In a significant move this month, European Union ministers ratified rules that grant essential labor rights to some 28 million “gig economy” workers on platforms like Uber and Deliveroo. These regulations are poised to classify gig workers as employees, ensuring they can access benefits such as paternity leave and holiday pay.

This development underscores the ongoing efforts within the EU and globally to regulate digital platform companies and gig work. These platforms wield immense influence, reshaping how individuals work, innovate, and seek employment. Facilitating connections between various stakeholders, from buyers and sellers on e-commerce giants like eBay and Amazon to linking passengers and drivers using ride-hailing services such as Lyft and DiDi, platform companies generate staggering revenues, surpassing $7 trillion annually, solidifying their status as some of the world’s most valuable companies.

However, concerns are mounting regarding the unchecked power amassed by platform companies, leading to precarious situations for gig workers, app developers, and other stakeholders dependent on the platforms. Consequently, calls for accountability measures to hold these platforms responsible for their actions are intensifying.

“There is a worldwide call to action. The platforms are here, they are restructuring society, but we cannot just let them disregard those who depend on them,” said Lindsey Cameron, a Wharton management professor. In response to this call, she collaborated with two other researchers — Hatim Rahman from Northwestern University and Arvind Karunakaran from Stanford University — to review the existing literature about how to hold platform companies accountable, and propose a framework for action. Their paper, recently published in the journal Academy of Management Annals, proposes a novel approach to foster fairness on platforms.

Platform Company Accountability

In recent years, a chorus of concern has emerged surrounding the accountability of platform companies, spurred by high-profile controversies at organizations like Uber, which faced a significant legal defeat at the U.K.’s highest court in 2021, which determined that its drivers are considered workers and are entitled to labor rights, such as receiving the minimum wage. As the scrutiny intensifies worldwide, regulators and other stakeholders are exploring avenues to ensure platforms play fair. There are two primary approaches: bottom-up (led by workers) and top-down (led by regulators), both identified in the review by Cameron and her co-authors.

“Looking at it only from a top-down perspective doesn’t work, as the platforms play a cat-and-mouse game with regulators.”— Lindsey Cameron

The bottom-up approach centers on how ordinary platform users, such as delivery drivers on sites like Instacart, advocate for equitable treatment by challenging platform policies collectively. Through grassroots efforts, these individuals coordinate collective actions via online forums and forge alliances with external entities like unions and nonprofits.

However, grassroots efforts face big challenges like the platforms’ strong network advantages, and problems in keeping everyone working together as algorithms and platform tactics change.

Conversely, the top-down approach focuses on legal, regulatory, and governance changes to ensure fairness and transparency on platforms, encompassing government regulations and internal platform policies. Yet, existing regulations often fall short in addressing platform-specific challenges, prompting experts to advocate for tailored approaches to tackling issues like data privacy and vertical contracting, when one party places trade restrictions on the other.

However, traditional regulatory frameworks face resistance and circumvention from powerful platform companies, raising questions about their efficacy in curbing platform dominance and ensuring accountability. For instance, the platforms have so much power that they can influence or even control local rules in their favor through tactics like lobbying and public relations campaigns.

“Looking at it only from a top-down perspective doesn’t work, as the platforms play a cat-and-mouse game with regulators — whenever there is a new rule, they play to the letter and not the spirit of the law,” said Cameron.

“So often, the finger pointing is at the platforms…. But accountability is multi-sided and there needs to be a more holistic approach.”— Lindsey Cameron

Is there a better way?

Cameron and her co-authors think so. In their review, the academics propose a “multi-sided accountability” framework that integrates both bottom-up and top-down strategies. This means platform owners and users would work together to make sure the rules are clear and consistently applied for everyone involved, ensuring that the outcomes are distributed fairly among all parties.

“So often, the finger-pointing is at the platforms; people argue they need to be more heavily regulated. But accountability is multi-sided and there needs to be a more holistic approach. Each user in this multi-sided network has responsibilities to ensure there’s a level playing field,” Cameron said.

The paper’s authors suggest several strategies that online platforms can adopt to ensure fairness and trust among users. Firstly, they suggest that platform owners can ensure equal opportunities for success by avoiding favoritism towards their own products and ensuring prompt and fair payment for all participants. Additionally, the researchers advise platforms to establish transparent rules and procedures, allowing users to report any instances of unfair treatment.

Furthermore, they say platform owners should refrain from exploiting their power, such as favoring certain sellers or competing unfairly with their own products.

Beyond this, the authors note that customers also play a pivotal role in maintaining fairness on these platforms by adhering to rules, reporting suspicious behavior, and providing honest feedback. Ultimately, the paper concludes that fairness on platforms hinges on everyone’s commitment to following the rules and looking out for each other. As digital platforms continue to reshape the economic landscape, ensuring accountability is likely to remain a top concern.