How Does Turkey’s Competition Board Interpret Anti-competitive Information Exchange? An Analysis of Its Recent Car Rental Decision

In a preliminary investigation involving 12 undertakings operating in the car rental sector, the Turkish Competition Board (the “Board”) scrutinised allegations that the car rental undertakings violated Article 4 of Law No. 4054 on the Protection of Competition by exchanging information pertaining to stocks, competitors’ price offers and market shares, and vehicle purchase data (“the Car Rental decision”).[1] This article contains an analysis of the Board’s approach towards the direct and indirect exchange of competitively sensitive information with a particular focus on the Car Rental decision.

The Concept of Information Exchange

In commercial life, undertakings, whether they are competitors or not, exchange information directly or through associations of undertakings, market research companies, customers and distributors, and in a sense, they make the market transparent to a certain extent. However, information that may be of strategic importance for the commercial activities of undertakings, such as prices, costs, customers, purchases, capacity, sales, R&D programmes, investments and technologies, is typically regarded as competitively sensitive information.[2] Therefore, any exchange of such information between competitors, whether directly or indirectly, holds a risk of potential infringement of competition law.

With respect to the practices involving the exchange of information, the Board takes into consideration (i) the degree of market coverage of the information subject to exchange, (ii) whether the data is aggregated or not, (iii) the timeliness of the data, and (iv) the frequency of the information exchange. Accordingly, the Board assesses that the anticompetitive effect of the exchange of information that has narrow market coverage, is aggregated, out-dated, and rarely shared between competitors, is rather unlikely to restrict competition. Additionally, the Board considers that the data obtained from publicly available sources is less likely to lead to a possible co-operation between competitors.

The Board’s Findings and Assessments Regarding the Car Rental Decision

The content of the documents seized during on-site inspections reveals that the undertakings operating in the car rental sector frequently obtain the price offers of rival undertakings. To this end, the Board discusses which price information has the quality of competitively sensitive information in terms of information exchange.

The Board indicates that due to the functioning of the car rental industry, the undertakings can closely monitor the prices of their competitors through market research and can obtain information concerning the prices that other market players offer, without the need for additional effort (i.e., through customers). Furthermore, a bargaining scheme is extremely common, and thus customers tend to share the proposals that they receive from other leasing/car rental companies. The main motivation for such customer practice is to obtain the most favourable offer.

Reviewing the practices regarding the exchange of information, the Board emphasises that in order for a possible competition law violation, the direct or indirect exchange of information must lead to an increase in prices and/or a parallel pricing policy between undertakings operating within the market. Within the scope of the preliminary investigation, the Board did not find any statement in the documents examined that give the impression that the price proposals obtained were used for an anti-competitive purpose. The Board held that the price offers obtained actually resulted in increased competition rather than a restriction of competition. Indeed, the undertakings evaluate the prices and stock information of competitors that are submitted by customers, and accordingly, review their own offers in terms of price competition.

The Board evaluated the practices of the sector participants and concluded that the price information obtained through both market research and customers were used for the purposes of increasing the competitive factors in the market, such as (i) offering lower prices, (ii) gaining customers, or (iii) preventing the loss of existing customers. In this vein, the Board concluded that the information exchange among the car rental undertakings does not constitute an anticompetitive characteristic with respect to the relevant market; on the contrary, it leads to efficiency gains from a pro-competitive perspective.

Another assessment within the scope of the preliminary investigation concerns the vertical relations between the car rental undertakings. Regarding a correspondence concerning the discussion of daily rental prices between the car rental undertakings, the Board concluded that such exchange of prices is between undertakings operating in short-term car rental services and those who only offer long-term car rentals, and that these two separate activities are in a vertical relationship with each other. In this respect, the Board concluded that the direct correspondence between long-term and short-term leasing companies relates to the supply and the procurement of replacement vehicles, in the event that the long-term leased vehicle needs to be maintained. Thus, the exchange of information concerning the short-term leasing prices and the stock statement is an extension of the undertakings’ vertical relation. Consequently, the Board deemed that the information exchange within the scope of a vertical relationship is not harmful to the competitive environment of the relevant market.

Furthermore, the Board examined the nature of the exchanged information as well as the relevant market structure and found that car rental undertakings utilise the data published by the association of car rental organisations (i.e., TOKKDER). Accordingly, when calculating the shares of the market players, the undertakings had relied on the information published by TOKKDER, which contains historical data regarding the sector. Additionally, the Board indicated that the market has a structure that complicates any possible coordination between undertakings due to the high number of undertakings operating in the market. Moreover, the Board concluded that the numerous factors that affect the pricing mechanisms of undertakings create a barrier to the monitoring competitor prices.

