Competition Law And Competition Concerns In Transaction Monopolies

1. Introduction

A transaction monopoly can be understood as a situation in which one undertaking, platform, network, or intermediary obtains substantial control over the infrastructure through which transactions between different groups of users take place. The expression is not normally a separate statutory category in competition legislation. Rather, it is a useful way of describing market power arising from control over a transaction layer—for example, payment networks, digital marketplaces, app stores, booking systems, financial clearing networks, or other platforms connecting buyers and sellers.

Competition law becomes relevant when control of transactions enables an undertaking to restrict competitors, impose excessive or discriminatory conditions, prevent users from switching, control access to customers, or strengthen its position in related markets.

Transaction markets are particularly important in the digital economy because many operate as two-sided or multi-sided platforms. A payment network, for example, simultaneously connects merchants and consumers. The value of the network to one group may depend on participation by the other group. These indirect network effects can make competition analysis more complicated than it is in an ordinary one-sided market.

The U.S. Supreme Court expressly recognised this characteristic in Ohio v. American Express Co., describing credit-card networks as two-sided transaction platforms in which a transaction requires simultaneous participation by merchants and cardholders.

2. Meaning of a Transaction Monopoly

A transaction monopoly arises where an undertaking acquires such a powerful position in the transaction process that businesses or consumers have limited practical alternatives to using its infrastructure.

The undertaking does not necessarily manufacture the goods involved in the transaction. Its power may instead arise from controlling the mechanism through which the transaction occurs.

For example, a platform might control:

• payment authorisation;
• merchant access;
• transaction processing;
• settlement or clearing;
• digital distribution;
• access to buyers or sellers;
• transaction data;
• commissions and transaction fees;
• ranking or matching systems; or
• contractual rules governing transactions.

Therefore, the principal competition issue is not monopoly ownership of the goods being sold but control of the transaction gateway.

3. Relevant Competition-Law Principles

Transaction monopolies can raise issues under several traditional areas of competition law.

Abuse of Dominance or Monopolisation

Possession of monopoly or dominant power is generally not prohibited merely because the undertaking is large or successful. Competition concerns normally arise when market power is acquired, maintained, or exercised through conduct prohibited by the applicable competition regime.

Potential practices include exclusionary contracts, discriminatory access, tying, foreclosure, predatory conduct and restrictions preventing customers from using competing transaction systems.

Restrictive Agreements

Transaction networks frequently establish contractual rules applying to merchants, financial institutions, sellers or consumers.

Such agreements may restrict:

• prices;
• discounts;
• steering;
• alternative payment methods;
• access to competing networks; or
• the ability to conduct transactions outside the platform.

Competition authorities therefore examine whether these restrictions reduce competition and, where the relevant legal framework permits it, whether sufficient efficiencies or objective justifications exist.

Merger Control

A transaction platform can also strengthen its position by purchasing competing platforms or businesses controlling complementary transaction infrastructure.

Competition authorities may consequently examine whether a merger could eliminate an emerging competitor, increase barriers to entry, strengthen network effects or give the merged business control over essential transaction data.

4. Two-Sided Transaction Markets

One of the most important concepts in this field is the two-sided market.

Consider a card-payment network. It needs:

1. consumers willing to use its cards; and
2. merchants willing to accept those cards.

More consumers can make the network more attractive to merchants, while greater merchant acceptance can make it more attractive to consumers.

These are known as indirect network effects.

In Ohio v. American Express Co., the U.S. Supreme Court held that the relevant credit-card transaction market had to account for both cardholders and merchants because a credit-card network could not supply the transaction without participation on both sides.

This principle demonstrates why competition analysis of transaction monopolies cannot always focus on only one category of customer.

5. Network Effects and Market Concentration

Transaction markets can become highly concentrated because of network effects.

Suppose Platform A has millions of buyers. Sellers may feel compelled to join Platform A because that is where customers are located.

Once more sellers join, consumers have another reason to use Platform A.

The process can reinforce itself:

More users → more merchants → more transactions → more transaction data → better platform services → more users.

This does not automatically establish unlawful monopolisation. However, strong network effects may create significant entry barriers.

A new competitor may need to attract both sides of the market simultaneously, which can make successful entry particularly difficult.

6. Transaction Fees

Another major issue concerns transaction charges.

