Predatory Pricing in Turkish Competition Law

The concept of predatory pricing refers to a case where a dominant undertaking deliberately reduces its prices below cost, to loss-making levels, in order to discipline its existing competitors or to foreclose the market to a new entrant, and then increases the prices again, resulting in consumer harm. The Guidelines on the Assessment of Exclusionary Conduct by Dominant Undertakings define predatory pricing as an anti-competitive pricing strategy where a dominant undertaking deliberately incurs losses or foregoing profits in the short term (‘sacrifices’), so as to exclude, discipline or otherwise restrict competitive conduct of one or more of its actual or potential competitors with a view to strengthening or maintaining its market power. It is difficult to determine or prevent predatory pricing for two main reasons: firstly, the predatory pricing strategy entails low prices and this is generally assumed to increase consumer welfare, which is one of the principal aims of competition law, and thus deemed to be desirable for consumers; secondly, it is difficult to distinguish between pro- and anti-competitive low prices from a competition law point of view. When a dominant undertaking engages in predatory pricing, even though consumers may initially enjoy lower prices, the implementation of this strategy may lead to undesirable consequences for consumers in the long term. Therefore, predatory pricing is prohibited, and undertakings that adopt predatory pricing strategies are subject to legal sanctions.

In the analysis of potential predatory pricing, the actual price of the relevant undertaking is compared with its costs in order to determine whether its pricing strategy could potentially foreclose the market to an as-efficient competitor. In predatory pricing, even though consumers enjoy low prices in the short term, competition constraints can lead to undesired consequences in the mid and long term, such as high prices, low quality and a decrease in consumer choice. In such cases, the Turkish Competition Board (Board) may impose an administrative fine on a dominant undertaking for predatory pricing (see, UN Ro-Ro (01.10.2012; 12-47/1413-474)). In general, the Board assesses the allegations of predatory pricing under six complementary stages: (i) dominant position, (ii) whether prices are below a certain cost level, (iii) intention to exclude competitors from the market, (iv) possibility of recoupment following the exclusion of competitors, (v) (actual/potential) effects, and (vi) whether there is any objective justification.

While predatory pricing may be regarded as a form of abuse as evidenced by many precedents (see, e.g., Trakya Cam (17.11.2011; 11-57/1477-533), Feniks (23.08.2007; 07-67/815-310), Coca-Cola (23.01.2004; 04-07/75-18)), complaints on this basis are frequently dismissed by the Turkish Competition Authority, as it is reluctant to interfere in pricing behaviour unduly. This means that predatory pricing claims usually require high standards of proof.

For more information on predatory pricing in Turkish competition law, please feel free to reach out to ELIG Gurkaynak at +90 212 327 1724 or through gonenc.gurkaynak@elig.com.