Competition Law and Adjacent Market Expansion by Platforms

Competition Law and Adjacent Market Expansion by Platforms

1. Introduction

Digital platforms frequently begin in one core market and later expand into related or adjacent markets. A search engine may enter comparison shopping, an operating-system provider may enter media players or browsers, an online marketplace may sell its own products, or a mobile ecosystem may expand into payments, advertising, cloud services, app distribution, or other complementary services.

Expansion itself is not normally unlawful under competition law. A successful platform is generally free to develop new products, integrate complementary services, and compete in neighbouring markets. Competition concerns arise when a platform possessing substantial market power in its core market uses that position in ways capable of restricting competition in an adjacent market.

This is particularly important for digital platforms because they may control gateways through which businesses reach consumers. Network effects, user data, defaults, interoperability rules, rankings, access conditions, and large installed user bases can make expansion by a powerful platform different from ordinary entry by a new competitor.

Competition authorities therefore examine whether expansion represents legitimate competition on the merits or whether the platform is leveraging market power to foreclose competitors.

2. Meaning of an Adjacent Market

An adjacent market is a separate but commercially or technologically connected market located close to the platform's existing area of activity.

For example:

• general search → comparison-shopping services;
• operating systems → media players;
• mobile operating systems → app distribution;
• marketplaces → private-label retail products;
• social networks → digital advertising;
• app stores → payment services;
• cloud infrastructure → software applications;
• smart-device ecosystems → connected-home services.

The two markets do not have to contain directly substitutable products. What matters is that control over one market can provide an important advantage in entering or influencing another.

3. The Basic Competition-Law Problem

Consider a platform P that dominates Market A and enters neighbouring Market B.

There is ordinarily nothing wrong with P competing aggressively in Market B. However, suppose P controls an important gateway required by competitors operating in Market B.

P might then:

• give its own service preferential placement;
• make competing products harder to discover;
• bundle its adjacent service with the core platform;
• impose restrictive default settings;
• deny or degrade interoperability;
• restrict access to important APIs;
• impose discriminatory contractual conditions;
• require businesses to use another platform service;
• use exclusivity arrangements;
• disadvantage competing applications technically;
• combine data unavailable to competing businesses.

The central question becomes whether the platform is succeeding because its adjacent product is better or because control of the core platform enables it to distort the competitive process.

4. Market Power and Leveraging

One of the principal theories relevant to adjacent-market expansion is leveraging.

Market leveraging occurs where power held in one market is used to obtain or strengthen a position in another market.

Competition law does not automatically prohibit leveraging. A company can legitimately exploit efficiencies arising from its existing business. The legal concern is generally with particular conduct through which dominance is used to restrict competition.

In EU competition law, Article 102 TFEU can apply where a dominant undertaking uses conduct in one market that produces exclusionary consequences in another sufficiently connected market.

The Google Shopping litigation provides an important modern illustration. The Court of Justice's 2024 judgment concerned Google's treatment of its own comparison-shopping service and competing comparison-shopping services on general-search results pages. The Court upheld the finding of abuse and discussed leveraging, competition on the merits, potential exclusionary effects, causation and foreclosure.

5. Self-Preferencing

Self-preferencing occurs when a vertically integrated platform treats its own downstream or adjacent service more favourably than competing services using the platform.

Examples can include:

• preferential ranking;
• more prominent display;
• preferential access to platform functions;
• better technical integration;
• preferential access to data;
• advantageous default settings.

Self-preferencing is not automatically unlawful in every legal system or factual situation.

Authorities normally have to examine the relevant legal test and circumstances, including dominance, the nature of the conduct, its competitive significance and its capability to restrict competition.

Google Shopping

Google LLC and Alphabet Inc. v European Commission, Case C-48/22 P (2024) is particularly significant.

The dispute concerned Google's general-search services and specialised comparison-shopping services. The European Commission had concluded that Google favoured its own comparison-shopping service while treating competing comparison-shopping services differently.

The Court of Justice dismissed Google's appeal in September 2024. It confirmed, in the circumstances of the case, the finding that the conduct departed from competition on the merits and was capable of producing exclusionary effects.

The case demonstrates that control over a powerful gateway cannot necessarily be used to favour an adjacent service without competition-law scrutiny.

6. Tying and Bundling

Adjacent expansion can also occur through tying.

A simplified structure is:

Product A + Product B

where customers seeking A are required, technically or commercially, also to obtain B.

