Competition Law and Evolving Theories of Dominance in Ecosystem Markets

1. Introduction

Traditional competition law generally analyses dominance within a defined relevant market. A firm is considered dominant where it possesses substantial market power enabling it to behave to an appreciable extent independently of competitors, customers, or consumers.

The emergence of ecosystem markets has complicated this traditional approach. Digital platforms, operating systems, app stores, payment systems, cloud services, e-commerce marketplaces, digital advertising, social networks, smart devices, and connected products increasingly operate as interconnected ecosystems rather than as isolated markets.

An ecosystem may contain several complementary products or services controlled by the same undertaking. Market power can therefore arise not merely from market share in one product market, but from:

• control over an important platform;
• network effects;
• control over data;
• interoperability advantages;
• switching costs;
• ecosystem-wide defaults;
• vertical integration;
• technical restrictions;
• cross-subsidisation;
• access to complementary markets; and
• the ability to leverage power from one market into another.

The evolving theory of dominance consequently asks a broader question:

How should competition law assess market power when competitive conditions are shaped by an interconnected ecosystem rather than by a single standalone relevant market?

2. Meaning of an Ecosystem Market

An ecosystem market exists where several products, services, technologies, users, suppliers and complementary businesses interact through a common technological or commercial architecture.

Examples include:

Digital ecosystems

• smartphone + operating system + app store + payments;
• search engine + browser + advertising;
• social network + messaging + advertising;
• e-commerce marketplace + logistics + payments;
• cloud infrastructure + software + data services.

Physical-digital ecosystems

• electric vehicles + charging networks + software;
• smart homes + devices + cloud platforms;
• wearable devices + health applications + operating systems;
• connected automobiles + navigation + digital marketplaces.

Financial ecosystems

• digital wallets + payment infrastructure + merchants;
• banking platforms + APIs + financial applications;
• payment networks + card issuing + acquiring services.

The important characteristic is interdependence.

3. Traditional Theory of Dominance

The conventional analysis usually proceeds through:

Step 1 — Define the relevant product market

The authority identifies products or services that are sufficiently substitutable.

Step 2 — Define the geographic market

The geographic area in which competitive conditions are sufficiently homogeneous is identified.

Step 3 — Assess market power

Relevant factors include:

• market share;
• barriers to entry;
• financial resources;
• technological advantages;
• customer dependence;
• network effects;
• countervailing buyer power;
• access to essential inputs.

Step 4 — Determine whether dominance exists

Dominance does not itself constitute an infringement.

Step 5 — Examine abusive conduct

Examples include:

• exclusionary tying;
• refusal to deal;
• discriminatory access;
• predatory pricing;
• self-preferencing;
• exclusivity;
• margin squeeze;
• leveraging;
• unfair trading conditions.

Ecosystem markets require these steps to be adapted because market boundaries and sources of power can be interconnected.

4. Evolution From Market Dominance to Ecosystem Dominance

A. Single-market dominance

The traditional model asks:

Does undertaking A possess substantial power in market X?

For example, a firm may possess a large share of the market for a particular product.

B. Multi-market dominance

The analysis then developed toward situations where power in one market could affect another market.

For example:

Operating system → browser → search → advertising

Dominance in the first layer may provide advantages in subsequent layers.

C. Platform dominance

Digital platforms introduced a further development.

The platform may simultaneously serve:

• consumers;
• sellers;
• advertisers;
• developers;
• content providers.

Consequently, its competitive position cannot always be understood by examining only one side of the platform.

D. Ecosystem dominance

The most recent theoretical development considers the architecture connecting multiple markets.

The question becomes:

Does control over the ecosystem allow an undertaking to influence competitive conditions across several interconnected markets?

This does not necessarily mean that an undertaking must be dominant in every individual market.

5. Sources of Ecosystem Dominance

5.1 Network Effects

Network effects arise when the value of a service increases as more users participate.

For example:

More users → more developers → more applications → greater consumer attraction → more users.

This can create a self-reinforcing competitive advantage.

Network effects can be:

Direct

The value increases because more users use the same service.

Example:

• messaging platforms.

Indirect

More users attract complementary suppliers.

Example:

• operating systems attracting developers.

6. Data as a Source of Ecosystem Power

Data can reinforce dominance through a feedback loop:

More users → more data → better service/targeting → more users → more data.

A dominant ecosystem may therefore possess advantages that are not reflected by conventional market-share analysis.