A dominant transaction intermediary may charge:

• interchange fees;
• merchant service charges;
• platform commissions;
• settlement fees;
• processing charges; or
• compulsory service fees.

High fees alone do not necessarily establish a competition-law infringement. Authorities normally consider the market structure, competitive alternatives, contractual restrictions, efficiencies and applicable legal test.

The EU proceedings concerning MasterCard demonstrate the importance of this distinction.

In MasterCard and Others v Commission, EU courts considered multilateral interchange fees associated with card transactions. The European Commission had concluded that the fees established a floor under merchants' costs and restricted price competition. The Court of Justice ultimately confirmed the judgment upholding the Commission's decision.

7. Anti-Steering Restrictions

A particularly important transaction-market concern is an anti-steering rule.

Steering occurs when a merchant encourages a customer to use a cheaper or otherwise preferred transaction method.

For example, if Network A charges the merchant more than Network B, the merchant might offer customers an incentive to use Network B.

A platform might contractually restrict this practice.

Such provisions can attract competition scrutiny because they may reduce the ability of merchants to create price competition between transaction networks.

However, their legality depends on the applicable law and evidence.

The importance of this distinction is illustrated by Ohio v. American Express Co., where the Supreme Court held that the plaintiffs had not established the required anticompetitive effects across the relevant two-sided credit-card transaction market.

8. Transaction Data as a Source of Market Power

A dominant transaction platform can obtain substantial information about:

• purchasing behaviour;
• prices;
• transaction frequency;
• consumer preferences;
• merchant performance;
• demand patterns; and
• geographical activity.

Transaction data can improve fraud detection, matching, recommendations and efficiency.

At the same time, competition concerns may arise where control over uniquely valuable data makes entry significantly harder or where a vertically integrated platform uses commercially sensitive information in ways that disadvantage businesses competing with it.

The relevant legal question remains whether the particular conduct restricts competition under the applicable competition-law standard.

9. Barriers to Entry

Transaction monopolies can generate significant barriers to entry through several mechanisms.

Network Effects

New competitors may have difficulty persuading consumers to join without merchants and merchants to join without consumers.

Switching Costs

Businesses may have invested substantially in integrating a particular transaction network.

Data Advantages

An incumbent processing millions of transactions can possess information unavailable to a new entrant.

Contractual Restrictions

Exclusivity or similar restrictions can make alternative networks less attractive or viable.

Economies of Scale

Transaction processing frequently has substantial fixed costs but relatively low incremental costs.

A large incumbent may therefore operate at a scale that a new competitor cannot quickly reproduce.

Important Case Laws

1. Ohio v. American Express Co. (U.S. Supreme Court, 2018)

This is one of the most important modern cases concerning transaction platforms.

American Express operated a credit-card platform connecting merchants and cardholders. Its merchant agreements contained anti-steering provisions restricting merchants from encouraging customers to use competing cards.

The U.S. government and several states challenged those provisions under §1 of the Sherman Act.

The Supreme Court treated credit-card networks as two-sided transaction platforms. Because transactions required simultaneous participation by cardholders and merchants, the Court concluded that competitive effects had to be examined across the relevant transaction market rather than solely through merchant fees.

The plaintiffs had not established that the challenged restrictions increased transaction prices above competitive levels, reduced transaction output, or otherwise produced the necessary anticompetitive effect. The Court therefore upheld the judgment for American Express.

Importance

The decision demonstrates that market definition and competitive-effects analysis can require special treatment where both sides of a transaction platform are strongly interconnected.

2. MasterCard Inc. and Others v European Commission

Case C-382/12 P

This major EU competition case concerned MasterCard's multilateral interchange fees.

The fees represented part of a card transaction ultimately reflected in costs imposed on merchants.

The European Commission concluded that the arrangements restricted competition because they effectively established a floor beneath certain merchant costs.

The Court of Justice confirmed the General Court's judgment and upheld the Commission's prohibition of the relevant multilateral interchange fees.

Importance

The case illustrates that rules established within transaction networks can constitute competition restrictions where they interfere with price competition between institutions participating in the network.

3. MasterCard and Others v Commission

Case T-111/08

Before the appeal reached the Court of Justice, the General Court considered MasterCard's challenge to the Commission decision.

One important question concerned whether the multilateral interchange fees were objectively necessary for the operation of the MasterCard system.

