Pricing algorithms assist undertakings in making pricing decisions by analyzing current and historical market and customer data, such as supply and demand, competitor prices, and historical trends. For example, in digital markets, many platforms offer tools and algorithms to their third-party sellers to support optimal pricing decisions. While pricing algorithms may benefit consumer welfare by facilitating competition, reducing prices, and increasing efficiency and effectiveness, it may also lead to anti-competitive behavior. In this context, competition authorities worldwide started to research and investigate algorithmic pricing and its impact on competition law. Accordingly, the Turkish Competition Authority ("TCA") also took action on the issue and provided in its Strategic Plan for 2024-2028 that it plans to make further improvements in analyzing algorithm-based violations in competition law.
In its two recent decisions, the TCA addressed the anti-competitive risks posed by using pricing algorithms in the e-commerce sector. The TCA concluded two separate investigations on D-Market Elektronik Hizmetler ve Ticaret Anonim Şirketi ("Hepsiburada") and DSM Grup Danışmanlık İletişim ve Satış Ticaret Anonim Şirketi ("Trendyol"), two of the major multi-category e-marketplaces in Türkiye, concerning allegations that automatic pricing mechanism they offered to third-party sellers violate Article 4 of Law No. 4054 on the Protection of Competition ("Competition Law").
Both Trendyol and Hepsiburada implemented an automatic pricing mechanism where the third-party seller could manage its price offering according to the "Buy Box Price." The Buy Box uses algorithmic metrics to determine the seller who will appear prominently, and when a user clicks the "Add to Cart" or "Buy Now" button on the seller list, the product from the seller who has won the Buy Box is added to the consumer's cart. The automatic pricing mechanism under investigation allowed other sellers to automatically adjust their prices according to the Buy Box Price using options such as "Match the Buy Box Price," "Stay Below the Buy Box Price," or "Stay Above the Buy Box Price," with the Buy Box-winning price serving as the reference.
The TCA raised concerns about the potential anti-competitive effects of these mechanisms, particularly the widespread use of the "Match the Buy Box Price" rule. The TCA is concerned that the growing adoption of such automated pricing strategies could lead to price rigidity and coordinated pricing across the e-marketplace.
The TCA ended both investigations upon commitments of a similar nature. Trendyol and Hepsiburada submitted commitments to the Board, including eliminating the "Match the Buy Box Price" option from their automatic pricing mechanisms, and not sharing seller data related to the use of automatic pricing mechanism with other sellers. Also, the use of the automatic pricing mechanism will not be mandatory for sellers, and no incentives will be provided that would effectively make its use compulsory. The TCA found the commitments provided by the parties sufficient and likely to eliminate the competition concerns and concluded both investigations.
The TCA's recent focus on algorithmic pricing aligns with the global trend of increasing regulatory oversight of pricing algorithms in digital markets. Therefore, as pricing algorithms rapidly grow, businesses must adopt robust compliance measures to mitigate antitrust risks.
"Pricing Algorithms under the Focus of the Turkish Competition Authority" - Originally published by The Legal Industry Reviews
© Kolcuoğlu Demirkan Koçaklı Attorneys at Law 2020
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