Competition Law and Cognitive Market Power Theories

1. Introduction

Cognitive market power is an emerging competition-law perspective that examines how a firm can obtain or exercise market power by influencing the way consumers perceive information, make choices, allocate attention, form habits, and respond to defaults or recommendations.

Traditional competition law generally evaluates market power through factors such as:

• market share;
• barriers to entry;
• pricing power;
• control over supply;
• network effects; and
• ability to exclude competitors.

Cognitive-market-power analysis adds another dimension: the ability to shape the decision-making environment itself.

This is particularly important in digital markets, where platforms may control:

1. the information consumers see;
2. the order in which alternatives appear;
3. default settings;
4. recommendation systems;
5. search rankings;
6. interface design;
7. access to consumer data;
8. switching mechanisms;
9. attention and advertising;
10. interoperability between services.

The concept does not necessarily constitute an independent statutory test of dominance. Rather, it can operate as an economic and evidentiary framework for understanding conventional concepts such as dominance, exclusionary conduct, foreclosure, consumer harm, barriers to entry, and competitive effects.

2. Meaning of Cognitive Market Power

Cognitive market power may be defined as:

The ability of an undertaking to materially influence consumers' perceptions, attention, preferences or choices through control over information, defaults, interfaces, algorithms, recommendations, behavioural data or other decision-making environments, thereby weakening competitive constraints.

The essential distinction is:

Traditional market power

The firm controls economic options.

Cognitive market power

The firm may also influence how those options are perceived and selected.

For example, suppose a platform presents five competing services but:

• places its own service first;
• labels competitors less prominently;
• makes the firm's service the default;
• makes changing the default difficult;
• uses personalized recommendations to direct users toward its own product.

The platform may possess significant competitive influence even if consumers technically remain free to choose competitors.

Modern behavioural-economics scholarship specifically identifies choice architecture as increasingly relevant to digital competition law.

3. Major Cognitive Market Power Theories

A. Attention-Power Theory

Attention is a scarce economic resource.

Digital platforms compete not merely for purchases but for:

• screen time;
• clicks;
• searches;
• viewing time;
• engagement;
• user retention.

A platform controlling a large proportion of consumer attention may influence which businesses receive visibility.

Competition concern

A dominant platform could allegedly:

• favour its own products;
• downgrade rivals;
• manipulate rankings;
• alter recommendations;
• increase rivals' customer-acquisition costs.

Thus, control over attention can reinforce conventional market power.

4. Choice-Architecture Theory

Choice architecture concerns the design of the environment in which consumers make decisions.

Examples include:

• defaults;
• pre-selected options;
• ranking;
• colour and prominence;
• pop-up design;
• number of clicks;
• cancellation processes;
• recommended products;
• warning messages.

Competition law becomes concerned when choice architecture is used by a dominant undertaking to foreclose competitors rather than merely improve the user experience.

5. Default-Effect Theory

Consumers frequently continue with the option already selected for them.

Therefore, a default can possess substantial competitive significance.

Examples include:

• default search engine;
• default browser;
• default payment system;
• default app store;
• default cloud provider;
• default advertising technology;
• default digital assistant.

A technically reversible choice may nevertheless produce significant competitive effects if consumers rarely change the default.

6. Cognitive Switching-Cost Theory

Traditional switching costs include:

• monetary costs;
• contractual costs;
• technical costs.

Cognitive switching costs are different.

They arise when consumers must spend:

• time learning another service;
• understanding a new interface;
• rebuilding preferences;
• transferring information;
• changing habits;
• learning new commands;
• reconstructing digital relationships.

Therefore, a platform can make switching difficult without imposing a formal exit fee.

7. Information-Architecture Theory

A digital platform may control the structure through which consumers receive information.

For example, it may determine:

what is displayed → what is ranked → what is recommended → what is clicked → what becomes commercially successful.

This can create a feedback loop.

Visibility → consumer engagement → data → better prediction → greater visibility → stronger market position

The resulting market power may therefore become self-reinforcing.

