enables platform owners to skim off margins from their complementors or payment reserves from the consumers. At this, they avail themselves of information asymmetries and platform governance, which leads to market failure through unequal bargaining powers and anti-competitive behavior. Booking.com and Expedia can charge high fees due to their market dominance (Espinoza et al., 2020). The development of dominant platforms has been addressed in IS research (Hermes et al., 2020a) and pricing strategies are well recognized (Wan et al., 2017), but yet barely discussed as an objective of regulatory action as platform owners are neither actual competitors nor principles of their complementors (Gal and Petit, 2021; Rogers, 2016).

Second, dominant market power facilitates undue privileging of platform goods over those from complementors (Gilbert, 2020) which cannot easily switch to other marketplaces (lock-in effects). Hence, exclusive information about transactions or consumer preferences (information asymmetries) fosters coordination and anti-competitive behavior. Data and IT/IS play a decisive role in preferencing goods or content (Hermes et al., 2020; Khan, 2019). Plus, vertical integration helps offering complementary upstream and downstream goods, which otherwise was provided by complementors. Most prominently, “Amazon’s dual role as an operator of its marketplace that hosts third-party sellers, and a seller in that same marketplace, creates an inherent conflict of interest” to the disadvantage of third-party sellers (Nadler and Cicilline, 2020, p. 16).

Third, capitalization of core market dominance factors cross-subsidization, either of complementary goods on the core market (vertical integration) or new goods in adjacent markets (horizontal diversification). Consequently, these products/services can be offered low-priced or for free, which explains market failure through predatory pricing. IS and economics research discusses cross-subsidization mainly in terms of pricing strategies (Kung and Zhong, 2017), while other research disciplines critically discuss the development of such gradually entangled structures (Dolata, 2017).

Cross-market monopoly refers to problems that build upon gatekeeper positions in other markets (or market segments) beyond the platform’s core market. Such a dominance allows for predatory pricing through cross-subsidization and fosters the portfolio and agent-base convergence. Here, we identified three problem causes, namely infrastructure, coopetition, and innovation (Table 7).

Table 7.

Problems through cross-market monopolies.

Problem cause	Typical resulting problems	Failure
Infrastructure	Excessive exploitation of publicly paid infrastructures; horizontal/vertical expansion fosters agent engagement	Market {coordination; externalities; goodsavailability; externalities}
Coopetition	Negative effects for competitors and third parties; politicalinfluence through lobby work	Market {unequal bargaining power; anti-competitive behavior}
Innovation	Killer acquisitions prevent potential competition; danger to the autonomy of academia	Market {unequal bargaining power; goods availability}

Infrastructure-related problems are two-faceted. (1) From a technical perspective, digital platforms excessively benefit from public digital infrastructures (i.e., moral hazard, externalities), making IT/IS a prerequisite of platform problems. (2) From a socio-economic perspective, digital platforms provide essential infrastructures themselves by supplying and connecting various market actors across industries to substantiate their economic and societal power (Hein et al., 2019; Tilson et al., 2010), such as marketplaces, operating systems, or cloud services. Such infrastructures involve vertical and functional integration, horizontally and across industries (Parker et al., 2016, p. 33), making IT/IS an amplifier of such problems. Integrated mOS with stores and wallets are gatekeepers to apps and services from other industries (Fukuyama et al., 2020). While IS research has explored platform expansion (e.g., Staykova and Damsgaard, 2016) or infrastructure provision in view of platform openness (e.g., Setzke et al., 2019), the regulatory aspect is yet underexplored. However, infrastructuralization and cross-sectorization might give platforms regulator-like control over goods availability and coordination (Van Dijck, 2020).

