Competition Law and Immersive Commerce Platform Dominance

1. Introduction

Immersive commerce refers to commercial activity conducted through highly interactive digital environments such as virtual reality (VR), augmented reality (AR), mixed reality (MR), virtual worlds, spatial computing environments and 3D digital marketplaces.

An immersive commerce platform may combine:

virtual stores;

digital marketplaces;

virtual goods;

digital currencies or payment systems;

advertising;

social interaction;

identity and authentication;

creator marketplaces;

app stores;

hardware;

software;

cloud infrastructure;

augmented-reality interfaces.

This creates a distinctive competition-law problem because a single platform may control several layers of the commercial ecosystem.

For example:

VR/AR device → operating system → app store → immersive marketplace → payment system → advertising → user identity → virtual goods

If one undertaking controls multiple layers, it may possess the ability and incentive to leverage market power from one layer into another.

2. What Is Immersive Commerce?

Immersive commerce goes beyond ordinary e-commerce.

Traditional e-commerce generally involves:

User → Website/App → Product → Payment

Immersive commerce can involve:

User → VR/AR device → Platform → Virtual environment → Avatar → Digital storefront → Product/service → Payment → Social network

Products can include:

physical goods;

NFTs and other digital assets;

virtual clothing;

virtual land;

gaming items;

experiences;

advertising;

subscriptions;

virtual services.

The competition implications therefore extend across several interconnected markets.

3. Why Platform Dominance Matters

An immersive platform may develop substantial market power because of network effects.

More users create:

more creators;

more merchants;

more developers;

more virtual goods;

more advertising;

more social interaction.

That in turn attracts more users.

The cycle becomes:

Users

↓

Creators and developers

↓

More content

↓

More merchants

↓

More commercial opportunities

↓

More users

This can produce significant barriers to entry.

4. Multiple Layers of Market Power

Immersive commerce should not necessarily be treated as one market.

Competition analysis may separately examine:

Layer 1 — Hardware

VR headsets, AR glasses and spatial-computing devices.

Layer 2 — Operating systems

Software controlling immersive devices.

Layer 3 — App distribution

Platforms through which developers distribute immersive applications.

Layer 4 — Virtual marketplaces

Platforms where users buy virtual and physical products.

Layer 5 — Payments

Payment systems and digital wallets.

Layer 6 — Advertising

Immersive advertising and virtual-product promotion.

Layer 7 — Social networks

Communication and community functions.

Layer 8 — Digital identity

Accounts, avatars and authentication.

Dominance at one layer may potentially be leveraged into another.

5. Network Effects

Network effects are particularly powerful in immersive environments.

Suppose Platform A has:

100 million users;

2 million creators;

500,000 merchants;

a large developer ecosystem.

A new entrant with superior technology may still struggle because users may ask:

"Why should I move when all my friends, creators and purchases are already on the incumbent platform?"

This is a classic ecosystem entry barrier.

6. Switching Costs

Immersive platforms can generate unusually high switching costs.

Users may accumulate:

avatars;

virtual clothing;

digital purchases;

social connections;

reputation;

achievements;

virtual property;

creator relationships.

A user may therefore lose significant value by moving to a competing platform.

The problem becomes greater where digital assets are not portable between platforms.

7. Interoperability

Interoperability is one of the central competition issues.

Imagine:

Avatar purchased on Platform A

but

Avatar cannot be used on Platform B.

Similarly:

Virtual clothing purchased in World A

cannot be transferred to World B.

A dominant platform may benefit from keeping users inside its ecosystem.

Potential competition questions include:

Can avatars move between platforms?

Can digital assets be transferred?

Can developers build applications interoperably?

Can payment systems interact?

Can users communicate across platforms?

Can creators export their content?

Lack of interoperability is not automatically anticompetitive, but it can become important when combined with substantial market power and exclusionary conduct.

8. App-Store Power in Immersive Commerce

Many immersive platforms depend upon application stores.

The platform may control:

developer access;

distribution;

commissions;

payment systems;

ranking;

advertising;

technical standards.

This creates familiar competition concerns involving:

excessive commissions;

mandatory payment systems;

self-preferencing;

exclusion of competing payment methods;

tying;

discriminatory access.

These issues closely resemble competition disputes involving conventional mobile app stores.

9. Self-Preferencing

Suppose an immersive platform operates:

the VR operating system;

the app store;

its own virtual shopping service.

It may have the ability to give its own commerce service:

better placement;

preferential search ranking;

exclusive access to features;

lower fees;

privileged data;

better visibility.

This can potentially disadvantage independent merchants.

