ABSTRACT
As online platforms have increased in importance, they have come onto the agenda of competition authorities across the world and also in Turkey. No consensus has yet been reached on how to apply general principles of competition law to online platforms. It is of great importance for competition authorities to find fast and effective solutions addressed by the doctrine and to adopt flexible approaches that differ from general principles. This article addresses the issues arising from the application of these principles. Today, as the digitalization process continues at full speed, the importance of theinternet is increasing daily. Online platforms that provide various services on the internet are increasingly invading every area of human life and are becoming economically more robust worldwide.
I. INTRODUCTION
Today, as the digitalization process continues at full speed, the importance of theinternet is increasing daily. Online platforms that provide various services on the internet are increasingly invading every area of human life and are becoming economically more robust worldwide. Many economically powerful companies such as Google, Amazon, eBay, Airbnb, and Uber serve as online platforms in digital markets. These online platforms undoubtedly come within the scope of competition law, and because defining the relevant product market and evaluating market power in digital markets is much more complicated and challenging than in traditional markets, the Competition Board has to adapt to the digitalized world and digital economy.
This article will address the challenges in applying general principles of competition law to online platforms, referring to example Competition Board decisions, for instance, Information Technologies Marketing and Trade Inc. (“Sahibinden. com”)1 from the Owner, Yemeksepeti Elektronik İletişim Retail Food Logistics Corporation (“Yemeksepeti”)2 and Google Advertising and Marketing Limited (“Google”)3. The investigations regarding the economic integrity of Google International LLC, Google LLC, Google Ireland Limited and Alphabet Inc. and the decisions will be applied to clarify the issue.
II. LEGAL CONCEPT
A. The Concept of Online Platforms
An online platform is defined by the European Commission as a multilateral marketplace where at least one party will benefit by enabling two or more groups of interconnected users to interact via the internet.4 These platforms are not only platforms operating on the internet but also act as intermediaries among different customer groups and form a part of the network economy5. As such, online platforms are new structures that offer services to companies and consumers by taking advantage of the internet.
It may not be possible to propose a standard size of online platforms. Small websites with local access and companies that generate billions in revenue worldwide can both be defined as online platforms. If the classification is made in terms of the service they provide, online platforms include search engines such as Google, Yahoo, Bing; virtual marketplaces or online retailers such as Amazon, eBay, Asos, Allegro; video sharing platforms such as Youtube, Dailymotion, Vimeo; hotel reservation services such as Trivago, Booking. com; and social networks such as Facebook, Twitter, Instagram.
B. The Concept of Competition
Article 3 of the Law No. 4054 on the Protection of Competition ("Law") titled Competition states that “(t)he contest between undertakings in markets for goods and services, which enables them to make economic decisions freely.” The subject matter of competition law is to prevent, distort, or restrict competition in goods and services markets and the undertakings that dominate the market, and to ensure that competition is protected by making necessary regulations and controls6. Article 2 of the Law draws the scope of competition as "operating in the market of goods and services or affecting the markets of the Republic of Turkey" referring to the inventory. Under this provision, business activities within the borders of the Republic of Turkey, whether the business is registered in Turkey or not, is evaluated for distorting competition rules under the Law. Within the scope of the Law, "prohibited activities" are classified under three main headings in Articles 4, 6, and 7 of the Law. It useful here to briefly touch on the relevant articles of the Law: · Article 4 “Agreements, Concerted Practices and Decisions Limiting Competition”, covers any undertakings, including anti-competitive, disruptive and restrictive agreements, practices and decisions affecting the operation of goods and services markets within the borders of the Republic of Turkey, · Article 6 “Abuse of Dominant Situation”, covers abuses of dominant undertakings in the market, · Article 7 “Mergers and Acquisitions”, covers all legal transactions and behaviors that aim to create a dominant position or to strengthen an existing dominant position that, as a result, will significantly reduce competition7.
III. INVESTIGATION UNDER COMPETITION LAW CRITERIA
As following the definition, online platforms where an undertaking acts as a platform produces two different products or serves to two different demand groups, while the number of requests from one group has increased or decreased depending on the number of requests from another group8. Considering the definition, online platforms operate as a mixed, rapidly changing and multilateral structure. The traditional competitive approach may be difficult for these structures and thus may not guarantee effectiveness.
The differences between online platforms in the application of competition law criteria will be explained in detail below.
