Digital Ecosystem Competition Issues

1. Introduction

Digital ecosystem competition concerns competition where a large digital undertaking operates not merely in one market, but across a connected set of products, services, platforms, data resources, devices, applications, payment systems, cloud infrastructure, advertising services, and complementary technologies.

Unlike a traditional single-market business, an ecosystem operator may control several layers simultaneously—for example, an operating system, app store, search engine, advertising network, browser, payment service, cloud infrastructure, and hardware. This can create ecosystem-wide market power because advantages obtained in one market can reinforce power in another.

The principal competition-law concern is therefore not simply whether a firm has a high market share in one relevant market, but whether its control over interconnected markets enables exclusion, self-preferencing, tying, discriminatory access, data advantages, interoperability restrictions, or user lock-in.

In the EU, these issues can arise under Articles 101 and 102 TFEU, the EU Merger Regulation, and increasingly the Digital Markets Act (DMA). In the UK, the principal framework includes the Competition Act 1998, merger control, and the Digital Markets, Competition and Consumers Act 2024 (DMCC Act).

2. Meaning of a Digital Ecosystem

A digital ecosystem is a network of technologically or commercially interconnected services in which users, businesses, developers, advertisers, and complementors interact.

A simplified ecosystem may look like:

Device → Operating System → App Store → Payment System → Apps → Data → Advertising → Cloud → AI Services

The competitive significance arises because control at one layer can affect competition at another.

Example

Suppose an undertaking controls:

• a dominant mobile operating system;
• the principal app store;
• an integrated payment system;
• a browser;
• an advertising platform; and
• a large consumer-data infrastructure.

It could potentially:

1. favour its own applications;
2. restrict competing payment providers;
3. impose discriminatory app-store conditions;
4. combine data from different services;
5. make switching difficult;
6. impose technical restrictions on interoperability;
7. disadvantage competing browsers or search engines; and
8. acquire emerging competitors before they become significant threats.

Thus, ecosystem competition is fundamentally concerned with cross-market leverage.

3. Principal Digital Ecosystem Competition Issues

A. Self-Preferencing

Self-preferencing occurs when an ecosystem operator gives preferential treatment to its own downstream service.

Examples include:

• ranking its own shopping service above rivals;
• giving its own payment service superior technical access;
• favouring its own applications in an app store;
• promoting its own advertising products;
• giving its own AI services preferential access to distribution.

The concern is particularly strong where the platform functions simultaneously as:

infrastructure provider + marketplace operator + competitor.

The European Commission's Google Shopping case is the classic illustration.

B. Tying and Bundling

An ecosystem operator may require users or business customers to adopt one service in order to access another.

Examples:

• operating system + search;
• operating system + browser;
• app store + payment system;
• cloud service + proprietary software;
• hardware + subscription service;
• AI assistant + operating system.

Bundling may create efficiencies, but competition concerns arise where the practice forecloses equally efficient competitors or makes entry into adjacent markets substantially more difficult.

4. App-Store Gatekeeping

App stores represent a particularly important ecosystem bottleneck.

A platform operator may determine:

• who can distribute applications;
• which payment system developers must use;
• commission levels;
• ranking and discoverability;
• technical access;
• advertising rules;
• alternative app-store access;
• communication between developers and users.

The competition problem becomes acute when the platform operator competes with the developers whose access it controls.

This produces a structural conflict:

The ecosystem owner is simultaneously referee, infrastructure provider, and competitor.

5. Interoperability Restrictions

Interoperability enables rival products to communicate with an incumbent ecosystem.

Restrictions may concern:

• APIs;
• messaging;
• payment interfaces;
• operating-system functionality;
• smart devices;
• cloud migration;
• data portability;
• identity systems;
• AI interfaces.

A dominant undertaking may have incentives to make interoperability difficult because compatibility can reduce switching costs.

Competition law therefore increasingly examines whether technical design itself constitutes a foreclosure mechanism.

6. Data Advantages and Ecosystem Power

Data can reinforce ecosystem dominance.

