Competition Law and Financial Infrastructure Market Power

1. Introduction

Financial infrastructure refers to the institutional and technological systems through which financial transactions are executed, cleared, settled, recorded, and accessed. It includes:

• stock and derivatives exchanges;
• payment-card networks;
• instant-payment systems;
• clearing houses and central counterparties (CCPs);
• securities depositories;
• settlement systems;
• financial messaging and transaction networks;
• benchmark and market-data infrastructures; and
• increasingly, digital financial platforms and API-based infrastructure.

Competition law becomes particularly important because financial infrastructure often exhibits network effects, economies of scale, high switching costs, interoperability requirements and substantial entry barriers. A firm controlling an important financial rail may therefore possess market power even where its direct prices appear low.

The central competition-law question is not simply whether an infrastructure provider is large. It is whether its market position enables it to exclude competitors, discriminate in access, impose unfair conditions, leverage dominance into adjacent markets, or facilitate coordination among participants.

2. Why Financial Infrastructure Can Generate Market Power

A. Network effects

The value of a payment or trading network increases as more participants join it.

For example:

More merchants → more card acceptance → more consumers use the card → more merchants want acceptance.

This can produce a self-reinforcing competitive advantage.

B. Economies of scale

Clearing, settlement and payment infrastructures generally involve substantial fixed technological and regulatory costs.

An incumbent processing millions of transactions can therefore have substantially lower average costs than a new entrant.

C. High switching costs

Banks, brokers, merchants and institutional investors may have invested heavily in:

• APIs;
• compliance systems;
• software;
• settlement interfaces;
• cybersecurity systems;
• operational integration; and
• participant certification.

Consequently, changing infrastructure can be expensive.

D. Interoperability

A financial infrastructure provider may become indispensable because competitors cannot operate effectively without access to it.

This makes access conditions a major competition-law issue.

E. Data advantages

Infrastructure operators may obtain enormous volumes of transaction and market data.

That data can potentially be used to:

• improve competing financial products;
• identify profitable customers;
• develop trading strategies;
• discriminate between participants; or
• strengthen an existing ecosystem.

F. Regulatory barriers

Financial infrastructure is heavily regulated. Licensing, capital requirements, cybersecurity standards and operational-resilience requirements can make entry difficult.

Regulation can be legitimate and necessary for financial stability, but it can also interact with competition by reinforcing incumbent advantages.

3. Relevant Competition-Law Framework

Financial infrastructure can raise several different competition-law questions.

A. Abuse of dominance

A dominant infrastructure operator may potentially infringe competition law through:

• refusal to provide access;
• discriminatory access;
• excessive or unfair pricing;
• margin squeeze;
• tying or bundling;
• exclusionary rebates;
• discriminatory technical standards;
• interoperability restrictions;
• self-preferencing; or
• leveraging infrastructure dominance into downstream markets.

In India, these concerns primarily arise under Section 4 of the Competition Act, 2002.

B. Restrictive agreements

Infrastructure arrangements can involve agreements between:

• banks;
• payment networks;
• exchanges;
• brokers;
• clearing members;
• technology providers; and
• financial institutions.

These arrangements may raise Section 3 issues under Indian law and equivalent prohibitions elsewhere.

Particular risks include:

• fee fixing;
• allocation of customers or markets;
• common technical restrictions;
• discriminatory membership rules; and
• agreements limiting interoperability.

C. Merger control

Financial-infrastructure mergers can create particularly significant concerns because combining two infrastructures may eliminate an important competitive constraint.

Competition authorities therefore examine:

• horizontal overlaps;
• vertical integration;
• access foreclosure;
• interoperability;
• data concentration;
• network effects;
• clearing and trading relationships; and
• potential competitors.

4. Six Important Case Laws

1. MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd. — CCI, Case No. 13/2009

This is one of the most important Indian cases concerning financial-market infrastructure and dominance.

The dispute concerned competition in India's exchange-traded financial markets. The CCI examined NSE's position in relevant exchange markets and the competitive implications of its pricing and related practices.

The CCI found, by majority, that NSE had abused its dominant position and identified several forms of conduct under Section 4, including concerns involving pricing and exclusionary conditions.

Significance

The case demonstrates that:

A financial exchange cannot necessarily rely upon the importance of its infrastructure to escape competition-law scrutiny.

The case is particularly relevant to:

• exchange dominance;
• zero or low pricing;
• cross-subsidisation;
• network effects;
• entry barriers;
• vertical relationships; and
• access to financial-market infrastructure.