A. Making a Related Market Definition of Online Platforms
The correct definition of the relevant market is of great importance in terms of determining any abuse of dominant position and control of mergers and acquisitions. Indeed, market definition is a tool used to determine the limits of competition between undertakings. Market definition is a tool used to determine the limits of competition between undertakings9. The relevant market definition analysis is in two parts in line with the decisions of the Competition Board. Accordingly, the relevant product market definition gives the relevant market definition together with the relevant geographic market definition10. In online platforms, determining the relevant market requires a slightly different perspective. Having more than one side of the platform service and providing both product and service supply creates confusion in the determination of substitution11.
1. Determination of the Product and Service Market
In determining the challenges of Articles 4 and 6 of the Law, the relevant product or service market will first be evaluated. The Competition Board's decision will be completely based on the wrong basis in determining a possible wrong product or service market.
The subject that is taken into consideration when determining the product and service market is " substitutability". Several criteria determine substitution. These criteria may vary depending on the characteristics of the industry and the goods or services under consideration. The criterion used in one review may be of no importance in another review. The Competition Board avoids adopting a strict hierarchy of different sources of information or types of analysis to determine substitution12.
Online activities are classified into three different types13. These are advertising, such as Google, Yahoo, etc., companies selling physical products, such as Amazon, Aliexpress, E-bay, etc., and social media websites, such as Facebook, Myspace, etc.
Within these classifications, a product or service market can be defined narrowly or broadly as to the innovation and originality of the product/service of the multilateral market place enterprise. For instance, while social media sites and search engines will be subject to narrow definitions related to this market because the product/service is specific to theinternet environment, it may be possible to apply the broader interpretation for undertakings listed in the first and second categories above to the product/service, as it is provided to reach the buyer (consumer)14. This situation should be handled separately by the Competition Board in terms of individual cases and requires a comprehensive investigation.
The Compeition Board decisions regarding Yemeksepeti and Sahibinden.com are good example of how the Board defines the relevant market. As a result of an investigation carried out by the Competition Board, it stated that Yemeksepeti is in a dominant position in the relevant market and that it had abused its dominant position within the scope of Article 6 of the Law by creating exclusionary effects in the market related to “Most Favored Customer Charter” practices. Accordingly, it ordered an administrative fine of 427.977,70 TL against Yemek Sepeti. In its decision, the Competition Board defined the relevant market as "online food order, service platform services market". In this case, phone orders, restaurant websites, and only sites that offer restaurant, menu, price, and contact information and / or make reservations are excluded from the scope of the market definition. It this case, the Competition Board used a narrow interpretation method in its decision in order to determine the dominant position. However, if phone orders, restaurants' websites and only sites that offer restaurant, menu, price and contact information and/or bookings were also kept within the scope of the market definition, the Competition Board could not ascertain whether Yemeksepeti dominated the relevant market15.
As a result of an investigation into Sahibinden.com, the Competition Board stated that Sahibinden.com is in a dominant position in the relevant market. Also it was determined that it abused its dominant position under Article 6 of the Law through excessive pricing and Sahibinden.com was fined 10.680.425.98 TL. In its decision, the Competition Board defined the relevant market in two different markets as “online platform service market for real estate sales/rental services” and “online platform services market for vehicle sales services”. At this point, the Competition Board assumed that the main determinant in defining the market was the consumers (customers responding to advertisements) benefiting from the platform. In the relevant market evaluation, the Board made an inference only in terms of demand substitution rather than supply substitution. It also determined that offline advertisement services are not able to substitute for “Sahibinden.com”16. However, the 6th Administrative Court of Ankara, reversed the decision of the Competition Board on 18.12.201917. The 6th Administrative Court of Ankara stated that the Competition Board made the excessive price determination on the comparisons without making the necessary cost analysis and therefore the margin between the prices and costs could not be determined precisely. In the evaluation of the relevant market, the court stated that “there is no serious research on the rapid growth capacity of global players, their level of awareness in the market, the growth processes they follow in similar markets in different geographies, based on their current positions without collecting data, especially short, medium and in the long term, an incomplete examination has been made in determining the status of the market and the status of the related plaintiff company.” Accordingly, the variability of market dynamics on the online platforms and the speed of the entry-exit time of the undertakings were considered by the 6th Administrative Court of Ankara.
Based on these findings, the Competition Board has narrowly interpreted the market for online platforms. Nevertheless, in these markets where new players may enter very quickly and strong players need to be innovative in order to stay in the market, it will require detailed examinations and traditional approaches cannot be applied every time.
