Competition Law and Marketplace Design as a Source of Dominance

Introduction

Marketplace design refers to the way a digital or physical marketplace is structured and operated: how sellers are ranked, how consumers search and compare products, how transactions are completed, what information is disclosed, how commissions are imposed, which sellers receive visibility, and whether the marketplace gives preferential treatment to its own products or affiliated services.

Marketplace design can become a source of market power and, in some circumstances, dominance. The important competition-law distinction is that a particular design choice is not unlawful merely because it strengthens the platform. Competition law becomes relevant where a platform with substantial market power uses design features to exclude competitors, disadvantage dependent sellers, restrict consumer choice, raise switching costs, exploit data advantages, or extend power from one market into another.

The issue is especially important in multi-sided markets because the platform simultaneously interacts with consumers, sellers, advertisers, payment providers, logistics providers and sometimes competing service providers.

1. Meaning of Marketplace Design

Marketplace design encompasses several interconnected elements:

1. Search and ranking architecture
2. Default settings
3. Recommendation algorithms
4. Seller visibility and placement
5. Commission and fee structures
6. Access conditions
7. Payment architecture
8. Data collection and use
9. Self-preferencing
10. Interoperability and portability
11. Consumer-review systems
12. Advertising and sponsored placement
13. Choice architecture
14. Contractual restrictions
15. Technical restrictions on competing services

A marketplace therefore does not merely provide a neutral meeting place. Its architecture can determine who is visible, who can transact, what consumers see, and which suppliers can effectively compete.

2. How Marketplace Design Can Create or Reinforce Dominance

A. Control over visibility

A marketplace controls the gateway through which consumers discover suppliers.

If the platform systematically places its own products or affiliated businesses above competing products, the platform can potentially divert demand toward its own offerings.

The competition concern is not simply that the platform ranks products. Ranking is an ordinary function of a marketplace. The concern arises when ranking criteria are manipulated in a manner capable of foreclosing equally efficient competitors.

B. Network effects

Marketplace platforms frequently benefit from indirect network effects.

More consumers attract more sellers.

More sellers increase variety.

Greater variety attracts more consumers.

This produces a reinforcing cycle:

Consumers → Sellers → More variety → More consumers → More sellers

Once a platform reaches substantial scale, new entrants may find it difficult to reproduce the same network.

Marketplace design can accelerate this process through:

• exclusive visibility arrangements;
• loyalty mechanisms;
• preferential ranking;
• seller restrictions;
• consumer defaults;
• data advantages; and
• integration with payments or logistics.

3. The Role of Data

Data can become a major competitive advantage.

A marketplace may obtain information concerning:

• consumer searches;
• purchases;
• prices;
• seller performance;
• conversion rates;
• product demand;
• inventory;
• customer preferences;
• advertising effectiveness.

If the marketplace also competes with its own sellers, it may theoretically use marketplace-generated information to improve its competing products.

This produces a potentially important competitive conflict:

The marketplace controls the infrastructure through which competitors compete while simultaneously participating in the downstream market.

Competition authorities therefore increasingly examine whether the platform's data architecture gives it an advantage unavailable to independent competitors.

4. Self-Preferencing

Self-preferencing occurs when a platform gives preferential treatment to its own products or services compared with products supplied by independent competitors.

Examples include:

• placing its own products at the top of search results;
• giving its own services superior recommendation positions;
• displaying affiliated sellers more prominently;
• providing its own logistics service with special visibility;
• applying different ranking criteria to competing sellers.

Self-preferencing does not automatically constitute an abuse of dominance. Authorities generally need to examine the platform's market power, the mechanism involved, competitive effects and possible objective justifications.

5. Ranking Algorithms as Competitive Infrastructure

Search and recommendation algorithms increasingly function as essential commercial infrastructure.

A seller can technically remain listed on a marketplace but still be commercially invisible if the algorithm consistently places it below competing products.

Thus:

Formal access ≠ effective access

A competition authority may therefore examine:

• ranking criteria;
• changes to ranking algorithms;
• transparency;
• discriminatory treatment;
• sponsored rankings;
• treatment of affiliated products;
• demotion mechanisms; and
• the effect of ranking decisions on competing sellers.

6. Case Laws

1. Google Shopping — European Commission, 2017

The European Commission found that Google had abused its dominant position in general search by giving its comparison-shopping service more favourable positioning and display than competing comparison-shopping services.

