The Rising Risk of Platform Regulation

Unless platform companies act now, regulation could erode the powerful network effects that drive their growth and benefit their users.

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On Oct. 6, 2020, the U.S. House Judiciary Committee’s antitrust subcommittee released a 450-page report following a 16-month inquiry into the digital economy. It recommended fundamental changes to antitrust laws generally and targeted the Amazon, Apple, Facebook, and Google technology platforms specifically.1 Several weeks later, the U.S. Department of Justice filed suit against Google, accusing it of using “anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising and general search text advertising.”2 Similar regulatory initiatives aimed at platforms are underway around the world, including in the European Union, United Kingdom, Japan, Korea, and India.3

The blizzard of regulatory action swirling around platforms is producing new rules and laws, expanded powers for existing regulatory authorities, and the establishment of new regulatory authorities. These outcomes will not only affect Big Tech but also many other companies, in industries such as construction, health care, finance, energy, and industrial manufacturing, that have adopted or are considering adopting platform business models.

Few platform operators and owners have fully considered how the growing regulatory risk — which includes breakups, line-of-business restrictions, acquisition limits, and interoperability and data portability mandates — could derail their businesses. As a result, they could be caught off guard, just like many companies were caught off guard when the Sarbanes-Oxley Act of 2002 mandated board restructurings and expanded executive financial accountability in the aftermath of accounting scandals.4

The regulatory outcomes being proposed and adopted today could have varying degrees of impact on platform businesses. The most severe proposal in the House Judiciary Committee report would dictate a structural breakup, requiring “divestiture and separate ownership of each business.” This could unravel the network effects that drive platform growth and produce value. U.S. regulators have rarely pursued solutions this extreme, but there are notable exceptions, including the breakups of Standard Oil in 1911 and AT&T in 1984, and the attempted breakup of Microsoft, which settled with the DOJ in 2004. (It’s too early to say whether Google will join this list, but the DOJ complaint leaves open the possibility.)



1. U.S. House Committee on the Judiciary, “Investigation of Competition in Digital Markets” (Washington, D.C.: Government Printing Office, 2020).

2. C. Kang, D. McCabe, and D. Wakabayashi, “U.S. Accuses Google of Illegally Protecting Monopoly,” The New York Times, Oct. 20, 2020,

3. J. Espinoza, “EU Targets Big Tech With ‘Hit List’ Facing Tougher Rules,” Financial Times, Oct. 11, 2020,; and “Andrea Coscelli Calls for New Digital Markets Regulatory Regime,”, Oct. 9, 2020; “Japan to Introduce Bill to Ensure Fair Online Business Competition,” Kyodo News, Nov. 12, 2019,; S. Ji-hye, “Competition Laws Should Be More Flexible in Digital Era,” The Korea Herald, May 23, 2019,; and M. Nandy and G.C. Prasad, “New Regulatory Regime for  E-commerce  Kicks In,” Mint, July 24, 2020,

4. P. Lanois, “The Legacy of the Sarbanes-Oxley Act, 15 Years On,” The CLS Blue Sky Blog, Feb. 9, 2017,

5.The Dark Side of India’s New Ecommerce Rules,”, Jan. 28, 2019,

6. M.W. Van Alstyne and A. Lenart, “Using Data and Respecting Users,” Communications of the ACM 63, no. 11 (October 2020): 28-30.

7.Summary of Commission Decision of 27 June 2017 Relating to a Proceeding Under Article 102 of the Treaty on the Functioning of the European Union and Article 54 of the EEA Agreement,” Official Journal of the European Union, Jan. 12, 2018,

8. M. Iansiti and K.R. Lakhani, “SAP AG: Orchestrating the Ecosystem,” Harvard Business School case no. 609-069 (Boston: Harvard Business School Publishing, 2009).

9. R.S. Kroszner and R.G. Rajan, “Is the Glass-Steagall Act Justified? A Study of the U.S. Experience with Universal Banking Before 1933,” The American Economic Review 84, no. 4 (September 1994): 810-832; and D. Neuhann and F. Saidi, “Do Universal Banks Finance Riskier but More Productive Firms?” Journal of Financial Economics 128, no. 1 (April 2018): 66-85.

10. J. Davies, “The Impact of GDPR, in 5 Charts,” Digiday, Aug. 24, 2018,; and J. Jia, G.Z. Jin, and L. Wagman, “The Short-Run Effects of GDPR on Technology Venture Investment,” SSRN, March 5, 2019,

11. R. Collier, V. Dubal, and C. Carter, “Disrupting Regulation, Regulating Disruption: The Politics of Uber in the United States,” Perspectives on Politics 16, no. 4 (December 2018): 919-937.

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