Competition Law and Preferential Treatment in Digital Ecosystems

Introduction

Preferential treatment in digital ecosystems occurs when a platform gives its own products, services, subsidiaries, affiliated sellers, applications, content, payment systems, or other connected businesses more favourable treatment than competing third parties.

Digital ecosystems are particularly susceptible to this conduct because a single undertaking may simultaneously act as:

1. Platform operator;
2. Marketplace intermediary;
3. Search or discovery provider;
4. Payment intermediary;
5. Data controller or data intermediary; and
6. Competitor of the businesses dependent upon its platform.

The central competition-law concern is therefore not merely that a platform favours itself, but that control over an important digital gateway may be used to disadvantage competing businesses and protect or extend market power into adjacent markets.

1. Meaning of Preferential Treatment

Preferential treatment may take several forms:

A. Self-preferencing

A platform ranks or displays its own products more prominently than competing products.

Example: A search engine places its own comparison-shopping service above competing comparison-shopping services.

B. Preferential ranking

The platform's algorithm systematically gives affiliated products better ranking, visibility, recommendation or search placement.

C. Preferential access to data

The platform provides its own business with commercially valuable data generated by third-party users or sellers while restricting equivalent access to competitors.

D. Preferential interoperability

The platform gives its own applications or services superior technical integration with the platform's operating system, APIs or hardware.

E. Preferential pricing or commissions

Affiliated businesses receive lower commissions, better payment terms, discounts or other economic advantages unavailable to independent competitors.

F. Preferential access to customers

A platform may provide its own service with earlier access to leads, customer information, advertising opportunities or purchasing information.

G. Preferential payment treatment

An ecosystem operator may require third-party applications to use its payment system while allowing its own services to use alternative or cheaper payment arrangements.

2. Why Digital Ecosystems Create Special Competition Concerns

Traditional markets generally separate the infrastructure provider from the businesses competing on that infrastructure.

Digital ecosystems often combine them.

For example:

Platform → Marketplace → Sellers → Consumers

The platform can therefore influence:

• ranking;
• search visibility;
• commissions;
• access to data;
• advertising;
• payment systems;
• interoperability;
• recommendations;
• consumer defaults;
• authentication;
• app distribution; and
• access to customers.

This creates the possibility of vertical integration combined with gatekeeper power.

The competition-law question becomes:

Has the platform used control over an essential or strategically important digital interface to distort competition in a neighbouring market?

3. Relevant Competition-Law Framework

Preferential treatment can potentially be examined under several competition-law theories.

A. Abuse of Dominant Position

Where the platform possesses substantial market power, preferential treatment can constitute abusive conduct if it excludes competitors or exploits dependent users.

Relevant theories include:

• discriminatory treatment;
• refusal or restriction of access;
• tying and bundling;
• leveraging;
• margin squeeze;
• discriminatory ranking;
• exclusionary self-preferencing; and
• unfair conditions.

B. Exclusionary Conduct

The focus is whether preferential treatment makes it materially harder for rival firms to compete.

The authority may examine:

1. market power;
2. duration of the conduct;
3. degree of preferential treatment;
4. importance of the platform as a distribution channel;
5. switching costs;
6. network effects;
7. multi-homing;
8. access to data;
9. foreclosure of competitors; and
10. effects on innovation and consumer choice.

4. Self-Preferencing as a Distinct Theory

Self-preferencing is controversial because competition law does not ordinarily require a successful business to treat competitors identically.

A platform may legitimately prefer its own products for reasons such as:

• better quality;
• improved integration;
• security;
• technical compatibility;
• consumer demand;
• reduced transaction costs; or
• innovation.

The competition concern becomes stronger where preferential treatment is connected to substantial market power and exclusionary effects.

Thus, the analysis should distinguish:

Legitimate product integration

from

strategic discrimination designed to disadvantage rivals.

5. Digital Ecosystem Effects

Preferential treatment can be particularly significant because digital markets frequently exhibit network effects.

A simplified cycle is:

More users → more data → better service → more sellers → more users

If the platform also owns a competing downstream service:

Platform power → preferential treatment → increased downstream traffic → stronger downstream position → greater ecosystem power

This may create a feedback loop.

The competitor may lose visibility, users and data simultaneously.

6. Important Case Laws

1. Google Search (Shopping) — European Commission

Google Search (Shopping), Commission Decision AT.39740 (2017)

This is one of the most important authorities concerning preferential treatment in digital markets.