Bundling can sometimes produce genuine benefits:

• lower distribution costs;
• easier installation;
• improved compatibility;
• greater security;
• better user experience.

But where the supplier has substantial power over Product A, tying can potentially reduce the opportunities available to independent suppliers of Product B.

Microsoft

Microsoft Corp. v Commission, Case T-201/04 (2007) is a major example.

The litigation involved Microsoft's position in client PC operating systems and conduct concerning work-group server operating systems and Windows Media Player. The General Court upheld central parts of the Commission's findings concerning Microsoft's refusal to provide interoperability information and the tying of Windows Media Player with Windows.

The case remains important for platform markets because it illustrates how dominance in a technological platform can create competition concerns when used to expand or protect activity in complementary markets.

7. Interoperability Restrictions

Interoperability is especially important in platform ecosystems.

Independent businesses may require technical information or interfaces so that their products can interact effectively with the dominant platform.

A platform expanding into an adjacent market could potentially disadvantage competitors by:

• withholding interoperability information;
• changing interfaces strategically;
• degrading compatibility;
• reserving important functionality for its own products;
• creating unnecessary technical obstacles.

Again, competition law does not normally require every company to share everything it develops.

The legal threshold for intervention can be demanding, particularly where intellectual property, investment incentives and product design are involved.

The Microsoft v Commission litigation is important because the interoperability component concerned Microsoft's refusal to supply and authorise the use of certain interoperability information relating to work-group server operating systems.

8. Defaults and Pre-Installation

Defaults can have substantial competitive significance in digital markets because many consumers do not change preselected settings.

Suppose a platform controls a mobile operating system and expands into browsers.

It could potentially:

• pre-install its browser;
• make it the default;
• give it deeper technical integration;
• impose contractual conditions affecting alternative browsers.

The competition question is not simply whether a default exists. Authorities may investigate whether the combination of market power and contractual or technical restrictions materially reduces opportunities for competing providers.

This issue becomes particularly significant when the platform controls distribution to a very large installed base.

9. Data Advantages

Platforms frequently accumulate large quantities of commercially valuable data.

Expansion into neighbouring markets may allow a platform to combine:

Data + Distribution + Infrastructure + Existing Users

This can provide major efficiencies.

For example, data can improve:

• recommendations;
• fraud detection;
• search quality;
• advertising;
• product development;
• personalization.

But competition concerns can arise where the platform has access to commercially sensitive information generated by businesses that simultaneously compete against the platform's own adjacent services.

Authorities may therefore examine whether data access creates an exclusionary advantage and whether the conduct falls within applicable abuse-of-dominance or platform-regulation rules.

10. Network Effects and Ecosystem Expansion

Digital platforms frequently exhibit network effects.

A simple representation is:

More users → more developers/businesses → better ecosystem → more users

Expansion into an adjacent market can strengthen this cycle.

Suppose Platform A has millions of users. It introduces Service B and immediately distributes it throughout the existing ecosystem.

Service B may therefore obtain:

• instant distribution;
• a large customer base;
• user data;
• established identity systems;
• payment infrastructure;
• advertising infrastructure;
• technical integration.

None of those advantages is automatically anticompetitive.

Competition law becomes concerned where additional exclusionary practices make it unnecessarily difficult for rival services to compete.

11. Foreclosure

Foreclosure is central to the competition analysis.

Foreclosure does not necessarily mean every competitor must disappear.

The question can instead concern whether conduct is capable of making effective competition materially more difficult.

Potential indicators include:

• declining access to customers;
• increased rival distribution costs;
• loss of visibility;
• inability to achieve efficient scale;
• restricted interoperability;
• weakened entry incentives;
• increased switching costs.

The Google Shopping judgment specifically addressed the capability of conduct to produce foreclosure and potential anticompetitive effects.

12. Six Important Case Laws

Case 1: Google LLC and Alphabet Inc. v European Commission — Google Shopping

Case C-48/22 P, Court of Justice, 2024

Google operated a powerful general-search service while also offering comparison-shopping services.

The Commission found that Google gave more favourable treatment to its own comparison-shopping results than competing comparison-shopping services. The General Court substantially upheld the Commission's decision, and the Court of Justice dismissed Google's appeal in 2024.

Principle

A dominant platform's expansion into an adjacent market can attract Article 102 scrutiny where the platform uses its position in the core market to favour its adjacent activity through conduct departing from competition on the merits and capable of restricting competition.

