Competition Law and Governance of Trust-Based Markets

1. Introduction

Trust-based markets are markets in which consumers, businesses, or intermediaries rely heavily on reputation, reliability, certification, data integrity, privacy, security, professional standards, or the credibility of a platform or intermediary when choosing commercial partners.

Examples include:

• digital platforms and online marketplaces;
• financial and payment services;
• professional and certification services;
• healthcare and insurance;
• cloud and cybersecurity services;
• rating and review platforms;
• digital identity and authentication systems;
• knowledge and information markets;
• supply-chain certification;
• data-sharing ecosystems; and
• AI and algorithmic decision-making markets.

Trust can promote competition because it reduces information asymmetry and transaction costs. However, control over trust infrastructure can itself become a source of market power. A dominant undertaking may determine who is trustworthy, control reputation scores, restrict access to verification systems, manipulate rankings, exploit user data, or impose contractual conditions that make it difficult for competitors to establish credibility.

Competition law therefore increasingly examines not merely price and output, but also the competitive significance of reputation, data, interoperability, transparency, access, switching costs, and ecosystem control.

2. Meaning of a Trust-Based Market

A trust-based market exists where a significant part of competitive choice depends upon confidence in the reliability or integrity of a supplier, intermediary, platform, product, or information source.

Trust may arise from:

1. Reputation – historical performance and consumer reviews.
2. Certification – accreditation or quality assurance.
3. Data reliability – accuracy and integrity of commercially important information.
4. Security – cybersecurity, authentication and fraud prevention.
5. Privacy – protection of personal and commercially sensitive information.
6. Network reputation – trust generated by participation in a large ecosystem.
7. Professional standards – licensing and professional qualifications.
8. Platform verification – badges, ratings and identity verification.
9. Algorithmic credibility – rankings, recommendations and automated assessments.
10. Institutional trust – confidence generated by an established intermediary.

The competition-law problem emerges where a firm moves from earning trust through competition to controlling the mechanisms through which trust is created or allocated.

3. Why Trust Can Create Market Power

Trust possesses several characteristics that can generate durable competitive advantages.

A. Reputation effects

A firm with a strong reputation may attract more users. More users generate more transactions and reviews, which further strengthen the firm's reputation.

This can create a positive feedback loop:

Trust → Users → Transactions → Data → Better reputation → More trust

Such a loop can produce substantial barriers to entry.

B. Switching costs

Consumers may hesitate to move to another platform because they would lose:

• reviews;
• transaction history;
• reputation scores;
• professional credentials;
• verified identity;
• accumulated ratings;
• contacts; or
• transaction records.

C. Information asymmetry

Where consumers cannot independently assess quality, the intermediary controlling trustworthy information may acquire considerable influence.

D. Network effects

The value of a trust system can increase as more participants use it.

E. Data advantages

A platform may possess extensive information about:

• customer reliability;
• supplier performance;
• transaction histories;
• fraud patterns;
• product quality;
• user behaviour; and
• reputation.

That information can become a competitive asset.

4. Competition-Law Risks

4.1 Abuse of dominance

Competition authorities may examine whether a dominant undertaking exploits its control over trust infrastructure.

Potential conduct includes:

• denying access to verification systems;
• discriminatory certification;
• manipulation of reputation scores;
• exclusion from trusted marketplaces;
• self-preferencing;
• tying verification to another service;
• excessive switching barriers;
• discriminatory access to data;
• refusal to provide interoperability;
• exploitative use of reputation information; and
• discriminatory ranking.

The relevant legal test depends upon the jurisdiction, but generally requires analysis of dominance, conduct, effects, and justification.

5. Trust as an Essential Competitive Input

A trust mechanism can sometimes resemble an essential facility where competitors cannot realistically compete without access to it.

For example, imagine a dominant digital marketplace controlling the principal identity-verification system used by consumers and sellers.

If the platform:

1. controls verification;
2. prevents rivals from obtaining equivalent verification;
3. gives verified status preferential visibility; and
4. makes verification practically indispensable,

access to the trust infrastructure may become an important competition issue.

The legal question is not simply whether the system is useful. Authorities would examine whether denial or discrimination forecloses competition and whether legitimate technical, security or regulatory justifications exist.

6. Trust, Interoperability and Data Portability

Interoperability can reduce the competitive significance of accumulated trust.

