Turkey: A First-Time Ever Decision In Light Of Algorithmic Assessment: The Turkish Competition Authority Announces Interim Measures Against Trendyol

When there is a possibility of serious and irreparable damages until the adoption of the final decision, the Turkish Competition Board ("Board") is entitled to apply interim measures¹ to preserve the status before the violation and prevent irreparable damage to the competition in the relevant market until the end of the investigation conducted by the Turkish Competition Authority ("Authority").

On September 30, 2021, the Authority announced its decision to issue interim measures against DSM Grup Danismanlik Iletisim ve Satis Ticaret A.S. ("Trendyol") for its practices in the multi-category online marketplaces market. This is the second interim measure decision in 2021 that the Authority issued regarding the digital markets sector. Whether or not it is a coincidence that the Board utilized interim measures in digital markets one after the other, or whether it utilized the use of interim measures as a tool to keep up with the rapid developments in digital markets, will be more apparent in the near future.

Nonetheless, the Trendyol decision is highly remarkable as it might become a milestone in terms of determining the Board's approach going forward, as it was the first instance in which the Board decided to impose interim measures in an investigation conducted on algorithm-based competition law violations.

I. The Board's Trendyol Decision

With the decision of the Board, a preliminary investigation was initiated against Trendyol on whether it violated Article 4 (Agreements, Concerted Practices and Decisions Limiting Competition) and Article 6 (Abuse of Dominant Position) of the Law No. 4054 on the Protection of Competition ("Law No. 4054").

As a result of the on-site inspection and the analysis conducted during the preliminary investigation phase based on the data in the algorithms and information systems, the Authority found that Trendyol:

i. Acts as the intermediary for the third-party sellers, as well as conducting the sales of its own brands such as TrendyolMilla, TrendyolMan and TrendyolKids,

ii. Interferes with the listing algorithm in a way that gives its own products an unfair advantage,

iii. Uses the data obtained in scope of the marketplace activities in the creation of the marketing strategy of its own brands, and,

iv. Discriminates between sellers in the marketplace by interfering with the algorithms.

In light of the above and considering that Trendyol has gained significant market share in recent years in all categories within the market for multi-category marketplaces and particularly the fashion category, the Board decided to apply interim measures in the context of Article 9 of the Law No. 4054 since such violations have the potential to cause serious and irreparable damages until the final decision is rendered.

Within this scope, the Board decided that Trendyol shall:

i. End all kinds of actions, behaviour and practices, which provide an advantage against its competitors including the interventions made through algorithms and coding, for other products and services within the context of the marketplace activity; and avoid such actions during the investigation,

ii. Stop sharing and using all kinds of data obtained and produced from the marketplace activity for other products and services under its economic unity and avoid such actions during the investigation,

iii. End all kinds of actions, behaviour and practices, which may discriminate among sellers in the marketplace including interventions made through algorithms and coding, and avoid such actions during the investigation,

iv. Take all necessary technical, administrative and organizational measures to ensure the auditability of the above-listed interim measures,

v. Retain the data on the parametric and structural changes made on all algorithm models used for product search, seller listing, seller score calculation, etc. for at least 8 years, with all versions and irrefutable accuracy within Trendyol,

vi. Retain the source codes of all software that has been specifically developed for use within Trendyol, for at least 8 years, with all versions and irrefutable accuracy, and,

vii.. Retain the user access and authorization records and manager audit records for all software used within the scope of the business activities being conducted within Trendyol, for at least 8 years, with irrefutable accuracy.

II. Obstacles to Algorithm Assessments and the Authority's Previous Position on Algorithms

Algorithms, like most technology-based mechanisms, are used in a variety of ways, some more advanced and complex than others. For an outsider, in many cases, it is not fully possible to understand how the mathematical processes of algorithms work or what role undertakings play in driving their algorithms towards a particular pricing strategy, especially when it comes to artificial intelligence.²

While investigating a certain violation, the burden of proof must be satisfied in order to turn an allegation into a fact. In principle, the burden of proof is on the authority that is conducting the investigation. Therefore, in cases where the Authority is alleging a violation made through algorithms, it must first analyse the algorithm's object, implementation and changes over time, the undertaking's responsibility from the algorithmic behaviour, the scope of a suspected violation, and intent or negligence of the undertaking. The Authority can also analyse the information from the input data used by the algorithm when assessing whether there is a restriction by object.³

