Document Type : Research Paper
Authors
1 Faculty Member, Faculty of Law and Political Sciences, Kharazmi University, Tehran, Iran
2 Ph.D. Candidate in Private Law, Kharazmi University, Tehran, Iran
Abstract
Blockchain technology, with its decentralized, transparent, and tamper-resistant structure, has emerged as a transformative force in the digital economy. It has disrupted traditional models of intermediation and redefined the flow of transactions and information. While these developments offer efficiency gains and novel economic opportunities, they also raise significant legal challenges, particularly for competition law. The concept of abuse of dominance—long a core tenet in antitrust enforcement—faces new interpretive and enforcement difficulties in blockchain-based markets, where identifying actors, market boundaries, and dominance is fundamentally more complex.
This article explores the feasibility and necessity of applying abuse of dominance rules to blockchain ecosystems by drawing on a comparative legal analysis of Iranian and EU competition frameworks. In doing so, it examines both doctrinal underpinnings and applied challenges, arguing that the traditional tools of competition law must be reconfigured, rather than abandoned, to address the unique dynamics of decentralized networks.
The research begins with a conceptual overview of blockchain technology, highlighting its key features: decentralization, immutability, anonymity, transparency, and distributed governance. These features pose a significant departure from the centralized, vertically integrated firm structures upon which classical competition law has been built. The article distinguishes between public (permissionless) blockchains, such as Bitcoin and Ethereum, and private or consortium blockchains, such as Hyperledger Fabric or R3 Corda, emphasizing that the degree of centralization materially impacts the legal analysis of market power and responsibility.
The first core challenge lies in defining the legal subject. The absence of a central controller or a legally recognized entity complicates the application of competition rules, which traditionally focus on firms or undertakings. The article explores theories such as the “nature of the firm” and the “granularity theory” (Schrepel), which suggest that even in decentralized systems, power may be concentrated among a core group of actors—such as developers, validators, or miners—who effectively determine network rules and outcomes. These actors, collectively or individually, may be held accountable under competition law based on their functional role, rather than their formal legal status.
Another fundamental issue is market definition. Traditional tests, such as the SSNIP (Small but Significant and Non-transitory Increase in Price) test, become inadequate in digital and blockchain markets, where many services are offered for free, monetized through data, or facilitated via tokenomics. In light of this, the article discusses alternative metrics—such as quality, user engagement, interoperability, and data control—as potential proxies for market delineation. Drawing from EU jurisprudence, the study suggests adopting a functionality-based market analysis, especially in multi-sided platforms and network-driven ecosystems.
Within blockchain contexts, abuse of dominance can take novel forms or mimic classical types in new guises. The article categorizes abusive conduct into three classical forms: exclusionary abuse, exploitative abuse, and discriminatory abuse, and investigates their possible manifestations in blockchain environments.
Exclusionary Abuse
In consortium blockchains, exclusion can occur via refusal to deal, either technically (e.g., denying access to APIs or nodes) or contractually (e.g., requiring proprietary tokens or access standards). Public blockchains are ostensibly open, but strategic manipulation by dominant actors (e.g., through validator collusion or fee structures) can effectively limit new entrants. The article draws parallels with EU case law (e.g., Microsoft, Google Shopping), which recognizes such structural barriers as abuse.
Tying and Bundling
Tying behaviors can be encoded into smart contracts or platform design, whereby access to one blockchain service is conditioned upon use of a bundled proprietary tool or token. If such architecture limits consumer choice or deters competition in ancillary markets, it could be deemed abusive. This is particularly relevant in interoperable DeFi (Decentralized Finance) ecosystems, where gatekeeping may be hidden within protocol logic.
Predatory Innovation and Pricing
Aggressive technical upgrades that deliberately exclude interoperability with rival protocols may constitute “predatory innovation”, a concept now recognized in the EU and U.S. legal discourse. The article applies this to blockchain upgrades that intentionally disrupt rival applications. Likewise, pricing structures—such as gas fees or validator incentives—may be manipulated below cost (especially in private blockchains) to crowd out competitors, aligning with classical predatory pricing concerns.
Exploitative Practices
In networks with strong lock-in effects and switching costs, dominant blockchain platforms may impose unjustified fees, unfavorable conditions, or opaque governance practices on users. Exploitative pricing or data extraction—particularly when end-users have limited alternatives—raises significant concerns for user welfare and fairness. The article highlights the need for transparency and procedural fairness in blockchain governance, echoing the EU's emphasis on user-centric competition frameworks.
Discriminatory Conduct
Discrimination in transaction prioritization, access levels, or protocol features (e.g., granting lower fees to selected users or nodes) may distort competitive equality. This is exacerbated in permissioned systems where operator discretion is high. While public blockchains promote visibility, private networks may conceal or rationalize unequal treatment in non-transparent ways. Here, the article urges alignment with principles embedded in Article 102(c) TFEU.
From a normative perspective, the article underscores the importance of updating Iranian competition law, particularly Chapter Nine of the Law on the Implementation of Principle 44, to better reflect digital realities. Unlike the EU—which has adopted the Digital Markets Act (DMA) and issued draft guidelines on Article 102 to address platform dominance—Iran’s legal regime remains conceptually and institutionally under-equipped. Among the proposed reforms are the recognition of data as a source of market power, the redefinition of dominance in algorithmic settings, and the establishment of a specialized digital competition authority.
The paper concludes that blockchain is not beyond the reach of antitrust law. While decentralization creates analytical and evidentiary complexities, it does not eliminate the potential for harm or dominance. Rather, it calls for a paradigm shift: from entity-based liability to function-based scrutiny, from price-centric metrics to dynamic, network-aware indicators. Enforcement strategies must evolve to detect subtle forms of exclusion and exploitation hidden in protocol design, smart contracts, and governance layers.
Policy Recommendations
Develop context-sensitive definitions of relevant markets, especially for multi-sided and zero-price platforms.
Revise dominance criteria to incorporate network effects, data control, and rule-making power.
Modernize Iranian competition rules in line with EU developments, including the Digital Markets Act.
Establish a specialized authority for digital market analysis.
Enhance oversight of private and hybrid blockchains, particularly where rule-making is concentrated and opacity prevails.
In summary, this research supports the applicability and necessity of competition rules in blockchain-based markets. As new structures of economic coordination emerge, legal frameworks must adapt to prevent the concentration of power and ensure fairness, innovation, and access in the digital age.
Keywords
- Blockchain
- Competition Law
- Dominant Position
- Relevant Market
- Exclusionary Abuse
- Exploitative Abuse
- Discriminatory Abuse
Main Subjects
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