2. Determination of the Geographical Market
The relevant geographical market, which indicates the area in which substitution takes place among the products, reveals whether production in the geographic regions is to be included in the market, and whether the demands of consumers or users can be substituted for each other and the degree of this substitution18.
The Competition Board also considers the following criteria when deciding on the geographical market: i. Findings showing that orders have shifted to other regions in the past ii. Quantitative tests specifically developed to determine the market iii. Basic characteristics of demand (dependence on local brands, local habits etc.) iv. Customers' and competitors' opinions v. Current geographical trends of purchases vi. Trade flows and shipping trends, and vii. Barriers to the exchange of orders to undertakings in other regions and exchange costs.
However, this does not mean that it is necessary to evaluate each of these criteria in each review19.
In terms of online platforms, considering the limitless size and ease of access to the internet, it is not possible to define a geographical market with the traditional approach mentioned above. Accordingly, as Kagan stated, “The internet has no limits and is everywhere; but nowhere at the same time20.” Based on these findings, the Competition Board seeks new concepts and evaluations when defining the geographic market of online platforms. As a matter of fact, it was stated in the Yemeksepeti decision that there is no theoretically significant limitation in terms of geographical regions in the services provided clearly online21. In this regard Yemeksepeti’s geographic markets in terms of "operations of each of the cities where Yemeksepeti" as well as "Turkey" is determined, as if in the Sahibinden.com decision, only "Turkey" was identified.
B. Determining the Market Power of Online Platforms
Market power can be defined as the ratio of the activity of an undertaking in the relevant market to the activities in the whole market22. According to another definition, market power is above the level that should be under competitive conditions, so that the price is profitable by limiting production; at least for a certain amount of time. In determining the market power in question for online platform services over the internet, the factor of "speed" and "transience" should be considered due to the nature of the internet. It is possible to see that the undertaking, which was dominant in the rapidly changing internet markets, disappeared in a short time. In addition, the market share determination utilized while determining the market power also has some problems in terms of online platforms. As explained above, the narrow or broad interpretation of the market definition directly affects the market share determination. In the 6th Administrative Court of Ankara, the Competition Board's decision to overturn the Sahibinden.com decision stated that concrete data should be relied upon in determining market power and that it is only an opinion to make an evaluation based on the opinions of market actors who are not certain. The Board stated that the determination and evaluation should be made clearly and precisely in a definite way.
C. Market Barriers to Online Platforms
Market entry barrier analyzes are indispensable in the examination of competition authorities. As a matter of fact, entry barriers are handled together with market share in the determination of the dominant position and are directly related to mergers and the abuse of dominant position. However, there is no generally accepted method that can be used during the analysis in question23. It is essential to make this analysis correctly since online platform operations are changing rapidly.
There are relatively less barriers to market entry for online platforms than for traditional competition law coverage because items required for transactions are relatively low in number and cost. For example, supporting an online platform costs less than running a store in a shopping center. However, it is not correct to make a definitive comment for all online transactions. Search engine services can be cited as an example, since the costs of developing and maintaining a search engine algorithm are quite high, creating a barrier to entry24b
Another important issue for online platforms is the network effect. The Competition Board counts the network effect as an obstacle to market entry and this formed part of the decision in the case of Sahibinden.com. It is defined as the value of a platform with the participation of decision groups who may want to take advantage of the commercial interaction opportunities offered by the platform25. The network effect is “(a)s the number of users increases, some products or services become more valuable for some users26.” This is particularly relevant for online platforms that provide social networking services, where serious network effects create a barrier to entry. The attractiveness of the network becomes greater with the increase in the number of users that are part of the same network. Indeed, private social networking platforms such as Facebook and business such as LinkedIn are examples of the network effect27. It can be claimed that the sunk costs may be relatively low compared to traditional trade. However, we would like to point out that such a judgmenet would be wrong. Electronic reputation is the most critical factor. Accordingly, it can be said that marketing costs are one of the highest sunk cost items.