8. Data-Feedback Theory

Data can generate cognitive market power through a feedback mechanism.

Example

More users
↓
More behavioural data
↓
Better personalization
↓
Better recommendations
↓
Higher engagement
↓
More users
↓
More data

This is sometimes described as a data-network effect or data feedback loop.

The competition concern arises where competitors cannot reproduce the same feedback mechanism because they lack comparable:

• data;
• scale;
• user relationships;
• behavioural information;
• technological infrastructure.

9. Algorithmic Cognitive Power

Algorithms increasingly determine:

• search rankings;
• news feeds;
• product recommendations;
• advertisements;
• prices;
• content visibility;
• app rankings.

An algorithm can therefore act as a competitive gatekeeper.

Competition authorities may ask:

1. Who controls the algorithm?
2. What information does it use?
3. Does it favour affiliated businesses?
4. Are competitors disadvantaged?
5. Can consumers understand or challenge the ranking?
6. Does the algorithm create self-reinforcing network effects?

10. Cognitive Lock-In

Cognitive lock-in occurs when consumers become accustomed to a particular:

• interface;
• ecosystem;
• workflow;
• vocabulary;
• recommendation system;
• digital identity;
• operating system.

Even where competing products are technically available, consumers may remain with the incumbent because changing systems requires substantial cognitive adaptation.

This can become an entry barrier.

11. Six Important Case Laws

1. United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001)

Facts

Microsoft possessed a dominant position in PC operating systems. The case concerned Microsoft's conduct relating to Internet browsers and its efforts to protect Windows from competitive threats.

Relevance to cognitive market power

Microsoft is important because operating-system defaults and integration can influence consumer behaviour.

The competitive significance of Microsoft's conduct extended beyond price. Control over the operating-system environment affected:

• consumer access to browsers;
• developer incentives;
• distribution;
• default choices;
• network effects.

The court examined Microsoft's conduct in light of network effects and barriers protecting its operating-system position.

Principle

A dominant platform can use control over an important technological environment to reinforce its position in an adjacent market.

Cognitive-market-power significance

Microsoft demonstrates an early form of platform-mediated choice architecture: the firm controlling the underlying environment can influence which competing products consumers encounter and adopt.

12. Google Search (Shopping) – European Commission, 2017

Facts

The European Commission found that Google had abused its dominant position in general search by giving preferential treatment to its own comparison-shopping service.

Competition issue

Google's search engine controlled the presentation and ranking of information.

The relevant competitive mechanism therefore involved more than traditional price competition.

Search ranking influenced:

• visibility;
• consumer attention;
• traffic;
• click-through rates;
• commercial opportunities.

Cognitive-market-power relevance

This is a particularly important example of attention and information-architecture power.

The platform effectively determines:

which information consumers see first and which alternatives receive less visibility.

The case therefore illustrates how control over consumer attention can become a source of competitive advantage.

13. Google Android – European Commission, 2018

Facts

The European Commission examined Google's Android ecosystem, including arrangements concerning:

• Google Search;
• Google Chrome;
• Play Store;
• device manufacturers;
• distribution arrangements.

Cognitive significance

Mobile-device defaults are especially powerful because consumers may rarely change them.

The competitive importance of pre-installation and default placement arises from behavioural tendencies such as:

• inertia;
• familiarity;
• convenience;
• limited consumer search;
• switching costs.

Thus, a competitor may technically be available while still being disadvantaged in practice.

Principle

Competition analysis can consider how contractual and technological arrangements reinforce an ecosystem's position.

14. Google Android – Competition Commission of India

The Indian Android case is especially relevant to cognitive market power.

The CCI found Google dominant in relevant Android-related markets and examined arrangements involving mobile-device manufacturers, including restrictions associated with Android forks and bundling.

The CCI's analysis also recognised the significance of network effects and the strong position of Google Play.

Cognitive-market-power relevance

The Android ecosystem demonstrates how:

operating system → app store → applications → user familiarity → developer participation → stronger ecosystem

can create cumulative competitive advantages.

