Competition Law and Competition Implications of Behavioural Concentration

1. Introduction

Behavioural concentration is not a separately defined statutory concept in most competition laws. It is a useful analytical concept describing a situation in which competitive power becomes concentrated because of the behaviour of firms, consumers, platforms, intermediaries, algorithms, or market participants, even where conventional structural concentration measures such as market share or HHI do not by themselves reveal the full competitive problem.

Traditional merger analysis generally asks how concentrated a market is. Behavioural concentration additionally asks how market participants behave once concentration, network effects, data advantages, switching costs, information asymmetries, algorithms, loyalty effects or exclusionary strategies cause competitive power to accumulate.

It may arise through:

• exclusionary conduct by a dominant enterprise;
• self-preferencing;
• tying and bundling;
• loyalty rebates;
• exclusive dealing;
• algorithmic coordination;
• control over data or interfaces;
• network effects;
• consumer inertia and switching costs;
• platform rules that channel users toward the incumbent;
• strategic acquisition followed by restrictive conduct;
• common ownership or common technological infrastructure; and
• behavioural remedies imposed following a merger.

The central competition-law question is therefore whether conduct is merely successful competition or whether it creates, maintains or strengthens market power by restricting the competitive process.

2. Meaning of Behavioural Concentration

Behavioural concentration can be understood through the following formula:

Market power + strategic behaviour + reduced competitive alternatives = behavioural concentration of competitive power

For example, a digital platform may initially have only a moderate market share. If it controls search rankings, user data, default settings and access to customers, however, its behaviour may progressively divert demand toward its own services. Over time, competitors become less visible, their scale decreases, and the platform's competitive position becomes increasingly concentrated.

Thus, behavioural concentration differs from simple structural concentration.

The concept is particularly significant in digital markets, platform markets, technology markets, financial services, AI markets and markets characterised by strong network effects.

The European Commission has specifically discussed practices such as self-preferencing, where an integrated firm favours its own products or services over those of third-party rivals, including through ranking and access mechanisms.

3. Legal Framework

Behavioural concentration can be addressed under several branches of competition law.

A. Abuse of dominance

Where a dominant undertaking uses exclusionary conduct to strengthen or maintain its position, competition authorities may intervene.

Typical conduct includes:

• exclusive dealing;
• discriminatory access;
• predatory pricing;
• loyalty rebates;
• tying;
• refusal to supply;
• self-preferencing;
• discriminatory ranking;
• margin squeeze;
• leveraging dominance into neighbouring markets.

B. Merger control

A merger may create behavioural concentration by combining:

• data sets;
• technological ecosystems;
• distribution networks;
• customer relationships;
• intellectual property;
• platforms;
• complementary services.

The Competition Commission of India can modify or prohibit combinations where they cause or are likely to cause an appreciable adverse effect on competition (AAEC).

C. Cartel and coordinated-conduct rules

Behavioural concentration can also arise when independent firms begin behaving in parallel because of:

• algorithms;
• price-monitoring systems;
• common software;
• information exchange;
• hub-and-spoke arrangements;
• signalling mechanisms.

D. Vertical restraints

Agreements involving:

• exclusivity;
• resale restrictions;
• parity clauses;
• tying;
• MFN clauses;
• platform restrictions

may reduce the ability of competitors to obtain customers.

E. Digital competition regulation

Digital markets create special risks because market power may depend not simply on price but on:

• data;
• attention;
• interoperability;
• defaults;
• rankings;
• ecosystem dependence;
• switching costs;
• network effects.

4. Major Competition Implications

4.1 Reduction of Effective Competition

A market can contain several nominal competitors while effective competitive pressure becomes concentrated in one or two firms.

For example, a platform may technically permit numerous sellers but control:

• ranking;
• search visibility;
• payment systems;
• advertising;
• customer reviews;
• logistics.

Consequently, the number of competitors does not necessarily correspond to the amount of effective competition.

