The Law of the Platform

Posted by Social Science Research Network

The Law of the Platform

Orly Lobel (University of San Diego)

Abstract:      New digital platform companies are turning everything into an available resource: services, products, spaces, connections, and knowledge, all of which would otherwise be collecting dust. Unsurprisingly then, the platform economy defies conventional regulatory theory. Millions of people are becoming part-time entrepreneurs, disrupting established business models and entrenched market interests, challenging regulated industries, and turning ideas about consumption, work, risk, and ownership on their head. Paradoxically, as the digital platform economy becomes more established, we are also at an all-time high in regulatory permitting, licensing, and protection. The battle over law in the platform is therefore both conceptual and highly practical. New business models such as Uber, Airbnb, and Aereo have received massive amounts of support from venture capitalists but have also received immense pushback from incumbent stakeholders, regulators, and courts. This article argues that the platform economy is presenting not only a paradigm shift for business but also for legal theory. The platform economy does not only disrupt regulated industries but also demands that we inquire into the logic of their correlated regulations. It requires that we go back to first principles about public intervention and market innovation. The article thus poses a foundational inquiry: Do the regulations we have carry over to the platform economy? By unpacking the economic and social drives for the rise of the platform economy, the article develops a new framework for asking whether digital disruptions comprise loopholes akin to regulatory arbitrage, most prominently studied in the tax field, circumvention akin to controversial copyright protection reforms, or innovation-ripe negative spaces akin to design-around competition in patent law. Bringing together these different bodies of law, the article offers a contemporary account of the relevance of regulation for new business models. The article concludes that, as a default, legal disruption by the platform economy should be viewed as a feature rather than a bug of regulatory limits.