Relevant questions include:

• Who controls the data?
• Can competitors access it?
• Is data portable?
• Can users switch providers?
• Can competitors reproduce the dataset?
• Does data accumulation reinforce network effects?

7. Switching Costs

Ecosystems frequently make switching costly.

Consumers may accumulate:

• applications;
• subscriptions;
• contacts;
• digital purchases;
• cloud files;
• device integrations;
• loyalty benefits;
• transaction histories.

Consequently:

The absence of monetary switching costs does not necessarily mean that consumers can switch easily.

High switching costs can make an ecosystem more durable and can weaken competitive pressure from potential entrants.

8. Interoperability and Ecosystem Dominance

Interoperability is increasingly important.

A dominant ecosystem can potentially restrict competitors by controlling:

• APIs;
• technical standards;
• operating-system functionality;
• authentication;
• payment interfaces;
• data portability;
• messaging protocols.

A refusal or restriction of interoperability can therefore become an important competition concern.

However, competition law must distinguish between:

• legitimate product design;
• security requirements;
• intellectual-property protection;
• privacy requirements; and
• exclusionary interoperability restrictions.

9. Defaults as a Source of Market Power

Defaults can substantially influence consumer behaviour.

Examples include:

• default search engine;
• default browser;
• default payment system;
• default navigation application;
• default advertising technology;
• default cloud storage.

Even where consumers technically retain the ability to change the default, behavioural economics suggests that many users may not do so.

Therefore:

Formal consumer choice and effective competitive choice may differ.

This has become an important component of modern dominance analysis.

10. Self-Preferencing

Self-preferencing occurs when an ecosystem operator gives preferential treatment to its own downstream product or service.

For example:

Platform → marketplace → own retail service

The platform might allegedly:

• rank its own service more prominently;
• provide competitors with inferior access;
• use platform data to compete against dependent businesses;
• impose different technical conditions;
• favour its own products in recommendations.

Self-preferencing has become one of the most significant modern theories of ecosystem abuse.

11. Tying and Bundling

Ecosystem operators may bundle complementary services.

For example:

Operating system + browser

or

Device + payment service

or

Marketplace + logistics

Bundling can generate legitimate efficiencies but can also create foreclosure risks where a dominant undertaking uses power in one market to strengthen its position in another.

The important questions include:

1. Are the products distinct?
2. Is the undertaking dominant in the tying market?
3. Is access to the tied product effectively conditioned?
4. Can competitors realistically compete?
5. Does the arrangement produce foreclosure?
6. Are there objective efficiencies?

12. Leveraging Theory

Ecosystem dominance has revived the classical leveraging theory.

A simplified model is:

Market A dominance → conduct → competitive advantage in Market B → strengthened ecosystem

For example:

Operating-system power → preferential treatment for own application → increased application-market power.

The modern version is broader because the leveraged advantage can spread across several interconnected markets.

13. Ecosystem Lock-In

Lock-in occurs where consumers or businesses become dependent on an ecosystem.

Examples include:

• proprietary data formats;
• incompatible systems;
• accumulated digital purchases;
• loyalty programmes;
• technical integration;
• application dependencies;
• contractual commitments.

Lock-in may generate efficiencies, but excessive lock-in can reduce contestability.

14. Contestability as an Alternative to Market Share

Modern ecosystem analysis increasingly considers contestability.

The question is not merely:

"What is the incumbent's market share?"

but also:

"Can competitors realistically challenge the incumbent?"

Relevant factors include:

• entry barriers;
• access to data;
• interoperability;
• switching costs;
• multi-homing;
• access to users;
• control over distribution;
• developer dependence.

Thus, a market with relatively stable market shares may nevertheless be highly or weakly contestable depending on ecosystem architecture.

15. Multi-Homing

Multi-homing occurs when consumers or businesses use several competing platforms simultaneously.

For example, a seller might operate on several marketplaces.

Multi-homing can constrain ecosystem power because users can move between platforms.

Conversely, restrictions preventing or discouraging multi-homing can strengthen dominance.

16. Six Major Case Laws

1. Google Android — European Commission

Google Android (AT.40099) is one of the central modern cases concerning ecosystem dominance.

The European Commission examined Google's conduct concerning the Android operating-system ecosystem, including:

• Google Search;
• Google Play Store;
• Android devices;
• licensing arrangements;
• anti-fragmentation arrangements.

The case demonstrated how dominance can operate through an interconnected technological ecosystem.

Competition-law significance

The case illustrates:

• leveraging;
• tying;
• default arrangements;
• network effects;
• ecosystem reinforcement;
• distribution advantages.