4.2 Network Effects

Network effects can produce behavioural concentration because consumers prefer the platform that already has the largest user base.

This creates a feedback loop:

More users → more data → better service → more users → stronger network effects → weaker competitors.

Once this process becomes entrenched, competitors may face substantial barriers even if they offer innovative products.

4.3 Consumer Inertia

Consumers frequently do not change suppliers even when alternatives exist.

Reasons include:

• switching costs;
• lack of information;
• default settings;
• accumulated preferences;
• loss of data;
• learning costs;
• loyalty programmes.

Consequently, firms can obtain substantial market power through behavioural lock-in.

4.4 Self-Preferencing

Self-preferencing occurs where a platform gives preferential treatment to its own products or services.

Potential mechanisms include:

• higher ranking;
• better placement;
• preferential access to data;
• lower commissions;
• preferential recommendation;
• faster access to customers.

The competition concern is particularly significant where the platform simultaneously operates the infrastructure on which competing businesses depend.

4.5 Algorithmic Concentration

Algorithms can unintentionally or intentionally produce concentrated competitive outcomes.

For example:

Firm A's algorithm observes Firm B's price → Firm A automatically matches it → Firm B's algorithm responds → prices converge.

Even without an express agreement, sophisticated algorithms may facilitate:

• rapid price matching;
• tacit coordination;
• market signalling;
• discriminatory pricing;
• personalised offers;
• exclusion of smaller rivals.

The legal assessment still requires evidence concerning the actual conduct and competitive effects; mere use of an algorithm is not automatically unlawful.

5. Behavioural Concentration and Merger Control

A merger may generate behavioural concentration even where traditional market-share analysis is inconclusive.

Competition authorities may examine:

1. elimination of close competitors;
2. loss of potential competition;
3. control over critical inputs;
4. data accumulation;
5. ecosystem effects;
6. customer foreclosure;
7. supplier foreclosure;
8. network effects;
9. interoperability;
10. increased switching costs.

In Staples/Office Depot, the FTC argued that the parties were particularly close competitors for large business customers and that eliminating this rivalry could lead to higher prices and reduced quality. The proposed 2016 transaction was abandoned after the court granted a preliminary injunction.

This illustrates an important principle: competitive harm may result from eliminating particularly important behavioural rivalry even when the market contains other firms.

6. Behavioural Remedies

Competition authorities sometimes attempt to correct behavioural concentration through behavioural remedies.

Examples include:

• firewall obligations;
• non-discrimination requirements;
• access obligations;
• licensing commitments;
• interoperability;
• prohibition of tying;
• restrictions on information exchange;
• independent governance;
• restrictions on use of commercially sensitive information.

However, behavioural remedies may be difficult to monitor.

The CCI's ZF Friedrichshafen/WABCO matter is particularly instructive. ZF initially proposed behavioural safeguards involving firewalls and independent functioning of boards. The CCI considered those behavioural remedies insufficient and ultimately accepted structural divestment commitments addressing the relevant overlaps.

This demonstrates the distinction between:

Behavioural remedy: regulate what the combined firm does.

and

Structural remedy: alter what the combined firm owns or controls.

7. Important Case Laws

1. United States v. Microsoft Corp. (2001)

Facts

Microsoft possessed substantial power in the market for Intel-compatible PC operating systems. It engaged in various practices involving Internet browsers, computer manufacturers, Internet service providers and other distribution channels.

Competition issue

The central issue was whether Microsoft had used its operating-system dominance to restrict emerging competitive threats.

Principle

The case established that a dominant firm's conduct may violate competition law where it uses its market power to exclude rivals and preserve barriers to entry, rather than competing solely on the merits.

The DOJ's litigation position emphasised Microsoft's use of exclusionary practices to maintain the applications barrier supporting its operating-system monopoly.

Relevance to behavioural concentration

Microsoft illustrates how:

existing dominance → exclusionary conduct → reduced competitive alternatives → strengthened concentration of market power.

