Competition Law and Adaptive Governance for Enduring Market Structures

1. Introduction

Adaptive governance for enduring market structures refers to a competition-law approach designed for markets in which competitive conditions remain stable for long periods, even though technology, business models, consumer behaviour, and regulatory conditions continue to change.

Traditional competition law often focuses on a particular event—such as a merger, cartel, exclusionary agreement, or abuse of dominance. Adaptive governance takes a broader and longer-term view. It asks:

• How did a market become concentrated?
• Why does the structure remain concentrated?
• Are entry barriers persistent?
• Can new competitors realistically challenge established firms?
• Do network effects, data advantages, intellectual property, switching costs, or interoperability restrictions protect incumbents?
• Should competition authorities monitor the market after an intervention?
• Can structural or behavioural remedies preserve competition over time?

The central idea is that competition is not merely a condition existing at one point in time; it is also a process through which market structures evolve.

2. Meaning of an "Enduring Market Structure"

An enduring market structure is a market configuration that persists over a considerable period.

Examples include:

1. Highly concentrated oligopoly
2. Dominant-firm markets
3. Two-sided digital platforms
4. Markets protected by strong network effects
5. Markets with substantial economies of scale
6. Markets with high switching costs
7. Markets dependent on essential infrastructure
8. Markets where accumulated data creates persistent advantages
9. Markets with strong brand or distribution advantages
10. Markets where entry occurs but rarely produces effective competitive pressure

An enduring structure is not automatically unlawful.

A market may remain concentrated because firms are genuinely more efficient. Competition law generally becomes concerned when the structure is maintained or strengthened through conduct that substantially restricts competition.

3. Why Adaptive Governance Is Necessary

A. Markets Change Faster Than Traditional Regulation

Technology can transform markets rapidly.

For example:

• physical retail → e-commerce;
• traditional advertising → digital advertising;
• physical banking → digital banking;
• individual software → cloud platforms;
• traditional search → AI-assisted search.

A competition authority therefore cannot rely exclusively on an old understanding of market conditions.

B. Market Power Can Become Self-Reinforcing

A large firm may acquire advantages that make future competition increasingly difficult.

For example:

Large user base → more data → better service → more users → more data

This can create a feedback loop.

Similarly:

Large platform → more developers → more applications → more users → greater platform attractiveness

The resulting structure can persist even without an explicit cartel.

4. Main Components of Adaptive Governance

4.1 Continuous Market Monitoring

Competition authorities should monitor important markets over time rather than examining them only when a complaint arrives.

Monitoring may examine:

• market shares;
• entry and exit;
• prices;
• innovation;
• switching rates;
• interoperability;
• access conditions;
• mergers and acquisitions;
• exclusive agreements;
• technological developments;
• consumer dependence;
• supplier dependence.

This creates an early-warning system for structural problems.

5. Dynamic Market Definition

Traditional market definition generally examines substitutability between products and geographic areas.

Adaptive governance adds a temporal dimension.

Authorities may ask:

What will the competitive boundaries of this market look like if technology changes?

For example, a market that appears competitive today could become concentrated after:

• a major technological transition;
• acquisition of an emerging competitor;
• development of a dominant ecosystem;
• increased network effects.

Therefore, competition analysis should consider both current competition and foreseeable structural evolution.

6. Entry Barriers and Structural Persistence

Adaptive governance pays particular attention to barriers that prevent market entry.

Common barriers include:

• high capital requirements;
• intellectual property;
• network effects;
• economies of scale;
• access to data;
• exclusive contracts;
• regulatory barriers;
• infrastructure control;
• customer switching costs;
• strong distribution networks;
• interoperability restrictions;
• ecosystem dependence.

The important question is not simply:

"Can another company enter?"

It is:

"Can another company enter at sufficient scale and compete effectively?"

7. Network Effects

Network effects are particularly important in enduring market structures.

A product becomes more valuable as more people use it.

For example:

More users → greater platform value → more users

This can create substantial competitive advantages.

