Port Akdeniz decision: an excessive pricing assessment
On 25 August 2021, the Turkish Competition Authority ("Authority") published on its website the board's reasoned decision on the investigation of Ortadoğu Antalya Liman İşletmeleri A.Ş. ("Port Akdeniz").1 The investigation concerns whether Port Akdeniz is overpricing customers by using its dominant position.
What makes this board decision important?
Especially recently, the board increased its focus on excessive pricing practices of undertakings and, within the scope of the initiated investigations, it can be determined that the board tends to assess excessive pricing practices with a more detailed analysis. In particular, the board's assessment of Port Akdeniz's behaviors may influence the Turkish competition law for years to come.
In this particular case, the board conducted a sector-specific analysis of container handling services, bulk solid cargo handling services and general cargo handling services. Considering that the loading and unloading costs are determined in accordance with Customs Law No. 4458, the board's excessive price assessment regarding a sector with regulated prices will be important for the practices in the sector.
The board's assessments
Prior to its assessment on excessive pricing, the board determined the relevant product and geographical market and, accordingly, discussed in what market Port Akdeniz has a dominant position.
The starting point for defining the relevant product market in terms of ports is to identify the services offered at the port. The services offered at the ports are basically divided into two categories — cargo and ships — and Port Akdeniz provides services to general cargo, solid bulk cargoes, container cargoes, nonstandard cargoes of special projects and also passengers within the scope of port services. Within the framework of these activities, the board evaluated the previous commission and board decisions specifically for the relevant product markets and determined that the relevant product markets would be the container handling services market, bulk solid cargo handling services market and general cargo handling services market.
Moreover, regarding the geographical market, the board evaluated that the relevant geographical markets in terms of port services are generally determined by the market that is served by the port. While making this analysis, the board benefited from previous board decisions, which took into consideration many factors related to the characteristics and capacity of the ports, and the assessments of the Authority's Economic Analyses and Research Department (EAAD). In this regard, especially in light of previous decisions that concerned Port Akdeniz, the board concluded that the geographical market is the "Western Mediterranean."
After determining the relevant product markets and geographical market, the board first evaluated whether Port Akdeniz is dominant in these markets in order to assess excessive pricing. Within the scope of the geographical market defined as the Western Mediterranean, Port Akdeniz has a market share of 100% as it is the only port that provides container handling services. Although the mentioned market share is an important indicator of market power, it is stated by the board that it is not the sole determinant of the market position. Nevertheless, it has been concluded that Port Akdeniz is in a dominant position in the relevant market because there are no competitors in the market, it has unutilized capacity and there is no countervailing buyer power. In terms of the bulk solid cargo handling services market, Port Akdeniz has one competitor that entered into the market in 2018. The board evaluated market entry and expansion barriers and buyer power, and decided that Port Akdeniz is in a dominant position in the solid cargo handling services market. With regard to the general cargo handling services market, the board refrained from making a definitive dominant position evaluation, as it will not affect the findings within the scope of the investigation.
Regarding the allegations that Port Akdeniz abused its dominant position through excessive pricing practices, the board tends to assess these by the EAAD's pricing analysis. The EAAD conducted its analysis in two stages, first, it considered the price-cost difference and second, it carried out a profitability analysis based on price comparison. The board requested information and documents from 39 different ports. Within the scope of the analyses, an increase in Port Akdeniz's prices was determined in the container handling services market even in cases where the unit cost had decreased. In the comparison of Port Akdeniz and other ports, the fact that the average profitability of Port Akdeniz for the analyzed period was above the sector average according to alternative criteria, was an indication that Port Akdeniz keeps its prices much higher than its costs.
The board found that Article 6 of Law No. 4054 was violated in the container handling services market and imposed fines on Port Akdeniz in light of the EAAD analysis and the findings of the on-site inspection, as well as its detailed analysis. In terms of the bulk solid cargo handling services market and general cargo handling services market, the board did not find that Article 6 of Law No. 4054 was violated and did not impose any fines. In this respect, the relevant decision highlights the fact that economic analysis plays a growing role in competition law. We are expecting to see further decisions that include effective enforcement of the economic foundation.
Application of the commitment mechanism in digital platforms: decisions regarding Yemek Sepeti and Çiçek Sepeti
After the Communiqué on Commitments to be Submitted in Preliminary Investigations and Investigations Concerning Agreements, Concerted Practices and Decisions Restricting Competition and Abuse of Dominant Position entered into force, following the amendments to Law No. 4054 on the Protection of Competition ("Law No. 4054"), several undertakings adopted an active stance to conclude the investigations against them. The Turkish Competition Board ("Board") had to keep up with the pace to demonstrate its approach toward the commitment mechanism with its decisions.
