Defining relevant markets in digital ecosystems – challenges under the current framework and a path forward

Abstract

The legal and economic literature has recently argued that the market definition concept is no longer suitable as a theoretical framework for competition analysis concerning digital ecosystems. The issue relies on the fact that competition law aims to treat value-creation markets as the same as production markets, which are distinct. Indeed, the literature has emphasized that ecosystems’ distinctive and novel elements lie in their architecture, rules and complementarities that result from such structures. These elements make it necessary to move beyond the traditional market definition, which places emphasis on product substitution, towards a concept based on organizational structure and complementarities derived from ecosystems. This article proposes adopting a new framework for market definition, named ‘Competitive Environment for the Firm Under Investigation’, and applies it to the Google Android case. This exercise provides insightful considerations to the competition analysis of the different layers of the digital economy.