Competition Law and Future Oversight of Dependency-Based Market Power

Introduction

Dependency-based market power refers to situations in which an undertaking may not possess overwhelming power across an entire relevant market, yet a trading partner becomes so economically dependent upon it that the dependent undertaking cannot realistically switch to an alternative supplier, customer, platform, infrastructure provider, or distribution channel.

This concept is increasingly important in digital and platform economies. A supplier may depend on one marketplace for access to consumers; an app developer may depend on one operating system; a retailer may depend upon a powerful brand; or a business may become locked into a cloud, payment, data, logistics, or interoperability ecosystem.

Traditional competition law generally asks whether an undertaking is dominant in a relevant market. Dependency-based analysis adds a second question:

Can one undertaking exercise substantial commercial power over a particular trading partner because that partner lacks a realistic alternative?

The distinction is important. EU law traditionally treats dominance as market-wide power, whereas jurisdictions such as Germany and France have developed doctrines addressing relative market power/economic dependence. Contemporary scholarship identifies this as an emerging frontier of competition law.

1. Meaning of Dependency-Based Market Power

Dependency may arise where a business has:

1. High switching costs
2. Strong brand dependence
3. Exclusive or quasi-exclusive relationships
4. Network effects
5. Platform lock-in
6. Irreplaceable infrastructure
7. Data or interoperability dependence
8. Long-term contractual commitments
9. Relationship-specific investments
10. Lack of economically equivalent alternatives

The important point is that market share alone may not reveal the relevant power relationship.

For example:

Supplier A has only 25% of the overall market, but Distributor B obtains 80% of its revenue from A's products and has invested heavily in A-specific infrastructure. Switching would require two years and substantial sunk expenditure.

A may therefore have significant bilateral bargaining power over B, even though A is not necessarily dominant in the conventional market-wide sense.

2. Traditional Dominance vs Dependency-Based Power

The distinction is particularly important because dependency should not automatically be equated with dominance.

The Competition Commission of India, for example, expressly distinguishes dominance from abuse: dominance itself is not prohibited; abusive conduct by a dominant enterprise is.

3. Sources of Dependency

A. Brand dependency

A distributor may become dependent upon a famous brand because consumers specifically demand that brand.

The distributor may technically be free to sell competing products, but switching may destroy goodwill, customer relationships and investments.

B. Platform dependency

Digital marketplaces create particularly strong dependency risks.

A seller may depend upon:

• marketplace search rankings;
• platform advertising;
• customer reviews;
• fulfilment infrastructure;
• payment systems;
• recommendation algorithms;
• consumer data;
• platform-specific reputation.

Consequently, removing a seller from the platform can have effects substantially greater than the formal termination of a contract.

C. Infrastructure dependency

Dependency may arise around:

• electricity grids;
• telecommunications networks;
• payment systems;
• ports;
• airports;
• railway infrastructure;
• cloud infrastructure;
• data centres;
• charging networks.

Where duplication is economically unrealistic, access may become essential.

D. Data dependency

A firm may become dependent upon another undertaking's:

• transaction data;
• consumer data;
• API;
• interoperability information;
• technical standards;
• identity system;
• advertising data.

Future competition enforcement will increasingly have to distinguish ordinary commercial dependence from strategically created data dependence.

4. Switching Costs as the Core Indicator

Future competition authorities are likely to examine switching costs much more closely.

Relevant questions include:

Economic

• How expensive is switching?
• How long does switching take?
• What sunk investments become stranded?

Technical

• Can data be exported?
• Is interoperability available?
• Are APIs portable?

Commercial

• Will consumers follow the business?
• Will the business lose its reputation?
• Are alternative suppliers commercially viable?

Legal

• Are exclusivity clauses present?
• Are termination penalties imposed?
• Are non-compete obligations applicable?

Behavioural

• Are consumers actually willing to switch?

Thus, formal substitutability is insufficient. Competition authorities must consider practical substitutability.

5. Case Law

1. United Brands v Commission — C-27/76

The Court of Justice established the classic approach to dominance under EU competition law.

The case concerned United Brands' position in the banana market and examined whether the undertaking possessed substantial economic power enabling it to behave independently of competitors, customers and consumers.

Relevance to dependency

United Brands provides the foundational framework for determining economic power. Dependency analysis develops this concept by asking whether independence is lost not necessarily throughout the entire market but within a particular commercial relationship.

Principle

Market power involves the ability to behave to an appreciable extent independently of competitive constraints.

Future significance: authorities can use the independence concept as the starting point for analysing relational dependency.

2. Bronner v Mediaprint — C-7/97

This is one of the most important cases concerning access dependency.

The Court considered whether a dominant undertaking could be required to provide access to infrastructure.

It established stringent conditions for compulsory access, including:

1. refusal is likely to eliminate competition;
2. refusal lacks objective justification; and
3. access is indispensable because no actual or potential substitute exists.

The indispensability requirement means that alternatives must be assessed even if they are less advantageous.

Importance

Bronner establishes the principle that commercial difficulty is not automatically legal indispensability.