In this case, the Board had to evaluate the commitments of certain players in the digital platforms arena with two separate decisions, namely, Yemek Sepeti Elektronik İletişim Perakende Gıda Lojistik Anonim Şirketi ("Yemek Sepeti") dated 28 January 2021, numbered 21-05/64-28 and (ii) Çiçek Sepeti İnternet Hizmetleri ("Çiçek Sepeti") dated 8 April 2021, numbered 21-20/250-106. The decisions are attention grabbing in terms of the Board's adaptive approach to market dynamics in the digital era.
The competitive concerns for Yemek Sepeti
The Board initially had an ongoing investigation, decision dated 4 June 2020, numbered 20-27/336-M, to determine whether Yemek Sepeti violated Articles 4 and 6 of Law No. 4054 by applying "narrow" most-favored customer (MFN) clauses, 2 mandatory joker discount practice (Mandatory Joker), minimum basket price implementations and the pricing strategy of the "Yemek Sepeti vale" business model. While the Board rejected the first commitment package of Yemek Sepeti, it accepted the second commitment package and concluded the investigation by providing remedies to the following key points:
- Narrow MFN clauses
The Board noted that certain chain or individual restaurants desired to offer more convenient prices in their own channels to customers and avoid Yemek Sepeti's commission rates. However, the narrow MFN clauses implemented by Yemek Sepeti were likely to restrict customers' access to products or services on better terms, as Yemek Sepeti plays a non-replicable "gate-keeper" role for restaurants. Most of the packaged services are provided via Yemek Sepeti and it is quite hard for restaurants and other platforms to compete with Yemek Sepeti on the same minimum prices due to the MFN clause requirement. Therefore, the Board concluded that narrow MFN clauses could create entry barriers.
- Mandatory Joker discount practice
The Board found that the joker discounts were mandatory for individual restaurants despite the fact that they found this practice nonprofitable. In addition, it considered that these mandatory discounts could cause them to be dependent on Yemek Sepeti, as they would not be able to offer such discounts to other competitor platforms due to their limited resources, which would eventually exclude competitor platforms.
- Mandatory minimum basket price practice
Individual restaurants had complained about this practice, stating that they would charge higher minimum order prices, and they couldn't service higher basket priced orders from other competitor platforms or from their own channels during peak hours as they had to prioritize orders from Yemek Sepeti. They also knew that they would be faced with sanctions if they refused too many orders, which eventually affected their cost-management and prevented other competitor platforms from developing, as these restaurants could not opt-in to other platforms.
- Yemek Sepeti vale model
The Board noted that Yemek Sepeti had been providing its online meal ordering services and courier services together as packaged sales. The Board stated that the costs of the vale model must not be below price in an ecosystem where other competitors could not come up with an alternative. Such "below-cost" practices would restrict competition in the platform services market and exclude competitors in the short and long term.
Commitments and conclusion
Eventually, Yemek Sepeti submitted the following commitments, which the Board found to be sufficient to eliminate competitive concerns given above and lead the Board to conclude the investigation:
- Yemek Sepeti will terminate its narrow MFN practices within six months.
- Yemek Sepeti will terminate its mandatory joker discount practice within nine months.
- Yemek Sepeti will let restaurants determine their own minimum basket prices within one week.
- Yemek Sepeti vale model will be priced in accordance with the couriers' expenses.
The competitive concerns for Çiçek Sepeti
The Board already had an ongoing investigation launched with the decision dated 4 June 2020, numbered 20-27/335-M, to determine whether Çiçek Sepeti restricted its competitors' activities and abused its dominant position by the applications creating de facto exclusivity. Similar to the case for Yemek Sepeti, Çiçek Sepeti also had to submit a second commitment package before the Board, by providing sufficient remedies to the below issues from the investigation report, to conclude the investigation:
- Çiçek Sepeti was verbally warning its dealers that were cooperating with competitor online flower sales platforms.
- Çiçek Sepeti was setting high sales targets for delivering more flowers and consumable products to its dealers on special days.
- The investigation report concluded that such practices by Çiçek Sepeti could create de facto exclusivity and eventually obstruct the activities of competitor online flower sales platforms.