The General Court upheld the Commission's conclusion concerning the competition restriction. The subsequent appeal became Case C-382/12 P.

Importance

The case demonstrates an important principle for transaction platforms: a network rule cannot automatically escape competition scrutiny merely because it forms part of the network's operating arrangements. Questions of necessity, restrictive effects and possible exemptions must be examined under the relevant legal framework.

4. United States v. Visa U.S.A., Inc.

344 F.3d 229 (2d Cir. 2003)

This litigation concerned Visa and MasterCard rules that restricted their member banks from issuing cards through competing networks such as American Express and Discover.

The restrictions affected competition between payment networks for relationships with financial institutions.

The courts concluded that the exclusionary rules harmed competition.

Importance

The case illustrates how a powerful transaction network can create competition concerns by restricting the ability of participating institutions to cooperate with competing networks.

It is particularly relevant to transaction monopolies because access to banks, merchants, sellers or other important intermediaries can determine whether a competing transaction network can achieve sufficient scale.

5. In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation

This extensive U.S. litigation involved merchants challenging Visa and MasterCard network practices, including interchange-fee arrangements and network rules.

The litigation demonstrates the complexity of competition disputes involving payment transactions because multiple groups participate in the same system: merchants, acquiring banks, issuing banks, cardholders and payment networks.

The Second Circuit's 2016 decision addressed a proposed settlement and discussed the network rules and interchange-fee structure challenged by merchants.

Importance

The litigation illustrates how transaction-network rules can affect merchants across an entire payment ecosystem and why remedies in platform markets require careful attention to different groups of affected participants.

6. Eastman Kodak Co. v. Image Technical Services, Inc.

504 U.S. 451 (1992)

Although Kodak was not primarily a payment-platform case, it provides an important principle applicable to transaction monopolies.

Independent service organisations alleged that Kodak restricted access to replacement parts necessary to service Kodak equipment.

The Supreme Court rejected the proposition that competition in the original equipment market automatically prevented Kodak from possessing market power in relevant aftermarket circumstances.

Importance

The case is relevant where a transaction platform establishes an ecosystem and users subsequently become dependent on complementary services controlled by the platform.

It demonstrates the potential importance of:

• switching costs;
• information costs;
• lock-in;
• aftermarket control; and
• restrictions on access to complementary inputs.

These principles can assist in analysing transaction ecosystems where users become dependent on a platform after joining it.

7. Aspen Skiing Co. v. Aspen Highlands Skiing Corp.

472 U.S. 585 (1985)

Aspen Skiing involved competing ski operators that had previously participated in a joint multi-area ticket arrangement.

The dominant operator eventually terminated the cooperative arrangement under circumstances the Supreme Court regarded as relevant to exclusionary monopolisation.

Importance

Although the case did not involve a digital transaction platform, it remains relevant to theories concerning exclusionary conduct by dominant firms.

In transaction-market analysis, similar principles can become relevant where an incumbent controls infrastructure or arrangements important to competitors and changes access conditions in a manner alleged to preserve monopoly power.

The precise application of Aspen Skiing remains highly fact-dependent.

8. United States v. Microsoft Corp.

253 F.3d 34 (D.C. Cir. 2001)

Microsoft possessed monopoly power in the market for Intel-compatible PC operating systems.

The litigation examined practices affecting browsers and other software that could potentially weaken the applications barrier protecting Microsoft's operating-system position.

The D.C. Circuit upheld important monopolisation findings concerning exclusionary conduct.

Importance

Microsoft provides a useful analogy for transaction monopolies because platforms can use control of one important layer of an ecosystem to protect themselves from emerging competitive threats.

It demonstrates how competition law can examine strategies that protect market power by making distribution or market access more difficult for rivals.

Major Competition Concerns

The principal concerns surrounding transaction monopolies can therefore be grouped into several categories.

First, excessive transaction control. A powerful intermediary can potentially influence the conditions under which enormous numbers of transactions occur.

Second, exclusion of competing transaction systems. Exclusivity, restrictive agreements or technological barriers may make alternative systems less viable.

Third, anti-steering arrangements. Restrictions on directing customers toward competing transaction methods can reduce merchants' ability to encourage price competition.

Fourth, transaction-fee coordination. Network arrangements determining fees can attract scrutiny where they reduce independent price competition.