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 subjecting competing comparison-shopping services to Google's generic search algorithms.

Competition principle

The case illustrates how preferential positioning by a dominant digital platform can potentially constitute exclusionary conduct.

The concern was not simply that Google operated a comparison-shopping service. Rather, the conduct involved the relationship between:

• Google's dominant general-search service;
• its own comparison-shopping service; and
• competing comparison-shopping services.

Significance

The case established an important analytical framework for examining self-preferencing through search algorithms and ranking mechanisms.

2. Google Android — European Commission

Google Android, Commission Decision AT.40099 (2018)

The Android case concerned several forms of conduct involving Google's mobile ecosystem.

The Commission examined arrangements concerning:

• Google Search;
• Google Play Store;
• Chrome;
• Android device manufacturers; and
• competing mobile operating systems.

Competition principle

The case demonstrates how an ecosystem operator can use one strategically important product to reinforce its position in another market.

The broader lesson is that preferential treatment may operate through:

• contractual restrictions;
• default placement;
• ecosystem incentives; and
• restrictions affecting rival services.

Significance

Digital ecosystem cases therefore require analysis beyond an individual product because conduct in one layer may influence competition in several interconnected layers.

3. Microsoft — Internet Explorer

European Commission v Microsoft Corp., Case T-201/04, General Court (2007)

Microsoft's integration of Internet Explorer with Windows concerned the relationship between Microsoft's dominant operating-system position and web-browser competition.

The case principally involved tying, rather than pure self-preferencing.

Competition principle

The case is nevertheless important for digital ecosystems because it demonstrates the risks arising when a firm controlling an important technological platform uses that position to advantage an adjacent product.

Significance

It illustrates the broader concept of ecosystem leveraging:

Dominant platform → advantage to affiliated/connected product → reduced opportunities for rival products.

4. Microsoft — Interoperability and Windows

Microsoft Corp. v Commission, Case C-3/37.792 (European Court of Justice, 2007)

The Microsoft litigation also addressed Microsoft's refusal to provide interoperability information to competitors.

Competition principle

Digital ecosystems frequently depend upon interoperability.

A platform can potentially disadvantage competitors through:

• technical restrictions;
• discriminatory APIs;
• limited interoperability;
• withholding information; or
• superior integration for its own services.

Significance

The case provides an important foundation for understanding why technical access can itself become a competition parameter.

5. Amazon Marketplace — European Commission

European Commission — Amazon Marketplace investigation concerning the use of non-public seller data

The Commission examined Amazon's dual role as:

• marketplace operator; and
• retailer competing with sellers using the marketplace.

The concern centred on Amazon's access to and potential use of non-public business data generated by independent sellers.

Competition principle

This illustrates a different form of preferential treatment.

Instead of merely giving its own products higher rankings, an ecosystem operator may obtain an informational advantage from operating the platform itself.

Competitive mechanism

Third-party sellers → platform data → platform's retail business → competitive advantage

Significance

The case demonstrates why data asymmetry can be a source of competitive advantage within integrated digital ecosystems.

6. Google — Android Auto / Interoperability

Google Android Auto — European Commission, Case AT.40088

The Commission examined Google's restrictions concerning interoperability between Android Auto and competing applications.

Competition principle

A dominant ecosystem may potentially disadvantage competitors by controlling the conditions under which third-party services can interact with the platform.

The relevant competitive parameters can include:

• API access;
• interoperability;
• technical compatibility;
• functionality;
• user interface access; and
• availability of competing applications.

Significance

Preferential treatment can therefore occur through technical architecture, not merely through prices or rankings.

7. Apple App Store / App Distribution Investigations

European and national competition authorities have investigated Apple's App Store rules concerning:

• payment systems;
• commission structures;
• steering;
• app distribution;
• access to consumers; and
• treatment of competing services.

These proceedings are significant because Apple operates both:

iOS/App Store infrastructure

and

services competing within that ecosystem.

Competition principle

The platform may possess substantial control over:

• distribution;
• payments;
• consumer discovery;
• default functionality; and
• access to users.

Consequently, rules that favour Apple's own services or impose materially different conditions on rivals can become relevant to competition analysis.

8. United States v Google — Search Distribution

United States v. Google LLC, U.S. District Court for the District of Columbia

The U.S. search case concerned Google's agreements and conduct relating to distribution of search services.