The case is therefore highly relevant to behavioural concentration.

8. Aspen Skiing Co. v. Aspen Highlands Skiing Corp. (1985)

Facts

Aspen Skiing operated several ski areas in Aspen, Colorado. It had previously participated in a joint ticket arrangement with Aspen Highlands.

The dominant firm subsequently discontinued the cooperative arrangement.

Competition issue

The Supreme Court considered whether the refusal to continue the arrangement constituted exclusionary conduct.

Principle

The case is significant for the law concerning exclusionary conduct and refusal to deal.

The Court examined whether the conduct could be understood as competition on the merits or instead as an attempt to disadvantage a rival.

Relevance

Behavioural concentration can occur when a powerful undertaking controls an important input, distribution channel or platform and uses that control to reduce the ability of rivals to compete.

9. Lorain Journal Co. v. United States (1951)

Facts

The Lorain Journal was the dominant newspaper in its local market. It refused to accept advertising from businesses that also advertised through a competing radio station.

Competition issue

The issue was whether the newspaper could use its dominant position to exclude the competing medium.

Principle

The Supreme Court treated the conduct as unlawful monopolisation.

Relevance

The case illustrates:

Dominant position + exclusionary conduct directed against an emerging rival = potential unlawful concentration of market power.

It is particularly relevant to modern digital platforms where a dominant intermediary may control access to advertisers, customers or distribution channels.

10. United Brands Co. v. Commission (1978)

Facts

United Brands was found to possess a dominant position in the relevant banana market and was accused of various exclusionary and discriminatory practices.

Competition issue

The European Court of Justice examined the company's conduct under Article 86 of the Treaty of Rome, now corresponding broadly to Article 102 TFEU.

Principle

Dominance itself is not prohibited. What is prohibited is the abusive exploitation of that dominant position.

Relevance

The case is foundational for understanding behavioural concentration because it establishes that competition law focuses not simply on the existence of market power but on how that power is exercised.

11. Intel Corp. v. Commission (CJEU, 2024)

Background

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

Competition issue

The dispute concerned whether rebates offered by a dominant undertaking could constitute exclusionary abuse.

Principle

The litigation became important for the role of economic analysis in assessing whether rebate practices are capable of producing foreclosure.

Relevance

Loyalty-inducing commercial practices can progressively concentrate demand around a dominant undertaking.

Thus:

rebates → customer loyalty → reduced contestability → stronger incumbent position.

The case is important to behavioural concentration because the competitive concern may arise from customer behaviour induced by the dominant firm's commercial strategy, rather than simply from the firm's market share.

12. Google Shopping / Google Search (European Commission)

Facts

Google was investigated for giving preferential treatment to its comparison-shopping service in general search results.

Competition issue

The Commission concluded that Google had abused its dominant position in general search by favouring its own comparison-shopping service.

The Commission's competition-policy materials identify the Google Shopping decision as a major self-preferencing enforcement action.

Principle

The case demonstrates that a platform's control over a critical infrastructure can allow it to influence the competitive position of downstream businesses.

Relevance

It provides a modern example of:

platform dominance → preferential behaviour → traffic diversion → reduced rival visibility → reinforcement of platform ecosystem power.

13. FTC v. Staples, Inc. / Office Depot

Facts

The FTC challenged Staples' proposed acquisition of Office Depot in 1997.

The court granted a preliminary injunction, and the transaction was abandoned. The FTC argued that the two firms were particularly important competitors and that the transaction would eliminate substantial competitive pressure.

Competition principle

Merger analysis must consider actual competitive interaction, rather than relying exclusively on broad market definitions.

Relevance to behavioural concentration

The case illustrates how eliminating a firm that exercises significant competitive pressure can produce a concentrated competitive environment even before a formal monopoly is created.

14. FTC v. Heinz / Heinz–Beech-Nut

Facts

The proposed Heinz acquisition of Beech-Nut involved a highly concentrated baby-food market.

