Competition Law and Network Centrality and Antitrust Analysis

1. Introduction

Network centrality is a method of analysing how important a firm, platform, intermediary, infrastructure, or participant is within an economic network. In competition law, it is particularly relevant to digital platforms, payment systems, telecommunications, app stores, logistics networks, social networks, cloud services, online marketplaces, and other multi-sided markets.

A firm may not have the largest market share and yet possess substantial competitive significance because it occupies a central position in the network. A highly central undertaking may control important connections between users, suppliers, competitors, data sources, or complementary services.

Competition authorities therefore increasingly examine not merely “How large is the undertaking?”, but also:

• How many economically important relationships pass through it?
• How difficult is it for users to bypass it?
• Does it control an essential interface?
• Does its position create network effects?
• Can it use information obtained from one side of the network to disadvantage another?
• Does its conduct increase switching costs?
• Can rivals realistically achieve sufficient scale without access to the network?

Network centrality is therefore best understood as an additional analytical lens, rather than a standalone legal test.

2. Meaning of Network Centrality

In network analysis, participants are represented as nodes, while relationships between them are represented as edges.

For example:

Consumers → Platform → Sellers → Advertisers → Payment providers

A platform connecting thousands or millions of participants may have a much more central position than an ordinary seller operating within that network.

Simplified structure

                 Advertisers                     |                     | Sellers —— Platform —— Consumers    \                /     \              /      Payment System            |        Developers

The platform in the middle has potentially high network centrality because numerous relationships depend upon it.

3. Types of Centrality Relevant to Competition Law

A. Degree Centrality

Degree centrality measures the number of direct connections associated with a node.

A platform with:

• 10 million consumers,
• 500,000 merchants,
• 100,000 developers, and
• thousands of advertisers

may have extremely high degree centrality.

Competition significance

High degree centrality can indicate:

• extensive market reach;
• access to large numbers of customers;
• bargaining power;
• strong network effects;
• potential ability to impose discriminatory terms.

However, a high number of connections does not automatically establish dominance.

B. Betweenness Centrality

Betweenness centrality measures the extent to which a node lies on the shortest or economically significant paths between other nodes.

This is particularly important for gatekeeper analysis.

For example:

Merchant A ──┐ Merchant B ──┼── Platform ── Consumers Merchant C ──┘

If merchants cannot efficiently reach consumers without the platform, the platform may have high betweenness centrality.

Antitrust significance

A highly central intermediary may be capable of:

• raising access charges;
• excluding competitors;
• discriminating between business partners;
• tying complementary services;
• self-preferencing its own products;
• restricting interoperability.

C. Eigenvector Centrality

Eigenvector centrality considers not merely how many connections a firm has, but the importance of the entities to which it is connected.

For example, a financial institution connected to the country's largest payment networks may be more strategically central than a firm with a larger number of relatively insignificant connections.

Competition significance

It can help identify:

• strategic importance;
• influential counterparties;
• interconnected infrastructure;
• systemic commercial relationships.

D. Closeness Centrality

Closeness centrality measures how close a node is to other nodes within the network.

A platform with high closeness may be able to interact rapidly with large parts of an ecosystem.

This can matter in:

• information markets;
• advertising;
• digital communications;
• logistics;
• payment systems.

4. Network Centrality and Market Definition

Traditional competition law begins with relevant-market definition.

Network analysis can supplement traditional methods such as:

• SSNIP analysis;
• demand substitutability;
• supply substitutability;
• geographic market analysis;
• price and non-price competition.

Digital platforms create difficulties because services may be supplied at zero monetary prices.

Consequently, competition authorities may examine:

• users;
• data;
• attention;
• transactions;
• developers;
• advertisers;
• merchants;
• interoperability.

Network centrality can demonstrate that a platform's competitive significance extends beyond its apparent market share.

5. Network Effects and Centrality

Network centrality is closely associated with network effects.

A network effect exists when the value of a service changes because the number or characteristics of other users change.

Direct network effect

More users → greater value to each user.

Example:

More messaging users        ↓ More people available to communicate with        ↓ Greater value of messaging platform

Indirect network effect

More consumers → more sellers → more consumers.

More buyers   ↓ More sellers   ↓ More product variety   ↓ More buyers

High centrality may therefore reinforce network effects and create feedback loops.

6. Network Centrality and Market Power

Network centrality can contribute to market power through several mechanisms.

1. Switching costs

Users connected to a highly central platform may find it costly to move elsewhere.

2. Multi-homing limitations

If users cannot efficiently participate in multiple networks, centrality becomes more commercially significant.

