9. Power and the Potential for the Abuse of Power in Online Gateway Systems: An Analysis of Google

In Chapter 6, we introduced the pattern associated with platforms and platform envelopment. Chapter 7 introduced two additional patterns, Mandatory Participation Third Party Payer Systems (MP3PPs) and online gateways, and showed how they combined for a unique form of power that was among the most important and most profitable innovations enabled by the Internet. Chapter 8 showed how these three patterns become intertwined online. We argued that the net has not reduced the power of online gateways that function as MP3PPs, but has actually increased their power. In this Chapter, we explore how dominant MP3PPs protect and extend their power, and how they make the transition from value creation to value harvesting. We explore the harm that this causes, and the inability of traditional forms of competition to correct this harm. When competition and the discipline of the market cannot limit abuses, regulation becomes necessary. Regulation of online activities must balance limiting harm from abuse of power against harm from premature or excessive regulation. We explore the conditions under which harm occurs, and under which regulation may be necessary. Historical precedents explain when regulation has been necessary in the past, and offer guidance for the form it should take now.