Article 3 of the Law on the Protection of Competition No. 4054 (“Competition Law”) defines dominance as follows: “Dominant Position is 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.”
Dominance itself is not prohibited. The abuse of dominance, however, is prohibited under Article 6 of the Competition Law, which sets forth a non-exhaustive list of forms of abuse of dominance. The wording of Article 6 prohibits abuses of dominance both by a single company, as well as by multiple companies (collective dominance).
Precedents on collective dominance are neither abundant nor mature enough to allow for a clear inference of a set of minimum conditions under which collective dominance would be alleged. That said, the Turkish Competition Board (“Board”) has considered it necessary to establish an “economic link” for a finding of abuse of collective dominance (Sinema TV (18.05.2016; 16-17/299-134), Turkcell/Telsim (09.06.2003; 03-40/432-186), Biryay (17.07.2000; 00-26/292-162)).
The dominant position definition provided under Article 3 focuses on economic criteria (i.e. the ability to determine economic parameters such as price, supply, the amount of production and distribution) and on the criterion of independence (i.e. the “acting independently of their competitors and customers” prong). Nevertheless, enforcement trends show that the Board is increasingly inclined to somewhat broaden the scope of application of the abuse of dominance prohibition by diluting the “independence from competitors and customers” element of the definition to infer dominance even in cases of dependence or interdependence (Anadolu Cam, 01.12.2004; 04-76/1086-271 and Warner Bros, 24.03.2005; 05-18/224-66).
The Board lists in the Guidelines on Evaluation of Abusive Exclusionary Conducts by Dominant Undertakings (“Guidelines”) the following factors for assessing and inferring dominance:
(i) Market positions of the company and its competitors:
The position of the company in the relevant market is primarily indicated by its market share, but there is no specific market share threshold proving that a company is dominant. The established practice of the Board is to accept that companies holding less than 40% of the market share are less likely to be dominant (Mediamarkt (12.05.2010; 10-36/575-205); Pepsi Cola (5.08.2010; 10-52/956-335), Egetek (30.09.2010; 10-62/1286-487)). That said, the Board acknowledges that a company with less than 40% market share may also hold a dominant position depending on the specifics of the market under examination. In general, the Board conducts more detailed examinations for companies with a higher market share. The Board also takes into consideration the stability of market shares over time as well as the number and the market shares of the current competitors in the relevant market. The larger and more stable the market share of the company concerned, the less likely it will be for its current competitors to put competitive pressure on the company concerned.
(ii) Barriers to entry and/or to expansion:
The likelihood of entry into the market by new companies and the expansion of companies already operating in the market (say Companies B and C) can exert competitive pressure on the behavior of the examined company (Company A). In order to talk about such pressure, entry or expansion of Companies B and C must be likely, timely and sufficient. For entry or expansion to be likely, it must be sufficiently profitable for Companies B and C. For entry or expansion to be timely, it must be swift enough so that Company A will not have time to use its market power and obstruct it. For entry or expansion to be sufficient, it must prevent the attempt of Company A to increase prices. Barriers to entry or expansion may stem either from the characteristics of the relevant market or from the characteristics/behavior of Company A. Barriers stemming from the characteristics of the relevant market can be the following: state monopolies (Belko 06.04.2001; 01-17/150-39), authorization and licensing requirements (Turkcell 06.06.2011; 11-34/742-230), intellectual property rights, sunk costs, economies of scale and scope, network effects, switching costs faced by customers. Barriers stemming from the characteristics/behavior of Company A can be the following: possessing key inputs, access to special information, spare capacity, a vertically integrated structure, a strong distribution network and a large product portfolio, high brand recognition, financial and economic power.
(iii) Buyer power:
The customers of a company have buyer power (also called “bargaining power”) if they are relatively numerous, sufficiently informed about alternative sources of supply and capable of switching to another supplier or creating their own supply within a reasonable period of time. In this case, buyer power acts as a counter-factor to dominance, therefore the company may not be found to hold a dominant position.