Market experience

Online Platforms in a Lockdown Economy: An Experience from the ASEAN Market

Guiyab —CONTRIBUTED PHOTOS

Perhaps nothing was more emblematic of the sudden onset of COVID-19 than the early days. People crowded into supermarkets, trying to get as many basic necessities as possible. People bought good supplies for a few weeks, perhaps thinking optimistically that the upcoming shutdowns would only last so long.

With the onslaught of the COVID-19 pandemic, the Philippines was forced to impose one of the longest lockdowns in the world. These closures have had crippling effects on trade, leaving the economy and micro, small and medium enterprises (MSMEs) at a loss. The consuming public was hit with a myriad of limitations: only a fixed number could go to stores, supply chains were blocked, and the necessities we had taken for granted suddenly became valuable enough to be traded online in newly formed barter groups.

Given the limit of options, e-commerce has seen a sudden growth during this period, encouraging new opportunities for emerging markets. This was mainly due to the fact that new consumers – those who would never have considered doing electronic transactions before the pandemic – were now exploring the electronic e-commerce space for the very first time. According to data from the E-Conomy SEA report from Google and Temasek, 37% of all consumers of digital services during this period were new customers, with 95% of these new users stating that they intend to continue their behavior after the pandemic.

Many people found themselves at home and with enough free time to pursue new hobbies, which led to the emergence of various home industries such as cooking or home crafts from day to day. the following day. The market, which now regularly adapts to the influx of new participants, has shifted to a market where platforms have become the new market. Digital platforms have served as outlets for new businesses, replacing traditional shopping malls. Digital platforms like Shopee and Lazada are then placed with great market power over traditional MSMEs who, due to the COVID-19 pandemic, have been forced to go digital.

Ultimately, at least in the Philippines, the triad of social media platforms, small package logistics apps (such as Grab or Lalamove) and fintech players became the “gatekeepers” (to borrow a end to the European Union or the proposed EU Digital Markets Act) of this new economy.

However, despite these developments, the informal economy has remained unregulated. The Philippines does not have concrete rules on competition on digital platforms as such.

Regulatory developments

Currently, there are various government agencies that have some form of regulation on certain applicable laws. For example, the Philippine Competition Commission deals with competition matters under the Philippine competition law; and the Department of Commerce and Industry uses the Consumer Law of the Philippines as a guideline to address violations, among others.

Given this, an analysis of the competition laws of more advanced jurisdictions like the EU, UK, Japan and South Korea can reveal certain regulatory trends as guidelines for local competition law. The EU has proposed the Digital Markets Act, which imposes penalties for breaches by large digital platforms, classed as gatekeepers, and the Digital Services Act, which oversees user content online.

Meanwhile, the UK has created a Digital Markets Unit with the power to designate companies as having strategic market status based on an analysis of a company’s market power and ability to cause anticompetitive damages.

Japan, on the other hand, regulates specific digital platforms based on a company’s total domestic sales.

Rapale

Finally, South Korea enacted a first-of-its-kind law prohibiting app store owners from forcing developers to use in-house payment systems.

The potential abuse of competition by these digital platforms is a matter of concern to help promote product innovation and preserve consumer control. We have seen how the market has gradually shifted to these spaces due to both their reach and accessibility. Now the question remains: how are we going to keep these platform spaces accessible to everyone without largely ceding that decision to the big platforms themselves and their allied industries?

Verification of platforms

An examination of the Philippine digital platform would show that it can be categorized into the formal or informal sector. Those in the formal sector are more compliant with regulations as they have to submit permits and resort to the use of invoices. Meanwhile, informal sector entities are not as compliant, capitalizing on the ease of their creation.

Another difference can be seen based on the interaction with the customer. While both sectors maintain store pages, the formal sector uses verification software, account creation, and third-party mechanisms. Websites are operational at all times of the day with little or no personal interaction. This contrasts with the informal sector which relies heavily on trust and requires face-to-face meetings. Moreover, for payment, the formal sector uses electronic and cashless payments while those in the informal sector rely on cash transactions.

To address these issues, the regulation of digital platforms, whether they cover the formal or informal economy, must be holistic. First, the approach should be to avoid targeting specific problem areas without considering the effects on other parts of the platform.

Second, financial inclusion should be addressed by embracing cashless payments and promoting access to credit products to encourage the movement of participants from the informal to the formal sector of the digital platform economy.

Finally, the proprietary interests or goodwill in the virtual domain of those in the informal economy must be protected. There’s no denying that today’s platforms, especially social media platforms, have unbridled discretion to impose their system of approval standards on their community. This ultimately puts them in a dominant position as they have the power to refuse entry to participants based on their own discretion.

Notably, platforms have been known to keep their approved content criteria ambiguous to prevent deliberate evasion and circumvention. However, this can easily be a double-edged sword and these standards need to be regulated to ensure they are applied in a fair and non-discriminatory way. Obviously, much remains to be done, but identifying these key issues will lead to a better competitive environment in the local digital economy to promote product innovation, better choices and options for Filipino consumers. —CONTRIBUTED SURVEY

These are excerpts from the essay of the same title that won the ASEAN Free Trade Area Competition Law Essay Competition in Australia and New Zealand. The winners were announced on December 9 at the Ninth ASEAN Competition Conference. The authors, Guiyab and Rapal, are both young lawyers from the Ateneo de Manila University School of Law, who passed the Philippine bar in 2017 and 2019, respectively.

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