Metaverse Economy: Platform Enclosure and Interoperability Issues

Detailed Legal Explanation with At Least 6 Case Laws — German and EU Competition Law, with UK and Comparative Perspectives

1. Introduction

The metaverse is a network of immersive digital environments in which users interact through avatars, participate in virtual economies, purchase digital assets, attend events, operate businesses, and engage in gaming, social networking, education, and commerce. Its economic infrastructure may include virtual land, non-fungible tokens (NFTs), digital currencies, identity systems, avatar marketplaces, payment services, cloud computing, artificial intelligence, and proprietary virtual-reality hardware.

Platform enclosure occurs when a metaverse operator uses technical, contractual, commercial, or governance mechanisms to restrict users and businesses to its own ecosystem. Interoperability refers to the ability of different platforms, services, devices, and applications to communicate, exchange data, authenticate users, or transfer digital assets in a usable form.

For example, a user might purchase a virtual garment on Platform A but be unable to wear it on Platform B because the platforms use incompatible avatar formats, licensing terms, identity systems, or asset-transfer protocols. A virtual merchant may similarly lose access to customers when it leaves a dominant ecosystem.

These restrictions are not automatically unlawful. Platforms may legitimately protect cybersecurity, intellectual property, user privacy, content moderation, and system integrity. The central competition-law question is whether restrictions are objectively justified design choices or mechanisms through which a powerful platform excludes rivals, raises switching costs, or entrenches market power.

2. Meaning and forms of platform enclosure

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A. Technical enclosure

Proprietary avatar formats, incompatible APIs, closed software development kits, restricted identity credentials, and non-portable digital inventories can prevent third-party services from functioning across virtual worlds.

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B. Economic enclosure

Exclusive payment systems, platform-specific tokens, high transaction fees, restrictions on external marketplaces, and non-transferable purchases can lock users and merchants into one ecosystem.

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C. Social and identity enclosure

A platform may control friends lists, reputation scores, avatar identities, creator followers, or virtual communities. Losing these connections can make switching costly even when competing services offer better prices or features.

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D. Governance and contractual enclosure

Terms of service, unilateral licensing changes, developer restrictions, content policies, and limitations on third-party distribution may enable an operator to determine which businesses can participate in its virtual economy.

Why enclosure matters economically

Metaverse platforms can benefit from direct and indirect network effects: users attract creators, creators attract businesses, and businesses attract more users. When combined with proprietary standards, accumulated digital assets, social relationships, and high migration costs, these effects may create durable competitive advantages.

The result may be a market in which competition exists between a few separate virtual worlds, but users cannot meaningfully exercise choice within an ecosystem or transfer their economic activity between ecosystems.

Interoperability can reduce these barriers, although it cannot by itself eliminate network effects, scale advantages, or all forms of market concentration.

3. Legal framework governing enclosure and interoperability

A. European Union competition law

Article 101 TFEU — Anticompetitive agreements

Article 101 may apply where competing metaverse operators, developers, asset marketplaces, or payment providers agree to restrict interoperability, exclude competing services, coordinate technical standards to disadvantage rivals, or impose unjustified exclusivity arrangements.

Not every interoperability agreement is restrictive. Shared technical standards can promote competition when they are transparent, accessible, and reasonably non-discriminatory.

Article 102 TFEU — Abuse of dominance

Article 102 prohibits the abuse of a dominant position where the conduct may affect trade between Member States. Potentially problematic practices include:

Refusing access to an interface or platform capability in circumstances where the refusal unlawfully excludes rivals.

Self-preferencing the operator's own virtual goods, marketplaces, or services.

Imposing discriminatory access conditions on independent developers.

Tying virtual-world access to proprietary payment, identity, or distribution services.

Using technical restrictions to prevent competing products from reaching users.

Dominance itself is not unlawful. The inquiry concerns the conduct, its actual or potential exclusionary effects, and any objective justification.

Digital Markets Act 2022 (DMA)

The DMA supplements conventional competition law with ex ante obligations for designated gatekeepers. Its interoperability provisions are particularly relevant:

Article 6(7): requires designated gatekeepers to provide effective interoperability with specified operating-system hardware and software features, subject to the regulation's conditions and justified integrity safeguards.

Article 7: provides for interoperability obligations concerning number-independent interpersonal communications services, including a phased implementation framework.

Article 8: addresses implementation of gatekeeper obligations and allows the Commission to specify compliance measures in relevant circumstances.

