ABUSE OF A DOMINANT POSITION
The dominant position refers to the ability of one or more undertakings in a particular market determining the economic parameters such as price, supply, production and distribution quantity acting independently of competitors and clientele. The ultimate goal of all undertakings in the market is to achieve dominance. In order to achieve these goals, undertakings sometimes develop tactics like entering into agreements with their competitors, directing the competition process in accordance with their wishes. In these cases, undertakings are prohibited from disrupting the competition for their own benefit in accordance with Article 6 of the Law on the Protection of Competition.
Article 6 of the Law on the Protection of Competititon (LOPC) No. 4054 regulates the abuse of the dominant position. According to the relevant article; “The abuse, by one or more undertakings, of their dominant position in a market for goods or services within the whole or a part of the country on their own or through agreements with others or through concerted practices, is illegal and prohibited.
Cases of abuse include, in particular:
a) Actions intending to directly or indirectly obstruct the entry of another undertaking into the field of commercial activity or complicate the activities of competitors on the market,
(b)Discriminating buyers in equal positions by asserting different conditions for the same and equal rights, obligations and actions directly or indirectly,
(c)Limitations being brought regarding the buying and selling conditions in case of a re-selling, a good or service being bought along with another good or service, or conditioning that a good or service that is demanded by the buyers who are in a position of intermediary undertaking will be displayed by the buyer, or a bought good not being sold under a certain price,
d) Actions aimed at disrupting conditions of competititon in another market of goods or services by taking advantage of the financial, technological and commercial advantages created by dominance in a particular market,
(e) Restriction of production, marketing or technical development at the expense of the consumer.”
As it is clear from the article, although the dominant position is recognized in the Turkish legal system, the abuse of it is prohibited. This is a regulation parallel to the rules of the European Community on competition law. According to Article 101 of the Treaty on the Functioning of the European Union (TFEU), agreements between undertakings, concerted actions and associations of undertakings which may obstruct, restrict or disrupt the trade between Member States and competition in the Internal Market are prohibited. According to Article 102 of TFEU, any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.
In addition, mergers and acquisitions of companies are also monitored in order to prevent them from creating a dominant position that will lead to a disrupting the competition or will unusually strengthen the existing dominant position (Council Regulation No. 139/2004)
For an undertaking that has achieved a dominant position in natural competitive conditions, an abuse of it will not be considered to have occurred. For example, if undertakings existing in a market are forced to withdraw from the market after they cannot keep up with an undertaking that is dominating in accordance with the law to the extent permitted by the market will not be considered as an abuse of a dominant position. An undertaking that has reached a dominant position in accordance with the legislation will be able to use this power to the extent permitted by the market in which it provides goods or services.
Article 6 of the Law on the Protection of Competition aims to prevent an undertaking that is in a dominant position from putting pressure on its competitors by using the position and power it has. The undertaking making an unlawful profit with the power it holds, attempting to make the competitors leave the market, or attempting to prevent competitors from entering the market are examples of abuse of the dominant position. The important criteria here is that the usual competitive environment trying to be obstructed by using the power given by being the dominant position. In this case, the abuse of a dominant position will be brought up.
The cases of abuse of a dominant position listed in Article 6 of the Law on the Protection of Competition are given only as examples; which are multipliable. The most common cases of abuse of a dominant position as follows:
1.Leaving Competitors in a Difficult Position by Blocking Market Entries
In accordance with Article 6, paragraph 2-a of LOPC , “directly or indirectly preventing an another undertaking to enter the area of commercial activity, or actions aimed at complicating the activities of competitors in the market,” were counted among abuse of a dominant position.
Blocking the entry of competitors into the market by an undertaking that is dominant in the market is competition-limiting behavior. However, there are differences of opinion in the doctrine due to the lack of clarity in terms of the “actions aimed at complicating the competitors' activities in the market” section in the continuation of the law. Therefore, the obstruction of activities in the market appears as a usual consequence of competition. The existence of competition pushes undertakings that are rivals and on the market to actions such as trying to catch up with technology and trying to minimize their costs. Since competition is inherently aimed at ensuring that competitors try to put each other in a difficult position; some think that it would be healthier to interpret the phrase in question as “actions aimed at complicating the competitors' activities in the market at an unordinary degree" in the doctrine.
In addition to blocking the entry of its competitor into the market, the dominant undertaking's activities aimed at obstructing the growth of its existing competitors are also considered to be an abuse of its dominant position. Behaviors that make the activities of competing undertakings more difficult than necessary should be restrictive to competition and should be a type of practice that cannot be considered legitimate. In that case, abuse of a dominant position will be brought up.