Network effects may be:

Direct

The value increases directly with the number of users.

Indirect

More users attract complementary businesses, developers, advertisers, or suppliers.

Adaptive governance therefore examines whether network effects are:

• contestable;
• reversible;
• reinforced by exclusivity;
• strengthened by data;
• strengthened by interoperability restrictions.

8. Switching Costs

Consumers may technically have the right to change suppliers but may face substantial practical costs.

Examples include:

• losing accumulated data;
• learning a new system;
• losing compatibility;
• contractual penalties;
• transferring business relationships;
• rebuilding reputation or history on a platform.

High switching costs can make an apparently competitive market structurally resistant to new entrants.

9. Interoperability as a Governance Tool

Interoperability can reduce structural barriers.

It allows competing products or services to interact with an established infrastructure.

This is increasingly important in:

• operating systems;
• payment systems;
• cloud computing;
• messaging;
• AI ecosystems;
• digital identity;
• app stores.

The European Commission's recent Digital Markets Act work concerning Android illustrates this structural approach: the Commission has pursued interoperability measures intended to give third-party AI services access to relevant Android capabilities.

The objective is not necessarily to eliminate a successful platform but to prevent control over infrastructure from becoming an enduring barrier to competition.

10. Data as a Structural Competitive Advantage

Data can contribute to durable market power.

A dominant firm may possess:

• larger datasets;
• better behavioural information;
• greater ability to train algorithms;
• more accurate prediction;
• greater personalization capabilities.

Adaptive governance may therefore examine:

• data portability;
• data access;
• interoperability;
• discriminatory data practices;
• exclusive access to commercially important information.

The European Commission's DMA framework expressly connects contestability with data portability and interoperability in digital ecosystems.

11. Merger Control and Enduring Structures

Merger control is one of the most important tools for preventing permanent structural changes.

A merger can eliminate:

• an existing competitor;
• a potential competitor;
• an innovative challenger;
• an important source of future competitive pressure.

Therefore, adaptive merger analysis considers not merely:

"How many competitors exist today?"

but also:

"What competitive constraints might disappear tomorrow?"

12. Case Law

Case 1 — Airtours plc v Commission

Case T-342/99, Airtours v Commission (2002)

This case concerned the proposed acquisition of First Choice by Airtours in the UK package-holiday market.

The European Commission had concluded that the transaction could create a collective dominant position among the major operators.

The Court annulled the Commission's decision because the Commission had not sufficiently demonstrated the conditions necessary for collective dominance.

The Court identified three important conditions concerning coordination:

1. market participants must be capable of observing each other's behaviour;
2. there must be incentives to maintain coordinated conduct;
3. competitors and customers must not be capable of effectively undermining that coordination.

Importance for adaptive governance

Airtours demonstrates that market structure alone is not sufficient.

Authorities must establish how a particular structure is capable of producing durable restrictions on competition.

It therefore provides an important analytical foundation for examining enduring oligopolistic structures.

Case 2 — FTC v. Staples / Office Depot

The U.S. Federal Trade Commission challenged Staples' proposed acquisition of Office Depot.

The FTC argued that Staples and Office Depot were particularly close competitors for large business customers and that eliminating one would substantially reduce competition.

The court granted a preliminary injunction, and the companies subsequently abandoned the transaction.

The case demonstrated the importance of examining actual competitive relationships between firms, rather than relying exclusively on broad market shares.

Adaptive governance significance

A merger can permanently change market structure.

Therefore, merger control can operate as a form of preventive structural governance.

Case 3 — Intel v Commission

Case C-413/14 P, Intel v Commission

The case concerned Intel's conditional rebates and payments to major computer manufacturers and a retailer.

The European Commission had found that Intel's conduct could foreclose AMD from the market.

In 2017, the Court of Justice held that where a dominant undertaking contests the ability of its rebates to restrict competition, the EU courts must examine the circumstances relevant to that question, including factors such as the extent of market coverage, conditions of the rebates, duration and amount, and possible exclusionary strategy.