3. Data advantages

A central platform can obtain large quantities of behavioural and transactional data.

4. Interoperability control

The central undertaking may determine whether competitors can communicate with the network.

5. Ecosystem expansion

A central platform may leverage its position into adjacent markets.

6. Entry barriers

New entrants may find it difficult to obtain sufficient users to achieve comparable network effects.

7. Network Centrality and Abuse of Dominance

Centrality can become relevant to several theories of abuse.

A. Refusal to Deal

A central platform may deny access to competitors.

The question becomes whether exclusion from the network materially prevents effective competition.

B. Self-Preferencing

A platform may rank its own products above competing products.

Network centrality is relevant because the platform controls an important route through which consumers discover products.

C. Discriminatory Access

A central infrastructure provider may offer different access conditions to competing firms.

The competitive concern increases where competitors have no realistic alternative network.

D. Tying and Bundling

A central platform may condition access to one network upon adoption of another service.

For example:

Access to dominant platform          ↓ Required use of ancillary service          ↓ Competitor excluded

E. Exclusive Dealing

Contracts with important participants may prevent rival networks from obtaining sufficient scale.

F. Predatory or Strategic Pricing

A central platform may temporarily sacrifice revenue to attract users and thereby strengthen network effects.

8. Network Centrality and Merger Control

Network centrality is also relevant to merger analysis.

A merger may create concerns even where conventional market-share calculations appear modest if it combines two strategically important networks.

Authorities may investigate:

• overlap between networks;
• control of interoperability;
• access to data;
• elimination of potential competitors;
• increased switching costs;
• foreclosure of rivals;
• strengthening of ecosystem effects.

A particularly important concept is the “killer acquisition” or nascent competitor theory, where an incumbent acquires a smaller firm whose importance lies in its future network position rather than current market share.

9. Network Centrality and Vertical Integration

Vertical integration can increase centrality.

Consider:

Operating System       ↓ App Store       ↓ Payment System       ↓ Developers       ↓ Consumers

If one undertaking controls multiple interconnected layers, its overall network position may be substantially greater than the market share of any individual layer suggests.

Competition authorities may therefore examine whether vertical integration permits:

• foreclosure;
• discrimination;
• data leveraging;
• self-preferencing;
• interoperability restrictions;
• margin squeezing.

10. 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 toward competing web browsers, particularly Netscape.

Microsoft used contractual and technical strategies that affected distribution and access to the Windows ecosystem.

Relevance to network centrality

Windows functioned as an important platform connecting computer manufacturers, software developers, consumers and applications.

The court's analysis demonstrated how control over an important technological platform can give an undertaking substantial strategic power over adjacent markets.

Principle

Control over a central platform can facilitate exclusionary conduct even where the excluded product operates in a related rather than identical market.

Network-centrality lesson

The relevant question is not simply the number of operating-system users. It is also how many economically significant relationships depend upon the platform.

11. European Commission – Google Shopping

Google Search (Shopping)

Facts

The European Commission found that Google had abused its dominant position in general search by systematically giving prominent placement to its own comparison-shopping service while applying less favourable treatment to competing comparison-shopping services.

Network-centrality relevance

Google Search occupied a highly central position in the online information-discovery network.

The search engine connected:

• consumers;
• merchants;
• advertisers;
• websites;
• comparison-shopping services.

Consequently, ranking and visibility within the network could materially affect competitors.

Principle

Control over an important access or discovery point can create competitive significance beyond conventional market-share measurements.

Network-centrality lesson

Search visibility can function as a network bottleneck.

12. Google Android – European Commission

Facts

The European Commission investigated Google's conduct concerning the Android mobile ecosystem, including contractual restrictions relating to Google Search, Chrome, app stores and licensing arrangements.

Relevance

Android created an interconnected ecosystem involving:

• device manufacturers;
• application developers;
• users;
• search services;
• app distribution;
• advertising.

Google's position at several layers increased its centrality within the ecosystem.

Principle

Restrictions imposed by a dominant platform can have effects extending across interconnected markets.

Network-centrality lesson

Antitrust analysis should consider ecosystem-wide leverage, not merely competition within one isolated product market.

13. Ohio v. American Express Co., 585 U.S. 529 (2018)

Facts

The case concerned American Express's contractual provisions restricting merchants from steering customers toward alternative payment methods.

The Supreme Court treated the credit-card platform as a two-sided transaction platform connecting merchants and cardholders.

Relevance to network centrality

The case is important because competition analysis must account for the interactions between the two sides of a platform.