The subsequent appellate proceedings also demonstrate that dominance and abuse must be separately analysed, rather than assuming that a large infrastructure provider is automatically liable.

2. National Stock Exchange of India Ltd. v. Competition Commission of India — COMPAT, 2014

The appellate proceedings arising from the NSE matter provide an important judicial examination of the relationship between market dominance and abusive conduct.

The majority CCI order had treated NSE as dominant and imposed a penalty. The appellate proceedings considered the relevant-market and Section 4 questions.

Significance

The case illustrates an important principle:

Market power alone is not prohibited.

Competition law normally requires a further showing of abusive conduct.

Thus:

Dominant infrastructure + legitimate competition = not necessarily unlawful.

But:

Dominant infrastructure + exclusionary or discriminatory conduct = potential abuse.

This distinction is fundamental when analysing exchanges, payment networks, clearing systems and other infrastructure operators.

5. Clearstream — Commission Decision COMP/38.096

The European Commission's Clearstream decision is a classic financial-infrastructure access case.

Clearstream operated important securities clearing and settlement infrastructure. The Commission found that Clearstream had abused its dominant position through a refusal to supply certain securities clearing and settlement services to Euroclear Bank and discriminatory pricing.

Competition issue

The case concerned precisely the type of problem that arises when an infrastructure operator controls an essential part of a financial market.

The important questions included:

• Who can access the infrastructure?
• On what terms?
• Are equivalent users treated equally?
• Can an incumbent discriminate against a downstream competitor?
• Can refusal of access prevent effective competition?

Principle

Where an infrastructure provider possesses substantial market power, access discrimination can become an abuse of dominance.

This makes Clearstream highly relevant to:

• central securities depositories;
• clearing houses;
• settlement systems;
• securities-processing networks; and
• other post-trading infrastructure.

6. Deutsche Börse AG v. European Commission — Case T-175/12

The proposed Deutsche Börse/NYSE Euronext merger concerned major European financial-market infrastructure.

The European Commission prohibited the concentration, and the General Court subsequently dismissed Deutsche Börse's action challenging the Commission decision.

The transaction involved major participants in the European derivatives market.

Competition concerns

The analysis focused on:

• trading markets;
• derivatives;
• clearing;
• network effects;
• market concentration;
• competitive constraints;
• efficiencies; and
• commitments offered to address competition concerns.

The Commission's analysis treated trading and clearing as closely connected parts of the financial-market infrastructure ecosystem.

Significance

The case shows that merger control can be particularly important where:

Two financial infrastructures with strong network effects combine.

The concern is not merely the number of firms after the merger. It is whether the transaction removes an important competitive constraint and creates an infrastructure that participants cannot realistically avoid.

7. MasterCard Inc. v. European Commission — C-382/12 P

MasterCard's multilateral interchange-fee arrangements became a major European competition-law case.

The Court of Justice upheld the finding that MasterCard's multilateral interchange fees restricted competition and rejected the argument that the arrangements automatically escaped Article 101 scrutiny. The case concerned the functioning of a two-sided payment-card system involving issuers, acquirers, merchants and cardholders.

Competition significance

The case demonstrates how competition law can apply to the rules governing a financial network itself.

The relevant infrastructure included:

• card issuance;
• merchant acquiring;
• transaction processing;
• interchange arrangements; and
• network rules.

The broader lesson is that a payment network can potentially exercise significant competitive influence through its rulebook, not merely through conventional pricing.

8. Budapest Bank and Others — C-228/18

This case concerned interchange fees established through arrangements involving Visa, Mastercard and Hungarian financial institutions.

The CJEU examined whether agreements concerning card-payment fees constituted restrictions of competition by object under Article 101(1) TFEU. The Hungarian competition authority had found an anticompetitive agreement concerning interchange fees.

Significance

The Court's reasoning is important because it cautions against automatically classifying every financial-network arrangement as a restriction by object.

The competition analysis must consider:

• the content of the agreement;
• its objectives;
• the economic and legal context; and
• whether the restriction is sufficiently clear and serious to constitute a restriction by object.

This is particularly important for financial infrastructure because certain common rules may simultaneously:

• facilitate interoperability;
• reduce transaction costs;
• create network efficiencies; and
• potentially restrict competition.

Therefore, context matters.

9. United States v. Visa U.S.A. Inc. — 344 F.3d 229 (2d Cir. 2003)

This important U.S. antitrust case concerned Visa and Mastercard's network rules and relationships with member banks.

The litigation examined restrictions affecting competition between payment networks, including rules that limited member banks' ability to issue competing cards.

The Second Circuit upheld important aspects of the antitrust case against Visa and Mastercard.

