A dominant company may raise its competitors’ costs in order to drive them out of the relevant market. The essence of increasing competitors’ costs is that the dominant firm raises its competitors’ cost compared to its own, resulting in inefficiencies for the competitor. A higher-cost competitor quickly reduces its output, which allows the dominant company to increase its market share even further. Raising competitors’ costs is prohibited under Article 6(a) of Law No. 4054 on the Protection of Competition (the “Competition Law”).
The dominant company can also raise its competitors’ costs indirectly through agreements with customers that make it more expensive for competitors to lure customers away from their contracts with the dominant company. For example, long-term contracts with penalty clauses can raise competitor’s costs, because in order for the competitor to induce the customer to switch, his price has to make it worthwhile for the customer to break the current contract, pay the penalty clause and buy the product from the new entrant. A competitor’s costs may be raised when there is no economic dependence. For instance, a dominant company may sell its product at discriminatory prices, setting higher prices to companies that compete against it downstream, thereby restricting competition by the competitor company in the relevant product market. While excluding competitors from the market, the dominant company also hampers new entry to the market.
The Turkish Competition Board may condemn dominant firms that engage in categorical conduct to raise their competitors’ costs, upon the consideration of the degree of exclusion that the abusive behaviors are likely to cause, and of whether there are any entry barriers.