Lastly, although there is a small amount of correspondence showing that the competitors have mutually communicated, the Board evaluated that the contents of the correspondence in question cannot be interpreted in any way to indicate the existence of an agreement between the competitors that restricts competition.

The Board’s Previous Case Law Regarding Information Exchange

When assessing the exchange of competitively sensitive information, the Board considers the impact of the exchange in the relevant market and follows a case-by-case analysis methodology. The decisions[3] of the Board typically indicate that the sharing of information related to future pricing is a violation of competition law. The possibility of restricting competition is often lower when it comes to the exchange of historical data. The Board also takes into consideration the nature of the information shared as well as the frequency of it.[4]

In its SERFED decision,[5] the Board did not grant an individual exemption for the Turkish Ceramics Federation’s public announcement of information on employee numbers, capacity, total production and sales, energy, and carbon emissions. The Board emphasised that although the data will consist of the sum of three months and be published quarterly, since the most recent data in the data set to be shared will only be two months old, the Board determined that the data will not be so obsolete that it loses its sensitivity. Furthermore, in its ISDER decision,[6] the Board concluded that the information sharing concerning undertakings’ regional and city-based sales volume would not be granted an individual exemption as the information is not aggregated. In a similar fashion, in its IMDER decision,[7] the Board examined information sharing by the sector association concerning the volume data of undertakings’ regional and city-based sales. Considering the frequency of the information exchange as well as the scope and purpose of the data collection, the Board concluded that no individual exemption could be granted on the grounds that the data to be shared concerned individual undertakings, that it is not possible to qualify the data to be shared as publicly available in real terms, and that the compilation will be done by the relevant association rather than an independent research company.

In the Construction Industrialists Employers Union decision,[8] the Board concluded that the exchange between the relevant undertakings facilitated coordination among union members and breached competition law rules, even though the exchanged data was aggregated. On the other hand, in its Car Glass Manufacturers decision,[9] the Board indicated that although the manufacturers of car glass exchanged information amongst themselves, they were not violating competition law, as the information shared was also available to retain through repair shops. In this vein, there are decisions where the Board concluded that the exchange of information that is publicly available does not constitute a violation.[10] However, the exchange of publicly available information is not entirely legitimate. In its Petroleum Industry Association decision, the Board asserted that competition law concerns may arise even in the exchange of publicly available information, due to increased transparency in the market.[11]

In several cases, such as the Hopi decision,[12] the Board has granted exemptions where the exchange of information resulted in a more competitive market and increased consumer welfare. In the Port Operators Association decision,[13] the Board granted an individual exemption deeming that the information exchange would increase consumers’ bargaining power and improve service quality. In the Automotive Distributors Association decision,[14] the Board issued a negative clearance regarding the sharing of information on hardware features, recommended prices that were already publicly available online, and promotional activities by the association, by highlighting that the information does not have any strategic characteristics.

With regard to the (indirect) information exchange through third parties, the Board has different approaches. In its Peugeot decision,[15] the Board determined that Peugeot’s dealers were inspected by an independent research company through a “mystery shopping” investigation; however, no violation was found, because intentional and active participation in the cartel could not be proven adequately. As per the Diye decision,[16] the Board found that the “Media Barometer” system was used as a hub for collecting advertising prices of advertisers, reducing prices, and determining future prices for advertising companies. Although no document gathered during the investigation indicated any directly determined prices, the Board, due to Media Barometer’s hub position, concluded that advertising companies can access strategically important information, such as individual advertising unit prices of undertakings, and that future information sharing would be possible. Thus, Board resolved that the Media Barometer system itself has similar effects as an agreement for the exchange of information on prices between undertakings.

The Board evaluated the Tyre[17] and Aral[18] decisions from the perspective of hub-and-spoke cartel. In the Aral decision, following an investigation based on complaints of retailers to Aral regarding the low prices applied by the retailers’ competitors, the Board imposed a fine for price fixing based on direct communications gathered within the scope of the investigation. It is notable that the Board abstained from imposing a fine on the grounds of a hub-and-spoke arrangement due to insufficient evidence indicating it. In the Tyre decision, the Board understood that distributors disclosed information to suppliers in the upstream market for bargaining purposes, thus did not open a full-fledged investigation. In the Poultry Producers decision,[19] although the Board did not explicitly evaluate the case from a hub-and-spoke perspective, the case involves hub-and-spoke features. The Board explained that exchanging future pricing information of the competitors through the dealers is not a competitive practice, particularly if the dealers automatically send the future-dated price lists without having any bargaining purposes.

