Competition Law and Self-Executing Contract Monopolization Risks

1. Introduction

A self-executing contract is an agreement whose performance is automatically carried out by software once predetermined conditions are satisfied. Smart contracts deployed on blockchain are the most prominent example: payment, access, pricing, penalties, termination, or exclusion can occur automatically without a new human decision.

The OECD describes smart contracts as code-based rules that can automatically execute predefined contractual terms. Their ability to reduce transaction costs can promote competition, but the same features can also facilitate coordination, monitoring, exclusion and automated enforcement of anticompetitive arrangements.

The central competition-law question is therefore:

Can a firm use an apparently neutral, self-executing contract to lock customers or suppliers into an ecosystem, exclude rivals, coordinate prices, or preserve monopoly power automatically?

The answer depends not on the fact that the arrangement is encoded in software, but on market power, contractual purpose, effects, foreclosure, coordination, and the applicable competition-law rules.

There is not yet a large body of reported judicial decisions specifically holding that a blockchain smart contract itself constitutes monopolization. Consequently, established cases concerning automated pricing, contractual exclusion, tying, platform restrictions, refusal to deal, and monopoly maintenance are particularly useful analogies.

2. Meaning of Self-Executing Contracts

A conventional contract normally operates through:

1. formation;
2. performance;
3. monitoring;
4. breach;
5. notice;
6. enforcement or renegotiation.

A self-executing contract can compress these stages into software.

Example

Suppose a dominant digital marketplace requires sellers to sign a smart contract containing:

• automatic price-parity provisions;
• automatic penalties for selling elsewhere;
• automatic suspension for using competing platforms;
• automatic commission deductions;
• automatic denial of API access after a breach.

The platform may argue:

"The computer merely executes what the parties agreed."

Competition law may instead ask:

• Did the dominant firm impose the terms?
• Was there meaningful alternative access?
• Do the terms foreclose rival platforms?
• Do automatic penalties make switching prohibitively expensive?
• Does the mechanism facilitate price coordination?
• Does the contract reinforce an existing dominant position?
• Can competitors realistically enter or expand?

Thus, automation does not immunize an agreement from competition law.

3. Relationship Between Contract Law and Competition Law

A contract can be perfectly valid under ordinary contract law and nevertheless create competition-law problems.

The distinction is important:

Accordingly, the phrase "the customer voluntarily entered the smart contract" is not necessarily sufficient.

4. Main Competition Risks

A. Automated Exclusive Dealing

A dominant platform could require suppliers to enter a smart contract providing that:

If the supplier sells through a competing platform, the smart contract automatically increases the commission or terminates access.

This can operate as a form of exclusive dealing.

The competition concern becomes particularly serious where:

• the platform controls an important distribution channel;
• suppliers need access to the platform;
• switching costs are high;
• the contract covers a large proportion of demand;
• competing platforms cannot obtain sufficient scale.

The automatic nature of the penalty may actually strengthen foreclosure because there is no need for continuous managerial enforcement.

5. Automatic Price-Parity Clauses

A self-executing contract could contain:

"The seller shall not offer a lower price on another platform."

Software could continuously monitor prices and automatically impose consequences.

Such provisions can create most-favoured-nation (MFN) / price-parity concerns.

Possible effects include:

• reducing price competition between platforms;
• preventing discounting;
• facilitating monitoring;
• increasing transparency;
• making deviations immediately observable;
• stabilising supra-competitive prices.

The danger is greater when several competitors use comparable automated systems.

6. Algorithmic or Blockchain Cartels

Smart contracts can potentially transform a traditional cartel into automated coordination.

For example:

1. Competitors agree to maintain a minimum price.
2. The agreed price is encoded into software.
3. The blockchain records transactions.
4. The software detects deviations.
5. Deviating participants automatically suffer a financial penalty.
6. Prices remain aligned without continuous communication.

The OECD has specifically identified the possibility that smart contracts can make deviations from collusive arrangements easier to monitor and can reinforce coordination.

The important legal principle is that automation does not eliminate the underlying agreement.

7. Automatic Punishment of Competitors

A sophisticated smart contract could contain exclusionary mechanisms such as:

• automatic denial of interoperability;
• automatic termination of supply;
• automatic withdrawal of discounts;
• automatic API suspension;
• automatic destruction or freezing of deposits;
• automatic reduction of network privileges.

