Executive Summary
Digital platforms have become the dominant organisational form of the 21st-century economy. The six largest technology platforms command a combined market capitalisation exceeding $14 trillion — greater than the GDP of every country except the United States and China. These platforms operate as multi-sided markets, connecting billions of users, millions of businesses, and vast ecosystems of developers and advertisers through network effects that create powerful economies of scale and scope.
The economic characteristics of digital platforms — direct and indirect network effects, high fixed costs with near-zero marginal costs, data-driven learning effects, and ecosystem lock-in — produce market dynamics that differ fundamentally from traditional industries. Markets "tip" toward dominant platforms, creating winner-take-most outcomes that traditional antitrust frameworks, designed for industrial-age competition, struggle to address. Simultaneously, the global nature of platform operations collides with the jurisdictional nature of regulatory authority, creating opportunities for regulatory arbitrage that undermine enforcement effectiveness.
This policy brief analyses the emerging global landscape of platform regulation — the EU's Digital Markets Act (DMA), US antitrust enforcement actions, Japan's Transparency and Fairness of Digital Platform (TFDPA) Act, and comparable initiatives in India, South Korea, and Australia — through the lens of two-sided market theory and regulatory competition. We find that uncoordinated regulation risks either under-enforcement (through jurisdictional gaps) or fragmented over-regulation (through inconsistent obligations), and propose coordination mechanisms drawing on institutional economics.
The Economics of Platform Dominance: Why Markets Tip
The theoretical foundations of platform economics, developed by Rochet and Tirole (2003) and Armstrong (2006), explain why digital markets exhibit persistent concentration. A platform is a multi-sided market that creates value by facilitating interactions between two or more distinct user groups. The value to each user group increases with participation on the other side — indirect network effects — and often with participation on the same side — direct network effects.
These network effects create positive feedback loops that drive market tipping. Consider a search engine: more users generate more search data, which improves search quality, which attracts more users. Simultaneously, more users attract more advertisers, which funds further quality improvements. The resulting dynamics exhibit increasing returns to scale: the marginal cost of serving an additional user approaches zero while the marginal value (through improved data) is positive.
Empirically, digital platform concentration is striking. As of 2025, Google commands 91.4% of global search traffic, Meta platforms serve 3.07 billion daily active users, Apple and Google collectively control 99% of mobile operating systems, and Amazon holds approximately 38% of US e-commerce. The OECD Competition Committee's 2025 review of digital market concentration finds that platform market shares in core digital markets have remained stable or increased over the past decade, despite regulatory interventions — suggesting that market tipping, once it occurs, is difficult to reverse through conventional competition policy.
Regulatory Fragmentation: Four Models of Platform Governance
The global regulatory response to platform dominance has produced four distinct models, each reflecting different theoretical assumptions about the nature of digital market competition and the appropriate role of regulatory intervention.
The EU Model: Ex Ante Regulation (DMA). The Digital Markets Act, effective since May 2023 with full compliance required by March 2024, represents the most ambitious ex ante platform regulation globally. The DMA designates "gatekeepers" — platforms meeting quantitative thresholds (€7.5 billion annual turnover or €75 billion market capitalisation, plus 45 million monthly active users in the EU) — and imposes specific behavioural obligations: interoperability requirements, prohibition of self-preferencing, data portability mandates, and restrictions on cross-service data combination. As of late 2025, the European Commission has designated seven gatekeepers across 24 core platform services and initiated non-compliance proceedings against three.
The US Model: Ex Post Enforcement. The United States relies primarily on ex post antitrust enforcement through the Department of Justice (DOJ) and Federal Trade Commission (FTC), supplemented by state-level actions. Major ongoing cases — DOJ v. Google (search distribution, ad tech), FTC v. Meta (social networking acquisitions), and FTC v. Amazon (marketplace self-preferencing) — seek to address platform dominance through traditional monopolisation and unfair methods of competition doctrines. However, the case-by-case approach is slow: the Google search case, filed in 2020, reached initial judgment only in 2024, with remedies still being determined in 2026.
The Japanese Model: Transparency and Co-Regulation (TFDPA). Japan's Transparency and Fairness of Digital Platform Act (2021) takes a lighter-touch approach, requiring designated platforms to disclose terms of service, establish complaint handling procedures, and submit annual transparency reports. The framework relies on co-regulation — industry self-governance within government-established parameters — reflecting a preference for market-oriented solutions. However, the OECD observes that the TFDPA's effectiveness depends on platforms' voluntary compliance and government monitoring capacity, which has been limited.
Emerging Economy Models: India, Brazil, and Beyond. India's proposed Digital Competition Bill (2024) draws on both EU and US approaches, combining ex ante obligations for "Systemically Significant Digital Enterprises" with enhanced merger review for digital acquisitions. Brazil's Digital Markets Bill and South Korea's amendments to the Monopoly Regulation Act similarly blend elements of multiple models. These emerging frameworks reflect the particular concerns of large market jurisdictions with significant digital consumer populations but limited domestic platform competitors.
