Data and the Regulation of E-commerce: Data Sharing vs. Dismantling

Abstract

The economic and societal roles of digital platforms are a hotly debated topic. They have been under close scrutiny by European competition authorities for a while and their US counterparts have now followed suit. The subject is also receiving increasing attention in the media and in political circles. Each platform raises specific questions, but the general themes are market power, the collection and (mis)use of personal data and related privacy issues, free speech and for some even their possible interference in the political process. Consequently, the call for regulatory or competition policy intervention has become ever more pressing. Various reforms are being considered, including extreme solutions such a dismantlement of the platform. In this chapter, we focus on the issues related to data collection in the e-commerce sector, examine its consequences on equilibrium under several market specifications and different measures that could be implemented to regulate a vertically integrated marketplace. We show that the optimal policy is either complete dismantlement or data sharing. The relative impacts on consumer surplus and total welfare of these two options involve a tradeoff between the increased competition implied by complete dismantlement and the data related delivery cost advantage achieved under data sharing. When this cost advantage is small, completely dismantling dominates, while data sharing is the best policy when the cost advantage is large. Vertical separation is never optimal. While it may or may not yield a larger welfare than the reference scenario, it is always dominated by the two other policies.

Reference

Claire Borsenberger, Helmuth Cremer, Denis Joram, Jean-Marie Lozachmeur, and Estelle Malavolti, “Data and the Regulation of E-commerce: Data Sharing vs. Dismantling”, in The Economics of the Postal and Delivery Sector: Business Strategies for an Essential Service, Pier Luigi Parcu, Timothy J. Brennan, and Victor Glass (eds.), Springer Nature Switzerland AG, 2022.