The central competition question becomes whether the platform is using control over an essential distribution layer to favour its affiliated downstream business.

10. Tying and Bundling

An immersive platform might require merchants to use:

Platform payment service + platform advertising + platform identity system

rather than allowing independent alternatives.

Potential theories include:

tying;

bundling;

foreclosure;

leveraging.

The legal analysis depends on market power, the relationship between the products, competitive effects and possible efficiencies.

11. Exclusive Dealing

An immersive platform could enter agreements requiring:

exclusive distribution;

exclusive advertising;

exclusive virtual goods;

exclusive payment processing;

exclusive access to particular creators.

Exclusive arrangements are not automatically illegal.

But where a dominant platform uses exclusivity to prevent rivals from obtaining sufficient scale, competition authorities may examine whether the agreements substantially foreclose competitors.

12. Data Advantage

Immersive platforms can collect unusually rich information.

For example:

gaze direction;

hand movements;

voice;

physical movements;

purchasing behaviour;

social interactions;

location;

device usage;

avatar preferences.

This data can provide significant competitive advantages.

A dominant immersive-commerce platform could potentially use the data to improve:

advertising;

product recommendation;

pricing;

consumer targeting;

marketplace ranking.

A data advantage becomes an antitrust concern where it contributes materially to market power or is used to exclude competitors.

13. Six Important Case Laws

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

This is one of the most important cases for analysing platform dominance.

Microsoft possessed substantial power in the PC operating-system market and was found to have engaged in exclusionary conduct involving its browser and relationships with other market participants.

Relevance to immersive commerce

The case demonstrates how a dominant platform can attempt to protect its position by controlling an important technological layer.

The same analytical structure can arise in immersive commerce:

Immersive operating system → distribution → applications → downstream commerce.

If a dominant immersive operating system uses its control to exclude competing applications or technologies, Microsoft provides an important conceptual precedent.

14. United States v. Google LLC — Search and Digital Advertising Litigation

The U.S. government's cases against Google concern alleged exclusionary practices in digital markets.

Although the factual markets are different from immersive commerce, the litigation is relevant because it demonstrates the competition concerns arising when a technology company controls important digital infrastructure and related commercial services.

Relevance

An immersive platform could similarly occupy several positions:

infrastructure;

marketplace;

advertising;

data;

distribution.

The competition issue is whether control at one level is used to disadvantage competitors at another.

15. Google Android, Commission Decision AT.40099

The European Commission found that Google imposed contractual restrictions relating to Android devices, search and application distribution.

The case involved:

app distribution;

Google Search;

Chrome;

Android;

licensing arrangements.

Immersive-commerce relevance

The structural similarities are important.

An immersive platform may control:

headset → operating system → app store → payment → commerce.

Restrictions at the operating-system or distribution level can therefore potentially affect downstream competition.

16. Google Shopping, Commission Decision AT.39740

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

Relevance to immersive commerce

The case is particularly relevant to self-preferencing.

Imagine an immersive marketplace displaying products through virtual storefronts.

If the platform:

owns competing stores;

controls marketplace rankings; and

systematically gives its own stores better visibility,

the logic of self-preferencing becomes relevant.

The precise legal analysis would depend upon the characteristics of the market and the conduct.

17. Epic Games, Inc. v. Apple Inc., 559 F. Supp. 3d 898 (N.D. Cal. 2021)

This case involved Apple's App Store ecosystem, payment restrictions and distribution rules.

The court examined:

app distribution;

in-app payments;

platform rules;

commissions;

competition between digital distribution systems.

Although the case concerned mobile applications rather than VR commerce, it is highly relevant to immersive platforms.

Relevance

An immersive platform may similarly control:

application distribution;

virtual goods;

developer access;

payment systems.

The case illustrates how a platform's rules concerning distribution and payment can become central competition-law issues.

18. Epic Games, Inc. v. Google LLC

Epic also brought litigation against Google concerning the Google Play ecosystem.

The dispute concerned:

app distribution;

billing;

commissions;

contractual restrictions;

competition between app stores and payment systems.

Relevance

The case provides a useful framework for analysing immersive app stores.

If a VR platform requires developers to use:

platform store + platform billing

and prevents alternative distribution or payment mechanisms, competition authorities may examine whether such restrictions foreclose competing systems.

19. Meta Platforms, Inc. / Within Unlimited — FTC Merger Challenge

The FTC challenged Meta's proposed acquisition of Within, a virtual-reality fitness application developer.

The FTC argued that the transaction could reduce competition in the emerging VR fitness market.