The more consumers become accustomed to one ecosystem, the greater the difficulty for an alternative ecosystem to attract both consumers and developers.

15. FTC v. Facebook/Meta

Facts

The U.S. FTC alleged that Facebook maintained monopoly power in personal social networking through a course of conduct involving, among other things:

• acquisitions of Instagram and WhatsApp;
• restrictions affecting developers;
• API-related practices.

The FTC alleged that these practices reduced competitive threats and protected Facebook's position.

Cognitive-market-power significance

Social-network markets possess unusually strong behavioural and network characteristics.

Users develop:

• social relationships;
• habitual usage;
• identity;
• accumulated content;
• communication networks;
• familiarity with interfaces.

This creates a combination of social switching costs + network effects + behavioural lock-in.

The case therefore provides an important framework for understanding how market power can be strengthened through control over an ecosystem in which users' social connections themselves create switching barriers.

Current procedural position: the litigation has continued beyond the original complaint; the FTC appealed the district court's November 2025 ruling in January 2026.

16. Google Ad Technology – United States

The Google ad-tech litigation provides another important example.

U.S. proceedings concerning Google's advertising technology have focused on Google's position across parts of the digital advertising supply chain and alleged conduct involving its ad server and exchange.

In September 2026, a U.S. federal judge ordered changes concerning Google's ad-tech practices after earlier findings concerning monopoly power in specified ad-tech markets.

Cognitive-market-power relevance

Advertising technology determines what advertisements consumers encounter and how publishers monetize consumer attention.

The chain is:

consumer attention → behavioural information → advertising targeting → advertiser demand → publisher revenue

Control over this chain can influence both consumer exposure and the competitive opportunities of advertising intermediaries.

17. United States v. Google – Search and Distribution

The U.S. Google search litigation is also significant for analysing defaults and distribution.

The central competitive question includes whether contractual arrangements and distribution practices can reinforce a search engine's position by making it the default or highly accessible search option.

Cognitive relevance

The theory is straightforward:

Default → inertia → reduced searching for alternatives → fewer opportunities for rivals → greater scale → stronger data advantages

This illustrates why competition analysis in digital markets may need to distinguish between:

• formal consumer choice; and
• effective consumer choice.

18. Summary of the Six+ Case Laws

19. Cognitive Market Power and Traditional Market Power

The cognitive approach should therefore supplement rather than automatically replace traditional market-power analysis.

20. Cognitive Market Power and Article 102 TFEU

Under Article 102 TFEU, the relevant questions may include whether a dominant undertaking uses its position to:

• foreclose rivals;
• discriminate between services;
• impose unfair conditions;
• engage in tying;
• self-preference;
• manipulate access;
• restrict interoperability.

Cognitive mechanisms can provide evidence concerning the effects of those practices.

For example:

A ranking advantage may matter because consumers disproportionately select highly visible results.

Thus, behavioural evidence can help connect a platform's conduct with competitive effects.

21. Cognitive Market Power and Indian Competition Law

The principal framework is the Competition Act, 2002, particularly:

• Section 4 — abuse of dominant position;
• Section 3 — anti-competitive agreements;
• Section 5 — combinations;
• Section 19 — investigation;
• Section 26 — investigation procedure.

Cognitive market power could become relevant when assessing:

Dominance

Whether a platform possesses substantial and durable market power.

Network effects

Whether increasing users make the platform increasingly difficult to challenge.

Barriers to entry

Whether competitors face behavioural, data, ecosystem or interoperability barriers.

Abuse

Whether a dominant platform uses:

• default settings;
• rankings;
• self-preferencing;
• tying;
• data advantages;
• interoperability restrictions;

to exclude competitors.

The CCI's Android analysis already demonstrates the importance of network effects, ecosystem dependence and barriers to alternative Android forks.

22. Cognitive Market Power and the Digital Markets Act

The EU's Digital Markets Act (DMA) moves beyond traditional ex-post dominance analysis for designated gatekeepers.

Several DMA obligations directly relate to cognitive-market-power mechanisms, including rules concerning:

• self-preferencing;
• interoperability;
• steering;
• choice;
• default settings;
• access to data.