The case is highly significant for marketplace design because the competitive issue concerned how the search-and-ranking architecture directed consumer traffic.

The Commission's reasoning demonstrated that a dominant digital intermediary can potentially distort competition through the manner in which it structures visibility rather than through an explicit refusal to deal.

Principle

A dominant platform's ranking and display architecture may become an abuse where it systematically disadvantages competing services and diverts traffic toward its own service.

2. Amazon Marketplace — European Commission, 2022

The European Commission investigated Amazon's use of marketplace data, particularly information generated by independent sellers using Amazon Marketplace.

The concern was that Amazon could use non-public seller information to inform its own retail activities.

The investigation illustrates the dual-role problem:

marketplace operator + competing retailer.

The resulting competition concern is not simply data collection. It concerns whether information obtained through operation of the marketplace gives the platform a competitive advantage over sellers that depend upon it.

Principle

A marketplace operator competing with marketplace participants may face competition-law scrutiny where marketplace-generated data contributes to preferential treatment or competitive advantages for the operator's own business.

3. Amazon Buy Box / Marketplace Practices — European Commission

The European Commission also investigated Amazon's treatment of sellers in relation to the Buy Box and the Prime programme.

The Buy Box is particularly important because marketplace design determines which seller receives the most prominent purchasing opportunity.

Competition concerns may arise where access to prominent placement or associated programmes is structured in a way that disadvantages competing sellers.

Principle

Control over transaction architecture—rather than merely control over price—can affect competition between sellers operating through the same marketplace.

4. Android Auto — Google and Alphabet v Italian Competition Authority / European Commission Context

The broader Google ecosystem cases demonstrate how technical design and interoperability can affect competition.

Where a dominant digital ecosystem controls access to a platform or interface, restricting competitors' ability to function effectively can preserve the platform's position.

Although Android Auto is not a conventional marketplace case, it illustrates an important principle for marketplace design:

Technical architecture can itself constitute a competitive parameter.

A platform that controls APIs, interfaces and interoperability may influence whether rival services can effectively reach consumers.

5. Apple App Store — European Commission Investigations

The App Store provides a major example of marketplace design becoming a competition-law issue.

Apple controls:

• app distribution;
• payment architecture;
• commission structures;
• app-review procedures;
• ranking and discovery mechanisms;
• technical access; and
• contractual conditions.

Competition authorities have examined whether Apple's rules create competitive disadvantages for competing payment systems and digital services.

Principle

A platform's contractual and technical architecture may have competition consequences where developers depend upon access to the platform to reach consumers.

6. Epic Games v. Apple — U.S. Litigation

The Epic Games litigation concerning Apple's App Store addressed restrictions surrounding in-app payments and Apple's control over app distribution.

The case illustrates the importance of marketplace rules that simultaneously govern access and competition.

Apple's argument emphasized security, privacy, user experience and ecosystem integrity, while Epic challenged Apple's restrictions as anticompetitive.

The court's findings did not simply treat Apple's marketplace as an ordinary commercial arrangement. Instead, the litigation examined the structure of the App Store, payment restrictions and the competitive significance of Apple's rules.

Principle

Marketplace restrictions should be assessed in their broader ecosystem context, including legitimate technical and security justifications and their effects on competing distribution or payment mechanisms.

7. Qualcomm — FTC v. Qualcomm

The Qualcomm litigation illustrates how control over an important technological layer can affect downstream competition.

Although not a conventional marketplace, Qualcomm's licensing practices demonstrated the relationship between control over an infrastructure layer and competitive conditions in downstream markets.

The case is relevant to marketplace design because digital marketplaces increasingly combine several layers:

hardware → operating system → application marketplace → payment → data → advertising

Control at one layer can influence competition at another.

Principle

Competition analysis may need to consider how contractual and technological control at one level affects competitive opportunities at connected levels.

8. Microsoft — European Commission / Internet Explorer

The Microsoft cases provide another important example of how default design and product integration can influence competition.

Microsoft's control over the operating-system environment allowed it to influence how users accessed competing browsers.

The significance for marketplace design is the recognition that:

Defaults can influence competitive outcomes even where consumers technically retain the ability to choose alternatives.

This concept has become increasingly important for modern digital marketplaces.