The case was especially important because it demonstrated that competition authorities may consider future and nascent competition in immersive technologies rather than waiting until a market becomes fully mature.

Significance

The case shows that competition law can address:

acquisitions of emerging VR companies;

ecosystem expansion;

potential future competitors;

innovation competition.

This is particularly important for immersive commerce because today's small virtual-world developer could become tomorrow's major commercial platform.

20. FTC v. Meta Platforms, Inc. — Social-Networking Platform Litigation

The FTC's broader Meta litigation concerns alleged monopolisation in personal social networking.

Relevance to immersive commerce

Meta's activities demonstrate how an established social-networking ecosystem can extend into:

VR;

virtual worlds;

avatars;

digital goods;

immersive advertising.

This creates the possibility of ecosystem leveraging.

A platform that already possesses:

users;

identity;

social connections;

advertisers;

data

may have advantages when entering immersive commerce.

The competition-law question is whether such advantages arise from legitimate competition or are reinforced through exclusionary conduct.

21. Platform Envelopment

Immersive commerce may create platform envelopment.

For example:

Social network

↓

VR platform

↓

Virtual marketplace

↓

Advertising

↓

Payments

An incumbent can potentially use an existing user base to enter an adjacent market.

This is not necessarily unlawful.

Competition law becomes relevant where the expansion is accompanied by conduct such as:

tying;

exclusivity;

discrimination;

foreclosure;

predatory strategies;

interoperability restrictions.

22. Killer Acquisitions in Immersive Commerce

Emerging immersive markets may contain small startups that have:

innovative VR technology;

new virtual marketplaces;

new avatar systems;

novel payment technology;

interoperability tools.

A dominant platform could acquire these companies before they become meaningful competitors.

Competition authorities may therefore examine whether an acquisition removes a potential or nascent competitor.

The Meta–Within litigation demonstrates the importance of this issue.

23. Virtual Goods and Marketplace Power

Immersive platforms can become marketplaces for:

virtual clothing;

avatars;

weapons in games;

virtual property;

experiences;

digital collectibles;

creator content.

If the platform controls access to the marketplace, it may determine:

commission rates;

search rankings;

seller access;

payment methods;

advertising opportunities.

A dominant marketplace could therefore potentially exercise substantial bargaining power over creators.

24. Creator Dependence

Creators may become dependent upon a single immersive platform because their:

audience;

followers;

reputation;

virtual inventory;

sales history

are tied to that ecosystem.

This produces creator-side switching costs.

A platform may therefore possess market power not only over consumers but also over creators.

Competition analysis should consequently examine both sides of the platform:

Users ↔ Platform ↔ Creators/Merchants

25. Two-Sided Market Effects

Immersive commerce is normally multi-sided.

For example:

A decision affecting one side can influence another.

For example:

Higher developer fees → fewer applications → lower consumer attractiveness.

Or:

More consumers → more merchants → more creator investment.

Therefore, competition analysis should consider cross-side effects.

26. Payment-System Competition

Payment is another major bottleneck.

An immersive platform could potentially require merchants to use:

proprietary wallets;

proprietary virtual currencies;

proprietary billing systems.

Competition concerns could include:

tying;

exclusion of rival payment providers;

excessive transaction fees;

discrimination;

interoperability restrictions.

Payment restrictions are particularly important because digital goods often involve repeated small transactions.

27. Virtual Currency and Competition

Some immersive ecosystems may use platform-specific virtual currencies.

A dominant platform could potentially control:

Currency issuance → payment → transaction → commission → conversion.

This can increase platform dependence.

The competition analysis may examine whether users and merchants can realistically use competing payment systems.

28. Self-Preferencing Through Virtual Search

Immersive marketplaces may use algorithms to determine which virtual stores users encounter.

For example, a platform could control:

virtual shelf placement;

search results;

avatar recommendations;

product visibility;

personalised shopping environments.

If the platform also sells competing products, it could potentially favour its own products.

This is analogous to self-preferencing concerns in conventional digital marketplaces.

29. Algorithmic Competition

Immersive commerce will likely depend heavily upon AI.

Algorithms can determine:

prices;

product recommendations;

search ranking;

advertising;

creator visibility;

inventory;

consumer targeting.

Potential competition risks include:

Algorithmic discrimination

Rivals receive systematically worse treatment.

Algorithmic coordination

Competing sellers use common systems that facilitate coordinated pricing.

Algorithmic exclusion

The platform's algorithm reduces visibility of rival products.

Algorithmic self-preferencing

The platform's own products receive favourable ranking.