For example, an excessively low price may be applied in order to prevent competitors from entering the market or to take them out of the market. But in any case, it will not be evaluated in this way. It would not be true to accept “The dominant undertaking commiting the act in question with motives such as destocking, promotion, discount policies, changes in the product model, tactical reasons, not with the purpose of taking competitors out of the market or blocking them from entering the market” as an abuse of a dominant position. In a decision about the Star Newspaper (Decision No:99-58 /599-381 Decision Date: 08.12.1999), the Competition Board determined that practicing low prices which were not made to exclude competitors from the market, but to enter and hold on to the market could not be considered abuse of a dominant position.
2. Stopping the Delivery of Goods
In accordance with the principle of freedom of contract, undertakings in free economies have the freedom to make agreements. However, if an undertaking that has been providing goods to a business for a long time stops providing them, even though the demand has not changed and there is no justified reason to stop providing goods, the abuse of a dominant position will be brought up. Therefore, the fact that goods are not supplied to an enterprise requesting them for the first time is not an abuse of a dominant position.
However, the issue of when a client will be considered as a regular and a permanent client will be determined individually according to each case. According to the Competition Board, “In order for stopping the delivery of goods to be an abuse, the goods of the long-term provider company must be stopped for an unjustifiable reason. A company that receives goods on a one-year contract is not considered a regular client, and the client's failure to comply with the terms of the supply contract is considered a justified reason.” (Decision No: 01-56/554-130 Decision Date: 20.11.2001) The Competition Board commonly refers to the provider's refusal to provide goods if they have an existing debt from the buyer as a justifiable reason. It is within the scope of the court's duty, not the Competition Board, to conduct research on whether this debt actually exists or not. Therefore, the Competition Board will accept that as a justifiable reason if there is a debt; officially investigating the debt's existence will not be resorted. However, in the event that a lawsuit is opened regarding the debt in question, it will be fair for the Competition Board to accept the trial as a prejudicial cause and wait for its outcome.
Again, the Board looks for the existence of certain conditions in order to qualify the refusal to provide goods as an abuse of the undertaking's dominant position. Some of these conditions are; the goods or rights in question being indispensable, the act of refusal eliminating the competition in the market and there being no objective justification for the action.
In the practice of competition law, the act of refusing to provide goods basically arises as a refusal to provide goods directly and without any justification, or to provide goods at a high price/low quality. There are decisions of the Competition Board that indicates the cessation of promotion support also means cessation of the supplying of goods, thus being an abuse of a dominant position. However, it should be remembered that the characteristics of each concrete case should be evaluated in its own scope. Therefore, the important thing in terms of the Competition Board's decisions is how the Board approaches and views the concrete case. The determination of how and to what extent the rule is applied in practice will be subject to different evaluation according to the elements of each concrete event.
According to a decision of the Competition Board; to stop receiving goods, as well as to stop giving goods, is considered abuse “if it is a violation of competition”. (Decision No: 02-24/244-99 Decision Date: 16.04.2002) In addition, according to another decision of the Board, delaying or completely ceasing the delivery of goods by systematic and coordinated acts is also considered an abuse.(Decision No: 03-76/925 Decision Date: 4.12.2003)
3.Putting an Obligation to Procure from the Monopolies
A dominant undertaking establishing its own sales network and making exclusive purchasing agreements with sellers in order to sell its own products, can be considered as an abuse of a dominant position if it obstructs the competition. During the evaluation, the elements of each concrete case will be taken into account separately. If the action in question does not limit the competition, then the abuse of a dominant position will not be brought up.
4.Setting Unfair Commercial Terms
Sometimes there is a tendency to make agreements between undertakings due to the commercial environment. If an undertaking in a dominant position makes an agreement containing provisions that restrict the freedom of competing undertakings, this will be considered an abuse of dominant position, since these conditions will lead to an unfair competition. If the terms of the said agreement prevent third parties from entering the market, these terms will be able to be evaluated within the scope of LOPC art.6/2-a.
In accordance with Article 6, subparagraph b of the LOPC, “Direct or indirect discrimination against buyers of equal status by asserting different conditions for the same and equal rights, obligations and actions” is considered an abuse. As a regulation in the same direction, in accordance with Article 102, paragraph c of the EU Agreement, “applying different conditions for equivalent transactions to other parties to the commercial relationship, putting them at a disadvantage in terms of competitiveness” is exemplified as abuse.
In contrast to the regulation in the LOPC, the EU Treaty emphasizes that the parties be “put at a disadvantage in terms of competitiveness”. Because the regulation purpose of the article is originally this subject. As understood from the article, the action should take place between undertakings that are competitors to each other.
