Contents:
- Umbrella Effect within the Framework of Private Competition Enforcement
- Booking.com Decision
- Passing-On Defense and Indirect Purchaser Rule in Compensation Claims Arising from Competition Law
- Price / Margin Squeeze
Umbrella Effect within the Framework of Private Competition Enforcement
Undertakings in various levels of the chain of distribution, as well as with end-consumers, may incur damages from anti-competitive conduct by other undertakings. The concept of private enforcement of competition laws is aimed at recovery of such damages, along with losses of profit and accrued interest as regulated under Art. 57, et seq, of the Act on the Protection Competition numbered 4054 (“Competition Act”). The corresponding piece of legislation in the European Union’s acquis communautaire is Directive 2014/104/EU on Certain Rules Governing Actions for Damages under National Law for Infringements of the Competition Law Provisions of the Member States and of the European Union (“Directive”)[1].
The damages caused by a certain, anti-competitive conduct that results in artificial price increases are often discussed within the vertical chain or from the viewpoint of the competitors; whereas, the concept of umbrella effect concerns the damages beyond these categories. In other words, it entails the liability of members of a cartel for the price increases they have caused in the general market – more specifically, the purchasers of their competitors. Although neither the Competition Act, nor the Directive, include any explicit provisions with regard to the so-called “umbrella effect,” it was discussed by the European Court of Justice (“ECJ”) in its Kone decision, and in several decisions of the US courts, which we will elaborate on further, below.
Booking.com Decision
The Competition Board (“Board”) concluded its investigation with regard to the booking services provided by Booking.com B.V. (“Booking.com”) and by Bookingdotcom Destek Hizmetleri Limited Liability Company, operating as the Turkish representative of Booking.com. During its investigation, the Board has evaluated whether Articles 4 and 6 of Act No. 4054 on the Protection of Competition (“Competition Act”) were violated by Booking.com’s “best price guarantee” practices. As a result of the investigation, the Board decided that Booking.com violated Article 4 of the Competition Act and, therefore, an administrative fine of 2,543.992.85 TL[1] should be imposed on the undertaking concerned in accordance with Article 16 of the same Act.[2] The reasoned decision has not yet been published.
Passing-On Defense and Indirect Purchaser Rule in Compensation Claims Arising from Competition Law
An illegal price increase as a result of a competition law infringement primarily affects direct purchasers. Direct purchasers may then pass this increase on to their purchasers operating in sub-markets, namely, indirect purchasers. In such a case, the infringing undertakings that are subject to compensation claims may argue that direct purchasers have passed their damages on to indirect purchasers (passing-on defense); therefore, they are not harmed by the competition infringement. In this regard, indirect purchasers may wish to bring actions against the infringing undertakings, by claiming that the damage has been passed on to them. The discussions concerning the competition law doctrine with regard to the standing of indirect purchasers are known as the “indirect purchaser rule.”
The right to bring compensation claims arising from competition law is regulated under the Act on the Protection of Competition numbered 4054 (“Competition Act”) Art. 57 et seq. However, the Competition Act does not include any explicit rules with regard to the passing-on defense and the indirect purchaser rule. Furthermore, the Court of Cassation does not have established case law on these issues. Below, we will elaborate on their European Union (“EU”) and Turkish practice.
Price / Margin Squeeze
Dominant undertakings have a unique responsibility to ensure that their conduct does not distort competition in a particular market for goods or services. However, in some cases, such undertakings may use their dominance to obstruct others and to restrict their options, such as cases of ‘price squeeze.’ The term of ‘price squeeze’ (also referred to as ‘margin squeeze’)corresponds to an anticompetitive practice that occurs when there is a narrow margin between an integrated provider’s price to sell essential inputs to a rival and its downstream price that the rival cannot survive or effectively compete[1] with.
Price squeeze cases before the competition authorities are relatively common. Many of the price squeeze cases particularly arise in the telecommunications sector, but also in other sectors, such as water, railways, postal services, pharmaceuticals, pay television and gasoline sectors, etc[2].