Where the firm possesses substantial market power, such mechanisms can potentially contribute to monopolization or abuse of dominance.

The crucial distinction is between:

Legitimate automation

"Payment will automatically be released when delivery is verified."

and

Potentially exclusionary automation

"If the supplier also supplies a competing platform, access to the dominant platform is automatically terminated."

The second mechanism has an obvious competitive dimension.

8. Lock-In and Switching Costs

Self-executing contracts may increase switching costs.

A customer may have:

• deposited collateral;
• committed future purchases;
• accumulated digital assets;
• linked APIs;
• integrated software;
• embedded data;
• automated payment arrangements.

If terminating the relationship triggers automatic financial penalties, switching may become economically difficult.

This is especially significant in markets characterized by network effects and ecosystem dependence.

The European Commission's current digital-market work illustrates the broader concern: large digital ecosystems can benefit from entrenched user bases, switching costs and ecosystem effects.

9. Tying and Bundling

A dominant firm may use a self-executing contract to link products.

For example:

Access to Product A automatically requires continued use of Product B.

Possible examples include:

• cloud service + identity service;
• payment processing + marketplace;
• operating system + application store;
• blockchain infrastructure + wallet;
• EV charging network + proprietary payment system.

The software may automatically prevent the customer from separating the products.

This can create technological tying, particularly where competitors cannot reproduce the same functionality.

10. Interoperability and Access

One of the most important issues concerns interoperability.

Suppose a dominant platform uses a smart contract that automatically refuses:

• API access;
• data portability;
• interoperability;
• cross-platform transactions;
• authentication;
• network participation.

The system may technically operate according to predetermined rules, but competition authorities can still investigate whether those rules exclude rivals.

Current EU digital regulation provides a useful modern context. In 2026, the European Commission has pursued measures concerning interoperability with Android and access to Google Search data, demonstrating the continuing importance of interoperability and access in digital competition regulation.

11. Six Important Case Laws

1. United States v. Microsoft Corp.

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

Facts

Microsoft possessed a dominant position in PC operating systems and engaged in conduct concerning web browsers and rival technologies.

Principle

The case established important principles concerning:

• monopoly maintenance;
• exclusionary conduct;
• technological integration;
• barriers to entry;
• effects on competing technologies.

Relevance to self-executing contracts

A dominant platform cannot necessarily avoid antitrust scrutiny simply by embedding exclusionary conduct into technical architecture.

A smart contract that automatically:

• prevents rival access,
• locks users into a platform,
• disables competing functionality,

could raise analogous concerns.

Key lesson

Technical implementation can constitute the mechanism of exclusion; the fact that exclusion occurs through software does not make it competitively neutral.

2. Aspen Skiing Co. v. Aspen Highlands Skiing Corp.

472 U.S. 585 (1985)

Principle

The U.S. Supreme Court examined exclusionary conduct involving a refusal to continue a previous course of cooperation.

The case is particularly important for understanding the circumstances in which a monopolist's refusal to deal can become anticompetitive.

Relevance

Imagine a dominant platform historically allowing interoperability and then deploying a smart contract that automatically terminates interoperability with a rival.

The question would not merely be:

"Did the code execute correctly?"

It would be:

"Did the dominant firm deliberately change access conditions in a manner that excludes competition?"

Key lesson

Automated termination cannot automatically transform potentially exclusionary conduct into legitimate conduct.

12. Verizon Communications Inc. v. Trinko

540 U.S. 398 (2004)

Principle

Trinko placed significant limits on the circumstances in which competition law requires a dominant firm to assist competitors.

The Supreme Court emphasized the general principle that antitrust law ordinarily does not impose a broad duty to deal.

Relevance

This becomes important for blockchain and digital ecosystems.

Suppose a dominant infrastructure provider operates a self-executing access system that refuses competing applications.

The analysis must distinguish:

• legitimate independent refusal to deal;
  from
• conduct that falls within a recognized antitrust theory of exclusion.

Key lesson

A smart contract's refusal mechanism does not itself establish an antitrust violation; the legal basis for requiring access must first be established.

