The question we're interested in is why it is so difficult for smaller businesses to compete, despite new modern technology that should make it much easier for them to be successful.
As it stands, entrepreneurs must navigate a series of expensive and near-invisible competition issues that are imposed by digital gatekeepers. As small businesses increasingly sell online in platform-based marketplaces, they're dealing with de facto private regulators that dictate terms and impose tolls as middlemen.
For example, Etsy sellers recently went on strike and closed their online stores in protest of rising transaction fees. Meta recently announced that it would take a 47.5% cut of all digital assets sold in its metaverse platform. Amazon now makes the largest amount of its revenue from seller fees, which have risen consistently every year. In April of this year, Amazon hit sellers with a 5% fuel and inflation surcharge to make up for their slower growth in Q1.
However, it's not just digital markets. Grocery store suppliers recently raised concerns over increased fines penalizing late deliveries due to supply chain disruptions that were largely outside of their control.
Through the initiative that I co-lead, Access to Markets, I've had countless conversations with entrepreneurs across industries as diverse as music and entertainment, farming and cloud storage. These entrepreneurs cannot access markets on fair and equal terms due to dominant gatekeepers. This means that they cannot compete based on producing better quality goods and services. Many businesses are justifiably afraid of speaking out for fear of retaliation or repercussions for their businesses.
As of now, small and medium-sized businesses must independently navigate these and other anti-competitive tactics. These tactics can extend to coercive, unfair or unclear contract terms, which are often referred to as “contracts of adhesion”. This means that the contract is a take-it-or-leave-it agreement with inherent power imbalances. These contract terms are increasingly used to weaken the bargaining power of smaller suppliers or counterparties, workers and consumers. Things like mandatory arbitration, non-disparagement clauses, perpetual claims on IP and other such terms can silence stakeholders, limit their legal options or rights, impede fair dealings, restrict the freedom to set prices and extract profits or information from independent businesses.
Businesses also may have their product copycatted or their IP stolen. They're finding few avenues for recourse from the platforms because, in fact, platforms may be the perpetrators of the copycatting.