Regulatory Humility: Should Legislators Rethink Plans to Overhaul Online Marketplaces?

Over the past several decades, tech companies have innovated to provide great products to consumers for free. While most people are happy about this, politicians seem not to be. Driven by the perception that tech needs fixing, in the U.S., Europe, and recently Asia, politicians have begun proposing disruptive antitrust legislation targeting tech companies. Many of these proposals seek, in some form, to limit “self-preferencing” by tech companies on digital platforms. Others seek to constrain tech companies with online platforms from merging with or acquiring other online products and services. These proposals threaten the business models that have made these great products free to consumers, and risk harming developers by increasing fragmentation and raising the cost of capital.

By Bruce Gustafson[1]

Legislators across the world have been struck by the urge to dictate how online marketplaces are run. In December 2020, the European Commission proposed the Digital Markets Act (“DMA”), which proposes to regulate everything from how online services can conduct rankings to what services they must make interoperable. In 2021, both houses of the U.S. Congress followed suit with a barrage of legislative proposals, some based on the DMA and others adding new restrictions and requirements.

Regulators in Asia show signs of following suit. In August 2021, South Korea’s Nationa