In the decision of the Competition Authority dated 01.10.2018 and numbered 18-36/584-285, the allegations that “Sahibinden Bilgi Teknolojileri Paz. ve Tic. A.Ş. violated Article 6 of Law No. 4054 by applying excessive prices in the on-line platform service markets for vehicle and real estate sales/rental services” were examined. The majority of the Investigation Panel of the case, which did not include the Competition Authority’s Economic Analysis and Research Department (EAAD), concluded that the allegation of excessive pricing should be rejected, while one expert argued that an administrative fine should be imposed due to excessive pricing. The Ankara 6th Administrative Court issued an annulment decision against the decision. The critical findings regarding the economic analysis in the Court’s decision are noteworthy. In this framework, the highlights of the Board’s Decision and the court’s decision are presented below:
Board Decision
SAHİBİNDEN.COM was founded in 2000 and operates as an online platform where advertisements and classifieds can be placed in many different areas besides real estate advertisements and classifieds. The company, which is the largest online buying and selling platform in Turkey, mediates online ads and postings in many different categories such as real estate, automobiles, spare parts and accessories, second-hand goods, business machines, craftsmen and services, tutors, job postings, assistant seekers, pets, etc. The way SAHİBİNDEN.COM works consists of comparing sellers who want to sell their products on the website with buyers who want to buy these products, and while membership to the site is free of charge for buyers; for sellers, a fee tariff that varies according to the identity of the seller (product owner, real estate agent, auto gallery, etc.) is applied. Among the allegations that were the source of the investigation, which real estate offices and auto dealers complained about, were that sahibinden.com “increased the package prices of real estate advertisements offered to its corporate customers by ten times in the last four years”.
RELEVANT MARKET: The Board defined the relevant product markets subject to excessive pricing as “online platform service for real estate sales/rental services” and “online platform service market for vehicle sales”. The relevant geographic market was determined as “Turkey”.
DOMINANT POSITION ANALYSIS: In the dominant position analysis, it was first determined that sahibinden.com achieved a very high price increase between 2015 and 2017 compared to its competitors such as milliyetemlak.om and zingat.com. Despite this price increase, the rise in the number of corporate members of sahibinden.com was emphasized and it was stated that the company has the power to increase prices without incurring a significant cost. In the rest of the analysis, the market shares of sahibinden.com and its competitors were compared in terms of the number of visits, the number of corporate members and the revenue generated from corporate members. In addition, “network effects”, high sunk costs and sahibinden.com’s presence on multiple platforms and portfolios were evaluated. In addition, interestingly, the domain name which meant “from the owner” used by sahibinden.com has been considered and it has been determined that sahibinden.com is in a dominant position in the relevant markets by taking into account the high sunk costs for market entry.
INFRINGEMENT (“EXCESSIVE PRICE”) ANALYSIS: “Economic Value Test” was used in the analysis. In this framework, comparative prices and price-cost margins in the relevant markets were evaluated. Within the scope of the price comparison analysis, it was emphasized that sahibinden.com’s prices were significantly higher than its competitors. The margin between sahibinden.com’s prices and costs could not be analyzed. The Board stated that sahibinden.com’s organizational structure and way of doing business, the functions and qualifications of the products and licenses purchased on the basis of capital expenditures, and the functions and qualifications of the products and licenses purchased on the basis of capital expenditures were not suitable for calculating category-based expenditures and refrained from the price-cost analysis. However, the “Return on Equity Ratio (%)” and “Net Sales Profitability Ratios (%)” of sahibinden.com and its competitors were compared. In this framework, it is stated that sahibinden.com’s return on equity and net sales profitability ratios are significantly higher than those of its competitors. Price, price increase rates, equity profitability ratio as well as net sales profitability ratios were compared in the on-line platform service market for vehicle sales services.
As a result, the Competition Board concluded that sahibinden.com abused its dominant position through excessive pricing emphasizing that:
It is assessed that SAHİBİNDEN.COM exhibits high pricing behavior in the relevant markets, which is unlikely to be seen in competitive markets, and that existing competitors in the relevant market do not exert any competitive pressure that may affect this pricing behavior. The existence of the above-mentioned barriers to entry into the market also prevents the potential creation of competitive pressure. Therefore, it is assessed that both markets are not capable of self-correction in the short and medium term. Accordingly, it is assessed that SAHİBİNDEN.COM’s pricing behavior for the 2015-2017 period constitutes excessive pricing and violates Article 6 of Law No. 4054. At this point, in order to put an end to the violation, price increases are required to be made at reasonable levels that can be justified with cost increases.
