Predatory pricing is a pricing strategy by a dominant company where it performs below-cost pricing in order to (i) exclude its existing competitors from the market, (ii) prevent potential new entries to the market or (iii) prevent its existing competitors' tendency to reduce their prices.
Predatory pricing by dominant firms is prohibited under Article 6(a) of Law No. 4054 on the Protection of Competition, which outlaws any activities by dominant firms that directly or indirectly impede the entry of another firm into the market or impede the activities of those already within the market. Although there is no set definition for predatory pricing, it is agreed by the case law and the legal scholars that predatory pricing, on a general level, involves a dominant company that artificially offers below-cost prices for a long term in an attempt to primarily eliminate its competitor(s) (see, for example for assessments concerning predatory pricing allegations; TTNet (11.07.2007; 07-59/676-235); Denizcilik İşletmeleri (12.10.2006; 06-74/959-278); Coca-Cola (23.01.2004; 04-07/75-18); Türk Telekom/TTNet (19.11.2008; 08-65/1055-411); Trakya Cam (17.11.2011; 11-57/1477-533); Tüpraş (17.01. 2014; 14-03/60-24) and UN Ro-Ro (01.10.2012; 12-47/1413-474)). Once the competitor(s) exit the relevant market, the supplier then increases its prices to make up for its losses achieved during the predation period. In other words, it is a response of a dominant company to its competitor, whereby it sacrifices a part of the profit that could be earned under competitive circumstances under the scenario where the competitor could remain viable, in order to induce exit and gain consequent additional monopoly profit.
In UN Ro Ro (01.10.2012; 12-47/1413-474) and Kale Kilit (06.12.2012; 12-62/1633-598), the Turkish Competition Board ("Board") clarified the legal standards with respect to predatory pricing under Turkish competition laws. The Board identified the required conditions for the finding of a predatory pricing violation as follows: (i) being in a dominant position in the relevant market, (ii) a pricing scheme wherein products are consistently priced below cost, (iii) the intent to engage in a predatory pricing scheme and (iv) a reasonable probability of anti-competitive market foreclosure through exclusion of equally efficient competitors from the market and (v) losses borne in a short term in exchange for long-term profits.
In the same vein, in Turkish Airlines (25.12.2014, 14-54/932-420), the Board examined the "average avoidable cost" ("AAC"), average prices and income and expenses for the period of five months to determine whether Turkish Airlines implemented predatory pricing strategies. The assessment looked at the relationship between average price and AAC, where the AAC was calculated by adding up variable direct expenses and fixed direct expenses. Furthermore, the Board considered "advertisement costs" avoidable costs as Turkish Airlines would have avoided these costs if it did not start flights from another airport.
Due to its reluctance to micro-manage pricing behaviour, the Board requires high standards for predatory pricing claims and has frequently dismissed past complaints alleging this issue. However, the decisional practice of the Board has shown that the Board will not hesitate to step in when confronted with cases of clear predation.
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