Coopetition refers to problems occurring from the platform dominance at various segments in the digital economy, namely mOS (duopoly of Google and Apple), social media and advertising (Facebook and Google), non-food online retailing (Amazon), or search engines (Google). At this level, platforms barely challenge each other’s segments, and research has shown that strategic expansion into the rivals’ segments turns disadvantageously (Bar-Gill, 2019). For instance, Google had unavailingly attempted to establish another social network platform (“Google+”). Moreover, the platforms collaborate in various ways. For example, Apple draws on AWS (Dang, 2020), and Google paid Apple to provide the default search engine in iPhones (Novet, 2016). They conclude cartel-like agreements like Google and Facebook in the US advertisement market (Tracy and Horwitz, 2020). Consequently, big digital platforms may jointly defend their monopolies to build up market-entry barriers for other players, which is why recent theories refer to “moligopoly” constellations with unequal bargaining powers (Petit, 2020).

Innovation refers gatekeeping mechanisms in research and development (R&D) in three ways. (1) Platforms have shown to entice high-skilled employees from other organizations (Popkin, 2019). (2) They can exploit their financial resources to simply acquire emergent technologies or competitors (unequal bargaining power), such as Facebook’s acquisitions of WhatsApp and Instagram (Schallbruch et al., 2019). (3) If such technologies or competitors are not available by purchase, platforms can draw on their financial and technological capabilities to imitate. For instance, Amazon screens new ideas through camouflaged investment pitch events (Lombardo and Mattiolo, 2020). Research refers to kill zones when VC firms bother to invest in startups that can be easily copied by big platforms (Kamepalli et al., 2020). If only a few actors control the evolvement of groundbreaking innovations (i.e., goods availability), they can minimize the disruptive threats and maintain their market powers. Hence, platforms rely on gatekeeping the innovative capabilities in and beyond their markets for their continuous success (e.g., Katz, 2021).

User-base monopoly refers to resulting problems that relate to a platforms’ gatekeeper positions towards the end-user bases. Thus, the platform dominance spreads above markets. Here, we identified two complementary problem causes: consumer ownership and data ownership (Table 8).

Table 8.

Problems through user-base monopolies.

Problem cause	Typical resulting problems	Failure
Data ownership	Difficulties to incorporate data as competitive factor;disproportionate financial compensation of user data	Regulatory {false assumptions}; market {unequal bargaining power; anti-competitive behavior; coordination; rationing; windfall profits}
Consumer ownership	Difficulties to determinate correct antitrust markets; difficulties to assess the extent of network effects

Consumer ownership reflects the market view of user-base monopolization due to network and lock-in effects based on core- and cross-market monopolies. It refers to all problems that occur because platforms have turned into hard-to-bypass access points to reach consumers in a digital world (and vice versa), given the ubiquity and inevitability of their digital infrastructure (van der Aalst, 2019): Web pages are virtually non-existing if not appearing on Google Search, while apps are irrelevant if inaccessible through mOS app stores or incompatible with Windows or Mac. Consequently, platforms control the digital access to consumers through IT/IS (i.e., coordination), while traditional companies can hardly connect digitally without them (*Gleiss et al., 2021*), fostering unequal bargaining power and anti-competitive behavior.

Data ownership reflects the resource view of user-base monopolization. It refers to all problems that emerge from the circumstance that platform owners collect data from all agent activities and transactions in combination with a large user base scope (i.e., coordination and rationing). In digital markets, data is a critical resource for success and competitiveness. Apple and Google have successfully monopolized the data ownership and restricted access to third parties through their platform governance and missing external regulation. At the same time, they profit from regulatory measures that force other actors to open their resources (e.g., EU PSD2 regulation). This power asymmetry strengthens the platforms’ position over traditional market actors (Just, 2018). They gain a monopoly on these resources which are actually created and provided by the agents who do not (equally) benefit, leading to unfair competition and windfall profits. Given the required capabilities of collecting and processing large amounts of data, IT/IS are fundamental (Bergemann et al., 2018). Beyond IS research, the data ownership discussion spills over to questions of data privacy, security, portability, and control (e.g., Lam and Lui, 2020).