The important theoretical lesson is that control over a foundational technological layer can affect competitive conditions in complementary markets.

2. Google Shopping — European Commission

Google Search (Shopping)

The European Commission found Google had abused its dominant position in general search by favouring its own comparison-shopping service in search results.

Ecosystem significance

Search is not merely an isolated service.

It can operate as a gateway to:

• shopping;
• advertising;
• information;
• specialised search services.

The case therefore illustrates how control over a critical gateway can affect downstream competitive opportunities.

Principle

A dominant gateway may possess significant competitive significance because competitors depend upon access to that gateway to reach consumers.

3. Microsoft — European Commission

Microsoft (COMP/C-3/37.792)

The Microsoft proceedings are foundational to modern ecosystem theory.

The European Commission examined Microsoft's conduct involving:

• Windows;
• work-group server operating systems;
• interoperability information;
• Windows Media Player.

Significance

Microsoft demonstrated that dominance in an operating-system layer can have consequences for complementary technological markets.

It helped develop competition-law thinking concerning:

• interoperability;
• technological tying;
• network effects;
• leveraging;
• exclusion of complementary technologies.

The case remains important when analysing modern platform ecosystems.

17. Qualcomm — European Commission

Qualcomm (Predation)

The European Commission's Qualcomm proceedings demonstrate the importance of examining market power in technology-intensive markets where scale, innovation and ecosystem relationships interact.

Qualcomm's position in baseband chipsets was examined in the context of alleged exclusionary conduct.

Ecosystem relevance

Semiconductor markets can form foundational layers for broader ecosystems:

Chipset → device → operating system → applications → services

The case therefore illustrates why dominance analysis increasingly considers the position of an undertaking within a technological value chain.

18. Apple — App Store / Digital Ecosystem Cases

Competition authorities in several jurisdictions have examined Apple's App Store arrangements.

Issues have included:

• commission structures;
• payment restrictions;
• anti-steering provisions;
• access conditions;
• app distribution;
• restrictions on alternative payment systems.

Ecosystem significance

Apple's ecosystem demonstrates the distinction between:

device market power

and

ecosystem gateway power.

The device provides access to the operating system, while the operating system controls access to applications and services.

This creates a potentially important chain:

Device → OS → App Store → payment → developer → consumer

The competition issue is therefore not confined to the sale of the physical device.

19. American Express v. Ohio — U.S. Supreme Court

Ohio v. American Express Co., 585 U.S. ___ (2018)

The Supreme Court examined the two-sided nature of the credit-card platform.

American Express simultaneously connects:

• cardholders; and
• merchants.

The Court treated the two sides as part of a single relevant market for purposes of the rule-of-reason analysis.

Ecosystem significance

The case demonstrates that conventional one-sided market analysis may be inadequate for platforms.

The competitive effects on one side may be connected to conditions on another.

This is particularly important for:

• payment platforms;
• advertising platforms;
• marketplaces;
• app stores;
• social networks.

20. Intel — European Commission

Intel (T-286/09)

The Intel litigation concerned conditional rebates and the assessment of exclusionary conduct by a dominant undertaking.

The subsequent EU judicial treatment emphasised the importance of assessing whether rebates are capable of producing exclusionary effects.

Ecosystem significance

The case is relevant to ecosystem analysis because dominant firms may use commercial arrangements with customers or distributors to protect their position across interconnected markets.

The broader lesson is that the legal assessment of dominance cannot necessarily stop at the existence of a contractual discount; its actual or potential exclusionary effects must be considered under the applicable legal framework.

21. Bronner — European Court of Justice

Oscar Bronner GmbH v Mediaprint

The Court considered when refusal of access to infrastructure could constitute an abuse of dominance.

The case established demanding conditions associated with compulsory access under the essential-facilities framework.

Ecosystem significance

The reasoning remains relevant to modern digital ecosystems because platforms increasingly control infrastructures that competitors may need to reach consumers.

Examples include:

• app distribution;
• interoperability;
• technical interfaces;
• payment infrastructure;
• cloud infrastructure.

However, ecosystem importance alone does not automatically establish a legal duty to provide access.

22. United Brands — European Court of Justice

United Brands v Commission

United Brands is a classic authority on dominance.

The Court considered factors including:

• market position;
• economic strength;
• barriers to entry;
• commercial advantages.

Ecosystem significance

Although the case predates digital platforms, its conceptual importance remains considerable.

It demonstrates that dominance is not determined exclusively by market share. The broader economic position of an undertaking matters.

