Concern Over Excessive Regulation of Platform Companies

There has been a continued push to strengthen regulations on platform companies. In particular, some countries, led by the EU (European Union), are seeking to restrict conduct that favors their own products and services.

However, it is necessary to ask whether such regulation truly has a positive effect on consumers and the market. Platform companies have grown through innovation, and using regulation as a tool to check them, as some countries are doing, is an inefficient approach that undermines the autonomy of the market.

In the marketplace, individual transactions should basically remain free within the framework of civil law. Transactions between consumers and businesses should be based on voluntary choice, and this ultimately produces outcomes that benefit everyone.

The countless contracts and transactions made in the market are formed according to the preferences of individual economic actors, and regulating them excessively infringes on individual economic freedom. Therefore, it is important for the state, from a micro-level perspective, to protect individuals’ voluntary choices and contracts.

Regulating platform companies can produce unfavorable outcomes for consumers. For example, banning preferential treatment for a company’s own products may weaken a platform’s incentive to improve the quality of its own services.

It may also eliminate opportunities for consumers to purchase bundled products at discounted prices or reduce the flexibility of services offered by platforms. Therefore, rather than imposing unconditional regulation, a balanced approach that takes consumer benefits and market competition into account is needed.

Competition among firms makes the market more dynamic and offers consumers a wider range of choices. Practices identified as self-preferencing, such as selling private brand products and direct purchasing, are products of competition among businesses.

Through competition, firms develop better products and services, and consumers in turn gain more options. It should be recognized that competition among firms is itself an act that enhances consumer welfare.

When the government suppresses the activities of specific firms or intervenes artificially, it instead weakens market vitality and ultimately leads to an infringement of consumer rights and interests.

A platform company’s dominance in the market is the result of individual choices. Rather than restricting competition among firms, the authorities would be better advised to create a better competitive environment.

To strengthen the long-term competitiveness of platform companies as well, a policy direction that promotes “innovation” and “competition,” rather than “regulation,” is needed. For firms to remain competitive in the global market, continuous technological development and service improvement are essential.

Therefore, above all, a flexible business environment is essential if domestic firms are to survive in the global market. If unnecessary regulation hinders innovation and growth, the damage will inevitably fall on consumers and the market as a whole.

In modern society, the significance of platform companies goes beyond that of a simple business model; they have become part of the social infrastructure. Platforms increase efficiency in various sectors, including e-commerce, finance, logistics, and content industries, and play a role in connecting consumers and producers more closely.

Such platforms must be allowed to continue growing and making innovative contributions to society. Rather than controlling the market through regulation, it is desirable to foster a business-friendly environment that encourages vigorous competition.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 플랫폼 기업에 대한 과도한 규제를 우려한다

Author: Sung-no Choi

Date: 2025-03-10

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=27395