Private benefits and social harm: Why digital platforms need certification

Concerns about the practices and influence of dominant digital platforms have been growing. These platforms are often accused of manipulating user behavior to increase engagement, while polarizing society or causing psychological harm to youngsters. At the same time, users consume digital services they perceive as free, unaware that their personal data is the currency they are paying with.

The effectiveness of regulations is limited by the difficulty of monitoring and enforcing rules. Additionally, platforms can obscure their practices or adopt evasive tactics to avoid restrictions.

In the United States, the staunch defense of free markets risks turning the sector into a game of Monopoly, where a small number of market players expand their size and hegemony. Europe has attempted to regulate platforms with legislation such as the Digital Services Act (DSA) and the Digital Markets Act (DMA), but these measures have shown their limitations. Insufficient enforcement resources, lengthy intervention times and reliance on self-regulation undermine the effectiveness of even the most sophisticated regulations.

The study therefore raises the question of how digital platforms can be incentivized to operate more transparently and responsibly.

The three authors bring together expertise from different fields: a management scholar with a strong interest in the social implications of corporate behavior, a legal expert specializing in digital technology regulation, and an economist with practical experience in antitrust cases. Their multidisciplinary approach leads to a comprehensive analysis and an innovative solution.

The authors propose a voluntary certification system that would establish clear standards for desirable and undesirable business practices and assess them through independent inspections. Certification would go beyond self-reported practices by platforms, extending to their algorithms to ensure greater transparency in the internal functioning of digital platforms.

The researchers draw inspiration from established certification systems such as ISO 9001 and B Corp, adapting their principles to the context of digital platforms. The certification process would include several phases:

• Definition of standards: Identifying desirable and undesirable business practices and creating evaluation metrics.
• Independent inspection: Having a well-reputed third-party organization with expertise in multiple disciplines (computer science, law, business administration) thoroughly examine the platform’s business practices and algorithms.

• Analysis of business practices and algorithms: The inspection would involve reviewing software code, testing in controlled environments, and assessing AI training data to detect biases or harmful practices.

• Evaluation scorecard: Introducing a standardized rating system that enables users to compare platforms along several dimensions and track improvements over time.

Beyond ensuring greater transparency, this approach could reduce the information asymmetry between platforms and their users, fostering greater trust in the digital ecosystem.

The certification of digital platforms could have a significant impact on the market. While dominant platforms may initially resist voluntary certification, emerging platforms could use it to differentiate themselves and gain credibility with users, investors, and regulators. As they increase their market share, this competitive pressure could push dominant platforms to reassess their practices as well.

For policymakers, certification could serve as a complementary tool to regulation, encouraging positive behavior rather than simply penalizing harmful practices. Additionally, public incentives could support certification efforts, such as funding for certified startups that adopt prosocial practices or priority in receiving government contracts for certified platforms.

Another advantage of certification is its flexibility: whereas regulations may take years to develop and implement, certification scorecards can be updated quickly to keep pace with market evolution and new practices.

Dovev Lavie, Oreste Pollicino, Tommaso Valletti. “Certification of business practices and algorithms as a complementary approach to platform regulation.” Academy of Management Perspectives Special Issue on Platform Regulation. DOI: https://journals.aom.org/doi/abs/10.5465/amp.2023.0421.

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