Turkey: Rebates Systems Applied By The Undertaking In Dominant Position In Competition Law

Dominant position and abuse of dominant position

The Act on the Protection of Competition (the "Act") defines dominant position as "the power of one or more undertakings in a particular market to determine economic parameters such as price, supply, the amount of production and distribution, by acting independently of their competitors and customers".

The Act prohibits "preventing, directly or indirectly, another undertaking from entering into the area of commercial activity, or actions aimed at complicating the activities of competitors in the market" by the Article 6(a) and "making direct or indirect discrimination by offering different terms to purchasers with equal status for the same and equal rights, obligations and acts" by the Article 6(b) for the undertakings in dominant position. In this framework, as the rebates, provided to some buyers, may constitute discrimination between the buyers, this kind of practices are evaluated as abuse of the dominant position and prohibited. The most significant characteristic of the rebates systems is that rebates are subject to conditions, thus some buyers in the relevant market benefit from the rebates while some buyers do not1. Moreover, rebates may have exclusionary effects for the current competing undertakings in the market and may restrict new entries to the market for the potential competing undertakings2. Therefore, rebates systems have two different anti-competitive effects: exclusion and discrimination3.

Rebates systems

Rebates systems are defined as changes in pricing applications for the buyers implied by the undertakings operating at different levels of the production or distribution chain4.

Rebates systems are classified in several ways in practice and by scholars. In this article, we will base on the effects of the rebates with regard to the abuse of dominant position.

Rebates systems which are considered as abusive

First one of these types of rebates is fidelity rebates, (or loyalty discounts) which conduct the buyers to supply their entire needs from one undertaking. The undertaking in dominant position provides fidelity rebates on condition that the buyer supplies the entire or an important part of its needs from the relevant undertaking5.

Second type of rebates, which are considered as abusive are the target rebates. Target rebates imply targets related to the future forecasted needs of buyers or targets which are independent from the buyers' needs6.

In this context, the undertaking in dominant position assures its supply of products. On the other hand, it guarantees buyers' fidelity and complicates and restricts the activities of competing undertakings while preventing potential new entrants to the market hereby.

Rebates systems which are considered as legal

In principle, quantity discounts are not considered as abusive in Competition law, because the quantity discounts are not provided for purchase in a specific period. Quantity rebates are only related to the purchase from the supplier, are applied to entire buyers and provided objectively regarding the amount of the purchase. Hence, two buyers, who purchase the same amount of products, acquire equal rebates. However, quantity rebates should not be considered as per se legal, their effects in the market should also be examined.

Functional rebates are also considered as legal and do not constitute price discrimination because this kind of rebates is provided by the suppliers for the reason that the buyer effectuates a function in the relevant market.

In this framework, it should be noted that while rebates systems are predefined and are provided to the entire buyers, we may not mention any price discrimination7.

Conclusion

Rebates systems applied by the undertakings in dominant position cause the buyers to make more efforts for achieving relevant targets and thus limit their freedom of choice, prevention, distortion or restriction of competition in the relevant market, and cause discrimination between the buyers. Therefore, rebates which promote the fidelity of the buyers and which are provided ambiguously are prohibited under Turkish Competition Law. However, as is mentioned before, we may not refer to the price discrimination if the rebates are explicitly definite and objectively applied.

Consequently, undertakings in dominant position should pay attention while applying rebates systems that discrimination and exclusion effects are sufficient for the prohibition in Competition law. However, in case that different pricing have economic and rational justifications (rule of reason), related rebates shall not be considered as abuse of dominant position. Briefly, while applying rebates due to the necessities of the commercial relation and market conditions, undertakings in dominant position should take into consideration that these rebates must not have discriminatory and exclusionary effects and apply rebates systems objectively.

Footnotes

1. Kocabaş, Bekir, İndirim Sistemleri ve Rekabet: Tek Taraflı Davranışlar Açısından Bir Değerlendirme, Rekabet Kurumu Uzmanlık Tezleri Serisi No:90, Ankara, 2009, p. 5

2. Öz, Gamze, Avrupa Topluluğu ve Türk Rekabet Hukukunda Hâkim Durumun Kötüye Kullanılması, Rekabet Kurumu Lisansüstü Tez Serisi No:4, Ankara, 2000, p. 175

3. Sanlı, Kerem Cem, Rekabetin Korunması Hakkındaki Kanun'da Öngörülen Yasaklayıcı Hükümlere Aykırı Sözleşme ve Teşebbüs Birliği Karalarının Geçersizliği, Rekabet Kurumu Lisansüstü Tez Serisi No:3, Ankara, 2000, p. 302

4. Kocabaş, ibid, p. 5

5. Görgülü, Ümit, Hâkim Durumun Kötüye Kullanılması Kapsamında Fiyat Ayrımcılığı Uygulamaları, Rekabet Kurumu Uzmanlık Tezleri Serisi No: 32, Ankara, 2003, p. 17

6. Kocabaş, ibid, p. 9

7. Gül, İbrahim, Teşebbüsün Alıcılarına Ayrımcılık Yaparak Hâkim Durumunu Kötüye Kullanması, Rekabet Kurumu Lisansüstü Tez Serisi No: 2, Ankara, 2000, p. 83

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