This principle has become increasingly significant in ecosystem markets.

23. How the Theory of Dominance Is Evolving

The evolution can be represented as follows:

Traditional Competition Law

↓

Market Share

↓

Market Power

↓

Barriers to Entry

↓

Network Effects

↓

Platform Power

↓

Data Advantages

↓

Interoperability

↓

Switching Costs

↓

Multi-Homing

↓

Gateway Control

↓

Ecosystem Power

↓

Contestability of the Entire Ecosystem

This represents a movement from a static market structure analysis toward a more dynamic analysis of competitive ecosystems.

24. Ecosystem Dominance Versus Conventional Dominance

25. New Theories of Ecosystem Dominance

A. Gateway Theory

A firm may possess substantial competitive power because it controls access to consumers.

Examples:

• app stores;
• search engines;
• operating systems;
• payment systems.

B. Bottleneck Theory

An ecosystem may contain a critical bottleneck through which competitors must pass.

The bottleneck can create bargaining power over:

• developers;
• suppliers;
• merchants;
• advertisers;
• consumers.

C. Envelopment Theory

A platform can enter an adjacent market by using assets accumulated in its original ecosystem.

For example:

Existing user base + data + infrastructure → expansion into adjacent service

This can make traditional market boundaries less predictive of future competitive conditions.

D. Ecosystem Expansion Theory

Dominance may be strengthened through expansion into complementary markets.

The mechanism can be:

Core product → complementary service → data accumulation → increased ecosystem value → stronger core position.

E. Data Feedback Theory

Data can create a feedback loop:

Users → data → improved service → more users → more data.

This may create barriers that conventional market-share analysis cannot fully capture.

F. Switching-Cost Theory

Dominance can persist because consumers and business users face substantial costs in leaving the ecosystem.

G. Interoperability Theory

Control over technical interfaces can determine whether competitors can effectively enter or remain in the market.

26. Ecosystem Dominance and Consumer Welfare

Ecosystem integration can produce significant efficiencies.

Possible benefits include:

• better security;
• lower transaction costs;
• improved interoperability;
• integrated user experience;
• innovation;
• reduced prices;
• greater convenience;
• improved quality.

Therefore, competition law should not treat ecosystem integration itself as unlawful.

The central issue is whether conduct protects legitimate ecosystem efficiencies or unlawfully suppresses competitive constraints.

27. Potential Abuses in Ecosystem Markets

A dominant ecosystem may potentially engage in:

1. Self-preferencing

Favouring its own products.

2. Tying

Making access to one service dependent on another.

3. Bundling

Combining complementary services in ways that may foreclose competitors.

4. Exclusivity

Restricting partners from dealing with competing ecosystems.

5. Data leveraging

Using commercially sensitive data obtained from ecosystem participants to compete against them.

6. Interoperability restrictions

Limiting technical compatibility.

7. Discriminatory access

Providing different access conditions to similarly situated competitors.

8. Anti-steering

Preventing businesses from directing consumers toward alternative purchasing channels.

9. Predatory or exclusionary pricing

Using ecosystem resources to exclude competitors.

10. Margin squeeze

Controlling upstream and downstream levels while imposing conditions that make effective downstream competition difficult.

28. The Role of Dynamic Competition

Ecosystem markets are frequently characterised by rapid technological change.

Competition authorities therefore increasingly need to consider:

• innovation;
• future entry;
• technological displacement;
• ecosystem expansion;
• investment incentives;
• interoperability;
• consumer switching;
• multi-homing;
• data accumulation.

A firm with a high market share today may face technological disruption tomorrow.

Conversely, a market that appears competitive today may become highly concentrated because network effects reinforce an incumbent.

29. Ecosystem Dominance and Merger Control

Ecosystem theory also affects merger analysis.

A transaction may raise concerns even where the parties have modest horizontal overlaps if it combines:

• valuable data;
• complementary technologies;
• distribution networks;
• user bases;
• cloud infrastructure;
• operating systems;
• applications.

The relevant concern may be:

Will the merger allow an ecosystem operator to eliminate a future competitive constraint?

This has contributed to greater attention to:

• nascent competition;
• potential competition;
• innovation competition;
• killer-acquisition theories;
• data accumulation;
• interoperability.

30. Indian Competition-Law Perspective

Under the Competition Act, 2002, the concept of dominance is fundamentally linked to the ability of an enterprise to operate independently of competitive forces or affect competitors or consumers in its favour.