Adaptive governance significance

Intel demonstrates why competition enforcement increasingly needs to examine economic effects and market circumstances, rather than applying overly mechanical rules.

A conduct practice can be important because it affects the ability of rivals to obtain sufficient scale.

Case 4 — Google Android

Google LLC and Alphabet Inc. v European Commission, Case T-604/18

The case concerned Google's Android ecosystem and arrangements involving:

• Google Search;
• Chrome;
• the Play Store;
• device manufacturers;
• mobile network operators;
• anti-fragmentation requirements.

The General Court's judgment dealt with concepts including multi-sided platforms, ecosystems, product bundling, exclusivity payments, and anti-fragmentation obligations.

Adaptive governance significance

The case is particularly important for enduring digital structures.

A platform ecosystem can connect several markets:

Operating system → app store → search → browser → users → data

Control at one level may therefore reinforce market power at another level.

This means competition authorities may need to examine the ecosystem as a system, rather than treating every product in isolation.

Case 5 — Qualcomm v Commission

Case T-235/18, Qualcomm v Commission

The case involved incentive payments made by Qualcomm to Apple on the condition that Apple source its LTE chipsets from Qualcomm.

The Commission had imposed a fine of close to €1 billion, finding that the arrangements were capable of foreclosing competing LTE chipset suppliers.

In 2022, the General Court annulled the Commission decision, citing procedural irregularities and concluding that the Commission's analysis of the payments' potential anticompetitive effects was incomplete.

Adaptive governance significance

Qualcomm illustrates an important principle:

Structural concerns require rigorous evidence.

Adaptive governance does not mean intervention whenever a market is concentrated. Authorities must establish a sufficiently supported causal connection between conduct and competitive harm.

Case 6 — Staples / Office Depot 2016

The FTC again challenged a proposed Staples–Office Depot merger in 2015–2016, this time focusing on contracts for large business customers.

The FTC argued that the transaction would eliminate important head-to-head competition and that entry or expansion by other suppliers would not occur quickly or sufficiently to replace the lost competition.

The district court granted the preliminary injunction, after which the companies abandoned the transaction.

Adaptive governance significance

This case demonstrates that market structure must be reassessed over time.

Interestingly, the FTC had investigated a different office-supply merger in 2013 and concluded that competitive conditions had changed sufficiently since its earlier Staples case.

That provides a useful illustration of adaptive governance:

The same broad industry cannot necessarily be governed using the same competitive assumptions indefinitely.

13. Structural vs Behavioural Remedies

Adaptive governance may use two broad categories of remedies.

Structural Remedies

These alter the structure of the market.

Examples:

• divestiture;
• prohibition of mergers;
• separation of business units;
• removal of ownership interests.

Advantage

They can directly address structural concentration.

Limitation

They can be difficult to design and may interfere with legitimate efficiencies.

Behavioural Remedies

These regulate future conduct.

Examples:

• non-discrimination requirements;
• interoperability;
• access obligations;
• transparency;
• restrictions on exclusivity;
• data portability;
• firewalls.

For example, the FTC imposed a firewall condition in Staples' acquisition of Essendant to restrict access to commercially sensitive customer information.

Advantage

They can preserve integration while addressing particular competitive risks.

Limitation

They require continuing monitoring and enforcement.

14. Adaptive Remedies

An adaptive remedy can be designed to change as market conditions change.

For example:

Stage 1

Identify a structural competition problem.

Stage 2

Impose an access or interoperability obligation.

Stage 3

Monitor competitive conditions.

Stage 4

Measure whether competitors actually obtain meaningful access.

Stage 5

Modify the remedy if circumstances change.

This is more flexible than assuming that a single remedy will remain appropriate forever.

15. Competition Authorities as Market Monitors

Adaptive governance gives competition authorities several continuing functions:

1. Detection

Identify emerging structural problems.

2. Diagnosis

Determine why competition is weakening.

3. Intervention

Use merger control, abuse-of-dominance rules, or other competition instruments.