These provisions do not impose a universal duty on every metaverse operator to make all virtual assets, identities, or worlds interoperable. Their application depends on the designated service, the particular obligation, and the relevant facts.

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B. German competition law

Germany's Gesetz gegen Wettbewerbsbeschränkungen (GWB) provides an additional framework.

Section 19 GWB: prohibits abusive conduct by dominant undertakings, including potentially exclusionary or discriminatory conduct.

Section 19a GWB: permits the Bundeskartellamt to impose specified obligations on undertakings of paramount significance for competition across markets, following the statutory procedure.

Section 20 GWB: addresses certain forms of abusive conduct involving undertakings with relative or superior market power, including some dependencies that may arise even without conventional dominance.

These provisions can be relevant when a metaverse operator controls an important technical interface, virtual marketplace, identity layer, or distribution channel on which dependent developers rely.

The analysis should distinguish genuine technical limitations from strategic restrictions designed to disadvantage rivals. Section 19a is not a blanket interoperability mandate; its application depends on the statutory requirements and the measures imposed.

C. United Kingdom competition law

The principal UK provisions are:

Competition Act 1998, Chapter I prohibition: addresses agreements and concerted practices that restrict competition.

Competition Act 1998, Chapter II prohibition: addresses abuse of a dominant position.

Digital Markets, Competition and Consumers Act 2024 (DMCC Act): establishes a regime for designated firms with strategic market status, including conduct requirements and pro-competition interventions under the statutory framework.

A metaverse operator could raise competition concerns if it controls a strategically important digital ecosystem and uses contractual or technical restrictions to foreclose competing developers, marketplaces, or services. Whether the DMCC regime applies depends on the designation and relevant statutory conditions; the fact that a platform is large or operates a virtual world does not alone establish strategic market status.

D. Intellectual property, privacy and cybersecurity

Interoperability must also be reconciled with copyright, trademarks, software licensing, personal-data protection, cybersecurity, and consumer protection.

For instance, a virtual garment may be technically transferable but subject to a licence limiting its use to a particular game or environment. A social-graph transfer may involve personal data requiring an appropriate legal basis and safeguards.

The legal objective is not unrestricted copying or universal access. It is effective competition without unnecessarily sacrificing legitimate rights, security, or user protection.

4. Key case laws: at least eight authorities

The following judgments are established competition-law authorities that can be applied to metaverse enclosure by analogy. They do not all concern the metaverse itself, and their legal tests must be applied in their proper factual contexts.

Case 1: Microsoft Corp v Commission (2007)

General Court of the European Communities, Case T-201/04

Legal principle: A dominant undertaking's control over interoperability information can be used to exclude competing products, and access restrictions may constitute abuse in the relevant circumstances.

Facts and decision: The European Commission challenged Microsoft's refusal to provide interoperability information needed by competing work-group server operating systems. The General Court largely upheld the Commission's decision, including the interoperability-related infringement and remedy.

Application to the metaverse:

A dominant metaverse operator might control the technical specifications required for third-party avatars, virtual objects, identity services, or applications to work within its environment. If it withholds necessary information while favouring its own competing services, the conduct may warrant scrutiny under Article 102 TFEU.

For example, independent avatar developers might be denied access to essential interface documentation while the operator's own avatar products receive equivalent functionality.

Significance: The case demonstrates that interoperability restrictions can become an antitrust issue where they protect a dominant undertaking against competition rather than merely safeguard legitimate technical interests.

Limitation: Microsoft does not establish that every proprietary interface must be opened. The specific facts, effects on competition, and applicable legal test remain important.

Case 2: Oscar Bronner GmbH & Co KG v Mediaprint (1998)

Court of Justice of the European Communities, Case C-7/97

Legal principle: A refusal to grant access to infrastructure developed for a dominant undertaking's own business is subject to a demanding essential-facilities analysis.

Facts and decision: A newspaper publisher sought access to a rival's home-delivery distribution system. The Court did not accept that the system had to be made available merely because access would improve the applicant's competitive position.

The traditional refusal-to-supply framework requires careful consideration of indispensability, the potential elimination of effective competition, and the absence of objective justification.

Application to the metaverse:

Suppose a company builds a proprietary virtual world and refuses to permit rival platforms to access its avatar engine. The refusal is not automatically abusive merely because interoperability would be commercially useful.

A court must determine which refusal-of-access principles apply, whether genuine alternatives exist, and whether the alleged conduct threatens competition rather than simply disadvantaging one competitor.