Fifth, ecosystem lock-in. Once consumers and businesses have invested in a transaction ecosystem, switching may become expensive or inconvenient.

Sixth, network effects. The incumbent's large user base itself can become an important competitive advantage because new platforms need sufficient participation from multiple sides of the market.

Seventh, discriminatory access. A vertically integrated transaction platform could potentially give preferential treatment to its own services while disadvantaging rivals.

Eighth, data concentration. Large transaction volumes can produce valuable datasets that further reinforce the incumbent's position.

Modern Enforcement Example

The continuing importance of these issues can be seen in United States v. Visa Inc., filed by the U.S. Department of Justice in September 2024.

The DOJ brought a civil monopolisation case involving debit-network competition and alleged exclusionary practices. The case is an ongoing enforcement matter rather than a final judicial determination of liability; DOJ's case page records a June 23, 2025 memorandum opinion and order concerning the litigation. Accordingly, the government's allegations should be distinguished from established findings following a completed trial.

This proceeding demonstrates that control over transaction infrastructure remains an important subject of contemporary competition enforcement.

Competition-Law Analytical Framework

A competition authority examining a possible transaction monopoly would ordinarily consider several questions.

Step 1 — Define the Relevant Market

The authority identifies the products, services and geographical area in which meaningful competition occurs.

For transaction platforms, this can require deciding whether different sides of the platform constitute separate markets or whether sufficiently strong transactional interdependence requires consideration of a combined platform market.

Step 2 — Determine Market Power

Relevant indicators can include:

• transaction volume;
• market share;
• merchant coverage;
• consumer adoption;
• switching costs;
• barriers to entry;
• network effects;
• access to data; and
• availability of substitutes.

Step 3 — Identify the Conduct

The authority determines whether the undertaking has engaged in potentially restrictive conduct such as exclusivity, tying, discriminatory access, anti-steering provisions or exclusionary platform rules.

Step 4 — Determine Competitive Effects

The central question is whether competition itself has been materially harmed rather than merely whether individual competitors have suffered.

Authorities can consider effects on prices, output, quality, innovation, choice and market access.

Step 5 — Examine Justifications and Efficiencies

Platform restrictions may sometimes have legitimate functions.

For example, particular arrangements could potentially:

• prevent free riding;
• improve security;
• reduce fraud;
• ensure interoperability;
• increase network reliability; or
• balance participation between different platform sides.

The relevance and legal treatment of those justifications depends on the jurisdiction and applicable competition-law test.

Step 6 — Consider Remedies

Where an infringement is established, possible remedies can include ending exclusionary agreements, changing transaction rules, modifying contractual restrictions, providing non-discriminatory access or imposing other behavioural or structural measures permitted under the relevant competition regime.

Transaction Monopoly Versus Ordinary Monopoly

An ordinary monopoly usually concerns control over the supply of a particular product or service.

A transaction monopoly is distinctive because the source of power may instead be control over interactions between other market participants.

The intermediary can therefore become commercially powerful without owning the underlying goods.

For example:

Buyer → Transaction Platform → Seller

The platform can potentially control:

access → matching → transaction → payment → data → settlement

This creates what may be called transaction-layer market power.

Because numerous businesses can depend upon the same intermediary, restrictive behaviour at this layer can potentially affect competition across several related markets.

Conclusion

Competition concerns involving transaction monopolies arise when control over the infrastructure connecting buyers, sellers, merchants, financial institutions or other participants becomes a source of substantial market power.

The principal risks include exclusionary access rules, anti-steering restrictions, transaction-fee restraints, ecosystem lock-in, discriminatory treatment, network effects and concentration of transaction data.

At the same time, large transaction volume or dominance does not by itself establish unlawful conduct. Competition analysis requires examination of the relevant market, market power, specific conduct, competitive effects and any legally relevant efficiencies or justifications.

The case law demonstrates different dimensions of this analysis. Ohio v. American Express is particularly important for understanding two-sided transaction markets; the MasterCard litigation demonstrates scrutiny of interchange-fee arrangements; United States v. Visa illustrates restrictions affecting rival payment networks; and Kodak, Aspen Skiing and Microsoft provide broader principles concerning lock-in, exclusion and preservation of monopoly power.

Together, these authorities show that modern competition law increasingly needs to examine not merely who sells a product, but also who controls the infrastructure through which the transaction takes place.