An ecosystem operator may obtain data from several connected markets:

Search + Maps + Shopping + Video + Advertising + Browser + Mobile + Cloud

This creates a potential data feedback loop:

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

The resulting advantage may make entry increasingly difficult.

However, possession of large quantities of data is not automatically an infringement. Competition authorities must generally examine:

• whether the data is commercially important;
• whether rivals can realistically obtain substitutes;
• whether access is technically or legally restricted;
• whether data aggregation creates an exclusionary advantage;
• whether the conduct harms competition rather than merely individual competitors.

7. Ecosystem Lock-In

Lock-in occurs when users or businesses face substantial costs in leaving an ecosystem.

Switching costs may arise from:

• loss of accumulated data;
• loss of applications;
• incompatible formats;
• subscriptions;
• contacts and social connections;
• device compatibility;
• learned user behaviour;
• loyalty programmes;
• authentication systems;
• cloud migration costs.

Lock-in can create ecosystem inertia.

A user may remain with a platform even when a competing service offers better price or quality because leaving means abandoning complementary services.

This is particularly significant in digital markets because network effects and switching costs can reinforce one another.

8. Network Effects

Digital ecosystems often exhibit strong network effects.

Direct network effect

The service becomes more valuable as more users join.

Indirect network effect

More users attract developers or advertisers, while more developers and advertisers attract users.

The result can be a reinforcing cycle:

Users → Developers → Applications → More Users → More Data → Better Services → More Users

This can produce rapid concentration.

Importantly, network effects do not themselves establish dominance. They become competition-law relevant when combined with exclusionary conduct or significant barriers to entry.

9. Ecosystem Leveraging

A firm possessing power in one market may leverage that power into an adjacent market.

For example:

Operating-system dominance → app-store dominance → payment-market advantage

or:

Search dominance → advertising-data advantage → AI advantage

or:

Cloud infrastructure → AI-compute advantage → AI-service distribution

The legal question is whether the undertaking is using an existing bottleneck to foreclose competitors in another market.

10. Digital Ecosystem Competition and Merger Control

Ecosystem competition has also transformed merger analysis.

Traditional merger control often concentrated on:

• market shares;
• prices;
• concentration;
• horizontal overlaps.

Digital ecosystem transactions may require consideration of:

• nascent competitors;
• data assets;
• user communities;
• interoperability;
• ecosystem complementarity;
• vertical foreclosure;
• potential competition;
• innovation competition;
• access to infrastructure.

A small company may have low current revenue but possess technology capable of becoming a major competitive constraint.

Consequently, killer-acquisition and nascent-competition theories are particularly important in digital ecosystems.

11. Important Case Laws

1. Google Shopping — European Commission / General Court

Case: Google and Alphabet v Commission, Google Shopping litigation.

Principle

Google was found to have abused its dominant position in general search by systematically favouring its own comparison-shopping service in search-result placement while demoting competing comparison-shopping services.

Importance for ecosystems

The case demonstrates how dominance in one layer—general search—can be leveraged to advantage a connected service—comparison shopping.

It is therefore a foundational authority for:

• self-preferencing;
• leveraging;
• platform neutrality;
• ranking discrimination;
• ecosystem foreclosure.

2. Google Android — European Commission / General Court

Case: Google and Alphabet v Commission, Android.

Principle

The European Commission examined Google's contractual practices concerning Android, including tying and restrictions relating to competing search engines and browsers.

The General Court largely upheld the Commission's findings while modifying certain aspects of the decision.

Importance

Android illustrates how control over an operating system can provide leverage into:

• search;
• browsers;
• mobile distribution;
• application ecosystems.

It demonstrates the significance of multi-layer platform control.

3. Google Search (AdSense) — European Commission

The European Commission's AdSense case concerned contractual restrictions imposed on third-party websites using Google's search-advertising intermediation services.

Principle

The Commission considered that Google's restrictions could prevent competitors from accessing important online advertising distribution channels.

Ecosystem significance

The case illustrates vertical foreclosure within an advertising ecosystem:

Search → advertising intermediation → publishers → advertisers

Control over an upstream or intermediary layer can affect competition downstream.