Altogether, our cases indicate that (particularly big) digital platforms have established monopoly-like structures in different ways that induce different types of market failure (unequal bargaining powers, anti-competitive behavior, windfall profits, information inadequacies, and moral hazard). Defining the relevant market turned out be difficult in a global, networked economy (Peitz, 2020) and might be explained by insufficient understanding of the characteristics of platform markets and their interplay with traditional markets. Moreover, platforms govern resources, which allows availability control, rationing, and coordination—actually tasks of the regulator. Both consumer and data ownership in turn expedite lock-in and network effects, and thus consolidate the monopoly structures of the digital platforms.

The special case of big digital platforms

In the course of analysis, big digital platforms have assumed a special role: Not only do they cause platform-related problems to large extent but also (and almost exclusively) monopoly-related ones. What is more, the issues of cross-market and user-base monopolization have proven to be characteristic. Thus, we took a closer look at the nature of such big digital platforms. For this purpose, we analyzed the business portfolios of GAFAM to understand the interwovenness of their products and services along five layers (Figure 3).

Figure 3.

GAFAM Business Architecture.

The basis of the digital platform architecture is an infrastructure layer to host and provide a technical foundation for downstream products and services. However, they heavily rely on the availability of public or third-party infrastructure to make their services accessible. To connect their end-users with services, the platforms provide physical/tangible devices (device layer). Here, particularly Apple obtains a well-marked position (i.e., MacBook, iPhone), which helps controlling the upper layer elements and boundary resources. Hereupon, the OS layer plays a strategic role as it connects physical devices with applications, mostly through centralized app stores. It helps controlling standards and collecting data. Google, for example, employed Android to analyze usage behavior and growth patterns of apps from third-party developers (Nadler and Cicilline, 2020, p. 387). Hence, governing the OS layer ensures power, which is why Amazon targeted IoT (with Alexa) and Facebook the AR/VR domain (with Metaverse). Upon this, platforms provide several consumer services (platform service layer). Here, the platforms have different market stakes through their various services that connect the users with other downstream offerings, such as apps, contents, or services that can be provided by owners or complementors.

Big digital platforms exhibit a high level of vertical integration, that is, offering downstream or upstream products/services and thus facilitating functional integration within the markets (Parker et al., 2016, p. 33). Google offers various services (like Gmail, Workspace) upon the cloud infrastructure and Apple provides and controls a compound of hardware, OS, and applications, which increases consumer and data ownership, reinforcing network, and lock-in effects. This, in turn, allows for platform governance, information asymmetries, skim-off effects, and undue privileging. Thus, vertical integration fosters monopolization tendencies as it enables owners to increase the power on the markets they govern (e.g., AppStore) and their dominance on the markets they act in (e.g., Google Ads in the advertising industry).

What is more, big digital platforms have successfully pursued strategies of horizontal diversification for functional integration across industries by launching similar services that build upon equal infrastructures (e.g., Apple Wallet and Pay), providing complementary services that are technically integrated into one interface (e.g., Google Suite), or acquiring competitors (i.e., horizontal integration). Therefore, horizontal diversification helps platforms to transfer market dominance to new markets (i.e., cross-market monopolization) such as healthcare (*Gleiss et al., 2021*) and thus create ecosystems with lateral user-base monopolies. Hence, the markets they govern are not only integrated vertically across layers but also horizontally across market segments.

Altogether, platform owners benefit from platform-related problems to successfully operate and grow. If they achieve a dominant market position or a “winner-takes-all” monopoly (Shapiro and Varian, 1998)—promoted by agent behavior (Zhou et al., 2020) and regulatory deficiencies (Srinivasan, 2019b)—platform owners can skim off their complementors and privilege goods or content. Finally, horizontal and vertical expansion allows for cross-market and user-base monopolization. Through coopetition, big digital platforms can protect their dominant positions (Petit, 2020). At all this, digital platforms rely on the efficient employment of IT/IS. Figure 4 condenses our findings into a classification of digital platform problems.