Furthermore, information on the output of the algorithm and the decision-making process connected with it might be useful in detecting collusions through a pricing algorithm, by assessing whether a potential infringement can be attributed to an undertaking and determining whether the algorithmic behaviour was intended or foreseeable by such undertaking. Therefore, linking these algorithmic processes to illegal behaviour or holding undertakings accountable for using algorithms in a way that restricts competition is not always an easy task.⁴

Even if the steps mentioned above are taken, whether there is an actual theory of harm is debatable, when it comes to undertakings with their algorithms.⁵ In cases where the algorithm is independently and autonomously learning from itself or co-operating with other algorithms and adjusting itself accordingly, resulting in profit maximizations through price coordination, is it really possible for an authority to prove such action is attributable to the undertaking at hand?⁶

Assessing liability for algorithmic actions for undertakings can result in two outcomes:

i. Holding an undertaking liable for anticompetitive conduct through developing/using an algorithm that takes actions which end with anticompetitive results, or

ii. Holding an undertaking liable for not complying with reasonable care and foreseeability regarding this conduct.⁷

Until the Trendyol investigation, there has not been a case where the Authority inspected algorithmic commercial behaviours. Therefore, such examination constitutes a milestone for on-site investigations since the Authority has analysed the algorithms of an undertaking in detail for the first time. While this might the case, it must be noted that the Trendyol investigation is not the first time the Board has faced algorithms as a tool for infringement.

From 2015 to 2020, the Authority started investigating online platforms with dominant positions in the market such as Yemeksepeti⁸ and Booking.com.⁹ Even though the Authority dealt with online platforms in the digital sector in its earlier decisions, it abstained from examining the algorithms the platforms used. In the Board's Booking.com decision dated 2017 the Board evaluated Booking.com's "best-price" guarantee practices by examining the "most favoured customer" clause in their agreements and asessing whether its effects on the market were anticompetitive.

Algorithm related allegations were also assessed within the Board's Google AdWords decision¹⁰ in 2020, where it can be seen that the Board became more interested in the digital platform's algorithms by investigating whether Google had violated Law No. 4054 by making changes in its algorithm. The investigation in the case covered algorithm related allegations, as well as others.

Nonetheless, the Board concluded that (i) "based on the findings reached within the scope of the case at hand, it is not possible to come to a conclusion that Google causes a violation of competition through changing the algorithms and giving incomplete information regarding these changes" (ii) "at this stage, no determination was made that would require intervention as per Law No. 4054, within the scope of the allegations that Google changed the algorithm with the intention of deliberately excluding organic search results from the market, and the allegations that the text advertising of the websites affected their ranking in the organic results."

Additionally, according to the 2020 OECD Notes, the Authority empowered its Strategy Development Department to catch up on digital developments in the economy to be able to monitor the effects of algorithms usage on both the consumers and the markets.¹¹ More specifically, the OECD notes state that "It is stated by TCA that in recent years, there have been significant developments in the digital economy both in national and international level, which requires competition authorities to closely monitor the effects of multi-sided platforms and the use of algorithms on both consumers and markets."

In April 2021, the Authority published its preliminary report on the e-marketplace platforms sector. In the report, the Authority highlighted the concerns on algorithms, their effect on the marketplaces and signaled that the Authority is on its way to dive deeper into the world of algorithms.

III. Global Trends of other Competition Authorities

The infringement allegations arising out of algorithms and codes are also increasing globally. In 2015, in David Topkins' Poster Cartel judgement¹² in the USA, it was determined that David Topkins used a pricing algorithm that collects competitor information in order to coordinate the sales prices of the posters in the Amazon marketplace. The court held David Topkins liable for price fixing with other sellers and the case was highlighted as the first criminal prosecution against conspiracy through algorithms, specifically targeting e-commerce.

In 2017, following the insolvency of Air Berlin, the German competition authority Bundeskartellamt initiated an investigation against Lufthansa, saying that the company abused its dominant position in the market through conducts of abusive pricing.¹³ However in its defense, Lufthansa claimed that it did not use abusive pricing because its prices are established by a completely automated booking system that analyses market demand on its own. While the Bundeskartellamt decided not to pursue an abusive pricing case, it also overlooked the issue of whether the increases in pricing under investigation were carried out by an algorithm or involved human input. Andreas Mundt, the President of the Bundeskartellamt signalled their attitude toward future cases involving algorithmic behaviour by stating that "the use of an algorithm for pricing naturally does not relieve a company of its responsibility" because algorithms are created by humans and require human intervention in order to attain specific outputs.