Commitments and conclusion
Çiçek Sepeti later provided the following commitments before the Board, which the Board found to be sufficient to eliminate competitive concerns given above to conclude the investigation:
- Çiçek Sepeti will explicitly inform its dealers that they are free to work with competitor platforms without any contractual or de facto obligations, include this explanatory clause in its dealership agreements as soon as possible and implement this conduct to its prospective dealers by providing a clarification text to them beforehand.
- Çiçek Sepeti will switch to a dealer-specific, improved and mutual bargaining approach on setting sales targets for special days and the dealer would approve the agreed delivery amount afterward through the dealers' interface.
- Çiçek Sepeti will neither discriminate nor terminate its dealership agreement when Çiçek Sepeti's recommended delivery amount is not met and, therefore, the ordinary performance criteria would still be in force.
To put together ...
Both decisions are important for demonstrating the Board's adaptive approach to digital markets, as it appreciates the different, various dynamics and market behaviors of digital platforms. Another point is the Board's constructive stance, which allows the undertakings to revise their commitments to produce their problem-solving solutions for a second time, and concluding investigations when it considered them to be sufficient. Although every case is unique, undertakings active on online platforms must note two points for future references: (i) the Board always has an eye on digital platforms; and (ii) it is possible to conclude investigations when the commitments are able to sufficiently eliminate competitive concerns, and there is a constructive ecosystem to try again if you fail the first time.
Competition Authority concluded its investigation on Hepsiburada/Anka
On 11 October 2021, the Authority published on its website the Board's reasoned decision3 on its investigation of Anka Mobil Tedarik A.Ş. ("Anka Mobil") and D-Market Elektronik Hizmetleri ve Ticaret A.Ş. ("Hepsiburada"). The Board launched the investigation based on its decision No. 19-22/326-M to determine whether Hepsiburada and Anka Mobil violated Article 4 and Article 6 of Law No. 4054 with the most favored customer clauses (MFC), discrimination, refusal to supply and resale price maintenance (RPM).
Evaluation of dominant position
Recently, e-marketplaces have frequently been on the Board's radar. Within the scope of the relevant decision, the market share assessment of e-marketplaces is examined based on two criteria: (i) the click-through rates reflecting the amount of visits to the relevant sites; and (ii) the income generated from sales made through the platform. According to the analysis conducted in terms of these criteria, the share of Hepsiburada in the relevant market is below 40%. As such, the Board stated that Hepsiburada is not in a dominant position under all possible market definitions.
In terms of Anka Mobil, which is the distributor of Spigen branded phone accessories, the Board decided that it is not in a dominant position due to the existence of hundreds of different undertakings operating in the same market as Anka Mobil.
Subsequently, the Board conducted a detailed analysis regarding the four allegations below:
- Refusal to supply
According to allegations, Anka Mobil refrains from providing Spigen branded products directly, and obliges the complainant to purchase the related products through Hepsiburada. To that end, the complainant alleged that Hepsiburada becomes both the supplier and retailer of the related products and gains a competitive advantage. In accordance with the documents obtained during the on-site inspection, the Board concluded that Anka Mobil refused to supply products to sellers that sell Spigen products on Hepsiburada. The act of refusal to conclude contract/supply goods is considered within the framework of Article 6 of Law No. 4054. Because, Anka Mobil is not in a dominant position, the relevant allegation was declared as invalid.
It has been alleged that Hepsiburada discriminates against sellers in terms of commission rates. As of September 2016, Hepsiburada has switched to a transparent and standardized system that is applied equally to all sellers in terms of commission rates. Within the scope of this system, average commission rates vary due to the application of different commission rates to each sales category. In this case, the Board concluded that Hepsiburada does not discriminate in terms of the commission rates based on the assumption that Hepsiburada is in a dominant position.
Moreover, the allegations indicated that Anka Mobil favors Hepsiburada in the sale of Spigen branded accessories compatible with Samsung Galaxy Note 7 for the first 15 days after the product is released. In order for the discrimination claim to be evaluated within the scope of subparagraph (b) of the Article 6 of Law No. 4054, as mentioned above, it is necessary for Anka Mobil to be in a dominant position. As a result of the evaluations, it was determined that Anka Mobil is not in a dominant position, thus the relevant action does not constitute a violation within the scope of Article 6.
- The MFC clauses
The Board approaches MFC clauses, which have become an indispensable part of digital platforms, with suspicion. 4 The MFC condition implies the obligation of the supplier to offer the favored buyer a more favorable price and contract terms offered than to other buyers.
