‘Market’ definition in ecosystems

Abstract Despite the popularization of the concept of ‘ecosystems’ among academics and practitioners, ecosystems have so far failed to become a coherent unit of analysis in competition law. One of the reasons is that it is not yet apparent when ecosystem analysis should be preferred over standard market-based analysis, and we also lack empirical methodologies to define their boundaries. In this article we first describe contexts where formal definition of ecosystem boundaries (similar to market definition) is necessary or at least desirable to achieve quality analysis, and then describe methodologies on how to achieve that (hierarchical clustering, K-means clustering, network of complementarities, factor analysis, and snowball selection). Furthermore, we provide guidance on when each of the methodologies is pertinent. We describe the limitations of the substitutability, aftermarkets, and connected markets approaches in cases in which ecosystems are the main unit of analysis. Finally, we provide four examples of how, in such cases, these methodologies presented can be useful to practitioners: i) market inquiries, investigations, and pro-competition interventions; ii) designation of undertakings as having strategic market status; iii) conglomerate mergers and iv) calculation of fines and quantification of harm/effects.