Data Scale: How Does Data Lead to Network Effects? - Part 6


Bethany Walsh

Sep 17, 2021

Data Network Effects: Policy Considerations

People have already reached a consensus on platform’ using the data, such as platform acquires data from complementary suppliers and users’ transactions, to support their own service (priority) or its partners services. These actions may create conditions for the unfair competition on the market, and do not provide any increment benefit for the end user.

The fact that the platform not only acts as an arbiter between suppliers of complementary goods, but also competes directly with them, is not in itself a problem. In fact, however, it may stimulate competition and innovation, and enhance the overall value. Platforms can use data to understand the benefits of more popular products and the priorities of complementary suppliers, as to bring their own products and services to market. As a result, data can coordinate/drive innovation and shape interactions between platforms to enhance value creation.

However, anecdotal evidence is growing that platforms can use data related to suppliers of complementary goods, or adjust recommendation mechanisms to support their own services, thereby suppressing services from competing suppliers of complementary goods, or excluding services from competing platforms from entering the market. Under these circumstances, the consensus is that these are unfair competitive practices, and will not create any additional value for the end user or the entire network. Therefore, regulatory measures need to regulate these behaviors and reduce the abuse of significant market dominance by platforms for pure self-interest.


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