Loyalty rebates refer to rebates that are offered on condition that the customer engages in a loyal purchasing behavior, by repeatedly purchasing from the same seller and refraining to purchase from other suppliers. In other words, if the customer purchases products/services over a certain threshold in a reference period, the supplier company grants loyalty rebates to that customer.
These rebates are not considered per se illegal under either Law on the Protection of Competition No. 4054 (“Competition Law”) or the Treaty on the Functioning of the European Union. The protective cloak of the Block Exemption Communiqué No. 2002/2 on Vertical Agreements also applies to arrangements containing loyalty-inducing rebates, if the company applying loyalty rebates has a market share lower than 40%. However, there would be obvious risks to the competitive process in cases where the loyalty-inducing rebate schemes are applied by dominant firms, since doing so may sometimes have the unintended effect of driving competitors out of the market.
The reason behind the keen interest of the competition law discipline in rebate systems is the assumption that under certain circumstances loyalty rebates applied by the dominant companies might create negative impacts on the competition in the relevant market. Such impacts might occur particularly if the rebate system has the capacity to foreclose a significant portion of the relevant market by functioning as a single branding agreement or a de facto non-compete obligation, especially when the system is deemed as loyalty-inducing. That said, this does not necessarily mean that loyalty-inducing rebate systems are altogether prohibited. The Turkish Competition Board (“Board”) does not tend to forbid implementation of rebate systems altogether, without engaging in a market analysis to assess their potential or actual foreclosing effects.
The Board, in Turkcell (Turkcell, 09-60/1490-37, 23 December 2009), condemned the defendant for abusing its dominance by, inter alia, applying rebate schemes to encourage the use of the Turkcell logo and refusing to offer rebates to buyers that work with its competitors. In addition, with its Doğan Yayın Holding decision, the Competition Board has condemned Doğan Yayın Holding for abusing its dominant position in the market for advertisement spaces in the daily newspapers by also applying loyalty-inducing rebate schemes (30 March 2011, 11-18/341-103).
Furthermore, within its ABBOTT decision, the Board concluded that in order for any rebate scheme to be deemed a violation of Law No. 4054, it should be primarily analysed whether the relevant undertakings subject to allegations is dominant in the relevant product market or not. (31 January 2013, 13-08/88-49) The Board has further decided that the relevant rebate scheme should be evaluated within the scope of aspects as increasing proportionality, retro-activeness, etc, and it should be determined whether the applied rebate scheme actually has loyalty inducing and foreclosure effects.
In 2017, the Competition Board fined Luxottica (23 February 2017, 17-08/99-42) for its activities the wholesale of branded sunglasses by obstructing competitors’ activities through its rebate systems. In a more recent decision, the Board conducted a preliminary investigation against Frito Lay Gıda San. Tic. A.Ş. to examine whether Frito Lay has abused its dominant position through, inter alia, rebate schemes and ultimately concluded that that there were no grounds or factors leading the Board to initiate a full-fledged investigation against Frito Lay in connection with its rebate systems (12 June 2018, 18-19/329-163).