A payment network's competitive position depends upon participation on both sides.

Principle

In certain two-sided transaction platforms, the relevant market and competitive effects must be analysed by considering the relationship between the two groups served by the platform.

Network-centrality lesson

Centrality in a multi-sided network cannot always be assessed by examining only one participant group.

14. FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020)

Facts

The FTC challenged Qualcomm's licensing practices relating to cellular-standard-essential patents and modem chips.

The Ninth Circuit ultimately reversed the district court's judgment against Qualcomm.

Relevance

Qualcomm occupied an important position in the technological and licensing network surrounding cellular communications.

The case illustrates the difficulty of distinguishing:

• technological importance;
• contractual leverage;
• intellectual-property rights; and
• legally cognisable anticompetitive exclusion.

Principle

A strategically important position in an industry does not automatically establish an antitrust violation.

Network-centrality lesson

Centrality is evidence requiring legal and economic interpretation, not a substitute for proving the elements of an antitrust offence.

15. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985)

Facts

Four major ski areas in Aspen had historically participated in a joint ticketing arrangement. Aspen Skiing ultimately discontinued cooperation with Aspen Highlands.

The Supreme Court found the conduct unlawful under Section 2 of the Sherman Act.

Relevance to network analysis

The case illustrates the importance of access to an established commercial network.

The smaller operator's ability to participate in the multi-resort offering was competitively significant.

Principle

Under exceptional circumstances, termination of a previously profitable cooperative relationship by a monopolist can constitute exclusionary conduct.

Network-centrality lesson

A network participant may become competitively vulnerable when a central or strategically important undertaking controls access to an established network.

16. European Commission – Microsoft (Windows Media Player)

Facts

The European Commission found Microsoft had abused its dominant position by tying Windows Media Player to the Windows operating system.

Relevance to network centrality

Windows served as a central technological platform.

Bundling the media player into that platform gave Microsoft's complementary product access to an enormous installed user base.

Principle

Dominance in one technologically central market may facilitate leveraging into a neighbouring market.

Network-centrality lesson

Installed-base centrality can create competitive advantages for complementary products.

17. Essential Facility and Network Centrality

Network centrality also intersects with the essential facilities doctrine.

An infrastructure or platform may become particularly important where:

1. the facility is difficult to duplicate;
2. competitors require access;
3. access is technically feasible;
4. denial threatens effective competition;
5. no adequate alternative exists.

Examples can include:

• telecommunications networks;
• payment infrastructures;
• electricity grids;
• railway infrastructure;
• digital platforms;
• app ecosystems;
• cloud infrastructure.

However, centrality alone does not make an asset an essential facility.

18. Network Centrality and Data

Data can increase network centrality.

A platform may obtain data from:

• consumers;
• merchants;
• advertisers;
• suppliers;
• applications;
• transactions.

This produces a possible feedback loop:

More users     ↓ More data     ↓ Better service / targeting     ↓ More users     ↓ Greater centrality     ↓ More data

Competition concerns arise where this feedback mechanism creates significant barriers to entry or allows an undertaking to leverage its position across markets.

19. Network Centrality and Algorithmic Competition

Algorithms can increase or decrease network centrality.

For example, a platform controlling ranking algorithms may determine:

• which sellers receive visibility;
• which advertisements receive impressions;
• which applications are recommended;
• which content is distributed;
• which products appear first.

Consequently, algorithmic control can become equivalent to control over important network pathways.

Potential theories include:

• self-preferencing;
• discriminatory ranking;
• exclusion;
• algorithmic collusion;
• personalised pricing;
• manipulation of interoperability.

20. Network Centrality and Digital Gatekeepers

A gatekeeper typically controls an important access point between businesses and users.

Examples include:

• app stores;
• search engines;
• operating systems;
• online marketplaces;
• social networks;
• payment platforms.

The greater the network centrality of the intermediary, the greater the potential consequences of its conduct.

Example

                  Advertisers                       |                       ↓ Developers → APP STORE ← Consumers                       ↑                       |                  Payment System

If competitors cannot reach users without the app store, restrictions imposed by the platform may have significant foreclosure effects.

21. Measuring Network Centrality in Competition Investigations

Competition authorities and economists can construct network datasets containing:

These metrics can then be combined with traditional antitrust evidence.

22. Centrality Is Not the Same as Dominance

This distinction is crucial.

High centrality does not necessarily mean:

• monopoly;
• dominance;
• substantial market power;
• abuse;
• unlawful exclusion.

A company may be highly central because it provides an efficient service that competitors can easily replicate.