Although the U.S. legal framework differs from EU abuse-of-dominance law, the litigation is relevant to digital ecosystems because it illustrates how control over distribution channels and defaults can affect competition.

Competition principle

Digital competition can be affected not only by search quality but also by:

• default settings;
• distribution agreements;
• access to users; and
• network effects.

9. Apple v Pepper

Apple Inc. v. Pepper, 587 U.S. 273 (2019)

The U.S. Supreme Court considered consumer standing in litigation concerning Apple's alleged monopolization of the iPhone app-distribution market.

The case was principally concerned with antitrust standing rather than a final determination that Apple had unlawfully self-preferenced.

Competition principle

The case is important because it highlights the economic significance of app-store distribution as a distinct commercial channel.

A platform can become an intermediary between:

Developers → platform → consumers

while simultaneously controlling the conditions under which developers reach consumers.

10. European Commission — Apple Music / App Store Steering

The European Commission's proceedings concerning Apple's App Store rules and music-streaming services provide another important illustration.

The competitive concern involved restrictions affecting the ability of competing music-streaming providers to inform users about alternative purchasing options.

Competition principle

Preferential treatment can therefore involve information flows and steering, not merely ranking.

If a platform permits its own service to communicate purchasing opportunities more freely than competing services, the resulting competitive advantage can become relevant.

11. Key Forms of Preferential Treatment

12. Market Definition in Digital Ecosystem Cases

Market definition can be complicated because a digital ecosystem may contain several connected markets.

For example:

Market 1

General search

Market 2

Comparison shopping

Market 3

Online advertising

Market 4

Mobile operating systems

Market 5

App distribution

Market 6

Digital payments

The same company may have significant power in one market while attempting to leverage that power into another.

Therefore, competition authorities examine horizontal, vertical and ecosystem relationships simultaneously.

13. Network Effects

Network effects amplify preferential treatment.

Suppose a platform has:

10 million users

and gives its affiliated service preferential placement.

That service receives:

more visibility → more transactions → more users → more data → improved service → more transactions.

At the same time:

rival loses visibility → fewer users → less data → weaker service → fewer users.

This can produce a self-reinforcing competitive advantage.

14. Data Advantages

Data is particularly important in digital ecosystems.

A platform may simultaneously possess:

• search data;
• transaction data;
• consumer preferences;
• seller performance data;
• advertising data;
• location information;
• payment data; and
• behavioural information.

If the platform's own downstream business receives preferential access to these datasets, competitors may face an important informational disadvantage.

The relevant question is therefore not merely:

Who owns the data?

but also:

How does control and use of data affect competitive conditions?

15. Algorithmic Preferential Treatment

Algorithms can produce preferential treatment without an explicit instruction to discriminate.

For example:

Algorithm A

may systematically rank the platform's affiliated service higher because the platform's internal data, ranking signals or design parameters favour that service.

Competition authorities may therefore examine:

• ranking criteria;
• recommendation systems;
• search algorithms;
• default settings;
• A/B testing;
• data inputs;
• quality-adjustment mechanisms;
• internal policies; and
• changes in ranking after market entry by competitors.

16. Discriminatory Access to APIs

APIs can become strategically important infrastructure.

Suppose:

Platform's own application → full API access

but

Independent competitor → limited API access

The difference can affect:

• functionality;
• speed;
• interoperability;
• user experience;
• data availability; and
• innovation.

Where the platform possesses substantial market power, discriminatory API access may therefore raise competition concerns.

17. Consumer Welfare Considerations

Preferential treatment can affect consumers through:

Higher prices

Competitors may become less effective.

Reduced choice

Consumers may see fewer alternatives.

Lower innovation

Rivals may have weaker incentives to invest.

Reduced quality

Competitive pressure may diminish.

Privacy effects

Reduced competition may affect firms' incentives concerning privacy and data protection.

Reduced interoperability

Consumers may become more dependent upon a single ecosystem.

However, preferential treatment does not automatically harm consumers.

A platform may legitimately prioritise its own product where the preference results from:

• superior quality;
• better integration;
• greater security;
• reduced costs; or
• legitimate technological design.

18. Efficiency Defences

A platform may argue that preferential treatment produces legitimate efficiencies.

Possible justifications include:

1. Better product integration;
2. Improved cybersecurity;
3. Reduced latency;
4. Lower transaction costs;
5. Improved consumer experience;
6. Prevention of fraud;
7. Technical compatibility;
8. Better quality control; and
9. Incentives for innovation.