Significance: Bronner guards against turning competition law into a general compulsory-licensing regime.

Limitation: Its strict indispensability requirement does not automatically govern every interoperability dispute, particularly where the platform was designed to accommodate third-party services.

Case 3: Magill (RTE and ITP v Commission) (1995)

Court of Justice of the European Communities, Joined Cases C-241/91 P and C-242/91 P

Legal principle: In exceptional circumstances, intellectual-property rights may not justify a refusal to license where the refusal constitutes an abuse of dominance.

Facts and decision: Broadcasters refused to license programme listings that a publisher needed to produce a comprehensive weekly television guide. The Court upheld the finding of abuse in the circumstances, including the prevention of a new product for which there was consumer demand.

Application to the metaverse:

A platform might own proprietary specifications or intellectual property relating to virtual objects, avatar systems, or environment-specific formats. It could raise concerns if it invokes those rights strategically to prevent an innovative interoperable product from emerging.

For example, a third party may wish to create a cross-world inventory allowing users to organise legally acquired virtual assets across several environments.

Significance: Magill provides a framework for examining exceptional cases where intellectual-property control obstructs new products and competition.

Limitation: It does not establish that interoperability automatically overrides copyright or licensing rights. The exceptional circumstances must be demonstrated.

Case 4: IMS Health GmbH & Co OHG v NDC Health (2004)

Court of Justice of the European Communities, Case C-418/01

Legal principle: Refusal to license intellectual property may constitute abuse in exceptional circumstances where the protected resource is indispensable, the refusal prevents a new product for which there is potential consumer demand, competition is excluded, and the refusal lacks objective justification.

Facts and decision: The dispute concerned a pharmaceutical-sales data structure known as the “brick structure.” The Court explained the conditions under which refusal to license intellectual property might infringe Article 102.

Application to the metaverse:

Consider a dominant platform whose proprietary asset format has become a practical requirement for a particular cross-world service. An independent developer may argue that refusing a licence prevents it from supplying a new interoperable service.

The claimant would still need to establish the applicable exceptional circumstances; widespread use or commercial desirability alone is insufficient.

Significance: IMS Health is particularly useful when platform enclosure involves the intersection of intellectual property, technical standards, and access to a commercially important format.

Case 5: Google Shopping (Google and Alphabet v Commission) (2024)

Court of Justice of the European Union, Case C-48/22 P

Legal principle: Self-preferencing by a dominant platform can constitute abuse where the conduct departs from competition on the merits and has exclusionary effects.

Facts and decision: The Court dismissed Google's appeal against the Commission's decision concerning the favourable treatment of Google's own comparison-shopping service in search results relative to competing comparison-shopping services.

Application to the metaverse:

A virtual-world operator might control the default discovery page, asset marketplace, search ranking, or recommendation engine. It could favour its own virtual goods while demoting comparable third-party products.

A platform may legitimately curate content, but ranking rules become a competition concern if the evidence demonstrates that a dominant operator uses its control of access to disadvantage rival services without adequate justification.

Significance: The case supports examination of how control over a digital gateway can distort competition even when rivals are not formally prohibited from entering the market.

Case 6: Alphabet and Others v AGCM — Android Auto (2025)

Court of Justice of the European Union, Case C-233/23

Legal principle: Refusal to make a digital platform interoperable with a third-party application can constitute abuse even where the platform is not strictly indispensable to the application's commercial operation, depending on the circumstances.

Facts and decision: The case concerned Google's refusal to ensure that an electric-vehicle charging application could interoperate with Android Auto. On 25 February 2025, the Court clarified that the strict Bronner indispensability condition does not automatically apply where the digital platform was not developed solely for the dominant undertaking's own needs and is open to third-party businesses.

The authority must assess exclusionary effects and whether the refusal is objectively necessary and proportionate. Where no suitable technical template exists, the judgment also addresses whether one must be developed and the possibility of appropriate financial consideration.

Application to the metaverse:

This is a particularly relevant modern analogy. Suppose a metaverse platform already supports third-party avatar or commerce applications but refuses to make its interface compatible with one additional category of competing application.

The operator cannot necessarily defeat the complaint simply by arguing that the third party can operate somewhere else. The inquiry includes whether the refusal obstructs the development or growth of competing services and whether a justified technical reason exists.

Significance: Android Auto provides a contemporary framework for assessing interoperability refusals involving digital platforms.