Suppose a professional marketplace allows users to accumulate ten years of verified reviews. If those reviews cannot be transferred to another platform, the user's accumulated reputation becomes a switching barrier.

Competition policy may therefore consider:

• data portability;
• reputation portability;
• API access;
• interoperability;
• common technical standards;
• identity portability; and
• authentication interoperability.

The challenge is balancing interoperability against:

• privacy;
• cybersecurity;
• fraud prevention;
• intellectual property;
• confidential information; and
• integrity of the reputation system.

7. Self-Preferencing and Trust

A vertically integrated platform can potentially favour its own products by exploiting trust information.

For example:

Marketplace → controls seller ratings → operates its own retail business → gives its own products superior trust scores or visibility.

The concern is particularly significant where consumers interpret ranking or verification as an independent quality signal.

The competitive issue becomes whether the undertaking is using its position as trust intermediary to disadvantage competitors in an adjacent market.

8. Manipulation of Reputation Systems

Reputation systems can become competition parameters.

Potential practices include:

• suppressing competitors' reviews;
• artificially improving affiliated sellers' ratings;
• selectively enforcing review rules;
• changing ranking algorithms without adequate safeguards;
• excluding negative information about affiliated products;
• manipulating verification badges;
• charging competitors for enhanced trust status; and
• using privileged data to reproduce competitors' successful products.

Competition authorities may need to distinguish legitimate algorithmic improvements from conduct designed to distort competitive conditions.

9. Trust and Consumer Protection

Competition law and consumer protection frequently overlap.

For example, a platform may claim that:

"Verified sellers are independently trustworthy."

If verification is actually controlled by the platform and selectively granted, the conduct may raise both:

• consumer-protection concerns, because consumers may be misled; and
• competition concerns, because competitors may be disadvantaged.

The two bodies of law address different interests but can reinforce one another.

10. Trust-Based Collusion

Trust can also facilitate horizontal coordination.

Competitors may use:

• common information systems;
• industry databases;
• shared certification bodies;
• common pricing software;
• industry associations;
• shared customer-risk databases; or
• common algorithms.

Such systems can reduce uncertainty between competitors.

An information-sharing arrangement becomes particularly problematic when it enables competitors to monitor each other's:

• prices;
• output;
• customers;
• costs;
• inventory;
• future commercial strategies; or
• bids.

Thus, trust between competitors is not necessarily pro-competitive. A system that increases trust among competitors may simultaneously reduce the uncertainty that normally constrains collusion.

11. Important Case Laws

1. United Brands v Commission

Case 27/76, Judgment of 14 February 1978

The Court of Justice examined United Brands' position in the banana market and its conduct toward distributors.

The case is important for trust-based markets because it demonstrates how a powerful undertaking can use its commercial position and control over distribution relationships to influence market access.

Principle

Dominance is not established merely by high market share. The analysis considers factors such as:

• economic strength;
• barriers to entry;
• customer dependence;
• competitive constraints; and
• the undertaking's ability to behave independently.

Relevance to trust markets

Where customers or distributors become highly dependent upon a particular intermediary because of its reputation, reliability or network, those forms of dependence can contribute to market power.

12. Hoffmann-La Roche v Commission

Case 85/76, Judgment of 13 February 1979

This is one of the foundational EU abuse-of-dominance cases.

The Court considered loyalty-inducing arrangements used by Hoffmann-La Roche.

Principle

A dominant undertaking has a special responsibility not to allow its conduct to impair genuine undistorted competition.

Trust-market relevance

Trust can become a loyalty mechanism.

For example, a dominant platform could offer:

• exclusive verification;
• loyalty-based trust badges;
• preferential certification;
• trusted-partner status; or
• exclusive reputation benefits.

If these mechanisms artificially lock customers or suppliers into the dominant ecosystem, competition concerns may arise.

13. Oscar Bronner GmbH & Co KG v Mediaprint

Case C-7/97, Judgment of 26 November 1998

This case concerned access to a newspaper home-delivery system.

The Court established a demanding framework for refusal-to-deal claims.

Principle

Access to another undertaking's infrastructure is not automatically required merely because the infrastructure would make competition easier.

The relevant circumstances include whether:

• access is indispensable;
• duplication is practically or economically impossible;
• refusal eliminates effective competition; and
• there is no objective justification.

Trust-market relevance

The same logic is relevant to trust infrastructure.