This is one of the clearest contemporary cases concerning platform leveraging.

Case 2: Microsoft Corp. v Commission

Case T-201/04, General Court, 2007

Microsoft held a dominant position in client PC operating systems.

The Commission's case involved two particularly important practices:

1. refusal to provide certain interoperability information concerning work-group server operating systems; and
2. tying Windows Media Player to Windows.

The General Court largely upheld the Commission's decision.

Principle

A dominant technology platform can face competition-law liability when it uses control over its core ecosystem in ways that unlawfully restrict competition in complementary markets.

The case is particularly important for modern disputes concerning APIs, interoperability, bundling and ecosystem integration.

Case 3: Commercial Solvents v Commission

Joined Cases 6/73 and 7/73, Court of Justice, 1974

Commercial Solvents controlled an important input used in producing an anti-tuberculosis medicine.

After deciding to enter downstream production itself, it stopped supplying an existing downstream customer.

The Court accepted that a dominant supplier's conduct could constitute abuse where control over an important upstream input was used to reserve a downstream market for itself.

Principle

A company cannot necessarily exploit dominance in an upstream or gateway market to eliminate competition in a neighbouring downstream market.

The principle has continuing relevance to platforms controlling inputs, infrastructure or access mechanisms required by downstream businesses.

Case 4: Tetra Pak International SA v Commission — Tetra Pak II

Case C-333/94 P, Court of Justice, 1996

Tetra Pak operated across markets relating to packaging machinery and cartons.

The litigation was significant because conduct involving closely connected markets was examined even though dominance was not necessarily identical across every relevant market.

Principle

Article 102 analysis can extend beyond the precise market in which dominance exists where markets are sufficiently connected and the dominant position gives the undertaking special competitive leverage.

This principle is particularly useful for analysing digital ecosystems consisting of multiple interconnected services.

Case 5: Hilti AG v Commission

Case T-30/89, Court of First Instance, 1991

Hilti held a powerful position concerning nail guns and attempted to influence the use of nails and related consumables.

The dispute concerned practices linking a dominant product with complementary products.

Principle

Dominance over a primary product cannot automatically justify restrictions designed to reserve markets for complementary products.

The reasoning is relevant to digital platforms where control over a core device, operating system or infrastructure can potentially be used to influence complementary markets.

Case 6: IMS Health GmbH & Co. OHG v NDC Health GmbH & Co. KG

Case C-418/01, Court of Justice, 2004

IMS Health concerned access to a copyrighted structure used in providing pharmaceutical sales-data services.

The case developed the demanding circumstances in which refusal to license intellectual property by a dominant undertaking can amount to abuse.

Principle

Competition law can exceptionally require access to an indispensable input, but intervention is subject to strict conditions.

For platforms, this principle can become relevant to proprietary standards, interfaces, databases or other inputs required for competition in related markets.

13. Additional Important Case: Bronner

Oscar Bronner GmbH & Co. KG v Mediaprint, Case C-7/97 (1998) is also important.

A newspaper publisher sought access to a competitor's nationwide home-delivery system.

The Court imposed a demanding standard for compulsory access.

The case is significant because competition law does not generally mean that successful platforms must provide competitors with unrestricted access to everything they have built.

The indispensability requirement helps distinguish genuine exclusionary control over essential infrastructure from ordinary competitive advantages resulting from investment.

14. Additional Important Case: Google Android

The European Commission's Google Android proceedings also illustrate the broader adjacent-market issue.

The case concerned Google's Android-related contractual arrangements and restrictions involving Android mobile devices, Google Search and Chrome.

It illustrates how competition authorities may examine combinations of:

• operating systems;
• application distribution;
• search;
• browsers;
• pre-installation;
• defaults;
• contractual restrictions.

The broader lesson is that competition analysis increasingly examines the ecosystem as a whole, rather than treating each digital product as commercially isolated.

15. Main Legal Tests

When examining adjacent-market expansion, authorities generally investigate several connected questions.

A. Is the company dominant?

High market share alone may not settle the question.

Relevant considerations can include:

• market shares;
• network effects;
• switching costs;
• economies of scale;
• data advantages;
• barriers to entry;
• ecosystem dependence;
• customer lock-in.

B. Are there separate relevant markets?

Authorities must determine whether the core product and adjacent product constitute separate relevant markets.