13. Ohio v. American Express Co.

585 U.S. 529 (2018)

Principle

The Supreme Court examined contractual provisions restricting merchants from steering customers toward alternative payment methods.

The case is highly relevant to platform contracts and contractual restrictions on multi-homing.

Relevance to self-executing contracts

A payment platform could encode an anti-steering provision into a smart contract:

If the merchant directs a customer toward a competing payment provider, the contract automatically imposes a penalty.

The technological form does not eliminate the competition analysis.

The important questions include:

• What is the relevant market?
• Are there two-sided effects?
• Does the provision restrict competition between payment systems?
• Does the arrangement produce demonstrable anticompetitive effects?

Key lesson

Contractual restrictions inside a platform ecosystem can have competition consequences even where the contractual mechanism is technologically sophisticated.

14. Apple Inc. v. Pepper

587 U.S. 273 (2019)

Principle

The Supreme Court allowed consumers to pursue antitrust claims against Apple concerning its App Store distribution model.

The case is significant because it illustrates the competition importance of platform architecture, distribution and intermediary power.

Relevance

Imagine an app-store smart contract that automatically:

• requires use of the platform's payment mechanism;
• blocks external payment;
• deducts a commission;
• disables an application for non-compliance.

The self-executing mechanism could reinforce platform control over developers and consumers.

Key lesson

The contractual and technological architecture of a platform can be relevant to the assessment of market power and competitive harm.

15. United States v. Topkins

United States v. Topkins, No. 3:15-cr-00227 (N.D. Cal. 2015)

Facts

The case involved an online seller who participated in an agreement to fix prices using algorithms.

Importance

It is one of the most useful examples for understanding the relationship between:

• algorithms;
• explicit agreements;
• automated pricing;
• cartel conduct.

Relevance to smart contracts

Consider two competitors who agree:

"Our smart contracts will maintain the same minimum price."

The fact that the prices are subsequently produced automatically does not necessarily eliminate the original agreement.

The important legal distinction is:

Human agreement + automated implementation ≠ absence of cartel conduct.

Key lesson

An algorithm can be the instrument through which an anticompetitive agreement is implemented.

16. Eturas UAB v. Lietuvos Respublikos konkurencijos taryba

C-74/14, Court of Justice of the European Union (2016)

Facts

Eturas operated a common online travel-booking system. A system message communicated a limitation concerning discounts available to participating travel agencies.

Principle

The CJEU considered whether participants could be responsible for concerted practices where an electronic system facilitated the implementation of a common restriction.

Relevance

This is particularly valuable for self-executing systems because the competitive restriction can be embedded in a common technological environment rather than negotiated through traditional face-to-face meetings.

Smart-contract analogy

Imagine:

1. competing firms participate in a common blockchain;
2. a common smart contract imposes a maximum discount;
3. the system automatically prevents discounts beyond that level.

The legal analysis should focus on:

• communication;
• knowledge;
• participation;
• implementation;
• competitive restriction.

Key lesson

Electronic implementation does not necessarily break the chain between coordination and anticompetitive conduct.

17. Comparative Case-Law Table

18. Monopolization Theory

In jurisdictions applying a monopolization framework similar to U.S. antitrust law, three questions become important.

A. Market power

The firm must possess substantial power in a relevant market.

Relevant considerations include:

• market share;
• entry barriers;
• network effects;
• switching costs;
• data advantages;
• ecosystem dependence;
• control over essential infrastructure.

B. Exclusionary conduct

The self-executing contract must do more than simply make the firm successful.

Potentially relevant conduct includes:

• exclusive dealing;
• tying;
• discriminatory access;
• predatory arrangements;
• refusal to interoperate;
• foreclosure;
• contractual restrictions;
• exclusionary rebates;
• automatic penalties for dealing with rivals.

C. Competitive effect

Authorities may investigate whether the mechanism:

• raises rivals' costs;
• prevents entry;
• reduces output;
• increases prices;
• decreases innovation;
• limits consumer choice;
• reduces interoperability;
• entrenches market power.

19. Abuse of Dominance Perspective

Under EU-style competition law, Article 102 TFEU provides a particularly relevant framework.