12. Apple App Store — Epic Games v Apple

Epic Games, Inc. v Apple Inc.

This litigation is one of the most significant modern disputes concerning digital ecosystems.

Core issue

Epic challenged Apple's control over iOS application distribution and payment mechanisms.

The dispute concerned Apple's:

• App Store distribution model;
• payment system;
• commission arrangements;
• restrictions on alternative payment mechanisms;
• control over communication between developers and users.

Competition significance

The case demonstrates the structural problem of an ecosystem operator controlling the principal route through which rivals reach users.

The critical economic question is:

Can an ecosystem owner impose conditions on access to a bottleneck that it simultaneously uses to compete against businesses dependent upon that bottleneck?

The case is particularly relevant to platform governance, payment restrictions, app distribution and developer access.

13. United States v Google — Search and Distribution

The U.S. Google search litigation is another major ecosystem case.

The U.S. Department of Justice challenged Google's agreements concerning distribution of search.

Competition issue

Google's position in search was allegedly reinforced through arrangements involving:

• browsers;
• mobile devices;
• operating systems;
• default search placement;
• distribution channels.

Ecosystem significance

The case illustrates how dominance may be maintained through a network of distribution agreements rather than merely through product superiority.

The ecosystem theory is:

Search quality + defaults + distribution + scale + data

can collectively reinforce market power.

14. Microsoft — Internet Explorer

United States v Microsoft Corp.

Although predating today's platform economy, the Microsoft case remains extremely important to digital ecosystem analysis.

Principle

Microsoft possessed substantial power in PC operating systems and was accused of using that position to restrict competition from browsers.

The litigation addressed:

• tying;
• exclusionary agreements;
• distribution;
• operating-system control;
• barriers to competing technologies.

Modern significance

The case provides an early model of what is now described as ecosystem leveraging:

Control of a foundational platform → advantage in an adjacent digital market.

15. Microsoft / Commission — Windows Media Player

Microsoft Corp. v Commission

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

Importance

The case demonstrates that integration of two digital products can raise competition concerns when the dominant platform uses its position to disadvantage competing complementary products.

The case remains relevant to:

• tying;
• bundling;
• interoperability;
• platform integration;
• technical design;
• adjacent-market foreclosure.

16. Intel — Rebates and Ecosystem Effects

Intel Corp. v Commission

The Intel litigation concerned rebates offered by Intel to major computer manufacturers and a retailer.

The case became especially important because the Court of Justice required consideration of whether the rebates were capable of producing exclusionary effects.

Ecosystem significance

Although not a modern platform case, Intel demonstrates an important methodological point:

Competition law must examine the actual or potential foreclosure effects of conduct rather than relying solely on formal classification.

This approach is particularly relevant when analysing ecosystem incentives.

17. Amazon Marketplace Cases and Self-Preferencing

European competition authorities have scrutinised Amazon's use of marketplace data and its treatment of sellers.

The concern is that Amazon can simultaneously act as:

1. marketplace operator;
2. data collector;
3. logistics provider; and
4. competing retailer.

This creates the possibility of information asymmetry.

Amazon may potentially observe information generated by independent sellers while competing against those same sellers.

The ecosystem concern is therefore not merely price discrimination but control of commercially valuable platform-generated information.

18. Booking.com and Platform Parity

Platform competition cases involving online travel platforms have examined contractual arrangements affecting price parity and distribution.

These cases demonstrate how an intermediary can influence competition between suppliers and competing distribution platforms.

The ecosystem structure is:

Consumers ↔ platform ↔ hotels/service providers ↔ competing platforms

Restrictions on suppliers can therefore affect competition at multiple levels simultaneously.

19. DMA and the New Ecosystem Model

The EU Digital Markets Act represents a major shift because it does not depend exclusively on traditional Article 102-style litigation.

It identifies gatekeepers and imposes obligations concerning areas such as:

• self-preferencing;
• interoperability;
• data combination;
• sideloading;
• alternative payment systems;
• app-store access;
• portability;
• switching;
• interoperability with certain services.

The conceptual change is significant.