Figure 4.

Systematization of Digital Platform Problems.

In regulation theory, some problems are explainable with well-known market failure rationales. However, these rationales hardly explain problems resulting from the control over (integrated) platform markets for two reasons: First, platform markets contrast strongly with traditional pipeline markets, while disentangling these markets vertically and employing data-based and digital technologies (Parker et al., 2016). Second, platform owners conduct quasi-regulatory duties of coordination, rationing, and goods availability themselves, making them counterpoises of the regulatory body. Hence, regulatory failures are present in these markets (e.g., false assumptions, ineffective structures and processes).

Consequently, purposeful regulation needs to factor in four things: First, regulators have to recognize the distinction between platform-related and monopoly-related problems in association with regulatory and market failures. Second, regulators have to comprehend the distinction between regular digital platforms and big digital platforms with a highly integrated product and service architecture where many problem classes occur at once and are hard to tell apart. Third, regulators should lay more emphasis on the role of IT/IS in causing or facilitating regulatory platform issues and, fourth, employ the potentials of data and digital technologies themselves for effective regulation in a digital age.

New perspectives on DPR

Towards DPR ontology

Besides the systematization of problems, we could employ the 128 cases to systemize the threated societal actors (i.e., consumers, complementors, competitors, or the state/society at large) and control dimensions that helped platform owners continuously exert their power. These include activities (of the platform owner or agents), valuable resources (e.g., data, technological artefacts, intellectual property, money), and economic sectors (e.g., functions, markets). In order to derive and develop purposeful regulatory options, we analyzed three complementary sources: 83 historical regulation cases, 23 contemporary proposals from practice and research, and 5 current international regulation approaches.

Damage to involved parties

Based on abusive platform-owner behavior, exploitation of regulatory deficiencies, or unmindful agent activities, platforms could undermine applicable laws or neutrality standards to directly or indirectly damage involved parties. In many cases, the owners impinged upon the agents’ rights or acted to their disadvantage. For instance, social-media platforms closed contracts with underaged consumers (Müller, 2018) or Apple did not provide updates for old devices (Fuest, 2019). In other cases, owners caused harm to the complementors. Particularly, workplace platforms such as Clickworker were accused for precarious working conditions that ignore rationales of national labor law (Rogers, 2016). Moreover, platforms also harm competitors by legal gray areas to arbitrarily control—or intentionally not control—how they or their complementors produce their goods (value creation), what products and services they offer (value proposition), and how communication with consumers is organized (customer interaction). For instance, Airbnb has ignored prevailing legal norms by enabling the illegal rental of flats or the operation of taxi services without official permissions (Coldwell, 2014). Finally, platforms cause damage to state and society, for example, by avoidance of taxation (Bourreau et al., 2017) or polarization (De Gregorio, 2020).

Control over activities

Many of these problems are platform-related with the consequence that owners entirely control or abuse value creation, value proposition, or customer interaction on the platform. In many cases, conventional economic regulation might help solving the problem. That means, the regulator can set statutory provisions for the owners and their complementors that enter a new market (Taylor and Weerapana, 2010). Regarding value creation, for example, German Uber drivers have been made legally bound to return to their starting point (Schuetze, 2019). If such issues are irrespective of the market, social regulation might help solving the problem (e.g., labor rights). The regulator can exert influence on value creation, value proposition, or customer interaction to correct market failures, reduce externalities, and achieve socially desirable outcomes (e.g., Shleifer, 2005).

Control over resources

If controlling the conditions and transactions, successful platform owners are able to control valuable resources (data, technology, or revenue), either as gatekeeper (for skim-off effects) or as manipulator (for undue privileging). This way, owners can determine about prices and conditions and prioritize services. For instance, Twitter was accused to prefer liberal over republican content (Clayton, 2020). What is more, owners shuffle off responsibility, such as in the context of (missing) content moderation in social media platforms (Heldt, 2019). Here, the regulator might enforce neutrality or, at least, transparency about the owners’ practices and the content produced or displayed (De Gregorio, 2020). For example, the German Network Enforcement Act forces social media platforms to delete unlawful content (Heldt, 2019), which we refer to as elements of platform-governance regulation.

