Digital platforms and, in particular, social media platforms enjoy significant market power, which can be used in both the economic and the political arenas. Without regulatory restrictions, these platforms serve global markets and so issues of market power quickly become geopolitical issues. Thus, it is very difficult to address the issues arising from market power by regulating solely at the national level.
A recent working paper from the Bank for International Settlements (BIS) reviews the unique conditions that make digital platform markets prone to tipping. It postulates ways to restore competitive conditions in these markets and highlights the need for regulation at the international level to address the problems of digital markets.
The problems in digital markets can be solved only by structural interventions such as forcing interoperability and promoting more data-sharing. However, national regulatory bodies often may have neither the ability nor the incentives to carry out these interventions. Only at the international level are there the right incentives to introduce effective regulation. The recent international tensions could create political opportunities to design and implement such regulation.