A dominant enterprise may encounter competition concerns where self-executing contractual mechanisms produce:

• exclusionary effects;
• discriminatory conditions;
• tying;
• unfair contractual conditions;
• refusal of access;
• foreclosure of competing undertakings.

The EU's Digital Markets Act also provides ex ante obligations for designated gatekeepers, meaning that some platform conduct can be regulated without waiting for a conventional Article 102-style dominance case. The Commission has recently applied DMA obligations concerning self-preferencing and steering by Google.

20. Competition Risks Created Specifically by "Code"

20.1 Immutability

Once deployed, the code may be difficult to modify.

This can make an anticompetitive arrangement persistent.

20.2 Automatic enforcement

There may be no managerial discretion to relax exclusionary provisions.

20.3 Transparency

Blockchain transactions may allow competitors to observe conduct almost immediately.

This can facilitate:

• monitoring;
• retaliation;
• price alignment;
• detection of deviations.

20.4 Reduced communication costs

Competitors may coordinate through software rather than traditional communications.

20.5 Network effects

Once many users adopt the same smart-contract infrastructure, competing systems may struggle to obtain sufficient scale.

20.6 Switching costs

Automated termination fees or forfeiture mechanisms may make migration expensive.

20.7 Pseudonymity

Identifying the actual parties responsible for designing or operating the arrangement can sometimes be difficult.

21. Smart Contracts and Tacit Collusion

One particularly difficult issue is tacit coordination.

Suppose competing platforms independently program algorithms to maintain stable prices.

There may be:

• no written cartel agreement;
• no direct communication;
• no meeting;
• no traditional cartel document.

Nevertheless, algorithms may react predictably to each other's prices.

The competition-law question becomes whether the conduct constitutes:

• independent parallel conduct;
• conscious parallelism;
• facilitating practice;
• concerted practice;
• explicit agreement;
• algorithmic cartel.

The distinction is legally significant because competition systems do not universally treat mere parallel pricing as equivalent to an agreement.

22. Self-Executing Contracts as a Facilitating Device

A smart contract can serve three separate functions:

1. Coordination device

It establishes common terms.

2. Monitoring device

It observes compliance.

3. Enforcement device

It automatically punishes deviations.

That combination can be particularly powerful.

For example:

Agreement → Code → Monitoring → Automatic penalty → Continued coordination

This is potentially more durable than a conventional cartel arrangement.

23. Essential-Facility and Interoperability Risks

A dominant blockchain or digital infrastructure may become an important gateway.

Examples include:

• blockchain settlement infrastructure;
• cloud infrastructure;
• payment rails;
• identity systems;
• digital advertising exchanges;
• app stores;
• API gateways;
• EV charging networks.

If competitors depend upon the infrastructure, a self-executing access contract could become a mechanism for exclusion.

However, essential-facility doctrine is exceptional, and refusal-of-access cases require careful analysis rather than an assumption that every important infrastructure qualifies as an essential facility.

24. Vertical Foreclosure

A dominant manufacturer could impose a smart contract on distributors:

"If Distributor X sells a rival's product, the discount automatically disappears."

The contract may therefore create:

Manufacturer → Distributor → Automatic penalty → Rival foreclosure

Competition authorities may examine:

• duration;
• market coverage;
• distributor dependence;
• availability of alternatives;
• market share;
• entry barriers;
• actual foreclosure.

25. Killer and Roll-Up Strategies

Self-executing contracts may also interact with acquisitions.

Suppose a dominant platform acquires multiple competing blockchain applications and integrates them into one automated ecosystem.

The platform could then use contracts to:

• route transactions exclusively through its infrastructure;
• impose interoperability restrictions;
• bundle acquired services;
• prevent customers from switching.

The merger itself and subsequent conduct are separate competition-law questions.

26. Consumer Welfare and Innovation

Self-executing contracts are not inherently anticompetitive.

They can create substantial procompetitive benefits:

• lower transaction costs;
• faster settlement;
• reduced fraud;
• reduced enforcement costs;
• easier access for smaller firms;
• greater transparency;
• reduced counterparty risk.

The OECD similarly identifies potential competition-enhancing effects, including reduced transaction costs and easier participation by smaller firms.