Future application

The doctrine will be important for:

• cloud infrastructure;
• AI compute;
• app ecosystems;
• payment infrastructure;
• data access;
• digital identity;
• EV charging networks.

3. IMS Health v NDC Health — C-418/01

IMS Health concerned access to a copyrighted data structure used in pharmaceutical sales information.

The Court applied the exceptional-access principles associated with Bronner and emphasized the importance of indispensability and absence of realistic alternatives.

Dependency significance

A business can become dependent upon a particular infrastructure or data architecture where duplication is practically impossible.

Future relevance

The reasoning is especially significant for:

• proprietary datasets;
• interoperability systems;
• technical standards;
• AI training data;
• healthcare databases;
• digital infrastructure.

It provides a framework for distinguishing ordinary commercial advantage from genuinely indispensable infrastructure.

4. Slovak Telekom v Commission — C-165/19 P

Slovak Telekom involved access to the incumbent telecommunications operator's local loop and alleged abusive conditions of access.

The Court clarified an important distinction:

A refusal to provide access is different from providing access on unfair conditions.

Where access is already provided but on unfair terms, the stringent Bronner conditions for outright refusal do not necessarily apply.

Dependency significance

This is extremely important for dependency-based market power.

A platform may technically permit access while making access:

• excessively expensive;
• discriminatory;
• technically inferior;
• unstable;
• unpredictable;
• subject to discriminatory algorithms.

Thus, formal access does not necessarily eliminate economic dependency.

5. Deutsche Telekom v Commission — C-280/08 P

The Deutsche Telekom litigation concerned access to telecommunications infrastructure and margin squeeze.

The case demonstrates that a dominant undertaking can potentially exploit downstream dependency through pricing structures that make effective competition difficult.

Dependency significance

The case demonstrates why competition authorities should examine the economic conditions surrounding access, rather than merely ask whether access formally exists.

Future application

Similar reasoning can become relevant to:

• cloud platforms;
• digital payment systems;
• app stores;
• charging networks;
• telecommunications;
• digital advertising infrastructure.

6. Microsoft v Commission — T-201/04

Microsoft concerned interoperability information and Microsoft's position in operating-system markets.

The General Court upheld important aspects of the Commission's intervention concerning interoperability and tying.

Dependency significance

The case illustrates how technological ecosystems can generate dependence when competitors require access to technical information to compete effectively.

Future relevance

The principle is increasingly relevant to:

• operating systems;
• APIs;
• cloud interoperability;
• AI ecosystems;
• smart-device ecosystems;
• connected vehicles.

7. Apple Distribution — Autorité de la concurrence, Decision 20-D-04

This is particularly important because it directly concerns economic dependence.

The French competition authority found that Apple Premium Resellers were economically dependent upon Apple. Factors included:

• substantial reliance on Apple products;
• contractual restrictions;
• significant investment in Apple-specific retail infrastructure;
• difficulty switching to competing brands;
• strong consumer attachment to the Apple brand.

The authority concluded that Apple abused that dependency through practices including supply difficulties, discriminatory treatment and uncertain commercial conditions.

Importance

This is a direct illustration of the proposition that:

Economic dependence can exist even where the legal analysis is not simply conventional market-wide dominance.

6. French Economic-Dependence Doctrine

French competition law expressly addresses abusive exploitation of a state of economic dependence.

The French authority generally considers whether the dependent company lacks a technically and economically equivalent alternative within a reasonable period.

Importantly, high dependence on one supplier is not automatically sufficient. The authority examines the circumstances concretely, including whether the dependence resulted from a deliberate commercial choice.

The authority also examines whether the alleged abuse affects the functioning or structure of competition.

This provides an important safeguard against converting ordinary commercial bargaining disputes into competition-law cases.

7. German Relative Market Power

Germany provides another important model through Section 20 of the German Act Against Restraints of Competition (GWB).

The German approach recognizes situations in which an undertaking may possess power over another undertaking because the latter is commercially dependent upon it.

This is particularly significant in:

• platform relationships;
• small-business relationships;
• retail distribution;
• digital ecosystems;
• access to important commercial channels.

The modern German approach demonstrates that competition law can move beyond a purely market-wide conception of dominance toward relational market power.

8. Dependency in Digital Markets

Digital markets amplify dependency through several mechanisms.

Network effects

The more users a platform has, the harder it becomes for participants to leave.

Data accumulation

Historical data may make the incumbent platform more valuable.

Reputation systems

Seller ratings may not be portable.

Algorithmic visibility

A platform can control whether a dependent business is visible to consumers.

Ecosystem integration

A business may simultaneously depend on:

• operating systems;
• payment systems;
• cloud services;
• advertising;
• logistics;
• identity verification.

The result can be multi-layer dependency.

9. The Concept of Dependency Chains

Future competition law should increasingly examine dependency chains.

For example:

Manufacturer → Marketplace → Payment Platform → Cloud Provider → Advertising Platform → Consumers

A business may appear to have alternatives at every individual level, while in reality the combined switching costs make departure commercially unrealistic.

This produces a form of ecosystem dependency.