7. Defaults and Choice Architecture

Marketplace dominance can be reinforced through default settings.

Examples include:

• default payment method;
• default search provider;
• default delivery service;
• default seller;
• default advertising provider;
• default app marketplace;
• default recommendation engine.

Consumers may technically have alternatives, but changing the default can involve:

• time;
• information costs;
• switching costs;
• uncertainty; and
• inconvenience.

Therefore:

Choice technically available ≠ choice competitively effective

Competition law may examine whether defaults are used by a dominant undertaking to systematically reduce competitive opportunities.

8. Dark Patterns and Competition

Marketplace design can also interact with dark patterns.

These may include:

• difficult cancellation;
• confusing subscription choices;
• pre-selected options;
• hidden alternatives;
• misleading prompts;
• repeated confirmation screens;
• complicated switching procedures.

Consumer-protection law is generally central to these practices, but they can also have competition implications where a dominant platform uses design to increase switching costs or customer lock-in.

9. Switching Costs

Marketplace design may make switching costly by creating:

• stored payment information;
• accumulated reviews;
• loyalty benefits;
• seller reputation;
• consumer histories;
• proprietary data;
• subscriptions;
• integrated logistics;
• ecosystem compatibility.

A seller may therefore remain on a marketplace not because it prefers the platform, but because leaving would cause substantial loss of accumulated commercial value.

This can strengthen incumbent market power.

10. Seller Dependence

A marketplace can become a commercial bottleneck when sellers depend heavily on it for customer access.

Indicators include:

• large share of seller transactions;
• limited alternative marketplaces;
• high consumer concentration;
• strong network effects;
• substantial switching costs;
• dependence upon platform advertising;
• dependence upon platform logistics;
• dependence upon platform payment services.

The competition question becomes:

Does the marketplace merely provide a useful distribution channel, or has its design made it an unavoidable gateway to consumers?

11. Commission Structures

Marketplace design also includes pricing architecture.

A dominant marketplace may charge:

• listing fees;
• transaction commissions;
• advertising fees;
• payment fees;
• logistics charges;
• subscription fees;
• data-access charges.

A competition concern can arise if the marketplace combines high commissions with restrictions preventing sellers from using alternative channels.

This can potentially produce:

high dependence + high fees + reduced alternatives

However, high fees alone do not establish an abuse of dominance. Market power, contractual conditions and competitive effects remain relevant.

12. Parity Clauses

Marketplace operators may impose clauses preventing sellers from offering lower prices elsewhere.

These are commonly known as:

• price parity clauses;
• most-favoured-nation clauses;
• MFNs;
• platform parity provisions.

Such clauses can affect:

• entry;
• price competition;
• rival marketplaces;
• direct sales;
• consumer search costs.

The competitive assessment depends substantially on the market structure and the type of parity obligation involved.

13. Reviews and Reputation Systems

Reviews can themselves become competitive infrastructure.

A marketplace may control:

• review publication;
• review ranking;
• review removal;
• verified-purchase labels;
• seller ratings;
• product ratings.

Because reputation is difficult to reproduce outside the platform, accumulated reviews can create substantial switching costs.

A seller moving to a competing marketplace may lose the reputation capital accumulated on the incumbent platform.

14. Advertising as a Marketplace Design Tool

Modern marketplaces increasingly operate advertising businesses.

The platform may therefore occupy three positions simultaneously:

1. marketplace operator;
2. seller/retailer; and
3. advertising intermediary.

This creates potential conflicts concerning:

• search placement;
• sponsored rankings;
• advertising data;
• auction design;
• access to consumer data;
• preferential treatment.

The competition issue becomes particularly complex when the marketplace controls both organic visibility and paid visibility.

15. Vertical Integration

Marketplace dominance can be strengthened through vertical integration.

For example:

Marketplace → Payment → Logistics → Advertising → Cloud/Data

Integration may create legitimate efficiencies, such as:

• lower transaction costs;
• better security;
• faster delivery;
• fraud prevention;
• improved consumer experience.

But integration may also create opportunities for foreclosure if the dominant platform uses one layer to disadvantage competitors at another.

16. Essential-Facility Considerations

In exceptional circumstances, marketplace infrastructure may raise issues resembling the essential-facilities doctrine.