This issue of resource control increases if, at the same time, monopoly-related problems come into effect including undue privileging of an owner’s vertically integrated services over those from complementors (Krämer and Schnurr, 2018). Particularly, dominant owners hold access to the gathered data, technological resources and interfaces, or patents and licenses over competitors, consumers, or the state (Engler, 2020). Consequently, the regulator should consider enhancing third-party participation in the digital platform’s critical key terms and resources through access and sharing. Access entails data or analyses that all parties co-produce and platform’s technological artifacts such as interfaces or applications (Lancieri and Sakowski, 2020). This way, inter-platform interoperability and data portability could be facilitated, reducing lock-in effects and monopolization (De Hert et al., 2018).

Sharing relates to the owners’ profits that actually root back to the agents’ data and content. For instance, Google might pay news companies for using their content (Meade, 2020), or—more radical—owners should compensate agents monetarily (Lanier, 2014). Other radical proposals include mandatory sharing of algorithms, subsidization of competitors, or temporary shutdowns (Gal and Petit, 2021). In either case, affected parties could participate in platform governance and thus attenuate abusive market power. The analysis of historical regulation cases shows that access provision to critical resources from monopolists to other actors has often been appropriate to address market failure and foster innovation, like the AT&T US Consent Decree in 1956 (Watzinger et al., 2020).

Control over economic sectors

Such measures might remain ineffective through the data-related, technological, and financial superiority. As our analyses exhibit, big digital platforms have accumulated tremendous power and attained gatekeeper positions on end-users, innovation, and infrastructures. Plus, they have established anti-competitive, coopetitive, and innovation-absorbing practices. These platforms control access to products and services, data and technologies, and participation rules. Besides their dominant market power in the digital economy, they increasingly impinge on the real-world economy through horizontal/vertical integration and diversification. Here, regulators could pursue conventional measures of antitrust regulation to ensure a common basis for fair competition and the diffusion of innovations (e.g., Khan, 2019), social welfare (Autor et al., 2020), or state sovereignty (Wu, 2018).

Basically, the regulator has three options here. First, regulatory measures could aim at the functional segregation of single products and services through vertical or horizontal disintegration, either into externally controlled and independent business units or subsidiaries or into completely autonomous companies (i.e., divestiture). In history, the regulator has already disintegrated single companies that had gained too much market power ex-post, such as Kodak (1921, 1954), IBM (1936, 1956), AT&T (1913, 1956, 1982), or the movie studios of Paramount (1948). In view of big digital platforms, the regulator could examine vertical and horizontal product and service interrelations as we outline in the previous section (cf. Figure 3). Second, the regulatory body could foster the disentanglement of the markets that digital platforms operate on. This segregation can either concern industries and segments (e.g., banking) or regions (e.g., China’s ban of Facebook/Google). History has shown that such practices of horizontal and vertical segregation of market segments can leverage the desired effects (Crandall and Elzinga, 2004; Phillips Sawyer, 2019) as, for example, the Interstate Commerce Act (1887, horizontal segregation of US railway market), Glass–Steagall Act (1933, segregation of retail and investment banking), or the Air Mail Act (1934, segregation of airline production and operation). Third, disentanglement could go beyond functions and markets, for example, innovation or user-base monopolies. In either case, regulators hypothetically could exert governmental influence on the companies’ businesses through the purchase of company shares or nationalization (e.g., British Rail 1948). However, given the entanglement of markets, the linkage between platform- and monopoly-related problems, and IT/IS, it is more expedient to tackle problems at their roots instead of merely segregating entities (Parker et al., 2020). Figure 5 displays the comprehensive DPR ontology.

