Digital Ecosystems as a unit of antitrust analysis: lessons from Brazil

Brazil recently joined the bandwagon of countries applying antitrust scrutiny to Apple’s gatekeeping practices on the distribution of content for Apple’s devices, including payment restrictions and anti-steering rules. The tribunal of the Brazilian competition authority, the Administrative Council for Economic Defense (CADE), upheld on 19 May an interim measure imposed by the General Superintendence against Apple in relation to a potential abuse of dominance in the mobile ecosystems market. This case is a first in Brazil for applying and discussing in depth, especially for purposes of defining the relevant market identifying competitive concerns, the concept of digital ecosystems — an increasingly relevant approach in the analysis of competition in platform markets.

«…this has concrete implications for antitrust enforcement, as noted by the Commissioner: first, there is some form of competition in digital ecosystem which is not between directly substitutable products, but also between actors that compete in the appropriation of value within the ecosystem- what is referred to as “vertical competition”. Secondly, the economic dependence from the orchestrator of its commercial partners…«

But let us start from the beginning. The investigation began following a complaint by Mercado Livre, the leading e-commerce marketplace in Latin America, alleging that Apple was abusing its dominant position in the iOS app distribution market. The complaint was submitted after Apple rejected an update of Mercado Livre’s app which included a feature offering discounts on streaming services—such as HBO Max, Paramount, Deezer, Disney+, and Star+— to some users who signed up for its membership program. The rejection was a result of the application of Apple’s rules set forth in the App Developer Program License Agreement (DPLA) and the App Store Review Guidelines, which require the use of Apple’s In-App Payment (IAP) system for the distribution of certain digital content. However, Mercado Livre claimed that this restriction was illustrative of a broader strategy by Apple to restrict competitive access and exert excessive control over the iOS ecosystem.  On its part, Apple claimed that these restrictions were justified, pointing out that its ecosystem was deliberately designed as a closed system, and that those restrictions are driven by security and privacy considerations.

To assess the competitive impact of these practices, CADE’s General Superintendence (SG) launched a market investigation. Over fifty stakeholders were consulted, including app developers, app owners, and smartphone manufacturers. In addition, a public hearing was held to explore broader issues concerning mobile ecosystems. The proceedings brought together actors from the private sector, civil society, and academia, allowing for a multifaceted debate on the implications of mobile systems business models and ecosystem governance.

These measures were adopted throughout the administrative proceeding; however, the vote analyzed here concerns an appeal over a preliminary measure adopted by the General Superintendence (SG) requesting Apple to refrain from imposing restriction on developers, particularly on inserting links for external purchases or informing the possibility to acquire products outside the app, using payment mechanisms other than Apple’s IAP system, and preventing side-loading of apps. In his assessment of the appeal, Reporting Commissioner Victor Oliveira Fernandes concluded that the measures imposed by the SG should be upheld. Let us see peak into the analysis of this decision, in order to understand its significance and implications for Brazilian competition law.

Definition of digital ecosystems

At the outset, the Commissioner introduced a relatively new conceptual framework for antitrust analysis under Brazilian law: that of digital ecosystems. While this concept had appeared in earlier merger decisions, it received formal definition by CADE only more recently. In a footnote, the 2024 Guidelines for the analysis of non-horizontal mergers describe a digital ecosystem as “a common form of business organization in the digital economy, comprising a set of tools, platforms, and applications consolidated under a common strategy, with the aim of improving the positioning of a product, service, brand or economic group”^[1].  However, the Commissioner here proposes a fresh new definition, which offers a more rigorous foundation for future antitrust analysis, by referring to “networks of interdependent and non-hierarchical economic actors that offer digital products with varying degrees of complementarity based on modular technologies and that constantly interact through business relationships oriented toward co-creating value”. Three innovations are worth noting. First, this version incorporates technical elements identified in the management literature, such as non-hierarchical (in the sense of supply chain) relationships, interdependency (in the sense of the interlinkage of different activities), the complementarity (in the sense of combination that adds value on the supply or demand side) and modularity (in the sense of the ability to decompose and recombine elements of a system). Second, one conspicuously absent notion in this definition is that of “common strategy” aimed at “improving the position of a product, service, brand or economic group», which could be interpreted as referring to multi-product ecosystems of the same actor, and as requiring the boosting of position of one particular player as the aim that has been given to it by the orchestrator (generally, the platform operator). Third, and perhaps most importantly, the definition puts at its centre the notion of value co-creation between the various ecosystem actors, which is aligned with the idea of digital ecosystems as the equivalent of biological organisms in the business world^[2] and recognizes the need to address externalities intrinsic to cooperative relations of co-specialized investment^[3].

Analogies aside, this has concrete implications for antitrust enforcement, as noted by the Commissioner: first, there is some form of competition in digital ecosystem which is not between directly substitutable products, but also between actors that compete in the appropriation of value within the ecosystem- what is referred to as “vertical competition”^[4]. Secondly, the economic dependence from the orchestrator of its commercial partners (so-called “complementors”) can generate functional and distributional failures in the design and governance choice of the ecosystem, which competition law can address.

