Co-regulating algorithmic disclosure for digital platforms

Abstract

With digital platforms gaining dominant intermediating role and exerting regulatory functions vis-à-vis small and medium-sized enterprises (SMEs) through algorithms, EU institutions have started considering to rely on their analytical capacity to regulate the myriads of market transactions occurring within and through them (so-called platformto-business, or P2B transactions). Most of the time, the EU suggests recurring to light-tough disclosure duties. Hence, the European model falls short in rebalancing information asymmetry and unequal bargaining power plaguing the SMEs. In practice, the EU model consists either in pure delegation of self-regulatory powers (codes of conduct) or nonenforceable co-regulatory schemes (with technical standards established by the platforms themselves). Other models have been suggested that rely on the regulator's access to the platform's data (so called savvy and data-delegated options). These governance models present several limitations, making the platforms' role as regulatory intermediators little credible. In this scenario, the paper purports that a third option should be considered. In particular, to tackle the multifaceted risks associated with algorithmic decisions by digital platforms, while at the same time avoiding stifling innovation, it makes three suggestions: (1) also information disclosures should be done by an algorithm; (2) that is pre-tested in a co-regulatory process, that involves the regulator and stakeholders; and (3) enforced through legal and other empowerment tools, rather than sole fines.

Corporate accountability and big data analytics: is non-financial disclosure a missing link?

“…websites, online reports, blogs and social media platforms) for both reporting and communicating non-financial information to a wide range of stakeholders in a prompt way, reducing information asymmetry (Albarrak et al , 2020). Di Porto and Zuppetta (2021) propose an “algorithmic” form of disclosure which co-developed and pre-tested jointly by regulators, businesses and users but is done by BDA. The authors argue that such algorithmic form of disclosure is more effective, as it allows for immediate implementation of amendments and targeted disclosure towards the interests of specific stakeholder groups.…”

“…Furthermore, NFD can be used as a dialogical tool that informs company stakeholders about sustainability performance and enables them to express their position with regard to which metrics matter and what sustainability issues need to be addressed (Kempeneer, 2021; Di Porto and Zuppetta, 2021). In this case, stakeholder feedback presents the possibility of addressing the long-standing issue of companies “marginalizing what cannot be counted” (Quattrone, 2016, p. 120) and compelling managers to solve meaningful problems for which no data exist.…”

Information Asymmetries in Algorithms at Digital Platforms: Motivations to Participate and Eu Regulatory Approach

“…That has changed in the last few years. The change happened when platforms in many areas grew so big that they became "superdominant" and their behavior against their small-businesses became non-transparent and anticompetitive (Di Porto and Zuppetta, 2020). In recent years it has been acknowledged that the digital platforms require a new approach and as some researchers have put it, the question is not if urgent regulatory reform is necessary, the question is how it should be implemented (Marsden and Podszun, 2020).…”

Identifying the patterns: Towards a systematic approach to digital platform regulation

“…Upon these reflections, extant research derives concrete DPR measures and proposals (Gal and Aviv, 2020; Rösner et al, 2020). Those include rather soft measures like fiscal assessment of platform input factors like data (Ben-Shahar, 2017), labor (Rogers, 2016) or public infrastructures (Rahman, 2018); regulation of algorithms (Di Porto and Zuppetta, 2020) and prices (Loertscher and Marx, 2020); or enforcement of platform interoperability (De Hert et al, 2018) and neutrality (Krämer and Schnurr, 2018). According to Borrás and Edler (2020), the state can approach such novel ecosystems differently (i.e., observing, enabling, gatekeeping, moderating).…”