Figure 5.

Digital Platform Regulation Ontology.

Discussion

Our findings illustrate and confirm the complexity of DPR, including the entanglement of digital technologies with societal, economic, and political processes and structures. Furthermore, they reveal that interdisciplinary approaches are required to systematize and understand the core and impact of regulatory issues with digital platforms. In this regard, we conduce to bridge gaps between the research disciplines of information systems, public policy, and economics, combining these views in theorizing on DPR. In reflection of the existent interdisciplinary literature of DPR as well as the rationales of both regulation and digital platform theories, we substantiate and extend contemporary DPR research endeavors in three ways.

(1) Methodically, we walk off the beaten track by applying qualitative meta-analysis (Skinner et al., 2022). Our theorizations extend and consolidate existing research through a comprehensive and systematic approach that relies on empirical data, which is reflected with available knowledge on DPR. This way, we show that regulatory issues with digital platforms can partly be explained by regulation theory rationales, partly by the characteristics of digital platforms themselves, leading to market dominance of digital platforms in several economic sectors. Thus, we corroborate emerging research on DPR (e.g., Nooren et al., 2018), while our point of departure was not the business model of digital platforms, but the problems they create for economy and society. At this, we do not zero in on partial regulatory problems of particular digital platforms (Parker et al., 2020; Bourreau et al., 2017) but provide a comprehensive interdisciplinary view and fertile ground for further exploration and theorization.

(2) We enhance existing DPR research through breaking down and itemizing platform-related as well as monopoly-related problems. At this, we conclude that successful DPR is largely based on this differentiation. This contrasts not only with regulation practice but also with prior research, which has either inextricably mingled both problem classes (e.g., Haggart and Iglesias-Keller, 2021) or focused on one side only (e.g., Hermes et al., 2020b; Petit, 2020). Our analyses exhibit that digital platforms can cause trouble irrespective of monopolization, which helps regulators to target the actual problem. In addition, the differentiation makes clear why missing early-stage regulation of platform-related problems allows for platform growth and late-stage domination, which in turn induces monopoly-related problems.

(3) Our synthesizing, case-based approach connects and extends prior contributions, which have either been rather conceptual (e.g., Gilbert, 2020) or focused on selected platforms only (e.g., Khan, 2017). At this, our findings emphasize the relevance of vertical and functional integration, allowing platform owners to orchestrate the system and compete with complementors at once (e.g., Dolata, 2017). Viewing both small and big platforms, we can infer that particularly market-dominant platforms can utilize this constellation of being market owners within markets (e.g., iOS, AppStore, and Apps; Amazon as seller and marketplace). Particularly, GAFAM platforms have shown how they accumulate market power and dominance through continuous aggregation of value-creation layers and business segments, resulting in high market entry barriers for competitors and low innovation pressure for their platforms. Employing IT and IS, these players are increasingly converging across all layers and segments towards a strategic consumer and data ownership that enables control over revenue and resource streams (Birch et al., 2021; Zuboff, 2015).

Three conclusions might particularly guide further research on DPR. First, it is hard to determine the relevant market. In this regard, our findings line up with emergent notions on the definition of new markets that take into account data and consumers (Zuboff, 2015). Second, governing the platform markets makes platform owners to quasi-regulators themselves, facilitating the capture of peripheral layers and segments (Gawer, 2022). Third, platform ecosystems are very dynamic and evolve over time. Hence, regulatory frameworks need to be flexible and well-balanced to allow platform efficiency and innovation on the one hand and prohibit market failure on the other hand (Gawer, 2021). Altogether, governments are faced with a private counterpart in determining and governing market rules, while economy might suffer from user-base monopolization and society from surveillance capitalism and polarization (Zuboff, 2015). In particular, both researchers and regulators should lay more emphasis on gatekeeper positions and platform governance (van Dijck, 2020)—as the lynchpin to control resources and constrain the autonomy of complementors and competitors—in order to create a level-playing field among all actors.

