Regulatory interest in blockchain continues to increase. A blockchain is a shared ledger that can record different transactions between users.

Based on a pre-agreed set of rules and procedures, these transactions become permanent (that is to say there is no possible deviation or change) and accessible by all users.

Such technology, which is at the heart of bitcoin and other digital currencies, is expected to transform dealings between businesses by making them faster, easily verifiable and secure without the need for additional transaction records and intermediaries.

Blockchain’s potential benefits could be applied to a variety of sectors such as finance, insurance, shipping, transport, IP rights and government services. In the context of cross-border payments and trading, the self-verifying nature of a blockchain's nodes could allow for the clearing and settlement of trades to be done faster and without a third party intermediary. Blockchain technology can also be used in industries such as logistics, shipping and insurance to reduce transaction costs by creating standardised contracts with predetermined inputs.

However, blockchain technology and its uses raise significant questions about various issues, from security and privacy issues to liability and jurisdiction concerns with regards to potential disputes or fraud claims. An issue that has received relatively minimal attention however is whether the use of blockchain technology could raise competition law risks.

Having said that, competition agencies are already showing more interest in this issue and the OECD published a paper in April 2018 identifying a number of competition law issues that could arise from the use of blockchain.

When using blockchain technology, numerous users – who are often operating in the same market and therefore competing with each other – will have to collaborate. While competition rules in principle allow collaboration to take place between competing companies if it promotes efficiency and helps achieve outcomes that could not otherwise be achieved (or at least not as efficiently), companies need to be aware of the associated risks. These include risks around the exchange of information, collusion, setting standards, providing access rights to other users, abusing a dominant position and merger control, some of which are worth further analysis.

Information sharing

Information sharing is an important element of blockchain. However, exchanging and sharing information between competitors can raise competition concerns depending on the nature of the information shared and the structure of the relevant market. Competition authorities have in the past reviewed numerous ways of exchanging information in relation to financial institutions, such as LIBOR and FX cases, and would be very keen to assess how information is shared on distributed ledger networks like a blockchain.

Once information is written into the chain, it can be viewed by any of the nodes that operate the system. Where transaction information is transparent, there is a risk that this could be used by competing firms to coordinate and fix prices.

The OECD questions whether the transparency within blockchain might facilitate collusion. Transparency can have positive and negative effects on competition and therefore there is no presumption that a transparent blockchain raises competition concerns. As the OECD highlights, a key factor of blockchain is authentication – namely identifying the ownership of assets for a digital transfer. Such data is important to provide trust between the blockchain participants but it does not constitute commercially sensitive information as such.

Blockchain participants need to regulate the exchange of information and assess what information is available to competitors through a shared ledger and refrain from sharing information that could be used to facilitate price fixing, which is considered an object anti-competitive practice in the majority of jurisdictions.

It is essential to restrict the access to transaction records, in particular commercially sensitive information such as contractual terms, sales volumes, pricing data and party names. This information should not be automatically shared with every user or node. An extra layer of privacy may need to be added to safeguard competitively sensitive information. Users may also choose to keep that information outside of the blockchain, and use the blockchain simply to store data relevant to the contractual parties and certain assets.

However, disclosing pricing information is not necessarily illegal under competition law, especially if the information is aggregated or historical rather than about present or future prices. The structure of the industry’s market – whether it is concentrated or fragmented and transparent – will also determine whether competition has been harmed.

It is also essential to note that blockchains could be used to facilitate collusion and to monitor participants' behaviour and their possible deviation from a cartel. Participants should carefully monitor all communication channels in the blockchain to avoid inferences of collusion and price fixing.

Standard setting

Standard setting is part of blockchain technology and can have pro-competitive effects and promote efficiencies. However, when a new standard is set up between users who are competitors, it is important to ensure that they comply with competition law. For example, when standards are set between different platforms for compatibility purposes, users should ensure that participation in the blockchain is not unnecessarily restricted, standards are transparent and access to these standards is fair, reasonable and non-discriminatory.

In particular, the OECD's issues paper states that there could be a technical standard for interoperability so that different blockchains can interact with one another.

While a private blockchain may require an invitation for certain users to be able to join, any attempt to exclude participants (especially competing businesses) will have to be considered under competition law to ensure that the criteria to join are reasonable and objectively justifiable.

Abuse of dominance

The OECD also highlights a number of scenarios regarding a potential abuse of dominance. These include cases where a company tries to delay or completely prevent the adoption of a similar blockchain technology that could enhance competition. In addition, it could be that an existing private blockchain excludes companies from becoming users or raises the costs for further participation, leading to potential foreclosure. This could be the case where a newly established bank would like to join an existing blockchain for interbank payments but is refused access on discriminatory or non-objectively justified grounds. Finally, there is a theory of harm that the company holding the blockchain technology could lower the participation fees to levels that suspect predatory pricing. These are all examples of behaviour aiming to prevent alternative blockchains from operating in the same market.

The key issue for an abuse of dominant position in the blockchain area is to establish dominance. In order to do so, it is necessary to define the relevant market that the potentially dominant company operates in. Blockchain is not a market as such and when used for payments it competes not only with all other crypto-currencies, but also with a wide range of other electronic payments technologies. In addition, when blockchain is used for completing transactions (e.g. smart contracts) the blockchain technology competes with the more traditional ways of completing transactions. Therefore, it seems that for the foreseeable future, it is unlikely that the relevant market would be defined so narrowly as to only include blockchain, especially at this early stage in the market's development. As a consequence, the current creators of the blockchain technology are not automatically dominant players.

Merger control

The creation of a blockchain consortium may result in a merger that will have to be notified for clearance by competition authorities in certain jurisdictions. This could be the case even if the blockchain consortium does not operate in that jurisdiction. In the majority of jurisdictions, merger control approval will be needed before the consortium can be implemented.


The consequences of breaking competition law can be severe: lengthy and costly investigations leading to fines as high as 10% of a company's worldwide annual turnover. In addition, a director can be banned from being a director of a company or from being involved in the promotion, formation or management of one for up to 15 years. In the most serious cases, individuals can also go to prison for up to five years.

There is great potential for blockchain technology to benefit many sectors and it is not yet clear how competition authorities around the world will deal with the relevant regulatory issues raised.

However, users need to consider competition law compliance when deciding to collaborate. The key thing to ensure is that any sharing of information and setting standards for new technology are compatible with competition rules. The risks are numerous and there is a high degree of uncertainty until we see how blockchain and similar innovative technologies are used.

This article first appeared in Payments & Fintech Lawyer.