Section 19(4) provides several factors relevant to determining dominant position, including:

• market share;
• size and resources;
• importance of competitors;
• economic power;
• vertical integration;
• dependence of consumers;
• entry barriers;
• countervailing buying power;
• market structure and size;
• social obligations and costs;
• relative advantage;
• contribution by dominance to economic development.

These factors are particularly adaptable to ecosystem markets.

For example:

Section 4 may therefore accommodate sophisticated theories of digital and ecosystem dominance without requiring dominance itself to be treated as unlawful.

31. Indian Case-Law Development

Google Android — Competition Commission of India

The CCI's Google Android proceedings are particularly relevant to ecosystem theory.

The case involved relationships among:

• Android;
• Google Search;
• Google Play Store;
• device manufacturers;
• application developers;
• consumers.

The CCI examined practices involving pre-installation, search preferences, licensing arrangements and restrictions affecting the Android ecosystem.

Competition-law significance

The proceedings demonstrate the relevance of:

• platform dominance;
• tying;
• leveraging;
• defaults;
• network effects;
• ecosystem foreclosure.

32. The Essential Analytical Framework

A modern competition authority examining ecosystem dominance can use the following framework:

Stage 1 — Identify the ecosystem

Determine the interconnected products and services.

Stage 2 — Identify the critical layer

Ask which component functions as the gateway or bottleneck.

Stage 3 — Define relevant markets

Do not automatically treat the entire ecosystem as one market.

Stage 4 — Examine market power

Consider:

• market share;
• network effects;
• data;
• switching costs;
• interoperability;
• multi-homing;
• entry barriers.

Stage 5 — Examine ecosystem relationships

Identify:

• vertical integration;
• complementary products;
• platform participants;
• competitors;
• distributors.

Stage 6 — Identify conduct

Consider:

• tying;
• self-preferencing;
• exclusivity;
• discriminatory access;
• interoperability restrictions;
• data exploitation.

Stage 7 — Examine foreclosure

Ask whether rivals can realistically compete.

Stage 8 — Examine efficiencies

Consider:

• security;
• privacy;
• innovation;
• quality;
• integration;
• consumer convenience.

Stage 9 — Assess competitive effects

Examine both:

• short-term effects; and
• long-term effects on innovation and contestability.

33. Major Challenges for Competition Authorities

1. Market-definition problem

Ecosystems do not always correspond neatly to conventional product markets.

2. Dynamic competition

Technological markets can change rapidly.

3. Measuring data power

The economic value of data is difficult to quantify.

4. Network effects

Network effects may simultaneously produce consumer benefits and entry barriers.

5. Innovation versus foreclosure

Conduct that appears exclusionary may sometimes generate genuine innovation.

6. Multi-sided markets

Effects on one group may affect another group.

7. Global ecosystems

Digital ecosystems frequently operate across jurisdictions.

8. Regulatory overlap

Competition authorities increasingly interact with:

• privacy regulators;
• telecommunications regulators;
• consumer-protection authorities;
• financial regulators;
• digital-market regulators.

34. Emerging Theory: Ecosystem as the Unit of Competitive Analysis

The most important conceptual development is that competition may increasingly be understood through ecosystem architecture rather than individual products alone.

However, this does not mean that competition law should automatically declare an ecosystem itself to be the relevant market.

A more accurate approach is:

Define the legally relevant markets while analysing the ecosystem relationships that create, reinforce, or constrain market power.

This preserves the discipline of market definition while recognising the realities of modern technology.

35. Key Case-Law Principles

36. Conclusion

The theory of dominance is evolving from a relatively static conception of market share and independence toward a more dynamic understanding of ecosystem power, gateway control, network effects, data, interoperability, switching costs and contestability.

The central transformation can be expressed as:

Product dominance → platform dominance → multi-market leverage → ecosystem dominance → ecosystem contestability.

Modern competition law therefore has to examine not merely who sells the most, but also:

• who controls access to users;
• who controls critical infrastructure;
• who controls data;
• who determines interoperability;
• who controls defaults;
• who can influence complementary markets;
• whether consumers and businesses can switch;
• whether competitors can realistically enter; and
• whether ecosystem integration creates efficiencies or foreclosure.

The emerging approach does not make ecosystem size or technological integration unlawful by itself. Instead, it seeks to determine whether an undertaking's control over interconnected markets is being used to preserve or extend market power by restricting the competitive process.

Accordingly, the future of dominance analysis is likely to involve a combination of traditional market definition, platform economics, network-effects analysis, data economics, interoperability analysis, behavioural economics and dynamic theories of competition.