Competition significance

The case demonstrates how network rules can produce foreclosure effects.

A payment network may be powerful not simply because of its transaction volume, but because its contractual rules can affect:

• member-bank incentives;
• competing networks;
• merchant acceptance;
• cardholder choice; and
• entry.

The case is therefore highly relevant to modern financial-platform questions concerning:

interoperability + exclusivity + network effects + member restrictions.

10. Sainsbury's Supermarkets Ltd. v. Mastercard Inc. — UK

The UK litigation concerning Mastercard's multilateral interchange fees provides another major example of competition scrutiny of payment infrastructure.

The UK Competition Appeal Tribunal initially found Mastercard's UK MIF arrangements unlawful under competition law, and the subsequent appellate litigation addressed questions concerning competition effects and Article 101(3). The later proceedings continued to examine the counterfactual and economic effects of the interchange arrangements.

The issue remains particularly important because the UK courts have subsequently dealt with extensive merchant claims concerning Visa and Mastercard interchange fees. The CAT's 2025 judgment found infringement concerning certain default interchange-fee rules, while further litigation has continued.

Significance

The case illustrates the importance of the counterfactual:

What would competition look like if the challenged infrastructure rule did not exist?

That question is fundamental when analysing financial infrastructure.

11. What These Cases Establish

The cases collectively demonstrate several recurring principles.

12. Essential-Facility Dimension

One of the most difficult issues is whether financial infrastructure should be regarded as an essential facility.

The argument becomes particularly strong where:

1. the infrastructure is indispensable;
2. duplication is economically or technically impracticable;
3. competitors require access to compete;
4. the infrastructure owner has substantial market power; and
5. denial of access can eliminate effective downstream competition.

However, competition law generally does not mean that every dominant infrastructure operator must provide unlimited access.

Authorities must balance:

• competition;
• investment incentives;
• cybersecurity;
• financial stability;
• operational resilience;
• confidentiality;
• regulatory requirements; and
• legitimate business justification.

The Clearstream decision illustrates how refusal and discriminatory access can become competition problems where the infrastructure occupies a powerful position.

13. Two-Sided and Multi-Sided Markets

Financial infrastructure frequently operates as a multi-sided market.

For example, a card network connects:

Cardholders ↔ Issuing Banks ↔ Payment Network ↔ Acquiring Banks ↔ Merchants

Similarly:

Investors ↔ Brokers ↔ Exchange ↔ Clearing House ↔ Settlement System

Competition analysis must therefore consider interactions between different sides of the market.

A pricing decision that appears anti-competitive on one side may potentially generate efficiencies on another.

This is why payment-card cases have required sophisticated economic analysis.

14. Interoperability as a Competition Tool

Interoperability can be especially important in financial infrastructure.

Suppose Platform A controls a dominant payment rail.

If it prevents Platform B from connecting to A, B may be unable to reach:

• merchants;
• banks;
• customers;
• clearing systems; or
• settlement infrastructure.

Competition authorities may therefore examine:

Technical interoperability

Can competing systems communicate?

Commercial interoperability

Can competing providers participate on reasonable terms?

Data interoperability

Can users transfer relevant data?

Functional interoperability

Can competing services actually provide equivalent functionality?

Interoperability is particularly significant in modern payment ecosystems.

The CCI's UPI proceedings illustrate how competition authorities have treated UPI-enabled payment applications as a distinct market for certain competition-law purposes.

The 2025 appellate proceedings also considered the substitutability of UPI applications against wallets, cards and other payment methods.

15. Financial Infrastructure and Data

A modern financial infrastructure provider may simultaneously control:

Infrastructure + transaction data + customer relationships + technical standards.

This can create a feedback loop:

More transactions
↓
More data
↓
Better products/analytics
↓
More users
↓
More transactions

Competition authorities may therefore need to consider data-related market power alongside traditional infrastructure dominance.

Potential abuses include:

• discriminatory data access;
• withholding interoperability data;
• exclusive use of transaction information;
• preferential access to infrastructure-generated data;
• leveraging data into adjacent financial services.

16. Merger-Control Concerns

Financial-infrastructure mergers can create particularly powerful combinations.

Horizontal combination

Exchange A + Exchange B

Potential concern:

elimination of direct competition.

Vertical combination

Exchange + Clearing House

Potential concern:

foreclosure of rival exchanges or clearing providers.

Conglomerate combination

Payment network + fintech platform + financial-data provider

Potential concern:

leveraging infrastructure power into adjacent markets.

Data combination

Payment processor + financial-data business

Potential concern:

accumulation of commercially valuable transaction information.