In February 19, 2020, Spain's competition authority CNMC launched a full-fledged investigation against seven undertakings in online real estate brokerage sector for fixing prices.¹⁴ The investigation's major focus was on whether this coordination between undertakings was facilitated by real estate brokerage software and the algorithms embedded in them. According to its press release, the CNMC is also investigating "whether the conduct has been facilitated by firms specialized in IT solutions through the design of real estate brokerage software and the algorithms embedded in them."

IV. Outcome for Today

Algorithms with all their different types, levels of development and outcomes may be too much to tackle at once. It is an ongoing debate among competition law experts whether or not competition enforcers have the necessary tools to address concerns in digital markets¹⁵ or new measures are needed for certain types of misconduct.^16,17 Either way, interim measures are among the recommended tools by certain scholars¹ (either after the legal bar on their use is lowered or as they are regulated already in competition law policies).

For now, it seems that the Authority has clearly taken algorithms and codes that may lead to competition infringements under its radar and is not hesitant to dive deeper into technical aspects of algorithms to assess such infringement. Nonetheless, whether interim measures are considered by the Board as an effective tool against rapidly evolving digital markets is expected to be more apparent in the near future.

This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in December 2021. A link to the full Legal Insight Quarterly may be found here.

Footnotes

1 Article 9 of the Law No. 4054.

2 Gönenç Gürkaynak, Burcu Can & Sinem Ugur, Algorithmic Collusion: Fear of the Unknown or too Smart to Catch? (November 1, 2020). THE EVOLUTION OF ANTITRUST IN THE DIGITAL ERA: Essays on Competition Policy, Volume 1, Competition Policy International, November 2020, Available at SSRN:

https://ssrn.com/abstract=3775095

3 Ibid.

4 Avigdor Gal, It's a Feature, not a Bug: On Learning Algorithms and What They Teach Us, Roundtable on Algorithms and Collusion, Jun. 21-23, 2017, DAF/COMP/WD(2017)50.

5 Salil Mehra, Antitrust and the Robo-seller; Competition in the Time of Algorithms, 100 MINN. L. REV. 1323 – 1375 (2016).

6 Crandall, J.W., Oudah, M., Tennom et al. Cooperating with machines. Nat Commun 9, 233 (2018). https://doi.org/10.1038/s41467-017-02597-8.

7 Autorité de la concurrence &

Bundeskartellamt, Working Paper – Algorithms and Competition, Nov. 2019, available at https://www.autoritedelaconcurrence.fr/sites/default/files/algorithms-and-competition.pdf.

8 Turkish Competition Board's Yemeksepeti decision dated January 28, 2021, 21-05/64-28.

9 Turkish Competition Board's Booking.com decision January 5, 2017, 17-01/12-4.

10 Turkish Competition Board's Google AdWords decision November 12, 2020, 20-49/675-295.

11 OECD's Consumer data rights and competition – Note by Turkey dated May 25, 2020 and numbered DAF/COMP/WD (2020)55.

12 United States District Court of the Northern District of California in San Francisco Judgement dated April 30, 2016 and numbered CR 15-00201.

13 Bundeskartellamt's judgement dated May 2018, numbered B9-175/17.

14 CNMC's press release dated February 19, 2020 https://www.cnmc.es/sites/default/files/editor_contenidos/Notas%20de%20prensa/2020/2020219
%20NP%20Intermediation%20Market%20EN.pdf

15 See, e.g. Michal S. Gal & Niva Elkin-Koren, Algorithmic Consumers, 30 Harv. J.L. & Tech. 38 (2017), at 38.

16 See, e.g. Salil K. Mehra, De-Humanizing Antitrust: The Rise of the Machines and the Regulation of Competition (Aug. 21, 2014), Temple University Legal Studies Research Paper No. 2014-43, at 2.

17 Gönenç Gürkaynak, Burcu Can & Sinem Ugur, Algorithmic Collusion: Fear of the Unknown or too Smart to Catch? (November 1, 2020). THE EVOLUTION OF ANTITRUST IN THE DIGITAL ERA: Essays on Competition Policy, Volume 1, Competition Policy International, November 2020, Available at SSRN:

https://ssrn.com/abstract=3775095

1. A new competition framework for the digital economy Report by the Commission 'Competition Law 4.0', (September 2019), Federal Ministry for Economic Affairs and Energy (BMWi), at 7 & 71. Available at https://www.bmwi.de/Redaktion/EN/Publikationen/Wirtschaft/a-new-competition-framework-for-the-digital-economy.pdf?__blob=publicationFile&v=3

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