A dominant platform's:

• verification system;
• authentication network;
• reputation database; or
• trusted identity infrastructure

should not automatically be treated as an essential facility.

The indispensability and foreclosure analysis remains important.

14. Microsoft v Commission

Case T-201/04, Judgment of 17 September 2007

The Microsoft case involved interoperability information and Microsoft's position in operating systems.

Principle

Interoperability can be a significant competitive parameter, particularly where control over an important technological interface allows a dominant undertaking to restrict competitors.

Trust-market relevance

Modern trust ecosystems frequently depend on interoperable:

• identity systems;
• APIs;
• authentication mechanisms;
• reputation data;
• cybersecurity infrastructure; and
• cloud services.

A dominant undertaking controlling an interoperability layer could potentially use that control to disadvantage competing ecosystems.

15. Google Shopping

Google Search (Shopping), Case AT.39740, Commission Decision of 27 June 2017

The European Commission examined Google's treatment of comparison-shopping services.

The Commission concluded that Google had abused dominance by systematically giving prominent placement to its own comparison-shopping service while subjecting rival services to less favourable positioning.

Trust-market relevance

Search rankings are themselves a form of information trust infrastructure.

Users frequently assume that prominent results are relevant or reliable.

Therefore, a dominant information intermediary may possess the ability to influence:

• visibility;
• consumer confidence;
• traffic;
• reputation; and
• commercial opportunities.

The case illustrates why ranking and visibility can be competition parameters, not merely technical design choices.

16. Slovak Telekom v Commission

Joined Cases C-152/19 P and C-165/19 P, Judgment of 25 March 2021

The case concerned access to telecommunications infrastructure and exclusionary conduct.

Principle

A dominant undertaking's control over infrastructure can affect downstream competition where access conditions disadvantage rivals.

Trust-market relevance

Modern trust markets increasingly depend upon shared infrastructure, including:

• digital identity;
• cloud infrastructure;
• authentication;
• payment rails;
• cybersecurity systems; and
• data-access systems.

The case therefore provides useful analytical guidance for understanding how upstream infrastructure control can influence downstream competition.

17. IMS Health v NDC Health

Case C-418/01, Judgment of 29 April 2004

The case concerned access to a copyrighted data structure used in the pharmaceutical information market.

The Court considered the circumstances in which refusal to license intellectual property could constitute abuse.

Principle

Exceptional circumstances may justify compulsory access where refusal would:

• prevent the emergence of a new product or service;
• lack objective justification; and
• reserve a downstream market to the intellectual-property owner.

Trust-market relevance

Reputation and commercially valuable information can be protected by:

• intellectual property;
• database rights;
• confidentiality;
• contractual rights.

Competition law must therefore balance legitimate protection of proprietary trust systems against exclusionary use of those rights.

18. Bronner, IMS Health and Microsoft Together

These cases demonstrate an important distinction.

The existence of market power alone does not mean that a trust system must be shared.

19. Trust Accumulation as a Barrier to Entry

One of the most important emerging issues is strategic trust accumulation.

A large platform can accumulate:

• millions of reviews;
• transaction histories;
• identity records;
• seller-performance information;
• fraud indicators;
• consumer feedback;
• verification records; and
• behavioural data.

A new entrant may technically be able to enter the market but still face a major disadvantage because it lacks comparable trust capital.

This produces a distinction between:

Traditional entry barrier

High financial cost of building infrastructure.

and

Trust-based entry barrier

High cost and time required to accumulate credibility.

Competition authorities may therefore need to consider dynamic competition rather than only current market shares.

20. Trust Portability

A potentially important regulatory solution is trust portability.

Users could potentially transfer:

• verified identity;
• transaction history;
• reputation scores;
• professional credentials;
• verified reviews; and
• other trustworthy records.

However, portability must be designed carefully.

Benefits

It can:

• reduce switching costs;
• facilitate entry;
• increase multi-homing;
• weaken network effects;
• encourage innovation; and
• reduce dependence upon dominant platforms.

Risks

It can also create:

• fake-review migration;
• identity fraud;
• privacy violations;
• manipulation of reputation;
• cybersecurity risks; and
• difficulties in verifying the authenticity of transferred data.

21. Governance of Trust Infrastructure

Effective governance should address five principal dimensions.

1. Access

Competitors should not unnecessarily be excluded from commercially important trust infrastructure.