In terms of barriers to market entry, transition costs are also an essential factor. Transition costs are defined as “any cost that the customer encounters during the transition to a new provider, other than the price of the goods or services.”28 Going over the examples again, we can see that the cost of transition within the scope of search engines is quite reasonable for consumers. Google, which entered the market in 1998, was able to outperform the leading search engine of the period, Altavista and Yahoo, in a short time. Accordingly, if a player superior to Google were to join the search engine market in the future, it would be possible to easily switch to the new search engine, since consumers incur no significant transition costs. However, transition costs can be higher in the social network market. Instagram users, for example, are likely to remain with their existing social networking platform, as it is not possible to move existing photos, contacts (followers), information and data to another online platform. Therefore, it can be said that transition costs are more decisive for social networking platforms29.
D. Abuse of Dominance in Online Platforms
Dominant position is a general expression of economic power. Those who have power dominate others and have the potential to influence them in the way they want30. Article 6 of the Law states that “(i)t is illegal and forbidden for one or more undertakings to abuse the dominant position in a commodity or service market in the whole or a part of the country, alone or through agreements with others or through their behaviors.” This provision provides a definition of “dominant position”. Accordingly, the dominant position “refers to the power of one or more undertakings in a particular market to act independently of competitors and customers and to determine economic parameters such as price, supply, production and distribution amount.”
The decision regarding Google, a multinational American joint-stock company that invests in internet search, online information distribution, ad technologies and search engines, is a good example of decisions on abuse of dominant position. As a result of an investigation carried out to determine whether Google violated Article 6 of the Law by making it difficult for its competitors to be active in the online shopping services market by abusing its dominant position in the general search market, Google Advertising and Marketing Ltd. Şti. The economic integrity consisting of Google International LLC, Google LLC, Google Ireland Limited and Alphabet Inc., was deemed to have violated Article 6 of the Law, and was fined 98,354,000TL. In its decision, the Competition Board decided that Google abused its dominant position by making it difficult for its competitors to be active in the market, especially in providing an online shopping comparison service, and violated Article 6 of the Law by disrupting competition in the market.
IV. CONCLUSION
Digitalization of the world facilitates access to the internet and an increasing the number of users, which has meant the market value of online platforms operating through the internet has increased. There are many economically strong undertakings that serve as online platforms through the internet today. Sellers have been able to increase the speed of providing services and make cost savings by moving away from physical sales. Buyers, on the other hand, are able to search for products and compare them more quickly thanks to search engines and databases, and they are able to share information about the quality of products by communicating through comments. Considering that these undertakings operating in digital markets are competing on innovation, it is also possible for an undertaking that may appear in a dominant position to quickly disappear from the market. These markets are highly dynamic with high interaction.
Unlike traditional competition law parameters, it is of great importance to adopt new and flexible approaches for online platforms as they differ enormously from traditional platforms in the context of competition law, and are also rapidly growing and dominating the market. A detailed assessment of market dynamics should be taken into consideration by the Competition Board in determining a possible violation of competition for online platforms. As a matter of fact, the Competition Board has recently announced that it initiated a "Digitization and Competition Policy Report" with a proper approach. The report states what the competition policy goals should be in the digital age and how competition rules applied to digital platforms will be shaped. The report identifies a new area for the application of competition law and promises to be useful in eliminating many uncertainties in terms of rapidly developing digital platforms.
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FOOTNOTE
1 Competition Authority, “Sahibinden. com” Decision dated 01.10.2018 and numbered 18-36 / 584-285. (Hereafter, the references made in the text will be included as the “Sahibinden.com Decision”.)
2 Competition Authority, “Yemeksepeti” Decision dated 09.06.2016 and numbered 16-20 / 347-156. (Hereafter, citations referred to in the text will be included as the “ Yemeksepeti Decision”.)
3 Competition Board, Decision No. 20- 10 / 119-69, dated 13.02.2020.
4 European Commission, “Consultation on Regulatory Environment For Platforms, Online Intermediaries, Data And Cloud Computing And The Collaborative Economy”, Commision Staff Working Document, 24 Eylül 2015, s. 5. https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52015SC0202&from=EN (Date of access: 10.03.2020).
5 Inge GRAEF, “Data as Essential Facility Competition and Innovation on Online Platforms”, Thesis, KU Leuven, Thesis Faculty of Law, 2016, https:// core.ac.uk/download/pdf/34662689. pdf, (Date of access: 11.02.2020.) p. 21.