Competition authorities therefore need to distinguish competition on the merits from artificial exclusion.

19. Evidentiary Issues

Preferential-treatment investigations may require extensive digital evidence.

Relevant evidence may include:

• source code;
• algorithmic documentation;
• ranking histories;
• API documentation;
• internal emails;
• product-development documents;
• A/B testing;
• consumer data;
• seller data;
• click-through rates;
• conversion rates;
• traffic data;
• internal strategy documents; and
• records of changes to platform rules.

The authority may compare:

Treatment of affiliated service

with

Treatment of equivalent independent competitors.

20. Competition Analysis Framework

A useful analytical model is:

Step 1 — Identify the ecosystem

What platform or digital infrastructure is involved?

Step 2 — Identify the platform's role

Is the undertaking simultaneously:

• intermediary;
• infrastructure provider;
• marketplace;
• competitor;
• advertiser; or
• payment provider?

Step 3 — Define relevant markets

Identify the relevant product, geographic and interconnected markets.

Step 4 — Establish market power

Examine:

• market shares;
• network effects;
• switching costs;
• data advantages;
• entry barriers;
• interoperability;
• multi-homing; and
• ecosystem dependence.

Step 5 — Identify preferential treatment

Determine precisely what advantage is provided.

Step 6 — Identify affected competitors

Which rival businesses receive inferior treatment?

Step 7 — Examine foreclosure

Determine whether competitors':

• visibility;
• sales;
• access;
• data;
• innovation;
• distribution; or
• customer acquisition

are materially impaired.

Step 8 — Examine efficiencies

Consider whether the conduct has objective technical or economic justification.

Step 9 — Assess consumer effects

Examine:

• price;
• quality;
• choice;
• innovation;
• privacy; and
• interoperability.

Step 10 — Consider remedies

Possible remedies include:

• non-discrimination obligations;
• ranking transparency;
• interoperability;
• API access;
• data-access requirements;
• separation of functions;
• behavioural commitments;
• monitoring; and
• structural remedies in exceptional circumstances.

21. Difference Between Legitimate Integration and Anticompetitive Preferential Treatment

22. Regulatory Challenges

A. Dynamic markets

Digital markets evolve rapidly.

A market that appears competitive today may become concentrated tomorrow.

B. Algorithmic opacity

Authorities may have difficulty determining why an algorithm favours particular services.

C. Multi-sided markets

The platform may serve:

• consumers;
• advertisers;
• sellers;
• developers; and
• service providers

simultaneously.

D. Zero-price services

Traditional price-based analysis becomes less useful where consumers pay with:

• attention;
• data;
• engagement; or
• advertising exposure.

E. Ecosystem-wide effects

Conduct may affect several interconnected markets simultaneously.

23. Emerging Competition Concerns

Preferential treatment is increasingly relevant to:

Artificial intelligence ecosystems

AI platforms may favour:

• their own models;
• affiliated applications;
• preferred APIs;
• proprietary cloud infrastructure; or
• internal marketplaces.

Cloud ecosystems

Cloud providers may favour their own:

• databases;
• AI models;
• cybersecurity products;
• storage services; or
• developer tools.

App stores

Potential concerns include:

• payment discrimination;
• ranking;
• search visibility;
• commissions;
• steering restrictions; and
• access to device functionality.

E-commerce

Marketplace operators may favour:

• private-label products;
• affiliated sellers;
• preferred logistics providers; or
• platform-owned advertising products.

Digital advertising

Ad-tech platforms may favour their own:

• exchanges;
• demand-side platforms;
• supply-side platforms; or
• measurement services.

24. Overall Legal Principle

The central competition-law principle can be expressed as:

A digital platform's ownership of a downstream or complementary service is not, by itself, unlawful. The competition concern arises where substantial market power over a digital gateway is combined with preferential treatment that lacks adequate competitive justification and materially impairs effective competition.

The most important cases for understanding this area are Google Shopping, Google Android, Microsoft, Amazon Marketplace, Google Android Auto and the Apple App Store proceedings, because together they illustrate preferential treatment through ranking, defaults, interoperability, data, distribution and payment mechanisms.

Conclusion

Preferential treatment has become a central issue in modern digital competition law because digital ecosystems frequently combine platform control with vertical integration.

The legal analysis should not stop at asking whether a platform favours its own products. It should examine:

Market power → platf