4. Monitoring

Observe whether the intervention works.

5. Adjustment

Modify enforcement where market conditions change.

This creates a cycle:

Monitor → Analyse → Intervene → Measure → Adjust → Monitor again

16. Ex Ante and Ex Post Governance

Ex Ante Governance

Rules are imposed before competitive harm occurs.

Examples:

• merger review;
• interoperability obligations;
• platform conduct rules;
• access requirements.

Ex Post Governance

Authorities respond after potentially harmful conduct occurs.

Examples:

• abuse-of-dominance proceedings;
• cartel investigations;
• exclusionary-conduct cases;
• enforcement actions.

Adaptive governance generally combines both.

17. Role of Digital Ecosystems

Digital ecosystems create a special challenge because one firm may operate across multiple connected markets.

For example:

Operating system

↓

App distribution

↓

Search

↓

Advertising

↓

Data

↓

AI services

The competitive position in one layer can strengthen another.

This is why modern competition governance increasingly considers ecosystem effects.

The EU's current DMA implementation illustrates this approach, including rules concerning self-preferencing, steering, interoperability and access to important data.

18. Innovation and Enduring Structures

Competition law should not focus only on prices.

A highly concentrated market can also affect:

• research and development;
• product quality;
• privacy;
• technological experimentation;
• business-model innovation;
• consumer choice.

Therefore, adaptive governance should examine dynamic competition.

The relevant question becomes:

Does the existing market structure allow future innovators to challenge established firms?

19. Institutional Design

An adaptive competition authority should ideally have:

Economic expertise

To analyse market concentration, entry barriers and incentives.

Technological expertise

To understand algorithms, platforms, AI and data.

Legal expertise

To apply competition statutes and judicial precedent.

Investigative capacity

To obtain internal documents and market evidence.

Monitoring capacity

To determine whether remedies actually work.

Regulatory flexibility

To respond to technological and commercial changes.

20. Key Challenges

A. False Positives

Authorities may intervene against a structure that is actually the result of superior efficiency.

B. False Negatives

Authorities may fail to act while structural advantages become increasingly difficult to reverse.

C. Regulatory Overreach

Excessive intervention can discourage investment and innovation.

D. Remedy Failure

A remedy may appear effective on paper but fail in practical implementation.

E. Information Asymmetry

Dominant firms often possess more information about their technology, customers and commercial strategy than regulators.

21. A Practical Adaptive Governance Framework

A competition authority can analyse an enduring market using the following framework:

22. Relationship Between Enduring Structures and Competition Law

The overall relationship can be expressed as:

Persistent market structure
↓
Identification of structural advantages
↓
Analysis of entry and expansion
↓
Investigation of exclusionary or coordination mechanisms
↓
Assessment of competitive effects
↓
Competition-law intervention where legally justified
↓
Remedy
↓
Long-term monitoring
↓
Adjustment to changing market conditions

This approach recognises that competition problems can become progressively harder to solve once a market structure becomes deeply entrenched.

23. Conclusion

Adaptive governance for enduring market structures means applying competition law with a long-term structural perspective.

Its central concerns are:

• persistent concentration;
• durable barriers to entry;
• network effects;
• switching costs;
• data advantages;
• ecosystem control;
• interoperability;
• exclusionary conduct;
• potential competitors;
• innovation;
• merger-driven structural change.

The cases of Airtours, Staples/Office Depot, Intel, Google Android, Qualcomm, and related merger and platform cases demonstrate different aspects of this problem.

The most important lesson is that market structure should be analysed dynamically rather than treated as a fixed snapshot. At the same time, the cases also demonstrate that intervention must be supported by careful evidence of competitive effects and legally sufficient reasoning. Airtours and Qualcomm, in particular, show that structural concerns cannot substitute for rigorous proof.

Thus, adaptive competition governance seeks to maintain a market environment in which existing firms can compete, new firms can enter and expand, and technological change does not automatically convert temporary advantages into permanent competitive barriers.