Conclusion

The starting point of our considerations was the remarkable rise of debates and concerns about digital platforms in practice. While research has increasingly engaged in DPR, the underlying problems remained underexplored. Particularly, IS research, which had theorized on the nature and mechanisms of digital platforms to a vast extent, provided comparatively few knowledge on DPR. In order to fill this void, we aimed to shed light on the regulatory problems with digital platforms and strengthen the contribution of IS in the interdisciplinary research discourse. Our results are twofold: (1) We propose an empirically based systematization of digital-platform problems that factors in the role of IS in the interdisciplinary context. (2) We provide an ontological model of digital platform regulation that builds upon the classified problems. At this, we draw on both empirical data and interdisciplinary research.

Our findings suggest that digital platform owners have exploited regulatory inactivity while some have even transformed into serious market-governing entities and thus become challengers of the governmental regulatory body. Basically, platform owners capitalize on both platform- and monopoly-related problems, while IS help emerge or amplify several of them. Purposeful DPR is only possible if the regulator recognizes this distinction. Likewise, we need to distinguish between regular digital platforms and big digital platforms with a highly integrated product and service architecture where problems are intertwined and hard to tell apart. The control over valuable resources and the rule-making about the participation in platform markets are strategically relevant. Particularly, when it comes to regulation of access to data and technological artefacts (interfaces, applications, algorithms), IS knowledge is urgently required in the interdisciplinary research discourse on DPR.

As a contribution to research, we provide a comprehensive and transdisciplinary systematization that helps to understand and further explore the problems with digital platforms. At this, we fill not only a void in IS research but also tie in with current theorizing processes on DPR in adjacent research disciplines and bring attention to the importance of IS. As a contribution to practice, we provide an analytical tool that helps regulators to systematically and comprehensively approach DPR. Our study has several limitations. First, our scope is limited to digital platforms and regulatory approaches in Western societies. Thus, our findings and inferences might not apply to digital platforms of the Asian economic area. Second, our analysis focuses on the economic and technological dimension of DPR. However, we acknowledge that other dimensions might be equally important (e.g., social polarization). Third and most importantly, our qualitative research design, including the inductive systematization, is reliant upon the subjective selection, coding, and interpretation of the authors. In awareness of this limitation, our findings build on practical evidence that is reflected with extant theory and research.

We see three important avenues for future research. First, we need further research that helps define the relevant markets in the overlap of the real-world and digital economy, helping to deal with upcoming developments such as the Metaverse and AR/VR OS. Second, we need to emphasize the technological foundations of digital platforms in order to design accurate and feasible regulatory measures in terms of interoperability, resource sharing, and transparency. For instance, this implies complex mechanisms like automated content moderation, or questions of the design and time-scope of regulation, for example, ex-ante or ex-post (Cappai and Colangelo, 2021). Third and most important, we need to further examine the regulatory nature and impact of platform governance, making digital platforms to regulators themselves. Here, appropriate level-playing fields among platform owners, agents, and competitors are required to balance private and public interests effectively instead of just chasing the players and let them always be one step ahead. Research in favor of society has to derive systematic approaches for DPR that consider the very nature of IS in order to leverage the full potential of efficient matchmaking while avoiding its drawbacks—resulting in platforms that benefit economy and society, not the other way around.

Footnotes

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iDs

Alexander Gleiss

Key Pousttchi

Author biographies

Alexander Gleiss holds a doctoral degree in business informatics from University of Potsdam and is an affiliate researcher of the wi-mobile Institute for Digital Transformation in Naumburg, Germany.

Konrad Degen holds academic degrees in business informatics, political science, and public administration from University of Potsdam and is a senior manager at Verimi in Berlin, Germany.

Key Pousttchi is a full professor of business informatics. He held the SAP Chair for Digitalization at the University of Potsdam and, in 2022, founded the wi-mobile Institute for Digital Transformation in Naumburg, Germany.

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