The relevant clauses were divided into two subcategories in terms of e-commerce platforms:
- MFC clauses that required sellers not to offer better terms in their own e-commerce platforms (narrow MFC clauses)
- MFC clauses that required sellers not to offer better terms in any other e-commerce platforms, including competing platforms (wide MFC clauses)
The Board found out that Hepsiburada applies wide MFC clauses. However, as Hepsiburada's market share is less than 40% and these clauses do not amount to an interference with the resale prices of vendors, MFC clauses benefit from the block exemption.
Anka Mobil offers the relevant product to sellers that want to procure Spigen branded product, on the condition that it is sold more at a higher price than on Hepsiburada. If the condition is not accepted, it is understood that Anka Mobil will refrain from providing the product to the sellers. The Board ruled that Anka Mobil is intervening directly in the resale prices, which should have been freely determined within the scope of the independent commercial decisions of the buyers, and is preventing the buyers from setting their own resale prices, which constitutes a violation of Law No. 4054.
Moreover, the Board decided that RPM could not be justified by an exemption analysis, as it hinders intrabrand competition and inflates consumer prices.
To sum up, the Board did not find a violation of Article 4 and Article 6 of Law No. 4054 and did not impose any fines on Hepsiburada. In terms of Anka Mobil, the Board did not accept the defense that the indirect price maintenance was made within the scope of the MFC clause. According to the MFC clause, Anka Mobil has no obligation to keep the prices of the resellers lower than the prices on Hepsiburada. However, the Board expressed that RPM could not be justified by an exemption analysis, as it is a violation by object. In this regard, the Board decided that Anka Mobil violated Article 4 of Law No. 4054 by maintaining the resale prices of its products and decided to impose administrative monetary fines on the relevant undertaking.
The administrative judiciary clarifies the standard of proof in RPM cases, annuls the Henkel decision
In 2017, the Board launched a full-fledge investigation against Türk Henkel Kimya Sanayi ve Ticaret A.Ş. ("Henkel") pursuant to a complaint, which claimed that Henkel maintained its products' resale prices. The investigation lasted for approximately one year and eight months. The Authority's case team concluded that the evidence did not suggest that Henkel engaged in RPM and, thus, violated Article 4 of Law No. 4054. However, the Board's verdict was the exact opposite. The Board found that Henkel maintained its products' resale prices, thereby infringing Law No. 4054 and levied an administrative fine against Henkel worth of TRY 6,944,931.02.
The Board's violation finding: why?
The Board was suspicious of Henkel's close monitoring over its products' realized resale prices. Apparently, Henkel makes use of certain IT tools to monitor all its products' shelf prices. In addition, Henkel employs its field operation to obtain information regarding Henkel products' insert prices, display conditions, etc. According to the Board, Henkel particularly queries whether a retailer prices below the recommended level. Moreover, if that is the case, Henkel allegedly takes actions to raise that price. To support this theory, the Board relied on certain communication evidence. The relevant internal correspondences note that (i) certain prices are "erred" and, (ii) the personnel in the field will "take actions."
The court of state's judgment
Henkel claimed various procedural and substantive grounds for appeal. The court of state dismissed the procedural grounds (e.g., denial of right of defense, lack of reasoning, etc.) and based its ruling purely on substance. As such, the judgment provides significant clarification as to the law on RPM. In essence, the court of state's judgment provides for the following:
- Undertakings may, directly or indirectly, engage in RPM.
Evidence and standard of proof will be particularly important in
terms of indirect RPM. To establish an indirect RPM case, the
Authority must demonstrate that the investigated undertaking fixes
the sale price as a result of pressures or incentives.
- Applying this to the case at hand, the court of state
determined that there is no contractual (i.e., direct) RPM and,
thus, the Board's decision must meet the standard of proof
regarding indirect RPM cases. In this effort, the court of state
turned to the communication evidence. It noted that the Authority
obtained information from Henkel's resellers, which unanimously
submitted that (i) they freely determine their prices, and (ii) to
their knowledge, Henkel takes no action regarding shelf prices. The
court of state relied on these submissions and held that the Board
must assess whether sporadic practices (correspondence) build up to
one wide strategy. The court answered this question in a negative
way for Henkel.
- A pressure or incentive, which causes an indirect RPM, must be
able to affect the reseller's conduct. Thus, a mere compliant
about erred prices would not suffice. Evidence against Henkel does
not meet this criterion.