The court considered the effect of the transaction on concentration and rivalry.

Principle

High existing concentration combined with an increase in concentration can strengthen the inference of competitive harm.

The litigation materials identified the market as already highly concentrated and emphasised the elimination of competition between the merging firms.

Relevance

The case shows the interaction between:

structural concentration + elimination of rivalry + increased market power.

This is important because behavioural concentration and structural concentration can reinforce each other.

15. ZF Friedrichshafen AG / WABCO Holdings — CCI

Facts

ZF proposed acquiring WABCO. The CCI identified competition concerns in overlapping product markets.

Initially, behavioural safeguards including firewalls were proposed. The CCI considered those insufficient and ultimately accepted divestment commitments.

Principle

Where behavioural commitments cannot reliably eliminate competitive concerns, a structural remedy may be required.

Relevance

This is particularly important to behavioural concentration because it demonstrates the limits of attempting to control concentrated market power merely through behavioural restrictions.

16. Key Doctrinal Lessons from the Cases

The cases collectively establish several important principles.

Principle 1 — Dominance is not automatically unlawful

Competition law generally does not punish a firm merely for becoming successful.

The concern arises when market power is used in an exclusionary or abusive manner.

Principle 2 — Conduct matters

Market share alone may not capture the competitive problem.

Authorities may examine:

• contracts;
• pricing;
• ranking;
• access;
• tying;
• exclusivity;
• data;
• technical design;
• interoperability.

Principle 3 — Competitive process matters

The relevant question is not merely:

"How many competitors exist?"

It is also:

"How effectively can those competitors constrain the incumbent?"

Principle 4 — Behaviour can reinforce structural concentration

A merger may create structural concentration, after which exclusionary behaviour may make that concentration durable.

Principle 5 — Behavioural remedies have limitations

Where the underlying ownership or control structure creates persistent incentives for exclusion, behavioural commitments may be difficult to monitor or enforce.

The CCI's ZF/WABCO matter illustrates precisely this problem.

17. Behavioural Concentration in Digital Markets

Digital markets provide particularly strong examples.

A. Search engines

A search engine may control:

• ranking;
• visibility;
• traffic;
• advertising;
• user data.

Preferential treatment of its own services may therefore influence downstream competition.

B. E-commerce

A marketplace may simultaneously be:

1. marketplace operator;
2. seller;
3. advertiser;
4. logistics provider;
5. payment provider.

This creates the possibility of vertical behavioural concentration.

C. App stores

Control over:

• app distribution;
• payments;
• discovery;
• commissions;
• technical access

may allow a platform to influence competing applications.

D. AI ecosystems

AI markets may experience concentration through control over:

• compute;
• training data;
• foundation models;
• cloud infrastructure;
• APIs;
• distribution channels.

E. Financial technology

Fintech platforms can accumulate behavioural power through:

• transaction data;
• customer histories;
• payment networks;
• APIs;
• credit information;
• digital wallets.

18. Economic Effects of Behavioural Concentration

Behavioural concentration can produce several effects.

1. Higher prices

Reduced competitive pressure can permit higher prices or commissions.

2. Lower quality

Where consumers have fewer meaningful alternatives, firms may have less incentive to improve quality.

3. Reduced innovation

Entrenched firms may have less incentive to innovate, while start-ups may face greater barriers.

4. Reduced consumer choice

Consumers may technically have alternatives but find them difficult to discover or switch to.

5. Increased switching costs

Data portability restrictions, incompatible systems and ecosystem dependence can increase switching costs.

6. Foreclosure

Competitors may be denied access to:

• customers;
• inputs;
• data;
• infrastructure;
• distribution channels.

7. Entrenchment

The most significant long-term effect can be self-reinforcing market power.

19. Behavioural Concentration and HHI

HHI remains important but may not be sufficient.

Suppose:

• Firm A = 45%
• Firm B = 25%
• Firm C = 15%
• Firm D = 15%

The market may not initially appear monopolistic.

