CONTROVERSIAL EXCESSIVE PRICING: THE TCA IS INVESTIGATING ALLEGED ABUSE OF DOMINANCE BY SAHIBINDEN
On 5 June 2017 the Turkish Competition Authority launched an investigation into alleged abuse of dominance by Sahibinden.com via implementing excessive pricing. The case is expected to shed a light on such a debated issue as to what extend the excessive pricing shall be considered as a violation of competition law (if at all), as well as the criteria for determining this “excessiveness.”
Following the preliminary inquiry conducted in response to the claim and examination of the respective data, the TCA decided by its decision No 17-15/175-M to launch an investigation into Sahibinden.com. Excessive pricing is one of the most controversial theories of harm in competition law, and competition authorities are reluctant to take any enforcement action in that respect, mainly due to the difficulty in assessing what constitutes “excessive”.
Approach of the TCA
Excessive pricing actions by the TCA have been relatively rare. Most of the excessive pricing cases have been closed at the preliminary inquiry stage (as mentioned in the OECD report 2011). The first ever (milestone) decision and fine of the TCA was in relation to excessive pricing policy of a public undertaking in a dominant position Belko (decision No 01-17/150-39 dated 6.4.2001). The TCA in its assessment of excessive prices took prices and compared then with the prices of identical/equivalent products in other more competitive geographical markets.
In BOTAŞ-EGO-İZGAZ-İGDAŞ decision No 02-13/127-54 dated 8.3.2001 in spite of 66-67% profit of the undertakings concerned, the TCA did not consider the prices as excessive on the grounds that the upper and lower limits of prices of the companies were regulated by the Ministry of Energy and Natural Resources. Hence, the companies in the regulated industries cannot in principles be charged with excessive pricing claims since they do not have a freedom to set their prices.
Approach of the EC
There has been a rather limited case law concerning excessive prices in the EU as well. Excessive pricing may be viewed as abusive conduct in the EU if implemented by the dominant players, which can be interpreted from the wording of article 102 of the TFEU focusing on “unfair prices”. Specific parameters for establishing the excessive prices as a violation of competition law were provided for by the Court of Justice of the EU in the United Brands (Case 27/76) back in 1978: (i) whether difference between costs incurred and price charged is excessive, and (ii) price charged is unfair in itself or in comparison with competing products. This test has been frequently applied by the European Commission in its more recent cases.
Currently a judgement of the Court of Justice of the EU in AKKA/LAA (Case C‑177/16) is highly awaited as it will be an important update on and contribution to the limited guidance on the excessive pricing, as well as revisiting of the United Brands test, and is expected to further limit the scope of the abuse in question. According to the opinion of Advocate General Wahl, prices need to be significantly and persistently above the benchmark price to be considered as excessive, and authorities should only intervene where the price difference is “of such a magnitude that almost no doubt remains as to abusive nature of the price. Another important statement is that excessive pricing should only be considered in regulated markets (where a legal monopoly is present). To show the fair nature of the prices, once they are determined to be excessive, the AG suggests that undertakings may, in particular, refer to higher production or marketing costs or the fact that the products or services they supply are economically more valuable (i.e. innovative markets etc.).
The Sahibinden.com case is expected to shed a light on such a debated issue as to what extend the excessive pricing shall be considered as a violation of competition law, as well as the updated parameters for establishing the excessive prices as a violation (if any).
Although the excessive pricing may be considered as an abuse of a dominant position in the EU (unlike the USA), in markets where there is competition, the competition authorities refrain from intervention and limit themselves to markets where there are natural or legal monopolies or to markets where there is no price regulation. One of the main reasons for non-intervention of the competition authorities in such cases is the difficulty in evaluating what constitutes excessive. Additionally, by intervening the competition authorities have to (unwillingly) play a role of unofficial price regulators.
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