- Conducting market research about resellers' shelf prices is
not a mean to engage in RPM in and of itself. Thus, the Board
cannot hold Henkel liable for keeping an eye on market
- Market conditions suggest that Henkel would face serious hardship if it engaged in RPM (e.g., fierce interbrand competition, competitors are big multinational firms, in the last three years no firm had a market share above 20-25%, competing products are highly substitutable, the consumer is price sensitive).
With this judgment, the court of state clarified the standard of proof in RPM cases. (1) Truly inculpatory evidence should demonstrate a pressure or incentive that could affect the reseller's pricing behavior (i.e., a complaining supplier is not necessarily a price-fixing supplier). (2) Sporadic communication evidence is not sufficient, the Board should demonstrate a general practice on the supplier's part. (3) It also should take into account relevant market conditions and resellers' submissions. Time will tell how this judgment will affect the Board's RPM enforcement.
Trendyol stopped from self-preferencing and discriminating, according to the Board
In late September, the Board enforced Article 9, a rarely applied article of Law No. 4054, which enables the Board to apply interim reliefs before its final decision when serious and irreparable harm is likely to occur without such a provisional measure.
With its decision dated 30 September 2021, numbered 21-46/669-334, the Board adopted a comprehensive set of behavioral remedies (in the form of an interim relief) against DSM Grup Danışmanlık İletişim ve Satış Ticaret A.Ş. ("Trendyol"), a major online marketplace platform active in Turkey, solely controlled by Alibaba Group Holding Limited. The behavioral remedies are aimed at Trendyol's alleged self-preferencing and discriminatory conduct on its platform.
The diagnosis: self-preferencing and discrimination
The root of the problem is that Trendyol sells on its own online marketplace. It operates a multicategory online marketplace and acts host to many retailers. Yet, at the same time, it competes with them as a retailer itself (i.e., through Trendyolmilla brand).
The Board determined that the below activities may lead to anti-competitive harm:
- The Board found that Trendyol leverages its products against
competing products by meddling with the algorithm, which generates
seller listings and seller points. Trendyol fixes its smart listing
algorithm so that Trendyol products come on top. In addition, it
prevents negative customer scores from showing up on Trendyol
brands' profiles. Further, Trendyol reserves the "next day
shipping" option only for its own merchandise.
- Trendyol greatly benefits from its access to retailer data,
which receive Trendyol's e-marketplace services. This enables
Trendyol to copy products that are in demand and profitable.
However, the Board noted that data-based self-preferencing is a
type of free riding and can lead to anti-competitive market
foreclosure based on the market's concentration level.
- In addition, Trendyol artificially increases the number of followers of its brands. As such, it deceives sellers and users.
In terms of discrimination allegations, the Board found that certain retailers pay Trendyol for advertisements on the platform. In turn, Trendyol puts these brands higher on the list. The Board decided that Trendyol's rules on sponsored products lack clarity and this leads to discrimination between sellers in the marketplace.
The cure: behavioral remedies
The Board found that Trendyol enjoys a significant amount of market power and holds a dominant position. Competing firms' competitive pressure against Trendyol is not sufficient. In addition, the Board took note of the fact that Trendyol's market share increased significantly over the course of a year. This is why it had to prescribe an interim relief. Otherwise, the investigated conduct may cause irreparable damage during the investigation period, which can take up to two years.
The Board decided that, until it renders its final decision in the investigation, Trendyol will do the following:
- Cease to self-preference its goods and services against
competing products through, among other things, adjustments in the
algorithm and coding
- Stop sharing and using the data, which it generates through its
marketplace activities, for the sake of its goods and
- Stop discriminating against sellers through interventions in
the algorithm and coding
- Store certain data for a period of eight years
The Authority published its reasoned decision 11 days after the Board's decision. This is a relatively short time compared to other cases, which shows the Board's motivation to start the behavioral remedies as soon as possible.
The Board's interim relief against Trendyol will certainly soon have an impact in the multi-category online marketplace platform. The Board's final decision will tell whether these remedies will become permanent.
1. The board's decision dated 5 November 2020 No. 20-48/666-291.
2. In general, MFN clauses are contractual arrangements between parties to guarantee the customer side always gets the best price to be offered by the seller/provider/vendor to anyone. In digital platforms, "price" is not the only element to be considered as there are also non-price assets.
3. The Board's decision dated 15 April 2021, No. 21-22/266-116.
4. Please see the Board's Yemeksepeti decision dated 9 June 2016, No. 16-20/347-156, the Board's Booking decision dated 5 January 2017, No. 17-01/12-4, and the Board's Kitapyurdu decision dated 5 November 2020, No. 20-48/658-289.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.