The Deutsche Börse/NYSE Euronext proceedings demonstrate how competition authorities can scrutinise the interaction between trading and clearing infrastructure in merger review.

17. Regulatory Competition and Competition Law

Financial infrastructure is unusual because competition authorities do not operate alone.

Relevant regulators may include:

• competition authorities;
• central banks;
• securities regulators;
• payment regulators;
• financial-stability authorities;
• data-protection regulators; and
• market-conduct regulators.

In India, for example, payment systems are subject to the Payments and Settlement Systems Act, 2007, while the CCI applies the Competition Act.

The CCI's UPI investigation expressly considered the regulatory architecture under which RBI authorises payment systems and NPCI operates important retail payment infrastructure.

This creates an important principle:

Regulation does not automatically immunise financial infrastructure from competition law, but competition law must operate consistently with legitimate financial-stability regulation.

18. Remedies

Where competition problems are established, possible remedies include:

Structural remedies

• divestiture;
• separation of infrastructure businesses;
• ownership restrictions.

Behavioural remedies

• non-discriminatory access;
• transparent pricing;
• interoperability obligations;
• prohibition of exclusivity;
• access commitments.

Technical remedies

• open APIs;
• common technical standards;
• data portability;
• interoperability interfaces.

Merger remedies

• divestiture of overlapping infrastructure;
• licensing of technology;
• access commitments;
• firewall obligations;
• non-discrimination requirements.

19. Emerging Competition Issues

Financial infrastructure is rapidly changing through:

• real-time payments;
• central-bank digital currencies;
• tokenised securities;
• blockchain settlement;
• cloud-based financial infrastructure;
• artificial intelligence;
• open banking;
• embedded finance;
• digital identity;
• stablecoins;
• programmable payments; and
• API-based financial ecosystems.

These developments create a new competition question:

Who controls the financial rails on which competing financial services depend?

Control over a digital rail can sometimes be more strategically important than control over the consumer-facing financial product itself.

20. Indian Competition-Law Application

For India, a financial-infrastructure competition analysis should normally examine:

Section 3

Whether banks, payment operators or infrastructure participants have entered into anti-competitive agreements.

Section 4

Whether an infrastructure operator has:

• imposed unfair conditions;
• denied market access;
• discriminated between participants;
• leveraged dominance;
• tied products;
• engaged in exclusionary pricing; or
• otherwise abused dominance.

Sections 5–6

Whether a merger or acquisition creates an appreciable adverse effect on competition.

Relevant regulatory legislation

Depending upon the infrastructure, analysis may additionally involve:

• Competition Act, 2002;
• Reserve Bank of India Act, 1934;
• Payments and Settlement Systems Act, 2007;
• Securities Contracts (Regulation) Act, 1956;
• SEBI Act, 1992; and
• applicable securities, payment and market-infrastructure regulations.

21. Key Doctrinal Principles

The most important propositions can be summarised as follows:

1. Financial infrastructure can constitute a distinct relevant market.
2. Large transaction volume does not automatically establish unlawful dominance.
3. Network effects can create substantial barriers to entry.
4. Infrastructure access can be a critical competition variable.
5. Refusal to provide access can constitute abuse in appropriate circumstances.
6. Discriminatory access can be particularly problematic where competitors depend on the infrastructure.
7. Infrastructure rulebooks can themselves have competition effects.
8. Interchange-fee arrangements require economic and legal contextual analysis.
9. Merger control is important where infrastructure consolidation removes competitive constraints.
10. Two-sided-market effects must be considered rather than analysing one side in isolation.
11. Interoperability can be an important remedy for infrastructure market power.
12. Financial stability and competition objectives must be considered together.

22. Conclusion

Financial infrastructure market power is a distinctive competition-law problem because infrastructure can become a gateway through which other firms must operate.

The most significant competition risks arise where an infrastructure operator combines:

network effects + high switching costs + regulatory barriers + data advantages + control over access.

The MCX–NSE litigation demonstrates the importance of dominance and exclusionary conduct in Indian financial markets. Clearstream demonstrates the importance of non-discriminatory access to securities infrastructure. Deutsche Börse/NYSE Euronext demonstrates the importance of merger control over trading and clearing infrastructure. The MasterCard, Budapest Bank, Sainsbury's and Visa cases demonstrate how payment-network rules and interchange arrangements can affect competition.

Accordingly, modern competition law increasingly needs to look beyond the visible financial product and examine the underlying rails—payment, trading, clearing, settlement, data and interoperability infrastructure—on which financial competition depends.