Court Decision
Sahibinden.com filed an appeal to Ankara 6th Administrative Court for the annulment of the above-mentioned Competition Board decision. With its decision dated 18.12.2019 and numbered 2019/2625, the Court annulled the Competition Board’s decision as unlawful. The Court emphasized that the competition authority must prove a violation of competition with conclusive and concrete evidence, not based on observation, regarding the concept of excessive price, which is exceptionally intervened in Competition Law practice. In this respect, the Court stated that the Board conducted an insufficient examination regarding the excessive price assessment and found the decision unlawful and annulled the decision on the following grounds:
…in order to assess the degree of the accuracy of the examinations made by the competition authority -before the application of the intervention procedure and the intervention decisions to be made as a result- the conduct of excessive pricing, which is an ‘exceptional case’, must be demonstrated with data and facts that do not leave any room for doubt. Otherwise, it must be accepted that the approval of the intervention decision, which is expressed as a deviation from the general approach, may lead to results that are incompatible with the market economy and Competition Law…
…Although the Board Decisions include expressions such as reliable data, sufficient and satisfactory evidence, and clear evidence of the breach in order to meet the standard of proof required for the evidence in disputes related to Competition Law, it is apparent that the Board Decisions do not stipulate concrete criteria regarding the elements to be taken into consideration in order to determine whether the evidence meets the aforementioned qualifications. In the lawsuits filed in relation to the sanctions imposed by the Competition Board, the Council of State of Türkiye generally seeks the standard of proof as ‘proof by clear and conclusive evidence, free from any kind of doubt’…
…Although the aforementioned Decision states that “In the second stage of price comparison, the price of the product/service should be compared with both the undertaking’s own price and the prices of rival undertakings.”, when the entire Decision is examined, it is seen that the comparison is made with undertakings operating in different markets that are not appropriate, whereas price comparisons are not made with undertakings operating in different geographies and especially with countries where global players are located….
[Competition Board’s] findings including that “..even if the difference between the market shares is not high due to the network effect and the cost of being on more than one platform, the platform with the advantage in terms of market share is expected to dominate the market in the long run. This situation is also observed in the present case.” are based on observation and do not contain sound data. The defendant administration could not demonstrate how it reached those findings through which observations, facts and/or results in the similar markets.
…in the Decision it is stated that “offering a portfolio of various service categories (possibility of affiliate-customer relationship) instead of focusing on a single service category such as real estate or vehicles leads to an increase in the value of the platform; in addition, offering a wide portfolio of services leads to an increase in the number of visits compared to competitors focusing on a limited number of categories, which leads to an increase in the value of the platform for corporate customers, from which most of the operating revenues are generated, thus strengthening its substitution…”. It should be noted that the fact that the number of activity categories of an undertaking is high does not lead to the conclusion that the preference of other undertakings’ working/business models and the commercial reflections of the results of these preferences are associated with the phenomenon of “abuse of dominant position”. In order to make such a determination, the existence of comprehensive and scientific consumer behavior analyses regarding the behavior of final consumers is a must…
…It is clear that the Board could not determine the margin between prices and costs in a precise manner. Therefore, the defendant administration did not conduct a cost analysis suitable for determining excessive prices, but made an assessment based on comparisons. In this case, it is understood that there is an inconsistency at the point where the defendant administration offers suggestions for the plaintiff company to make price increases that can be justified by the costs, and it is seen that the defendant administration accepts that it is not possible to make a cost analysis in this way…
…due to the cautious approach to intervention in excessive pricing and the exceptional nature of the method, it should be stated that such an intervention may only be possible if it can be demonstrated with precise data that intervention in excessive pricing will have positive results. The fact that http://www.sahibinden.com is very expensive will be an incentive for new players to enter the sector with lower or even free membership fees and for corporate customers to switch to these platforms. As a matter of fact, the fact that there is no limitation for corporate customers or end consumers to use/ benefit from the platforms, and that the pricing is lower or free of charge compared to the dominant platform, are factors that facilitate the entry of new actors into the market, rather than making it difficult. In this case, it is understood that high prices are accepted as facts that trigger/incentivize market entry and low pricing should be tried to be prevented, contrary to the high prices of the dominant undertakings. In the case at hand, it is observed that no determination has been made as to how the decrease in the prices of the dominant platform will facilitate new entries to the market and how the new actors, who are already content with low membership fees, will compete against these low prices.
… In the Competition Law, the approach and practice of “abuse of dominant position through excessive pricing” is accepted in a very limited and exceptional manner, the intervention to price increases, which is an exceptional situation and which cannot be proven to clearly violate the competitive environment and therefore consumer welfare, is not accepted within the scope of the Competition Law, since the intervention to the price increase is an “exceptionally accepted situation”, the determinations and evaluations in this direction should be clear and precise in a way that does not cause any hesitation, and as required by the standard of proof; “what almost certainly happened” must be proved, reaching an opinion on the basis of suspicion would be legally incompetent, and it is understood that the proof of the event is legally sought with explicit evidence and justifications that will reveal that this suspicion is justified, it has been concluded that the facts, claims and determinations do not have the specified qualifications, and that there is no legality in the [Board Decisions] established by reaching a conclusion based on observation without relying on solid evidence obtained in a definitive and indisputable manner.