The legal challenge is determining whether the dependency is:

• natural;
• efficiency-based;
• consumer-created;
• contractually created;
• technologically engineered; or
• strategically maintained.

10. Future Oversight Framework

A future competition authority could use the following analytical model.

Stage 1 — Identify the relationship

Who depends upon whom?

Stage 2 — Identify the source of dependency

Is it caused by:

• infrastructure;
• data;
• brand;
• network effects;
• contract;
• technology;
• consumer preference?

Stage 3 — Measure alternatives

Are alternatives:

• technically available?
• economically viable?
• commercially credible?
• scalable?
• interoperable?

Stage 4 — Measure switching costs

Calculate:

• financial costs;
• time;
• lost customers;
• stranded investment;
• data migration;
• retraining;
• regulatory costs.

Stage 5 — Examine conduct

Possible abuses include:

• discriminatory access;
• supply restrictions;
• unfair contractual terms;
• tying;
• exclusivity;
• discriminatory algorithms;
• sudden delisting;
• discriminatory pricing;
• data withholding;
• interoperability restrictions.

Stage 6 — Examine competitive effects

The authority should ask whether the conduct affects:

• competitors;
• innovation;
• entry;
• consumer choice;
• quality;
• prices;
• resilience;
• market structure.

Stage 7 — Examine objective justification

The undertaking should have an opportunity to establish legitimate reasons such as:

• security;
• quality control;
• intellectual-property protection;
• capacity constraints;
• fraud prevention;
• technical compatibility.

11. Possible Future Remedies

A. Data portability

Dependent businesses should be able to retrieve commercially important data in usable formats.

B. Interoperability

Where justified, authorities could require technical interoperability.

C. Non-discrimination

Platforms could be required to apply equivalent access conditions to similarly situated businesses.

D. Transparency

Algorithms determining ranking, access, delisting or visibility could become subject to greater procedural transparency.

E. Contractual safeguards

Competition authorities could scrutinize:

• excessive termination penalties;
• unilateral variation clauses;
• exclusivity;
• MFN clauses;
• non-competes;
• automatic renewal mechanisms.

F. Structural remedies

In extreme cases, separation of platform functions or divestiture could be considered, although such remedies require careful assessment of their proportionality and competitive effects.

12. Risks of Over-Enforcement

Dependency-based competition law also presents significant risks.

Every commercial relationship creates some dependence.

A retailer naturally depends on suppliers. A supplier depends on customers. A franchisee depends on a franchisor.

Therefore:

Dependence alone cannot be the legal test.

Intervention should generally require evidence of meaningful lack of alternatives plus abusive conduct and a connection to competitive harm where the applicable legal framework requires it.

This is consistent with the French authority's position that even substantial reliance on one trading partner does not automatically establish economic dependence.

13. Implications for India

Indian competition law currently operates primarily through the conventional concepts of relevant market, dominance and abuse under Sections 3 and 4 of the Competition Act, 2002.

Section 4 examines whether an enterprise has a position of strength enabling it to operate independently of competitive forces or affect competitors or consumers in its favour. The statutory framework also covers unfair or discriminatory conditions, denial of market access, tying and leveraging.

Consequently, dependency-based concerns in India can potentially be analysed through:

• refusal to deal;
• exclusive supply/distribution;
• tying;
• discriminatory conditions;
• denial of market access;
• leveraging;
• platform-related conduct.

The conceptual challenge is whether future Indian competition law should expressly recognize relative/economic dependence as an independent basis of intervention or continue addressing such conduct primarily through existing dominance and vertical-restraint provisions.

14. Future Challenges

The next generation of dependency-based competition cases may involve:

AI ecosystems

Dependence upon one provider's models, compute or training infrastructure.

Cloud computing

High migration costs and proprietary architectures.

Digital advertising

Dependence upon a small number of advertising intermediaries.

App stores

Dependence upon access to mobile consumers.

EV ecosystems

Dependence upon charging, battery-management and payment networks.

Healthcare

Dependence upon proprietary clinical databases.

Financial technology

Dependence upon payment rails, APIs and digital identity infrastructure.

Autonomous systems

Dependence upon mapping, cloud and sensor-data ecosystems.

Smart manufacturing

Dependence upon proprietary industrial software and machine interfaces.

15. Key Principles Emerging from the Case Law

Conclusion

Dependency-based market power represents a significant development in the future architecture of competition law.

Traditional competition law primarily asks:

How powerful is the undertaking in the relevant market?

Dependency-based analysis additionally asks:

How difficult is it for the affected undertaking to escape the relationship?

The distinction is increasingly important in digital ecosystems where network effects, data, interoperability, switching costs, reputation and platform access can create substantial relational power without necessarily producing conventional monopoly conditions.

The emerging legal model should therefore combine:

market power + dependency + absence of realistic alternatives + abusive conduct + competitive effects + objective justification.

The case law from United Brands, Bronner, IMS Health, Deutsche Telekom, Microsoft, Slovak Telekom and the French Apple economic-dependence decision provides the foundations for this development. The future challenge will be designing rules capable of preventing strategically exploited dependency while preserving legitimate commercial freedom and efficient vertical relationships.