This becomes especially difficult where services are supplied together or at zero monetary price.

C. Is the conduct competition on the merits?

The distinction between legitimate integration and exclusionary conduct is fundamental.

Improving a product, developing complementary functionality and reducing prices are ordinarily legitimate competitive activities.

Competition concerns become stronger where the mechanism of expansion involves discriminatory or exclusionary practices rather than superior performance.

D. Can the conduct restrict competition?

Authorities can investigate whether the practice is capable of:

• excluding rivals;
• raising rivals' costs;
• restricting entry;
• reducing consumer choice;
• weakening innovation;
• strengthening barriers to entry.

E. Is there an objective justification?

A dominant platform may argue that its conduct is objectively justified or generates efficiencies.

Possible explanations can include:

• cybersecurity;
• privacy;
• fraud prevention;
• technical stability;
• quality control;
• system integrity;
• improved functionality.

Authorities must distinguish genuine justifications from restrictions that are unnecessary or disproportionate to those objectives.

16. Innovation Versus Foreclosure

This area presents a difficult competition-policy balance.

Platform integration can produce substantial efficiencies.

For example:

One integrated ecosystem

can provide consumers with:

• simpler installation;
• better compatibility;
• reduced transaction costs;
• improved security;
• faster services.

Excessively aggressive intervention could therefore discourage product development.

But insufficient intervention can allow a dominant platform to transform temporary market leadership into durable ecosystem control.

Competition law consequently attempts to distinguish:

Expansion through innovation

from

Expansion through exclusion.

17. Adjacent Expansion Through Acquisition

Platforms can also enter adjacent markets by acquiring businesses rather than developing competing services internally.

For example:

Core Platform → Acquisition → Adjacent Service

Merger control may examine whether an acquisition:

• removes an emerging competitor;
• strengthens ecosystem barriers;
• combines complementary datasets;
• increases foreclosure ability;
• eliminates potential competition;
• strengthens network effects.

This is different from traditional abuse-of-dominance analysis because merger control usually examines the expected competitive effects of the transaction before or around completion, depending on the jurisdiction.

18. Multi-Market Ecosystems

Modern platforms increasingly operate ecosystems rather than individual products.

A simplified ecosystem could contain:

Operating System
↓
App Store
↓
Payments
↓
Advertising
↓
Cloud Services
↓
AI Services

Control over several complementary layers may reinforce the platform's position.

Competition authorities therefore increasingly need to understand relationships between markets rather than considering each service completely independently.

The central issue remains whether expansion results from better products and legitimate integration or from restrictions capable of preventing rivals from competing effectively.

19. Remedies

Where competition authorities establish unlawful conduct, possible remedies can include:

Behavioural remedies

• ending discriminatory treatment;
• modifying tying arrangements;
• providing interoperability information;
• removing restrictive contractual terms;
• permitting greater customer choice;
• applying transparent access conditions.

Financial penalties

Competition authorities may impose significant fines where legislation permits them.

For example, the Google Shopping litigation concerned the Commission's approximately €2.4 billion fine, which ultimately remained in place after Google's appeal was dismissed.

Structural remedies

In exceptional circumstances, competition regimes may permit stronger structural measures where behavioural remedies would be inadequate, although the legal requirements depend heavily on the jurisdiction and applicable statute.

20. Case-Law Summary

21. Conclusion

Adjacent market expansion by platforms is not inherently anticompetitive. Competition law generally permits even dominant firms to innovate, enter neighbouring markets, integrate products and compete aggressively.

The legal concern arises when a platform combines its core market power with practices capable of preventing competition in the neighbouring market.

The main theories include:

market leveraging → self-preferencing → tying/bundling → discriminatory access → interoperability restrictions → refusal to supply → defaults/pre-installation → ecosystem foreclosure.

The case law demonstrates the development of this principle over several decades. Commercial Solvents, Hilti, Tetra Pak, Bronner and IMS Health established important principles concerning leveraging, complementary markets and access to inputs. Microsoft translated many of those concepts into technology ecosystems, while Google Shopping provides a particularly important modern application to digital platforms and self-preferencing.

The practical competition-law question is therefore not simply whether a platform has entered another market. It is how it entered and competed there. Expansion based on innovation, efficiency and superior products is ordinarily part of normal competition; expansion achieved through exclusionary use of a dominant gateway can trigger competition-law intervention.