Digital Market Perfection
Rory Van Loo*
Google’s, Apple’s, and other companies’ automated assistants are increasingly serving as personal shoppers. These digital intermediaries will save us time by purchasing grocery items, transferring bank accounts, and subscribing to cable. The literature has only begun to hint at the paradigm shift needed to navigate the legal risks and rewards of this coming era of automated commerce. This Article begins to fill that gap by surveying legal battles related to contract exit, data access, and deception that will determine the extent to which automated assistants are able to help consumers to search and switch, potentially bringing tremendous societal benefits. Whereas observers have largely focused on protecting consumers and sellers from digital intermediaries’ market power, sellers like Amazon, Comcast, and Wells Fargo can also harm consumers by obstructing automated assistants. Advancing consumer welfare in the automated era requires not just consumer protection, but digital intermediary protection.
The Article also shows the unpredictable side of eliminating switching costs. If digital assistants become pervasive, they could gain the ability to rapidly direct millions of consumers to new purchases whenever a lower price or new innovation becomes available. Significantly accelerated consumer switching—what I call hyperswitching—does not inevitably harm society. But in the extreme it could make some large markets more volatile, raising unemployment costs or financial stability concerns as more firms fail. This new kind of disruption could pose challenges for commercial and banking regulators akin to those familiar to securities regulators, who deploy idiosyncratic tools such as a pause button for the stock market. Even if sellers prevent extreme hyperswitching, managers may strategically prepare for hyperswitching with economically costly behavior such as hoarding liquid assets or forming conglomerates to provide insurance against a sudden exodus of customers. The transaction-cost-focused literature has missed macro-level drawbacks.
The regulatory architecture reflects these scholarly gaps. One set of agencies regulates automated assistants for consumer protection and antitrust violations but does not go beyond those microeconomic inquiries. Nor do they prioritize strengthening digital intermediaries. Regulators with more macroeconomic missions lack jurisdiction over automated assistants. The intellectual framework and regulatory architecture should expand to encompass both the upsides and downsides of digital consumer sovereignty.
*Associate Professor of Law, Boston University School of Law; Affiliated Fellow, Yale Law School Information Society Project. For valuable input, I am grateful to Vince Buccola, Daniela Caruso, Stacey Dogan, Megan Ericson, Anne Fleming, Erik Gerding, Ahmed Ghappour, Dick Herring, Keith Hylton, Jeremy Kidd, Daniel Markovits, Steve Marks, Mira Marshall, Troy McKenzie, Mike Meurer, Maureen O’Rourke, Fred Tung, Ashwin Vasan, David Walker, Jay Westbrook, Kathy Zeiler, and participants at the 2017 American Bankruptcy Institute Young Bankruptcy Scholars workshop, as well as conferences hosted by Cornell Tech, Washington & Lee, and the Wharton School of Business. Daniela Abadi, Jacob Axelrod, Phoebe Dantoin, Haley Eagon, Amy Mills, and Omeed Firoozgan provided excellent research assistance, and the Michigan Law Review editors were outstanding.