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Henry Farrell @henryfarrell
, 18 tweets, 4 min read Read on Twitter
1. The politics of big data platforms like Facebook and Google is developing in very different ways on the two sides of the Atlantic. We saw this today in a US Supreme Court ruling and in European Parliament hearings on Facebook. Both have to do with "two sided markets."
2. "Two sided markets" are markets in which there isn't a simple relationship between a business and its customers. Instead, the profit model involves a business mediating between two different groups, and making its money from bringing the two together.
3. This is the basis of the platform economy. Consider how Facebook works. Facebook's billions of users are not its customers. They are its product. Facebook sells access to these customers (sliced and diced into specific demographic packages) to its real customers - advertisers.
4. Hence it makes its money from mediating between Facebook users and advertisers. Google's platforms work similarly. This generates problems for conventional anti-trust analysis, which has big difficulties in understanding two sided markets (even apart from its other failings).
5. e.g. what happens when the platform provider in a two sided market imposes restrictions on business access to its platform?… If you are an optimist about the magic of markets, you might conclude that this squeezes surplus from the businesses ...
6. that the platform provider will then pass on to consumers. The miraculous mechanism underpinning this generosity (if you are a profit maximizing platform provider) is hard to imagine - but mere lack of imagination shouldn't stop you if you are on the SC majority (more anon).
7. You'd also want be wildly optimistic that the platform company wouldn't exploit the informational advantages of its privileged position - but that's so far away from standard antitrust analysis as to exist in a separate space-time continuum.
8. So back to what is happening in the US and EU. The US Supreme Court today ruled 5-4 on a case involving AmEx, embracing the Miracle of Markets Hypothesis of transfer of gains to consumers (even when those markets manifestly lack competitive restraints) in all of its majesty.
9. This marks a kind of ideological apotheosis of Borkian antitrust, which has now become completely unmoored from its original anchor-point in theories of competition (not that the anchor was sturdily lodged in the first place).
10. It also makes it extremely difficult - without a change in the partisan make-up of the court - to take effective action against Facebook or Google if they use their privileged position to fundamentally restructure power relations within markets.
11. What's happening in the EU today is also significant. As @hannahkuchler has been reporting, the European Parliament is holding hearings on Facebook, and MEPs are directing their questions to activists, because Facebook doesn't want to answer.
12. Which is why @maxschrems has been having a ball at the hearings. He is predicting (and a plain reading of the text of the law would seem to support him) that the ECJ is going to find against Facebook and Google in a privacy action he has taken against them.
13. What Schrems has done (as @ANewman_forward and I discuss -… ) is to weaponize two sided markets against Facebook and Google. EU privacy law seems to say that Facebook and Google cannot make their users provide data as a condition of access to service.
14. If the ECJ agrees, then that means that Facebook and Google's two sided business model is in enormous trouble. They provide services to individuals to serve those individuals up to advertisers. But if they cannot _demand_ personal data from their users as a condition,
15. then they don't have anything valuable to provide to their real customers any more. No-one (apart, I presume, from those who are being paid to), is paying any attention to this in the US, but it could have quite enormous consequences.
16. This also marks (as a European official whom I spoke to a few weeks ago described it) a new consensus within Europe - of pushing back against the business model of big platform companies, and what it is doing to politics, society and the economy.
17. Antitrust, privacy law and other regulations are being harnessed together towards these ends. That is not to say that Europe does not have its own internal divisions, or that the ferocious counter-lobbying will not sometimes bear fruit. Or that EU power (e.g. linking) will
18. always be used well. But there is still an extraordinary and important contrast between how the EU and US view the problem of two sided markets, which is likely to lead to starkly different regulatory approaches, and big jurisdictional clashes. Finis.
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