The Supermarkets decision was the first decision where the Board determined the existence of a hub-and-spoke cartel and issued sanctions.[20] The Board’s Supermarkets decision was followed by the FMCG decision, but no reasoned decision has yet been published.[21] In the Supermarkets and FMCG decisions, the Board relied heavily on findings that indicate that the supermarkets communicated through their common suppliers regarding product prices.

Conclusion

The Board’s Car Rental decision is an important ruling that includes determinations regarding when obtaining information about competitors’ prices through an intermediary constitutes a violation and when it does not. The Board concluded that information exchange should be closely evaluated with other factors such as (i) the impact of the information exchange, (ii) the structure of the relevant market, and (iii) the nature of the exchanged information, as well as the motive behind the exchange.

In the Board’s Car Rental decision, the Board evaluated the information exchange through third parties with a rather liberal perspective and resolved that acquiring information on competitor prices through customers does not disrupt competition in the market. On the contrary, since it has been observed that (indirect) information exchange leads to lower prices, such an exchange may even result in an increase in the level of competition in the relevant product market.

The Board concluded that given the purpose of customers was to increase their bargaining power to obtain better prices, rather than helping rival companies to communicate, the Board did not determine the existence of a hub-and-spoke arrangement in this case. We believe that the main reason behind the Board’s conclusion is that the exchange among the competitors was through customers and that the competitors did not intentionally use the customers as a facilitator to make the market more transparent. Furthermore, unlike the decisions where a hub-and-spoke arrangement was detected, there is no evidence of price synchronisation, monitoring or a sanctions system in the Car Rental decision. Additionally, the Board concluded that even if undertakings obtain information on their competitors’ prices through customers, the dynamics of the market make any possible coordination between rivals difficult.

[1] The Board’s Car Rental decision, dated 21.07.2022 and numbered 22-33/526-212.

[2] Guidelines on Horizontal Cooperation Agreements, para. 67.

[3] The Board’s White Meat Producers decision, dated 13.03.2019 and numbered 19-12/155-70; The Board’s Turkish Construction Industrialists Employer’s Union decision, dated 18.01.2018 and numbered 18-03/31-18.

[4] The Board’s Financial Leasing, Factoring and Financing Companies Association decision, dated 15.02.2018 and numbered 18-05/79-43; Diye decision, dated 12.12.2014 and numbered 14-51/900-410; Keşan Cement decision, dated 19.12.2019 and numbered 19-45/758-327.

[5] The Board’s SERFED decision, dated 20.08.2020 and numbered 20-38/526-234.

[6] The Board’s ISDER decision, dated 19.11.2020 and numbered 20-50/687-301.

[7] The Board’s IMDER decision, dated 19.11.2020, and numbered 20-50/688-302.

[8] The Board’s Turkish Construction Industrialists Employer’s Union decision, dated 18.01.2018 and numbered 18-03/31-18.

[9] The Board’s Car Glass Manufacturers decision, dated 15.10.2020 and numbered 20-46/618-270.

[10] The Board’s IQVIA Health decision, dated 12.06.2018 and numbered 18-19/330-164; The Board’s EBS decision, dated 30.3.2016 and numbered 16-12/194-88; The Board’s Automotive Distributors Association decision, dated 14.07.2011 and numbered 11-43/916-285; The Board’s Philips/Group SEB decision, dated 13.02.2020 and numbered 20-10/109-65.

[11] The Board’s Oil Industry Association decision, dated 21.11.2013 and numbered 13-64/904-384.

[12] The Board’s Hopi decision, dated 03.05.2018 and numbered 18-13/238-111.

[13] The Board’s Turkish Port Operator Association decision, dated 14.11.2019 and numbered 19-40/655-280.

[14] The Board’s Automotive Distributors decision, dated 09.07.2015 and numbered 15-29/428-124.

[15] The Board’s Peugeot decision, dated 08.01.2009 and numbered 09-01/8-7.

[16] The Board’s Diye decision, dated 12.12.2014 and numbered 14-51/900-410.

[17] The Board’s Tyre decision, dated 16.12.2015 and numbered 15-44/731-266.

[18] The Board’s Aral decision, dated 07.11.2016 and numbered 16-37/628-279.

[19] The Board’s Poultry Producers decision, dated 13.03.2019 and numbered 19-12/155-70.

[20] The Board’s Supermarkets decision, dated 28.10.2021 and numbered 21-53/747-360.

[21] https://www.rekabet.gov.tr/tr/Guncel/hizli-tuketim-mallari-sektorunde-faaliye-5c0bee541e81ed11a23100505685ee05 Last accessed date 18.03.2023.

Tagged with: Gen & Temizer | Özer, Bulut Girgin, Simru Tayfun, Merve Zeynep Aydaş, Competition