Therefore, authorities should distinguish between:

automation that makes markets more efficient

and

automation that makes exclusion or coordination more effective.

27. Efficiency Defence

A firm may argue that a self-executing contract produces efficiencies because it:

• eliminates intermediaries;
• reduces transaction costs;
• reduces enforcement expenses;
• prevents fraud;
• ensures predictable performance;
• improves supply-chain efficiency.

These arguments can be relevant where the applicable competition regime permits an efficiency or consumer-benefit analysis.

But efficiency does not automatically justify a mechanism that unnecessarily excludes rivals.

A useful analytical question is:

Could substantially the same efficiency be achieved through a less restrictive contractual design?

28. Remedies

Competition authorities and courts may consider remedies such as:

Structural remedies

• divestiture;
• separation of platform businesses;
• removal of exclusive relationships.

Behavioural remedies

• interoperability;
• access obligations;
• removal of exclusivity;
• prohibition of discriminatory terms;
• prohibition of anti-steering restrictions.

Technical remedies

• modification of smart-contract code;
• disabling automatic penalties;
• introduction of human override mechanisms;
• permissionless interoperability;
• API access;
• data portability.

Compliance remedies

• algorithmic audits;
• monitoring of smart-contract deployments;
• competition compliance approval before code deployment;
• documentation of algorithmic changes.

29. Special Problem: "Code Is Law"

The proposition "code is law" cannot mean:

"Code overrides competition law."

A self-executing mechanism may make contractual performance technically automatic, but public competition rules can still apply to the underlying commercial conduct.

The European Commission's current work on automated contracting similarly recognizes that AI-enabled and smart-contract-based automated contracting raises questions concerning how existing legal frameworks apply to increasingly autonomous transactions.

Therefore:

Code determines how an arrangement executes.
Competition law determines whether the underlying conduct is permissible.

30. Compliance Framework for Businesses

Businesses deploying self-executing contracts should conduct a competition-law audit before deployment.

Step 1 — Identify market power

Determine:

• market share;
• competitors;
• entry barriers;
• switching costs;
• network effects.

Step 2 — Examine contractual restrictions

Look for:

• exclusivity;
• MFNs;
• non-compete provisions;
• tying;
• resale restrictions;
• anti-steering;
• automatic termination.

Step 3 — Audit algorithms

Ask:

• Does the algorithm monitor competitors?
• Does it automatically respond to competitor prices?
• Does it punish deviations?
• Does it facilitate price alignment?

Step 4 — Test interoperability

Determine whether the contract:

• blocks rival systems;
• restricts APIs;
• prevents data portability;
• imposes technical barriers.

Step 5 — Conduct foreclosure analysis

Assess:

• percentage of the market affected;
• duration;
• availability of alternatives;
• rival access;
• customer dependence.

Step 6 — Build human safeguards

Provide mechanisms allowing:

• emergency suspension;
• regulatory compliance changes;
• correction of defective code;
• competition-law review.

31. Key Legal Distinction

The most important conceptual distinction is:

Self-execution is not the offence.

The potentially problematic conduct is what the self-executing mechanism does.

For example:

32. Conclusion

Self-executing contracts create a new technological layer for traditional competition-law problems.

The principal risks are:

1. automated exclusion;
2. exclusive dealing;
3. algorithmic price coordination;
4. automatic retaliation against competitors;
5. platform lock-in;
6. tying and bundling;
7. interoperability restrictions;
8. data and API foreclosure;
9. increased switching costs;
10. reinforcement of existing monopoly power.

The cases of Microsoft, Aspen Skiing, Trinko, American Express, Apple v. Pepper, Topkins and Eturas demonstrate different parts of the legal framework. None should be treated as a direct judicial holding that "smart contracts are monopolization"; rather, they provide established principles for analysing the competitive consequences of automated contractual architecture.

The central proposition for examination purposes is:

A self-executing contract does not escape competition law merely because its restrictive consequences are produced automatically by code. Where a firm possesses substantial market power, contractual automation may become a mechanism for exclusion, foreclosure, tying, discriminatory access, or coordination. Competition analysis therefore focuses on the underlying agreement, market structure, purpose, implementation, and competitive effects—not merely on whether a human manually enforced the contract.