Regulatory Arbitrage and the Jurisdictional Challenge
The fragmentation of platform regulation across jurisdictions creates opportunities for regulatory arbitrage — the exploitation of differences between regulatory regimes to minimise compliance burdens. Platform companies can structure operations to route data processing, algorithmic decision-making, and corporate functions through jurisdictions with the least restrictive regulatory requirements while serving users globally.
The arbitrage takes several forms. Structural arbitrage: locating data processing and algorithmic development in permissive jurisdictions while serving regulated markets remotely. Definitional arbitrage: structuring operations to fall below regulatory thresholds (e.g., the DMA's gatekeeper criteria) or to qualify for exemptions. Temporal arbitrage: exploiting the gap between regulatory adoption and enforcement — the DMA's implementation timeline of 2023–2024 gave platforms over a year to adjust operations. Compliance arbitrage: offering differentiated service versions across jurisdictions, complying with local requirements while maintaining the full-featured service elsewhere.
The OECD estimates that regulatory arbitrage reduces the effective impact of platform regulation by 30–45% relative to a hypothetical coordinated global framework. This "enforcement discount" undermines the policy objectives of individual jurisdictions and creates uneven competitive conditions for domestic firms that cannot similarly optimise their regulatory exposure.
Two-Sided Market Theory and Regulatory Design
Standard competition policy, designed for single-sided markets, can produce perverse outcomes when applied to platforms. The foundational insight of two-sided market theory is that optimal platform pricing involves subsidising one side of the market (typically end users) while charging the other (typically business users or advertisers). What appears to be predatory pricing or cross-subsidisation in a single-sided market framework may be efficient pricing in a two-sided market.
This creates analytical challenges for regulators. The DMA's prohibition on self-preferencing, for example, may conflict with platforms' role as market-makers who must balance participation incentives across user groups. Requiring interoperability may reduce switching costs but could also reduce investment incentives if platforms cannot capture the full value of their innovations. Mandating data portability addresses lock-in but raises questions about data ownership and privacy when user data includes information about other users' interactions.
The challenge is designing regulation that addresses genuine market failures — exploitative conduct, exclusionary behaviour, and innovation suppression — without inadvertently reducing the consumer surplus that platforms generate through efficient matching and coordination. The World Bank's Digital Development Report (2025) estimates that digital platforms generate $4.2 trillion in annual consumer surplus globally — value that could be reduced by poorly designed regulation.
Toward Coordinated Platform Governance
The analysis points toward three principles for improving the effectiveness of global platform governance:
1. Mutual Recognition of Regulatory Assessments. Just as financial regulators recognise each others' bank supervision through equivalence determinations, platform regulators should establish mutual recognition frameworks for market analyses, gatekeeper designations, and compliance assessments. This would reduce duplicative compliance costs while maintaining regulatory sovereignty.
2. Convergence on Core Principles with Local Flexibility. A multilateral framework establishing core principles — transparency, non-discrimination, interoperability for essential services, and merger review for digital acquisitions — would provide a common baseline while allowing jurisdictions to calibrate specific obligations to local market conditions. The G7's framework on digital competition, initiated in 2024, provides a starting point.
3. International Enforcement Cooperation. Platform regulation's effectiveness depends on enforcement capacity, which varies dramatically across jurisdictions. Establishing formal enforcement cooperation agreements — including joint investigations, evidence sharing, and coordinated remedies — would address the jurisdictional challenge more effectively than parallel unilateral enforcement.
Implications for GDEF's Regulation & Policy Working Group
Digital platform governance represents a defining regulatory challenge of the current era. The tension between platforms' global operations and regulators' jurisdictional authority requires institutional innovation beyond what any single jurisdiction can achieve. GDEF's Regulation & Policy Working Group will develop proposals for a multilateral digital markets governance framework, informed by the theoretical and empirical analysis presented here, for discussion at the 2026 Annual Summit.
References & Sources
- Rochet, J.-C. and Tirole, J. (2003). "Platform Competition in Two-Sided Markets." Journal of the European Economic Association, 1(4), 990–1029. doi.org/10.1162/154247603322493212
- Armstrong, M. (2006). "Competition in Two-Sided Markets." RAND Journal of Economics, 37(3), 668–691. doi.org/10.1111/j.1756-2171.2006.tb00037.x
- European Commission, Digital Markets Act: Gatekeeper Designation Decisions. Directorate-General for Competition, 2023–2025. digital-markets-act.ec.europa.eu
- OECD, Competition in Digital Markets: Summary of Discussions. Competition Committee, 2025. oecd.org/competition
- US Department of Justice, United States v. Google LLC. Case No. 1:20-cv-03010 (D.D.C.). justice.gov/atr
- Japan Fair Trade Commission, Report on the Transparency and Fairness of Digital Platform Act Implementation. 2025. jftc.go.jp
- World Bank, Digital Development Report 2025: Platforms, Markets, and Development. worldbank.org
- Crémer, J., de Montjoye, Y.-A., and Schweitzer, H. (2019). Competition Policy for the Digital Era. European Commission. ec.europa.eu
- Stigler Committee on Digital Platforms, Final Report. Stigler Center for the Study of the Economy and the State, University of Chicago, 2019. chicagobooth.edu