30. Privacy and Immersive Commerce

Immersive environments generate potentially sensitive information about:

eye movements;

body movements;

voice;

gestures;

spatial surroundings.

Privacy may therefore become a quality dimension of competition.

If users cannot realistically move to competing immersive platforms because of switching costs, a dominant platform may have greater ability to impose extensive data-collection practices.

Competition law may therefore increasingly interact with privacy regulation.

31. Indian Competition-Law Framework

The Indian Competition Act, 2002 can potentially address immersive-commerce conduct through:

Section 3

Anti-competitive agreements involving:

exclusive arrangements;

market allocation;

tying;

restrictions on distribution;

coordination between competing platforms.

Section 4

Abuse of dominance involving:

unfair conditions;

discriminatory access;

refusal to deal;

leveraging;

tying;

exclusionary conduct.

Sections 5 and 6

Mergers and acquisitions involving:

VR platforms;

AR ecosystems;

app stores;

digital marketplaces;

payment infrastructure;

immersive advertising platforms.

32. Relevant Indian Competition Questions

For an immersive platform, the CCI could potentially ask:

Market definition

Is the relevant market:

VR devices?

immersive operating systems?

VR app distribution?

virtual marketplaces?

digital goods?

immersive advertising?

Market power

Does the platform possess substantial market power?

Conduct

Is it:

tying products?

restricting interoperability?

self-preferencing?

imposing exclusivity?

discriminating against rivals?

Effects

Does the conduct:

prevent entry?

increase switching costs?

reduce innovation?

harm merchants?

reduce consumer choice?

33. Possible Competition Remedies

Where unlawful conduct is established, potential remedies could include:

Behavioural remedies

non-discrimination;

prohibition of exclusivity;

fair access requirements;

transparent ranking.

Technical remedies

API access;

interoperability;

data portability;

cross-platform functionality.

Structural remedies

In exceptional cases, separation of certain business functions may be considered.

Merger remedies

Authorities could require:

divestiture;

licensing;

interoperability commitments;

non-discrimination commitments.

34. Key Challenges for Competition Authorities

Immersive commerce presents several difficult analytical problems.

1. Markets may be nascent

There may be insufficient historical data.

2. Technology changes rapidly

Market power today may disappear tomorrow.

3. Markets overlap

Hardware, software, advertising and commerce may be interconnected.

4. Innovation is difficult to measure

A restriction may affect future rather than present competition.

5. Multi-sided effects

Benefits on one side may offset harm on another.

6. Privacy is difficult to quantify

Reduced privacy does not have an obvious monetary price.

35. Competition-Law Framework

A systematic analysis can be expressed as:

Step 1 — Define the relevant market

↓

Step 2 — Determine market power

↓

Step 3 — Identify the platform's ecosystem position

↓

Step 4 — Identify exclusionary or exploitative conduct

↓

Step 5 — Examine foreclosure and competitive effects

↓

Step 6 — Consider efficiencies and legitimate justifications

↓

Step 7 — Evaluate innovation and future competition

↓

Step 8 — Consider proportionate remedies

36. Important Distinction: Dominance Is Not Automatically Illegal

A successful immersive platform is not violating competition law simply because it becomes dominant.

Competition law generally protects the competitive process, not competitors from successful competition.

Therefore:

Large user base ≠ automatic antitrust violation.

Large data holdings ≠ automatic antitrust violation.

High market share ≠ automatic antitrust violation.

The critical issue is whether the undertaking uses market power through prohibited or exclusionary conduct.

37. Conclusion

Immersive commerce combines the characteristics of digital platforms, marketplaces, app stores, social networks, payment systems and virtual economies. This creates significant potential for ecosystem-based market power.

The most important competition-law concerns are:

platform dominance;

network effects;

high switching costs;

lack of interoperability;

self-preferencing;

tying and bundling;

exclusive dealing;

data concentration;

algorithmic discrimination;

control over virtual payments;

creator dependence;

killer acquisitions.

The cases of Microsoft, Google Android, Google Shopping, Epic Games v Apple, Epic Games v Google and the FTC's Meta–Within litigation provide useful legal frameworks for understanding these problems.

The central competition-law issue for immersive commerce can be summarised as follows:

When a single undertaking controls the hardware, operating system, application distribution, identity, payments, data and virtual marketplace through which immersive commerce occurs, competition law must examine whether that integrated ecosystem reflects legitimate innovation or whether control over one layer is being used to restrict competition at another.

The most significant future issue will likely be interoperability: whether users, creators, developers, digital assets, identities and payments can move between competing immersive ecosystems without losing the economic and social value accumulated on the original platform.