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Case 7: United States v Microsoft Corp (2001)

United States Court of Appeals for the District of Columbia Circuit

Legal principle: A dominant firm's technical restrictions and contractual practices may be unlawful when they preserve monopoly power through exclusionary conduct rather than competition on the merits.

Facts and decision: Microsoft faced antitrust proceedings concerning its conduct in protecting its operating-system monopoly, including restrictions affecting competing internet browsers. The appellate court upheld important findings of unlawful monopolisation while reversing or remanding other aspects of the judgment.

Application to the metaverse:

A dominant virtual-world operator might condition access to its ecosystem on using its own wallet, avatar system, distribution service, or virtual currency. It might also prevent developers from directing customers to competing marketplaces.

Such practices could raise concerns if they foreclose rival services and reinforce the platform's existing market power.

Significance: The case illustrates how technical integration and contractual restrictions may be used to entrench dominance. It is a US antitrust authority, not a direct ruling on European or UK competition law.

Case 8: Epic Games, Inc. v Apple Inc. (2021)

United States District Court for the Northern District of California

Legal principle: Restrictions governing application distribution and payment systems must be assessed under the applicable antitrust rules and the evidence of competitive harm; a platform's control over its ecosystem does not itself establish that every restriction is unlawful.

Facts and decision: Epic challenged Apple's App Store rules, including restrictions on alternative payment methods. The district court found Apple liable under California's unfair competition law in relation to its anti-steering rules but rejected Epic's principal federal antitrust claims. The judgment was subject to subsequent appellate proceedings.

Application to the metaverse:

A metaverse operator might require every purchase of virtual land, clothing, event tickets, or creator content to use its own payment system. It might also prohibit developers from informing users about external purchasing options.

The relevant analysis would examine the market, the platform's power, the practical effects of the restrictions, available alternatives, and legitimate security or commercial justifications.

Significance: Epic demonstrates the importance of distinguishing platform control from legally established anticompetitive conduct. It also highlights the relationship between distribution rules, payment restrictions, and developer access.

Case 9: Huawei Technologies Co Ltd v ZTE Corp (2015)

Court of Justice of the European Union, Case C-170/13

Legal principle: The exercise of intellectual-property rights relating to standard-essential patents may be constrained by competition law in particular circumstances, with attention to negotiation conduct and safeguards for both parties.

Facts and decision: The dispute concerned the enforcement of standard-essential patents subject to a commitment to license on fair, reasonable and non-discriminatory terms. The Court identified a framework for assessing when seeking an injunction by a dominant patent holder may constitute abuse.

Application to the metaverse:

Metaverse interoperability may depend on shared standards for identity, asset representation, communications, or immersive-device compatibility. If a dominant rights holder controls a genuinely essential standard and uses that position to discriminate against competing implementers, competition concerns may arise.

The case is relevant to standards-based interoperability, although it does not establish a general FRAND licensing obligation for all metaverse technologies.

Significance: It helps explain why fair and predictable licensing can matter when interoperability depends on protected technical standards.

5. Comparative summary of the cases

These cases do not create one universal legal test. The governing standard depends on the jurisdiction, the conduct, the relevant market, and whether the dispute concerns a refusal to supply, discriminatory treatment, tying, intellectual-property licensing, or another form of exclusion.

6. Principal competition problems in metaverse economies

A. Market definition and ecosystem power

Competition authorities should avoid assuming that every metaverse platform belongs to one broad market. Relevant markets may include virtual reality operating systems, immersive gaming, virtual-asset marketplaces, avatar creation, digital identity, or cloud rendering.

Market definition should consider demand-side substitution, supply-side constraints, multi-homing, switching costs, and the possibility that a platform controls several connected markets.

A company with a modest share of virtual land sales might nevertheless control an important gateway through its identity system or hardware ecosystem.

B. Network effects and switching costs

Network effects can make an established metaverse increasingly attractive as more users, developers, merchants, and creators join. These effects are often legitimate sources of value.

The competition concern arises when users cannot realistically switch without losing valuable assets, social connections, reputation, or access to commercial opportunities.

Potentially relevant remedies include interoperable identity credentials, portable user data, standardised asset descriptions, and non-discriminatory access to developer interfaces.

C. Digital assets and portability

Ownership of an NFT or possession of a blockchain token does not automatically confer a right to use the associated asset in every virtual world.

Portability may depend on:

The underlying intellectual-property licence.