But suppose Firm A controls:

• the principal distribution platform;
• customer data;
• industry standards;
• payment infrastructure;
• the principal advertising channel.

Firm A's effective competitive power may therefore be substantially greater than its 45% market share suggests.

This is why modern competition analysis increasingly considers:

market share + network effects + switching costs + data + control points + conduct + entry conditions.

20. Behavioural Concentration vs. Traditional Market Concentration

21. Regulatory Challenges

A. Distinguishing competition from exclusion

Successful firms naturally attract consumers. Competition authorities must distinguish:

competition on the merits

from

conduct that artificially excludes rivals.

B. Measuring future harm

Behavioural concentration may be dynamic. The harm may occur gradually rather than immediately.

C. Algorithmic opacity

Authorities may not always know how an algorithm produces ranking, pricing or recommendation outcomes.

D. Multi-sided markets

The same platform may serve consumers, advertisers, sellers and suppliers simultaneously.

E. Innovation

An intervention that protects existing competitors should not unnecessarily prevent legitimate innovation.

F. Remedy design

A behavioural remedy must be sufficiently precise to prevent circumvention while avoiding unnecessary interference with legitimate business decisions.

22. Indian Competition Law Perspective

Under India's Competition Act, 2002, behavioural concentration can arise particularly through Section 4 abuse-of-dominance cases and Sections 5–6 combination control.

Relevant areas include:

• denial of market access;
• discriminatory conditions;
• tying;
• predatory pricing;
• leveraging;
• exclusive arrangements;
• platform discrimination;
• data-related exclusion;
• vertical integration.

For combinations, the CCI assesses whether a transaction causes or is likely to cause an AAEC and may modify or prohibit the transaction.

The ZF/WABCO matter demonstrates that the CCI can scrutinise behavioural commitments and may prefer divestment where behavioural safeguards are inadequate.

23. Suggested Analytical Test

A competition authority analysing behavioural concentration can ask:

Step 1 — Define the relevant market

Identify the relevant product/service and geographic market.

Step 2 — Measure structural concentration

Examine:

• market shares;
• HHI;
• number of competitors;
• entry barriers.

Step 3 — Identify behavioural power

Examine:

• exclusivity;
• tying;
• self-preferencing;
• discrimination;
• pricing;
• ranking;
• data control.

Step 4 — Identify mechanisms of entrenchment

Look for:

• network effects;
• switching costs;
• defaults;
• interoperability restrictions;
• economies of scale;
• data advantages.

Step 5 — Assess foreclosure

Ask whether rivals are denied:

• customers;
• inputs;
• distribution;
• data;
• infrastructure.

Step 6 — Assess consumer effects

Examine:

• price;
• quality;
• innovation;
• choice;
• privacy/data conditions.

Step 7 — Examine efficiencies

Consider whether the conduct has legitimate:

• cost efficiencies;
• quality benefits;
• innovation benefits;
• security benefits.

Step 8 — Select remedy

Possible remedies include:

• prohibition;
• divestiture;
• access obligations;
• interoperability;
• non-discrimination;
• firewall;
• data separation;
• monitoring;
• behavioural commitments.

24. Conclusion

Behavioural concentration represents the accumulation and reinforcement of competitive power through market conduct rather than through market structure alone.

It is particularly important where markets are characterised by network effects, data advantages, switching costs, platform dependence, algorithms and ecosystem control.

The principal competition-law concern is not that a firm has become successful, but that its behaviour may reduce the ability of rivals to compete, restrict consumer choice, raise barriers to entry and make market power self-reinforcing.

The major cases—from Microsoft, Aspen Skiing, Lorain Journal and United Brands to Google Shopping, Staples/Office Depot, Heinz and ZF/WABCO—demonstrate different ways in which conduct and concentration interact.

The central doctrinal proposition can therefore be expressed as:

Competition law must examine not only who controls the market, but also how that control is acquired, exercised, reinforced and converted into durable competitive advantage.