Emerging Trends in Platform Governance within the Digital Economy
Prof. Liu Xiaolu, School of Economics, Renmin University of China
In the current era of rapid global digital economic growth, the robust development of the “platform economy” has become a strategic imperative for China as it forges a new development paradigm and advances high-quality growth in its new developmental phase. While the platform economy's expansion has generated substantial social wealth, it has also engendered extensive industry discourse on issues such as data security, privacy protection, labor rights, and social equity. The realm of platform regulation has now entered an advanced 2.0 phase. Specifically, China's regulatory approach to platforms has evolved through three distinct phases: from an initial stance of inclusive caution, to a period of intensive rectification, culminating in a state of normalized oversight. The guiding principles have shifted from the safe harbor principle to an emphasis on platforms’ primary accountability. Given the unique nature of platforms, the self-governance of platform ecosystems is faced with three fundamental issues: determining who is permitted to join the ecosystem and contribute their core capabilities; how to equitably distribute the collective value created by the platform among various stakeholders; and how to resolve conflicts of interest that may arise within the platform. To address these challenges, the government should delegate certain powers to platforms, integrating them into the governance framework while also overseeing and managing potential distortions stemming from platforms' pursuit of self-interest, to counteract the adverse societal impacts inherent in platform ecosystems.
A significant trend in this context is the government's strategic delegation of some of its authority to platforms, the primary market entities. Sustainable platform development necessitates a delicate balance of user interests, akin to the equilibrium in natural ecosystems. Disruption of this balance can lead to systemic collapse. If the needs of key interest groups on a platform are not consistently met, users will abandon the platform, leading to the disintegration of its ecosystem. Consequently, platforms have a vested interest in actively governing to sustain their ecosystem. Moreover, empowered by big data technologies, platforms possess the capability to enforce regulation and governance, offering the potential for their integration into the broader governance system.
However, platforms have their commercial interests, which can lead to societal issues such as privacy concerns and anti-trust matters. The government's role, therefore, is to regulate and manage the potential distortions arising from these self-interested pursuits. The establishment of a government-led platform governance system is essential, focusing on indirect oversight and providing regulatory incentives. This involves monitoring platform conduct regarding anti-trust and privacy and security regulations, as well as overseeing the ecosystem's participants by circumventing the platforms themselves. For instance, the State Administration for Market Regulation has initiated direct product supervision and random inspections for online sales. Additionally, the government must guide and incentivize platforms in their governance efforts. Questions such as whether online trading platforms or e-commerce platforms should establish inspection and monitoring systems, whether they should control the quality of listed products, and whether social platforms should verify the compliance of short video content, are all matters that the government aims to address, focusing on how to effectively guide and motivate platforms in governance.
Published on July 11, 2024