What's the business model of P2B platforms such as Amazon, Ebay or Google?
How important are online platforms for SMEs based economies?
What are, in your opinion, the main ethical problems of P2B platforms?
Is online antitrust regulation necessary?
How big is the impact of platforms on consumers behavior worldwide?
So, is it necessary to regulate platforms which have grown disproportionately?
For over thirty years, Jose Luis Fernandez has taught and researched about the ethics of business and management. With the arrival of the digital age, it was only natural that his approach would drift towards cyber ethics and ethical issues related to Artificial Intelligence and its impact on all areas of social dynamics.
Fernández is a professor at the Faculty of Economics and Business Administration-ICADE of the Universidad Pontificia Comillas de Madrid. He also is also the director of the Iberdrola Chair of Economic and Business Ethics since its foundation in 2003.
What's the business model of P2B (platform-to-business) platforms such as Amazon, Ebay or Google?
At its core, the P2B business model is a sophisticated version of eCommerce – electronic commerce- based on selling a wide range of products through a very big platform. It is a form of intermediary trade through the Internet.
Amazon began selling books without having neither warehouses nor physical bookstores and with no need for them. This saved costs and allowed Amazon to position itself in the market of non best sellers. Selling ‘many little demanded’ books to very specific audiences is viable because, on the planetary scale in which they operate, they represent a larger volume than the ‘the few very demanded’ books sold by the usual stores in a given city, no matter how big.
Opening up to the whole world, overcoming mental restrictions, providing value to customers -both individuals as other companies-, making use of the implicit potential in digitalization, not settling for a segment of people nor for a closed and limited list of products in the portfolio, constantly innovating, identifying new models and disruptive ways of proceeding, combining products and services…
Always seeking to provide the greatest possible value not only legally but also, and above all, ethically. This should continue to be the modus operandi of P2B companies if they truly aspire to preserve their legitimacy in the market.
99.4% of Spain's companies are small and medium-sized. How important are online platforms for this kind of economies?
Digitalization is not only a great opportunity but perhaps the only one that is likely to guarantee success, regardless of the product, service, size and sector of the company.
The digitalization mix will require political decisions as well as material and economic resources, since relevant technologies such as fiber optics, 5G, etc need to be deployed. Administrative obstacles need to be removed as do laws and regulations that are outdated or not pertinent.
And we must steer away froom doomsday narratives and promote optimism instead, both among companies and social agents such as universities, the media, civil society and, above all, public administrations.
On July 12, 2020, the EU Platform to Business (P2B) Regulation to promote fairness and transparency for the business users of online intermediation services platforms came into force. What are, in your opinion, the main ethical problems of these platforms?
Criminal acts and malpractice in this sector can derive from the asymmetries of power and information. Unethical behaviour is, in the medium term, counterproductive even for those carrying it out.
Informed and critical citizens can actually stop those who, under the guise of efficiency, undermine the socioeconomic climate and take undue advantage of the good faith of people.
The latter leads to mistrust and makes it difficult to move forward in the construction of a munificent environment that brings about economic growth; and above all, to the achievement of the social and human progress to which all institutions should contribute.
In the United States, small businesses - bookstores, hardware stores, office supplies providers and grocery stores, among many others - are forming a coalition to pressure the U.S. government to implement stricter online antitrust laws. Is regulation necessary in this regard?
“All the possible market and all the necessary state” is a slogan I use in my classes.
To be efficient from a technical point of view, the economy needs the freedom to innovate and being able to make informed decisions on which risks to take based on expected financial returns.
Without these requirements, little progress can be made in new services that contribute to the improvement of the wellbeing of people and societies.
However, it is another social and economic principle that some economic agents always stand out from the rest and tend to push those less able to meet the expectations and desires of customers and consumers out of the market.
Beforehand regulation has proved not to be a good practice in terms of productivity, since it is too restrictive and thereby hinders creativity and innovation.
But it is also obvious that the economy requires a commitment to values, criteria and principles that point to the economic dimension of human life in society. To human progress for everyone and everywhere.
To this end, of course, we have political institutions, legal mechanisms and moral narratives that must continue to be taken very seriously at every historical moment.
It will therefore be necessary to regulate when appropriate – the market is not omnipotent, nor does the invisible hand get it automatically right.
Freedom of initiative in the market is a prerequisite, a necessary condition for economic success; but it is not a sufficient condition. On the contrary, it needs to be complemented by other instances. Excessive freedom could harm freedom itself, just as unrestricted competition could end up being dangerous.
Moreover, monopolies, in the abstract, are a fact: if they distort economic efficiency and equity, they must be adjusted and, if they are reasonable ‘natural monopolies’, that shouldn’t be necessary.
P2B platforms such as Amazon or Facebook Shops not only serve as intermediaries, but also provide opinions and recommendations. How does this impact consumers behavior worldwide?
It is absolutely normal for a company engaged in P2B intermediation not to be neutral in its recommendations; it is also reasonable to think that all agents operating in the market have their own agendas and interests. Many of them are, of course, naturally legitimate. Others, perhaps not so much.
In the case at hand, the greatest harm would come from an environment -dystopian but not impossible- dominated by those in a position to manipulate the opinion of the end customer in their own favor and, given the case, sometimes even against their own interests.
If this were to become the norm in electoral processes, it would distort democracy.
The antidote is education and the exercise of logical rationality.
As far as the state is concerned, the key will be to put in place mechanisms to prevent such -technically possible- manipulation. Preserving the integrity of markets is a laudable objective, but it is even more so to favor the coexistence of freedom and respect for people’s conscience.
When advertising, the receiver of the message should always be capable of discerning with judgment when deception, fraud, manipulation or fraudulent use of personal data can happen. We must try to respond to this by putting the person at the center of the whole process and not allowing AI to become a pure means at the service of spurious interests.
So, is it necessary to regulate platforms which have grown disproportionately?
The short answer to this question is yes: in this case, regulation is necessary.
On the one hand, it should be regulated in order to preserve the freedom of individuals and personal human growth. On the other hand, to favor the existing dynamics of the regulated organizations, companies and platforms themselves. They are means and not ends. And, consequently, they should always be treated as such.
We find ourselves in a fascinating historical era in which companies are called upon to collaborate with many other bodies to build a more just, egalitarian and humane world. The possibilities that artificial intelligence and digitalization open up for humanity are fabulous and should not be wasted.