An application to mobile ecosystems: market definition

After presenting the concepts adopted to start the debate, the decision endeavors to delineate relevant market analysis focusing on the interactions that happen in the mobile ecosystems, moving beyond the traditional logic and exploring aspects of vertical competition. In particular, it emphasizes how participants in digital ecosystems simultaneously cooperate and compete: app stores and developers cooperate in the app ecosystem while, simultaneously, compete for the income generated through the cooperation on the commissions generated by the apps downloaded and the in-app purchases.  Also, the dependency of the developers from the orchestrator is a fundamental characteristic for the definition of the relevant market. Accordingly, regardless of the level of integration in which mobile ecosystems are analyzed, the existence of significant switching costs is seen as a barrier which creates market segmentation. In any case, the decision cites reports and market investigations conducted by the competition authorities in United Kingdom, the Netherlands and Australia^[5] concluding that app developers need to be in both the Android and the iOS ecosystems (licensable and non-licensable operating system) in order to efficiently distribute their own services and products.

The decision includes some discussion of methodologies that could be used to define markets more consistently in this complex environment. For instance, one examines traffic flows between apps, technical interdependencies through SDKs and APIs^[6];  while another focuses on the convenience of grouping markets togethers as cluster, considering possible harms across different market dimensions under a multi-layered approach^[7]. These approaches are helpful in understanding the connections between the mobile and other elements of the ecosystem (respectively, the operating system, the apps and the app store), but none of these approaches were ultimately chosen, considering the fact that the assessment was only done for purposes of the validity of an interim measure.

Following the definitions presented by the SG, the decision accepted using one relevant market where the conduct originates (what could be defined as the “core” platform market), the smart mobile operating systems market, at the national level. It also endorsed the idea of “target” markets that may be impacted by Apple’s conduct, in line with the idea that ecosystem effects can be felt in other markets, specifically: (i) the market for the provision of platforms to developers for the distribution of apps to iOS users; (ii) the market for payment processing systems for in-app purchases on iOS; and (iii) the market for the distribution of digital goods and services on iOS devices.

However, most strikingly, the traditional binary approach to market definition was set aside in this case to address the complexity of capturing the specificities of platform economic power, which stems from their strategic position within the value chain. Reference was made to concepts used in other jurisdictions that similarly aim to capture that phenomenon, such as bottleneck power^[8], intermediation power^[9], strategic market status^[10] and unavoidable trading partner^[11]. This enables the analysis of potential anti-competitive effects of unilateral conduct that extend beyond the traditional “target market.” Even in the absence of significant market share, a platform may adopt strategies to deter future threats from complementary players in the primary market by leveraging its orchestration power. This is potentially quite significant, as it would allow to consider how the competitive strategy in a broad range of products and services is likely to affect the position of the orchestrator in the future. This concern for defensive leverage adds up the one for offensive leverage, which can manifest itself in the form of self-preferencing or other types of discrimination, for instance through the collection of data enabled by the mandatory use of IAP^[12] (not being applied to Apple’s apps) and the ability to arbitrarily change the App Store rules.

Anticompetitive conduct at stake

The Decision takes issue specifically with two conducts undertaken by Apple, which can be configured as discrimination and tying. The former would be due to the inconsistent and arbitrary application of its prohibitions, which prevents its complementors from using alternative channels of distribution for digital good and services, and potentially favors Apple’s own products and those of other vertically integrated players. The latter, in turn, concerns the forced acquisition of both the iOS app distribution service and the IAP processing service. On both counts, this interim decision recognizes the likelihood of success on the merits, while recommending the collection of evidence of anticompetitive effects.

Two points that deserve been highlighted, however, pertain to the ecosystemic nature of these practices. First, the Commissioner explicitly refers to the fact that the different practices are part of a whole strategy: for instance, it is clear that, by mandating the use of its proprietary in-app payment system (IAP) and prohibiting developers from offering or even informing users about alternative payment options, Apple can more effectively pursue a strategy of eliminating competition in the payment processing market.

Secondly, the analysis of combination of two separate products that is required to establish tying can benefit from a look not only at the design, but also at the evolution of the ecosystem. Here, this case shows that (i) for some time the app store was offered independently from IAP (this was required only 3 year after the launch of the App store); (ii) the IAP system is not used by 84% of developers, who are exempted to pay any commission to Apple; and (iii) developers have clearly manifested their interest in using alternative payment mechanisms, and this has even be made possible by Apple in other jurisdictions (for instance, in the context of the DMA). This is inextricably connected to an aspect that was emphasized in the decision, and which relates to the very definition of ecosystem discussed above: the ecosystem does not necessarily need to be viewed only alongside the architectural and contractual choices made by its orchestrator. It is an economic community which evolves on its own, suggesting that any orchestrating choice that is not in the interest of the broader community should be carefully scrutinized.

Apple’s defense

To defend against the allegations of abuse of dominance, Apple’s core argument was that its IAP system is more than a payment processing service, which ensures the quality of the user experience. According to Apple, this, together with the anti-steering rules and the ban on the sale of digital goods by third parties enhances privacy and security, constituting an integral part of its commercial system.

