What is “platform power,” and how does it help us understand the political power of big e-commerce companies such as Uber, Google and Amazon?
Platform power is a distinctive form of power that tech companies have. They can use their ability to harvest and harness immense amounts of data to shape rules over how consumers access goods, services and information. Platform power goes well beyond the influence that companies win through lobbying and campaign contributions. It is anchored in companies’ ability to enlist their users as political allies in their battles with labor and with state regulators.
Because these firms are so big, they are often compared to 19th-century monopolies and oligopolies such as U.S. Steel or Standard Oil. Both 19th-century monopolies and modern tech companies have infrastructural power, because they control critical nodes in the flow of commerce. What’s different is that today’s dominant platform firms also have power because they can mobilize and weaponize a loyal (and sometimes captive) user base for political ends.
Uber pioneered and perfected this strategy. It uses its app to conduct social media campaigns that mobilize consumers against unwelcome regulations. Uber dares elected officials to risk alienating their constituents by interfering with their ability to continue to enjoy the fruits of radical innovation that these firms offer. Dominant platform firms actively cultivate a loyal user base because they understand how consumers can become a formidable source of opposition to regulation that threatens the convenience provided by these platforms.
How is platform power different from the ways in which more traditional businesses can mobilize consumers?
All firms have to attract and hold onto their customers. But the consumer allegiance that platform companies enjoy goes well beyond brand loyalty. Once they have achieved a certain scale, these companies become deeply integrated into the fabric of people’s lives. During the pandemic, giants like Amazon, Google and Facebook have come to play an even more central role in how people shop, pass the time and connect with each other (editorial disclosure: The Washington Post is owned by Jeff Bezos, the founder and CEO of Amazon).
Consumers are often effectively locked in by firms that dominate their markets. But users don’t object to this dominance because they are utterly dependent on these services. Most people can’t imagine (or remember) a world that lacks the palpable conveniences these firms deliver daily. Platform firms can thus enlist their users to defend their business models — including their controversial labor practices — by portraying themselves as promoting consumers’ interest in efficiency, innovation and choice.
How have legal and political institutions in the United States contributed to the power of platform companies?
Three features of the American political economy make it especially easy for these companies to grow and thrive. First, the American regulatory system is fragmented: There are many jurisdictions, and regulators often have crosscutting responsibilities, allowing companies to play the system. Furthermore, there are few social actors who have what J.K. Galbraith called “countervailing power” to push against these companies. American unions are weak. These are ideal conditions for the aggressive strategies through which these companies grew to scale.
Such strategies benefit from a second factor, America’s heavily financialized economy. These companies rely on abundant capital not just to absorb losses year after year as they scale up, but also to bankroll strategies that are often based on moving into legal gray zones and then tying opponents up in protracted legal battles, or as in the case of Proposition 22, bypassing existing laws through direct appeals to the public. Such strategies benefit from a third factor, the strongly pro-consumer bias of the American antitrust regime. The prevailing legal doctrine in the United States celebrates the strategies of dominant companies that deliver low prices at the cost of low labor standards.
How does this power vary across countries?
In other advanced democracies, disruptive market entrants with winner-take-all ambitions have to prevail against opposition from state regulators, from labor unions and even from organized business interests. Unions play an especially important role as countervailing forces. The business strategies of platform firms are often based on labor strategies that combine loose attachment to workers with extreme control over them.
“Loose attachments” are nothing new: Firms have long slashed labor costs through policies like just-in-time scheduling, in which workers are called in, or sent home, on short notice in response to swings in demand. But platform firms such as Uber have been able to take these techniques to a new level, using technology to optimize working times and calibrate remuneration in exquisite detail.
Such strategies flourish in the United States, where unions are weak and labor standards are ineffective. These strategies are much harder to use in other countries where organized labor is able to influence labor standards and where consumers — themselves often union members — are less open to the kind of unquestioning alliance these firms are able to cultivate with American consumers.
In Denmark, for example, unions waged a very successful public relations campaign against Uber. They appealed to the interests of the public, not as consumers, but as taxpayers and citizens who had an interest in maintaining a level competitive playing field in local transportation markets. In contrast, American consumers often simply find themselves sucked into a tacit alliance against labor. When the conveniences that platform firms offer are bundled with the low prices that consumers crave and that the American antitrust regime emphasizes, it is a powerful political force. There are few countervailing forces against it in the United States.