In July 2026, the European Commission fined Google in connection with alleged non-compliance involving self-preferencing in Search and restrictions on steering consumers toward alternative purchase channels on Google Play.

This illustrates the increasing regulatory significance of how digital interfaces structure consumer choice, rather than merely whether consumers theoretically possess alternatives.

23. Theories of Harm

Cognitive market power can support several competition theories of harm.

1. Self-preferencing

A platform places its own products ahead of rivals.

2. Dark-pattern foreclosure

Interface design makes rival choices difficult or unattractive.

3. Default foreclosure

Competitors are disadvantaged because the dominant product is pre-selected.

4. Ranking manipulation

The platform controls visibility and therefore consumer attention.

5. Data foreclosure

Competitors cannot access data necessary to develop comparable products.

6. Ecosystem tying

A dominant service is linked to complementary products.

7. Interoperability foreclosure

Competitors cannot effectively connect with the dominant ecosystem.

8. Behavioural lock-in

Users remain because changing platforms involves significant cognitive and social costs.

24. Evidence Used to Establish Cognitive Market Power

Competition authorities could examine:

Consumer evidence

• click-through rates;
• default retention;
• switching rates;
• consumer surveys;
• A/B testing;
• choice experiments.

Platform evidence

• internal documents;
• algorithmic design;
• ranking criteria;
• interface experiments;
• recommendation systems;
• default-setting strategies.

Economic evidence

• diversion ratios;
• elasticity;
• switching rates;
• retention;
• multi-homing;
• customer-acquisition costs.

Data evidence

• quantity of behavioural data;
• uniqueness of datasets;
• data portability;
• interoperability;
• quality of personalization.

25. Important Limitations

Cognitive-market-power theories should not be applied simply because a platform has a persuasive interface.

Several distinctions are necessary.

First

Influence is not automatically market power.

Every successful business influences consumers to some degree.

Second

Market power is not automatically unlawful.

A firm may become successful because consumers genuinely prefer its product.

Third

Behavioural effects require empirical evidence.

It is insufficient merely to assume that consumers are irrational or passive.

Fourth

Innovation can itself change consumer behaviour.

A superior recommendation engine or simpler interface may represent legitimate competition on the merits.

Fifth

Choice architecture may have pro-competitive effects.

Personalisation can:

• reduce search costs;
• improve discovery;
• increase product matching;
• reduce transaction costs.

Therefore, competition analysis must distinguish legitimate product improvement from exclusionary manipulation.

26. Emerging Legal Test

A useful analytical framework is:

Step 1 — Define the relevant market

↓

Step 2 — Establish conventional market power

Market share + entry barriers + network effects + switching costs

↓

Step 3 — Identify the cognitive mechanism

Default / ranking / recommendation / attention / data / interface

↓

Step 4 — Establish behavioural effect

Inertia / reduced search / reduced switching / increased engagement

↓

Step 5 — Establish competitive effect

Foreclosure / reduced innovation / reduced access / higher rival costs

↓

Step 6 — Examine efficiencies

Better matching / reduced search costs / innovation / improved quality

↓

Step 7 — Determine whether the conduct constitutes an unlawful abuse or exclusionary practice

27. Conclusion

Cognitive market power theory expands competition-law analysis from control over economic resources to control over the environment in which economic decisions are made.

Its central insight is that a digital platform may possess competitive power because it controls not merely what choices are available, but also:

what consumers see, what they notice, what is presented as the default, what is recommended, what is easy to select, and what becomes difficult to abandon.

The most important competition-law implications arise from the interaction between market power, behavioural economics, network effects, data advantages, defaults, attention, algorithms and ecosystem lock-in.

The Microsoft, Google Search, Google Android, CCI Android, Meta/Facebook and Google ad-tech proceedings illustrate different components of this developing framework. The emerging direction of digital competition regulation, including the DMA, increasingly recognises that effective consumer choice can be affected by platform architecture even when formal alternatives remain technically available.