Direct price discrimination by a dominant undertaking usually occurs on a regional basis. In this case, the purpose of the dominant undertaking is either to exclude its competitor located in that region from the market, or to increase its profit margin by exploiting its buyers who have the ability to pay. A dominant undertaking that makes price discrimination indirectly occurs in the form of giving discounts to some of its buyers. Price discrimination made by means of a discount is divided into loyalty discount and target discount. If the quantity discounts are also of a competitive disrupting nature, they will be classified as abuse.
Target Discount: A type of discount made if a set goal is reached in the sale of a specific product within a certain period of time. The goal is usually set for a period of one year. If the target discount is not applied to everyone at the same rate and is not determined equally for all the clientele, the abuse of a dominant position will be brought up.
Loyalty Discount: A type of discount given to the buyer if they get all of their needs from a single supplier. Essentially, loyalty discount is a kind of price discrimination. However, unlike price discrimination, certain conditions are sought in order to make a loyalty discount. According to one of these conditions, the buyer will not buy goods from other rival companies; they will only buy them from the supplier company that has market power. In this case, the buyer will be able to benefit from the loyalty discount. In practice, in addition to decommissioning the price between traders, it also occurs in the form of extending the maturity of the payment to be made in exchange for the goods. This situation, which is common among traders in practice, occurs due to the buyer's loyalty to the provider, even if there is no direct discount. The exclusionary effect is greater than the discrimination effect in loyalty discount due to it being conditioned. The loyalty discount provided by the dominant undertaking to certain companies directly concerns the undertakings that will enter the market. For this reason, loyalty discount also has a preventive effect on rivals' entry into the market.
Quantity Discount: A type of discount made for large-scale purchases, based on the amount of goods bought. If such a discount puts one of the parties at a disadvantage in the competition by discriminating between competing undertakings, it will be an abuse of a dominant position.
According to the Competition Board, in general, discrimination occurs if a product is sold to different clients at different prices despite having the same cost, or it is sold at the same price despite the cost difference. Discrimination can be made by not only on a price basis but also by applying other conditions other than the price. The situation in question will be subject to special evaluation according to the characteristics of each concrete event.
Similar to LOPC art. 6-b, in accordance with art. 4-c, “Controlling the supply and demand of goods or services, or their determination outside of the market” Competition-Limiting Agreements are illegal and prohibited under Concerted Practices and Decisions. The concepts of “controlling the supply and demand” and “their (goods or services) determination outside of the market” contained in the provision in question can be interpreted as discrimination. However, the important criteria here is whether it obstructs the competition or not. For example, putting different prices in order to make a production plan in accordance with different market conditions in various regions will not be an abuse of a dominant position.
6.Imposing Additional Obligations
An undertaking in a dominant position setting conditions by imposing additional obligations unrelated to commercial custom or to the subject of the contract with an undertaking will be considered an abuse of a dominant position. For example, this is the case if they force the buyer to buy another product along with the product he/she wants to buy. A dominant undertaking usually does this in order to sell products which are in a dominant position, as well as their other products which are not. In order for the two products to be sold with each other, an objective connection between them is mandatory.
In accordance with LOPC article 6, subparagraph 2-c, “Limitations being brought regarding the buying and selling conditions in case of a re-selling, a good or service being bought along with another good or service, or conditioning that a good or service that is demanded by the buyers who are in a position of intermediary undertaking will be displayed by the buyer, or a bought good not being sold under a certain price,” is especially considered as an abuse of a dominant position.
The competition board Examines certain topics in depth when determining whether there is an additional obligation in an obligation imposed by the dominant position in terms of abuse. First of all, it should be noted that it is necessary that the two products have two separate product qualities. If the connected products are inseparable parts or they increase the quality or effectiveness of the product, selling them together will not be an abuse of a dominant position. Secondly, regarding the sale of products, proving that they are being sold within the scope of a binding agreement is necessary. If it is proved that the buyer is forced to buy the products together after them being connected, this may be considered abuse. Thirdly, regarding the reason for connection; whether one of the products hahave economic power while the other product is not preferred enough is examined. Finally, said situation should have a limiting effect on competition in the relevant market.