Traditional competition law often asks:

Has dominance been abused?

The DMA increasingly asks:

Does a powerful digital gatekeeper have structural incentives and capabilities that justify ex ante obligations?

This is particularly suited to ecosystem markets where harmful conduct may become entrenched before conventional litigation can resolve it.

20. Ecosystem Competition Theory

Digital ecosystems can be analysed through five interacting forms of power:

1. Infrastructure power

Control over the technical layer necessary to participate.

2. Distribution power

Control over access to users.

3. Data power

Control over commercially valuable information.

4. Interface power

Control over APIs, rankings, defaults and user interfaces.

5. Behavioural power

Ability to influence user choices through design, defaults, recommendations and personalization.

These forms of power can reinforce each other.

Infrastructure → Distribution → Data → Personalization → User retention → Greater infrastructure power

This is an ecosystem feedback loop.

21. Key Competition-Law Theories Applicable to Digital Ecosystems

22. Why Traditional Market Definition Becomes Difficult

Digital ecosystems complicate the traditional relevant-market framework.

A platform may simultaneously serve:

• consumers;
• advertisers;
• developers;
• merchants;
• content creators;
• financial institutions;
• enterprises.

Consequently, authorities may need to consider multiple interdependent markets rather than treating the ecosystem as a single market.

The relevant analytical question may become:

Where does market power originate, and through which ecosystem connections is that power transmitted?

23. Consumer Welfare and Ecosystem Competition

Ecosystem conduct can harm consumers even without an immediate price increase.

Potential harms include:

• reduced choice;
• reduced innovation;
• degraded privacy;
• lower interoperability;
• higher switching costs;
• inferior quality;
• reduced developer opportunities;
• reduced transparency;
• weaker protection against exploitative design.

Thus, digital competition analysis increasingly recognises non-price dimensions of competition.

24. Innovation Competition

An ecosystem may suppress competition not by increasing prices but by reducing innovation.

For example, an incumbent may:

• prevent interoperability;
• acquire promising startups;
• restrict APIs;
• disadvantage competing applications;
• limit access to data;
• make alternative services difficult to discover.

The result can be innovation foreclosure.

This is particularly important in AI and emerging digital markets, where today's small complementor may become tomorrow's major competitor.

25. Remedies

Competition authorities may consider several remedies.

Structural remedies

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

Behavioural remedies

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

Technical remedies

• API access;
• switching tools;
• alternative payment mechanisms;
• interoperability protocols.

Governance remedies

• independent compliance monitoring;
• transparency requirements;
• internal firewalls;
• algorithmic auditing.

The most effective remedy depends on whether the competitive problem originates from conduct, architecture, ownership, or ecosystem structure.

26. Key Case-Law Principles — Consolidated

At least six major authorities can therefore be used to understand digital ecosystem competition:

1. Google Shopping — self-preferencing and leveraging.
2. Google Android — tying, defaults and ecosystem leverage.
3. Google AdSense — vertical foreclosure and advertising distribution.
4. Epic Games v Apple — app-store gatekeeping and payment restrictions.
5. United States v Google — search distribution, defaults and network effects.
6. United States v Microsoft — operating-system leverage into adjacent digital markets.
7. Microsoft v Commission — tying and platform integration.
8. Intel v Commission — effects-based analysis of exclusionary conduct.
9. Amazon marketplace investigations — platform data and conflicts between marketplace operator and downstream competitor.
10. Booking.com investigations — platform intermediation and parity restrictions.

27. Conclusion

Digital ecosystem competition law moves beyond the traditional question of whether a company dominates a single product market. The central concern is increasingly whether control over one technological or commercial layer enables an undertaking to extend, protect or entrench power across an interconnected ecosystem.

The most important risks are:

self-preferencing + tying + data aggregation + interoperability restrictions + network effects + switching costs + distribution control + ecosystem acquisitions.

The significance of cases such as Google Shopping, Google Android, Microsoft, Epic Games v Apple and the Google search litigation is that they show how digital market power can be exercised through defaults, interfaces, technical architecture, contractual restrictions and control of distribution, rather than through price alone.