2. Transparency

Participants should understand important rules governing:

• verification;
• ranking;
• suspension;
• reputation;
• authentication; and
• access.

3. Non-discrimination

Equivalent participants should not receive systematically different treatment without objective justification.

4. Portability

Where appropriate, users should be able to move commercially valuable reputation or identity information.

5. Accountability

Platforms should have procedures for:

• correcting inaccurate information;
• challenging decisions;
• detecting manipulation; and
• auditing important algorithms.

22. Artificial Intelligence and Trust Markets

AI introduces a new dimension.

AI systems increasingly determine:

• creditworthiness;
• fraud risk;
• insurance risk;
• hiring suitability;
• seller quality;
• search rankings;
• content credibility; and
• consumer recommendations.

If a dominant undertaking controls both:

data → AI model → trust score → market access

it may possess substantial ecosystem power.

Potential competition concerns include:

• discriminatory access;
• exclusionary scoring;
• opaque ranking;
• data foreclosure;
• self-preferencing;
• algorithmic coordination;
• interoperability restrictions; and
• leveraging trust information into adjacent markets.

23. Competition Between Trust Systems

Competition law should distinguish between competition within a trust system and competition between trust systems.

For example:

Platform A → verification system A
Platform B → verification system B

If consumers can use both systems, competition may remain robust.

But if Platform A makes its trust credential incompatible with Platform B, it may increase switching costs and encourage users and suppliers to remain within A's ecosystem.

Thus, interoperability can determine whether competing trust systems actually compete.

24. Remedies

Competition authorities may employ several remedies depending upon the infringement and jurisdiction.

Structural remedies

• divestiture;
• separation of business units;
• ownership restrictions.

Behavioural remedies

• non-discriminatory access;
• interoperability;
• data portability;
• prohibition of self-preferencing;
• transparent ranking rules;
• non-exclusive certification;
• restrictions on data use.

Procedural remedies

• independent audits;
• algorithmic monitoring;
• complaint procedures;
• periodic compliance reporting.

Technical remedies

• open APIs;
• interoperability standards;
• secure data-transfer mechanisms;
• portable identity systems.

25. Key Legal Issues for Future Regulation

The governance of trust-based markets is likely to raise several difficult questions:

1. When does reputation become an economic asset capable of creating market power?
2. When should reputation data be portable?
3. Can a dominant platform own the principal verification mechanism for its market?
4. When does a trust score constitute an essential input?
5. Can platforms self-preference their own verified suppliers?
6. How should algorithmic trust scores be audited?
7. When does information sharing between trusted competitors facilitate collusion?
8. How should privacy law interact with competition-based data-access remedies?
9. Can interoperability obligations undermine cybersecurity?
10. Should trust infrastructure be regulated like other digital infrastructure?

26. Overall Legal Framework

The competition-law analysis can be represented as follows:

Trust Asset
↓
Control by Undertaking
↓
Market Position
↓
Dependence of Users/Competitors
↓
Potential Competitive Harm
↓
Assessment of Conduct
↓
Objective Justification / Efficiency Defence
↓
Competition Remedy

The central question is not:

"Is the undertaking trusted?"

but rather:

"Does the undertaking's control over trust allow it to restrict, distort, or eliminate competitive constraints?"

27. Conclusion

Trust is ordinarily pro-competitive. It reduces information asymmetry, facilitates transactions, lowers search costs and enables consumers to choose among unfamiliar suppliers.

The competition problem arises when trust itself becomes an exclusionary asset.

A dominant undertaking may potentially convert:

reputation → data → verification → network effects → switching costs → market power.

The major competition-law concerns therefore include refusal of access, discriminatory verification, loyalty mechanisms, self-preferencing, ranking manipulation, interoperability restrictions, data foreclosure, reputation lock-in and information-sharing arrangements capable of facilitating coordination.

The leading cases—including United Brands, Hoffmann-La Roche, Bronner, Microsoft, IMS Health, Google Shopping and Slovak Telekom—provide different parts of the analytical framework. Together, they demonstrate that competition law must distinguish between legitimate ownership and development of trust and the strategic use of trust infrastructure to foreclose competitors.

In emerging digital and knowledge-intensive markets, the governance of trust is therefore likely to become an important component of abuse-of-dominance, interoperability, data-access, platform-regulation and market-entry analysis.