7.A Dominant Position of a Market being abused in Another Market
In accordance with article 6, paragraph 2-d of the Law on Protection of Competition, “actions aiming to disrupt the conditions of competition in another goods or services market by taking advantage of financial, technological and commercial benefits created by dominance in a particular market ” was also counted as abuse. This is the most common way in which abuse of a dominant position occurs in practice. It is stated in the doctrine that there must be a connection between the market of dominance and the market in which the act of abuse takes place in order for the said provision to be applied. The application of the relevant provision in terms of completely independent markets will not be in accordance with the Law's purpose. Therefore, a connection is being sought between the act of abuse committed and the limitation of competition resulting from the act in question.
8.Failure to Provide the Essential Facility
In cases where it is not possible to provide a good or service from another location, the dominant undertaking has an obligation to provide such goods or services to interested parties. The situation in question has a parallel logic with the rule of giving compulsory licence in cohesiveness of patent issues in the context of the Industrial Property Code, Article 131. In both cases, there is a state of necessity. According to Competititon Law, the presence of an essential facility leads to the disappearance of the existing competition. In a market where there is no alternative to a certain good, the dominant undertaking holding the good (or service) in question must sell it in order for the competition to continue to exist. Otherwise, the competition rules will not take effect, so this regulation is in accordance with the logic and principles of competition law.
However, it should not be concluded that the dominant undertaking will share the essential facility available to them with the market indefinitely in all possibilities and situations. In order to be able to apply the essential facility rule, these conditions are sought;
- The absence of an alternative (the presence of an undertaking in a state of monopoly)
- The inability to create an alternative (the production of an essential facility not being possible under reasonable conditions). In the presence of contractual situations, since the goods or services in question cannot be considered a essential facility, the dominant undertaking will not be forced to sell them.
If a dominant undertaking refuses to make the essential facility available to the relevant undertakings or prevents its use by other undertakings or cannot base the prevention on objective grounds, this will be considered an abuse of a dominant position.
9.Product/Service Quality-Price Ratio
A product or service that is sold by a dominant undertaking for prices that are either too low or too high than they should be, just because the undertaking can sell them for that price, is also considered an abuse. However, this aspect is not explicitly mentioned in the Law on the Protection of Competition. If the dominant position takes this action towards a competing company, although this action in the scope of LOPC art.6-2/a, the 2-a clause in question does not fully cover the action in its entirety.
In a decision of the Competition Board, they considered the concept of predatory pricing as one of the ways to disrupt competition in relation to pricing of undertakings. Predatory price, although there is no generally accepted definition of it, is expressed as unprofitable price in the event that the competition has not been eliminated or at least restricted. The competition board determined that undertakings that quote a price lower than the cost who then later quote prices much higher than the market in order to compensate their losses display competition disrupting behaviour. With this action of dominant undertakings, the competition existing in the market is limited by means of pushing competitors out of the market.
10.Making Restrictions on the Consumer
In accordance with LOPC art. 6, paragraph 2-e, “restriction of production, marketing or technical development to the detriment of the consumer” is also explicitly mentioned in the law as abuse. Therefore, if the behavior of the dominant position leads to the detriment of the consumer, the abuse of a dominant position will have occured in the context of Competition Law. Behaviors such as raising prices by arbitrarily reducing production or forcing the consumer to buy extra products at high prices under the name of marketing will lead to the abuse of a dominant position to the extent that it is to the detriment of the consumer.
There are opinions in the doctrine that defend it would be healthier to put a behaviour that constitutes an abuse "regarding pricing for consumers”that is encountered often in practice in a clear regulation into the provisions of the LOPC. Since the categories listed in the article of the law are not limited in numbers, the number of available categories can be increased according to the elements of a concrete event, even if there is no clear regulation in the law on pricing for consumers. In addition, in subparagraph e of article 6, “restriction of production and marketing” detrimental to the consumer is considered to be within the scope. Therefore, considering the abuse of a dominant position through pricing for consumers within the framework of LOPC art.6/2-e is in accordance with the principles of Competition Law.
Article 6 of Law No. 4054 on the Protection of Competition regulated the of abuse of a dominant position. In accordance with the Article, the abuse, by one or more undertakings, of their dominant position in a market for goods or services within the whole or a part of the country on their own or through agreements with others or through concerted practices, is illegal and prohibited. In the rest of the article, the commonly occurring cases of abuse are enlisted. If the act committed by a dominant undertaking does not fall into any of the categories listed in the law, it will be examined by the Competition Board according to the elements of the concrete case. Therefore, the cases listed in the law are not limited in number. That is why if the concrete case meets the required conditions, it will be considered within the scope of art.6. The main conditions required for an act to be considered an abuse are the act being performed by dominant undertaking/undertakings, an agreement or act existing and that this act has a limiting effect on competition. Taking the approach of the Competition Board into account, these sought-after conditions have been summarized and exemplified.