Compatibility of file formats, geometry, textures, and animation.

Platform-specific technical and safety requirements.

Smart-contract functionality and marketplace rules.

Whether the receiving platform recognises the asset and its associated rights.

Competition law should therefore distinguish technical portability, legal permission to reuse an asset, and commercial acceptance by another platform.

D. Algorithmic gatekeeping

AI-based ranking, moderation, recommendation, and pricing systems can strengthen enclosure by making a platform's own goods more visible, imposing inconsistent conditions on rivals, or restricting access to commercially important user groups.

A meaningful assessment should examine training and ranking objectives, access to relevant interfaces, the treatment of competing services, and measurable effects on entry and consumer choice.

Algorithmic discrimination is not automatically unlawful. Evidence must connect the conduct to an applicable legal prohibition or regulatory obligation.

E. Cybersecurity and legitimate restrictions

Interoperability may introduce impersonation, fraud, malware, harassment, privacy breaches, or manipulation of virtual economies.

A platform can have legitimate reasons to restrict certain integrations. Under the EU DMA's interoperability framework, integrity measures must satisfy the relevant statutory conditions, including necessity, proportionality, and proper justification.

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The correct approach is to examine whether a less restrictive solution could address the identified risk—for example, permissioned APIs, verified developers, limited data access, or standardised security testing.

7. Remedies and regulatory solutions

1. Technical interoperability

Require appropriately scoped interfaces, documented APIs, compatible data formats, and reliable developer access where a legal duty or justified remedy supports it.

2. Identity and data portability

Allow users to transfer eligible identity information, preferences, and social data with suitable authentication, consent, and privacy safeguards.

3. Non-discrimination safeguards

Prevent unjustified differences between the platform's own services and comparable third-party services in access to interfaces, discovery, or other relevant facilities.

4. Proportionate security rules

Permit restrictions supported by demonstrable security, privacy, intellectual-property, or integrity needs, while avoiding measures broader than reasonably necessary.

5. Monitoring and enforcement

Use technical audits, developer complaints, access logs, compliance reports, and outcome-based testing to determine whether interoperability remedies work in practice.

Structural separation or divestiture may be considered in appropriate cases where legally available and supported by the evidence, but neither should be presumed necessary simply because a platform operates a closed ecosystem.

8. Hypothetical case study

Facts: MetaWorld operates a major immersive social platform. It controls the dominant avatar identity system and an internal marketplace for virtual clothing. Independent creators seek to make their products usable across several competing worlds.

MetaWorld permits its own clothing to work across partner environments but denies comparable technical access to independent developers. It also prohibits creators from directing customers to competing marketplaces.

Potential legal analysis:

Market power: Determine whether MetaWorld is dominant in a relevant market or satisfies the applicable statutory conditions for a special regulatory regime.

Exclusionary conduct: Examine whether the differential access conditions disadvantage rivals and reduce effective competition.

Interoperability: Establish whether the requested interface is technically feasible and whether refusal obstructs competing services.

Objective justification: Assess whether the restrictions are supported by genuine cybersecurity, intellectual-property, privacy, or quality-control concerns.

Consumer effects: Evaluate whether users face higher prices, fewer choices, reduced innovation, or increased switching costs.

Remedies: Consider equal access to specified interfaces, transparent technical requirements, proportionate security controls, and independent compliance monitoring.

Possible outcome: If the evidence establishes unlawful exclusion, the relevant authority could impose a legally available remedy tailored to the infringement. If the restrictions are objectively justified, proportionate, and not otherwise prohibited, the platform may retain them.

This hypothetical illustrates how the principles in Microsoft, Google Shopping, and Android Auto could inform a metaverse competition investigation without assuming that their outcomes automatically determine the hypothetical case.

9. Conclusion

Metaverse platform enclosure presents a competition-law problem when control over identity, digital assets, interfaces, payments, or distribution is used to obstruct competition rather than merely maintain a coherent and secure virtual environment.

The most useful legal distinction is between legitimate platform design and exclusionary ecosystem control. EU and German competition law, UK competition legislation, and comparative US antitrust jurisprudence offer tools for examining that distinction. The DMA adds targeted ex ante obligations for designated gatekeepers, but does not establish universal interoperability for all virtual worlds.

The central policy objective is a metaverse economy in which users and businesses can benefit from meaningful choice, innovation, and proportionate portability without disregarding intellectual property, privacy, cybersecurity, or the legitimate autonomy of platform operators.