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The digital markets phenomenon: Is it impossible to regulate?

The concentration of digital markets gives these companies immeasurable power, due to phenomena such as externality and economies of scale: they are too large and they are increasingly adding more users, thanks to the apparent gratuity of many of their services.

In recent days this newspaper published an interesting article by Jean Tirole, Nobel Prize in Economics 2014, on the future of the regulation of digital markets. The technology companies Facebook, Apple, Google, Amazon and Microsoft, the most successful in the history of the economy in terms of income and global reach, exert a power whose effects are barely being understood and against which the regulation is erratic and incipient.

The inmeasurable power

The concentration of digital markets gives these companies immeasurable power, due to phenomena such as externality and economies of scale: they are too large and they are increasingly adding more users, thanks to the apparent gratuity of many of their services.

Google began as a search engine and Amazon, a book seller, from which they acquired a dominant power whose scope is impossible to foresee.

In the digital world, many businesses are born every day that are destined to be sold to the giants, which, apart from reducing competition, creates market phenomena of unpredictable consequences. Cases such as Facebook acquiring WhatsApp and Instagram and Google, Waze, show that, despite technological innovation, there are very few possibilities that in the short term new companies may emerge that can compete in the digital world.

A huge challenge for regulators

The regulators had never had a challenge of these dimensions. In a world of global companies without a regulatory authority, issues such as self-employment, privacy, the right to forget and many others will have to be resolved with a supranational scope. It is not simply an economic issue, it is a matter of global supremacy.

The defense of competition, the protection of workers’ rights, privacy and taxation require creating a new dimension of regulation with supranational scope. Unfortunately, the commercial war and ideological differences will prevent a normative framework that adapts to the new realities in the short term.

Published inStartups

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