6 Law on the Protection of Competition No. 4054, Official Gazette. Number: 22140.
7 Rekabet Kurumu, Rekabet Hukukunun Esasları, https:// www.rekabet.gov.tr/tr/Sayfa/ Rekabet-savunuculugu/rekabethukuku/rekabet-hukukunun-esaslari , Date of access: 03.03.2020
8 Tuğba ÇELİK, Elektronik Ticaret ve Rekabet Hukuku Kapsamında Çok Taraflı Pazaryerleri, Yüksek Lisans Tezi,http://openaccess. maltepe.edu.tr/xmlui/bitstream/handle/20.500.12415/2904/10300187. pdf?sequence=1&isAllowed=y (Erişim Tarihi, 10.02.2020), s. 66’dan naklen Evans David S., Michael Noel, “Defining Antıtrust Markets When Firms Operate Two-Sided Platforms”, http://www.noeleconomics.com/ research/articles/NOEL_defining. pdf, 8.06.2019 (Date of Access: 10.03.2020), p. 102.
9 Rekabet Kurumu, İlgili Pazarın Tanımlamasına İlişkin Kılavuz, 2008, p. 1.
10 Ibid. p. 4.
11 Çelik, p. 75, cited from, Gönenç Gürkaynak / Derya Durlu Gürzumar / Margaret Hagan, “Antitrust on theinternet: A Comparative Assessment of Competition Law Enforcement in theinternet Realm”. IBA Business Law International, Y. 2013, B. 14, N. 1, p. 53
12 Rekabet Kurumu, İlgili Pazarın Tanımlamasına İlişkin Kılavuz, p. 5.
13 Jared Kagan, “Bricks, Mortar and Google: Defining the Relevant Antitrust Market forinternet-Based Companies”, New York Law School Law Rewiew, B. 55, Y. 2010, pp.271-292. http:// www.nylslawreview.com/wp-content/ uploads/sites/16/2013/11/55-1.Kagan.pdf, 11.02.2020, p. 274.
14 Gönenç Gürkaynak, Derya Durlu Gürzümar, “İnternetin Ezber Bozan Ortamında ve Yenılikçi Dijital Pazarlarda Rekabet Hukuku Eğilimleri”, Journal of Competition, B. 16, N. 2, pp. 43-111, Y. 2015, p. 51.
15 Çelik, p. 80.
16 Şahin Ardıyok / Evren Sesli / Ramiz Arslan, “İnovasyonun Önünde Aşırı Fiyat Engeli: Kar Beklenmeksizin Teknolojik Gelişim Mümkün mü?”, Terazi Legal Journal, August 2019, p. 8.
17 Ankara 6th Administrative Court, E. 2019/946, K. 2019/2625.
18 Mehmet Fazıl Özkul, “İlgili Pazarın Tespitinde Kullanılan Kantitatif Yöntemler ve Güncel Uygulamalar”, Finans Politik & Ekonomik Yorumlar, 2017, p. 12.
19 Rekabet Kurumu, İlgili Pazarın Tanımlamasına İlişkin Kılavuz, 2008, p. 7.
20 Kagan, p. 291.
21 The Yemeksepeti Decision, p. 93.
22 Çelik, p. 84.
23 Mehmet Yanık, Rekabet Hukukunun Hâkim Durum ve Hâkim Durumun Kötüye Kullanılması Uygulamalarında Piyasa Giriş Engelleri, Uzmanlık Tezi, Rekabet Kurumu Yayınları, Ankara 2003, p. 1.
24 Çelik, p. 88.
25 The Sahibinden.com Decision, p. 8.
26 Rekabet Kurumu, Rekabet Terimleri Sözlüğü, https://www. rekabet.gov.tr/tr/Sayfa/Yayinlar/ rekabet-terimleri-sozlugu/terimlerlistesi?icerik=ca069934-26cd-4d55- a972-eec74a97dafc, (Date of access 12.02.2020).
27 Gürkaynak-Gürzümar, p. 60
28 Rekabet Kurumu, Rekabet Terimleri Sözlüğü, https://www. rekabet.gov.tr/tr/Sayfa/Yayinlar/ rekabet-terimleri-sozlugu/terimlerlistesi?icerik=4b3eace8-1b54-4b82- 9895-3182e3c5e88a, (Date of access 12.02.2020).
29 Gürkaynak-Gürzümar, p. 64.
30 Ahmet Alkan, Ramazan Erdem, “Güç: Formal Ve İnformal Yönden Güce Kavramsal Bir Bakış”, The Journal of Süleyman Demirel University Vizyoner, Year 2019, Volume 10, Issue 24, pp. 405-433 https://dergipark.org. tr/tr/download/article-file/772481, p. 2.