The relevant questions may include:

1. Is the platform genuinely indispensable?
2. Is there a realistic alternative?
3. Can competitors reasonably reproduce the infrastructure?
4. Is access technically feasible?
5. Is refusal objectively justified?
6. Would exclusion eliminate effective competition?
7. Can access be provided without undermining legitimate security or quality objectives?

The doctrine should not be applied merely because a platform is commercially successful or popular.

17. Market Definition

Marketplace cases require careful market definition.

Possible relevant markets include:

Consumer-side market

• online retail;
• online travel;
• food delivery;
• app distribution.

Seller-side market

• marketplace services for sellers;
• advertising services;
• logistics;
• payment services.

Ecosystem approach

In certain circumstances, authorities may examine interconnected markets rather than treating every digital service independently.

The multi-sided nature of platforms makes conventional market-definition techniques particularly challenging.

18. Indicators of Marketplace-Based Dominance

A competition authority may examine:

No single factor necessarily establishes dominance.

19. Legitimate Marketplace Design vs Anticompetitive Design

This distinction is essential.

Legitimate design

A platform may legitimately:

• improve search relevance;
• prevent fraud;
• promote high-quality sellers;
• maintain cybersecurity;
• require technical standards;
• integrate payment services;
• recommend products;
• remove counterfeit products.

Potentially problematic design

Competition concerns become stronger where design is allegedly used to:

• exclude rivals;
• discriminate against competing sellers;
• favour affiliated businesses;
• restrict interoperability;
• exploit confidential competitor data;
• increase switching costs;
• prevent multi-homing;
• manipulate rankings;
• foreclose competing marketplaces.

The legal analysis must distinguish competition on the merits from exclusionary conduct.

20. Remedies

Competition authorities can potentially address problematic marketplace design through several remedies.

Structural remedies

• divestiture;
• separation of business units;
• restrictions on vertical integration.

Behavioural remedies

• non-discrimination obligations;
• transparent ranking criteria;
• data-use restrictions;
• access obligations;
• interoperability;
• prohibition of certain parity clauses.

Technical remedies

• API access;
• data portability;
• interoperability;
• user-choice screens;
• algorithmic auditing.

Procedural remedies

• compliance monitoring;
• reporting;
• independent audits;
• periodic review.

21. Competition-Law Framework

A simplified analytical framework is:

Marketplace design

↓

Market definition

↓

Market power / dominance

↓

Identification of design feature

↓

Foreclosure / exploitation theory

↓

Actual or potential competitive effects

↓

Objective justification / efficiencies

↓

Proportionality

↓

Remedy

This prevents every unusual or innovative marketplace design from being automatically characterized as anticompetitive.

22. Key Legal Principles from the Case Law

The cases collectively illustrate several important principles:

Principle 1 — Visibility can be competitive power

Control over search results and rankings can influence the ability of rivals to compete.

Principle 2 — Defaults matter

Consumers may not switch easily merely because alternatives technically exist.

Principle 3 — Data can reinforce platform power

Information generated by dependent sellers can create competitive advantages for an integrated marketplace.

Principle 4 — Technical architecture matters

APIs, interoperability and platform access can determine whether rivals can effectively compete.

Principle 5 — Marketplace rules can affect downstream competition

Payment, logistics, advertising and ranking rules can extend power from the marketplace into adjacent markets.

Principle 6 — Self-preferencing requires contextual analysis

Preferential treatment becomes a serious competition concern particularly where the platform has substantial market power and the conduct materially disadvantages competing suppliers.

Principle 7 — Efficiency justifications remain relevant

Security, quality control, fraud prevention and consumer protection can constitute legitimate explanations for marketplace design.

Conclusion

Marketplace design can be a source, amplifier and enforcement mechanism of dominance. The modern competition-law problem is therefore no longer limited to whether a platform possesses a large market share. It also concerns how the platform's architecture converts its position into competitive advantages.

Ranking systems, defaults, data access, payment structures, seller visibility, interoperability, reviews, advertising and logistics can collectively create a powerful ecosystem. When the operator also competes against the businesses that depend upon its marketplace, the possibility of discriminatory treatment or vertical foreclosure becomes particularly important.

The central competition-law question is therefore:

Does marketplace design merely improve the platform's product and facilitate competition, or does it use control over the marketplace to restrict the ability of rivals and dependent participants to compete effectively?