Conversely, a company with relatively few direct connections may possess substantial market power because those connections control a critical bottleneck.

Therefore:

Centrality is an economic indicator of strategic position, not an independent legal finding of dominance.

23. Centrality and Consumer Welfare

Network centrality may generate both benefits and risks.

Potential benefits

• lower transaction costs;
• improved matching;
• greater product variety;
• interoperability;
• innovation;
• economies of scale;
• enhanced reliability;
• reduced search costs.

Potential risks

• exclusion of competitors;
• excessive switching costs;
• discriminatory access;
• self-preferencing;
• data exploitation;
• foreclosure;
• reduced innovation;
• excessive dependence upon one intermediary.

Competition analysis must therefore determine whether conduct creates efficiencies or protects market power through exclusionary mechanisms.

24. Regulatory Remedies

Where network centrality contributes to anticompetitive effects, possible remedies include:

Structural remedies

• divestiture;
• separation of business units;
• prohibition of certain acquisitions.

Behavioural remedies

• non-discrimination;
• access obligations;
• interoperability;
• data portability;
• transparency in ranking;
• restrictions on self-preferencing.

Technical remedies

• API access;
• interoperability standards;
• switching tools;
• data portability mechanisms.

Contractual remedies

• removal of exclusivity;
• modification of parity clauses;
• fair-access obligations.

The appropriate remedy depends upon the specific theory of harm and evidence.

25. Indian Competition-Law Perspective

Under the Competition Act, 2002, network centrality can be relevant to the assessment of:

• relevant market;
• dominance;
• appreciable adverse effect on competition;
• abuse of dominant position;
• denial of market access;
• discriminatory conditions;
• tying;
• leveraging;
• refusal to deal;
• combinations.

The statutory analysis does not formally establish “network centrality” as a separate offence. Instead, network characteristics can constitute economic evidence relevant to market power and competitive effects.

The concept is especially relevant to Indian digital markets involving:

• e-commerce;
• digital payments;
• app stores;
• online advertising;
• food-delivery platforms;
• mobility platforms;
• digital financial services;
• cloud services;
• telecommunications.

26. Evidentiary Issues

Authorities should avoid relying exclusively on a centrality score.

A proper investigation may combine:

1. market-share evidence;
2. network data;
3. internal business documents;
4. switching data;
5. customer testimony;
6. contractual restrictions;
7. pricing evidence;
8. entry barriers;
9. interoperability analysis;
10. economic modelling.

Centrality measurements can be particularly vulnerable to errors arising from:

• incomplete datasets;
• incorrect network boundaries;
• rapidly changing platforms;
• artificial or automated accounts;
• multiple identities;
• weighting problems;
• temporal changes.

27. Key Case-Law Principles at a Glance

28. Critical Legal Issues

Issue 1: Is centrality measurable?

Yes, but measurements depend heavily upon how the network is defined.

Issue 2: Does high centrality establish dominance?

No. It is supporting economic evidence.

Issue 3: Can a central platform be regulated more heavily?

Potentially, where legislation or competition rules establish appropriate obligations, but centrality alone does not determine liability.

Issue 4: Is network centrality relevant to merger review?

Yes. It can illuminate ecosystem effects, nascent competition, data advantages and foreclosure risks.

Issue 5: Does interoperability reduce centrality?

It can. Interoperability may allow users and firms to reach alternative networks without abandoning the original network.

29. Conclusion

Network centrality provides competition law with a powerful way of analysing modern markets in which economic power arises from relationships rather than simply from ownership of physical assets.

Traditional antitrust analysis asks questions such as market share, barriers to entry, pricing power and substitutability. Network analysis adds another dimension: who occupies the critical position through which economically significant relationships flow?

The concept is particularly important for digital platforms because a platform may simultaneously connect consumers, suppliers, advertisers, developers, payment systems and complementary services.

The major legal lesson from the case law is that centrality should be treated as evidence of strategic economic importance rather than as a standalone test of illegality. Courts and competition authorities must still establish the relevant market, market power or dominance where required, the challenged conduct, and its actual or likely competitive effects.

Thus, the modern antitrust framework can be represented as:

NETWORK STRUCTURE       ↓ CENTRALITY / GATEWAY POSITION       ↓ NETWORK EFFECTS + SWITCHING COSTS       ↓ MARKET POWER       ↓ CONDUCT       ↓ FORECLOSURE / COMPETITIVE EFFECTS       ↓ EFFICIENCIES AND CONSUMER EFFECTS       ↓ APPROPRIATE REMEDY