However, the justifications for the application of these restrictions put forward by Apple were deemed artificial and lacking any coherent commercial or technical foundation. In particular, Apple’s argument that it does not apply the 30% commission to transactions involving physical goods because it cannot verify their delivery was deemed based on arbitrary distinctions rather than coherent commercial logic or enforceable technical constraints– as confirmed by the fact that so-called “reader apps” are exempted from the fee applied to other apps that enable the purchase of digital goods and services.

Here, again, what can be seen from the decision is a certain expectation that the measure of governance adopted by an orchestrator must not only be fair, but also be seen to be fair. While evidence of the reasonableness of the differential treatment of certain apps within the ecosystem may be provided during the course of the proceedings as a possible defense against an allegation of anticompetitive discrimination, the very existence of opacity over the rules and their application may be sufficient to generate an inference of anticompetitive strategy, which can be provide an advantage (as we have seen in this decision) both in a secondary market as well as in the orchestrator’s core market. What remains to be examined, then, is what an appropriate remedy could be under these circumstances. Stay tuned for another blogpost.

 

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References

^[1] CADE — Conselho Administrativo de Defesa Econômica. Guia V+ 2024 – Guia de análise de atos de concentração não‑horizontais. Brasília: CADE, 2024. Available at: https://cdn.cade.gov.br/Portal/centrais-de-conteudo/publicacoes/Guia%20V+/Guia-V+2024.pdf.

^[2] MOORE, J. F. Business ecosystems and the view from the firm. The Antitrust Bulletin, v. 51, n. 1, p. 33, 2006. https://www.researchgate.net/publication/265217727_Business_ecosystems_and_the_view_of_the_firm

^[3] ADNER, Ron. Ecosystem as Structure: An Actionable Construct for Strategy. Journal of Management, v. 43, n. 1, p. 39–58, 2017, p. 42; JACOBIDES, M. G.; CENNAMO, C.; GAWER, A. Towards a theory of ecosystems. Strategic Management Journal, v. 39, n. 8, p. 2257, 2018.

^[4] JACOBIDES, M. G; LIANOS, I. Ecosystems and competition law in theory and practice. Industrial and Corporate Change, v. 30, n. November, p. 1199–1229, 2021, p. 1212. “The definition of the relevant market is centered on substitutability, and the metric commonly used to measure market power (market share) is not capable of capturing the issues raised by intra-ecosystem competition, where the key concern is not substitutability through horizontal rivalry, but rather the competition over the rents generated by complementary services.”

^[5] COMPETITION AND MARKETS AUTHORITY (CMA). Mobile ecosystems market study final report. Londres: CMA, 2022. Available at: https://www.gov.uk/government/publications/mobile-ecosystems-market-study-final-report;       AUTORITEIT CONSUMENT & MARKT (ACM). Summary of decision on abuse of dominant position by Apple. Haia: ACM, 2021. Available at: https://www.acm.nl/sites/default/files/documents/summary-of-decision-on-abuse-of-dominant-position-by-apple.pdf; AUSTRALIAN COMPETITION AND CONSUMER COMMISSION. Digital platform services inquiry – March 2021 interim report. Canberra, 2021. Available at: https://www.accc.gov.au/system/files/Digital%20platform%20services%20inquiry%20-%20March%202021%20interim%20report.pdf.

^[6] STYLIANOU, Konstantinos; CARBALLA-SMICHOWSKI, Bruno. ‘Market’ definition in ecosystems. Journal of Antitrust Enforcement, Oxford, p. 1–35, 2024. Available at: https://doi.org/10.1093/jaenfo/jnae046.

^[7] ROBERTSON, VIKTORIA H.S.E. Antitrust market definition for digital ecosystems. Concurrences, Paris, n. 2, p. 5, 2021. Disponível em: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3844551

^[8] STIGLER COMMITTEE ON DIGITAL PLATFORMS. Stigler Committee on Digital Platforms Final Report. Chicago: Stigler Center for the Study of the Economy and the State. 2019. pp. 105–106.

^[9] SCHWEITZER, H. et. al. Modernisierung der Missbrauchsaufsicht für marktmächtige Unternehmen. Projekt im Auftrag des Bundesministeriums für Wirtschaft und Energie (BMWi) – Projekt Nr. 66-17, pp. 66–74, 2018

^[10] FURMAN, J. et. al. Unlocking digital competition: report of the digital competition expert panel. Londres: 2019. p. 41.

^[11] CRÉMER, J.; DE MONTJOYE, Y. A.; SCHWEITZER, H. Competition policy for the digital era. Bruxelas: European Commission Final Report, 2019. p. 49.

^[12]  ZINGALES, Nicolo (2023). Data-Related Abuses: An Application to Fintech. In STYLIANOU, Konstantinos; IACOVIDES, Mario & LUNDQVIST, Bijorn, (Ed.). Fintech Competition: Law, Policy, and Market Organisation (pp. 147–186). Oxford: Hart Publishing. Retrieved June 30, 2025, from http://dx.doi.org/10.5040/9781509963379.ch-006

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