Automatic Pricing Mechanisms in Competition Law: The Turkish Competition Board’s Buybox Decisions
Introduction
Technology and the opportunities it brings undoubtedly play a key role in strengthening the competitiveness of market players. In this context, pricing algorithms that enable undertakings to monitor publicly available prices and optimize their own pricing strategies have become widely used, especially by digital platforms. These algorithms don’t just benefit businesses; they also empower consumers by offering greater access to information about the products and services they plan to purchase, ultimately boosting their purchasing power. However, the use of competitor pricing data via such algorithms can, in some cases, reduce inter-brand price competition and even carry the risk of facilitating price coordination. This article aims to offer an overview of how pricing algorithms are evaluated through the lens of competition law, with a particular focus on the Turkish Competition Board’s (Board) Buybox[1] decisions.
Pricing Algorithms in Competition Law
Today, digital platforms—on which consumers rely to meet many of their daily needs, ranging from online shopping to transportation and accommodation to energy consumption—make extensive use of advanced algorithms in the background. With the digitalization of commercial life, it is increasingly observed that platforms resort to algorithms and artificial intelligence tools to improve their pricing models, monitor consumer behavior, and track market trends. On one hand, algorithms serve various functions, such as improving production processes, encouraging innovation, reducing costs, and facilitating market entry. On the other hand, they enable consumers to make more informed decisions by allowing comparisons based on price, quality, and preferences, thus reducing search costs. In this context, pricing algorithms that are capable of processing comprehensive market data and balancing supply and demand can support more efficient market functioning and help consumers meet their needs at lower costs. While algorithms offer significant efficiency gains for both undertakings and consumers by enabling the delivery of better and more personalized products and services, they also carry the risk of being used in ways that reduce competition and harm consumers. Specifically, the way algorithms are used can allow businesses to come to unspoken agreements without needing a written contract or face-to-face meetings, which raises worries about unfair competition.. Among these concerns, pricing algorithms—commonly used in e-commerce to help undertakings to track the pricing strategies of competitors—stand out prominently. These algorithms increase market transparency and facilitate mutual monitoring among competitors, potentially enabling them to reach consensus on elements that influence strategic decision-making processes, particularly price. Examples of anticompetitive collaborations facilitated by algorithms include the determination of resale prices through automated pricing systems, hub-and-spoke cartels that involve information sharing among undertakings using the same third-party software, and inter-firm cooperation that emerges through self-learning algorithms in the absence of explicit coordination. As a result of such practices, algorithms can give rise to tacit agreements among undertakings, ultimately leading to price rigidity, diminished competition, and slowed innovation—all of which can negatively impact consumer welfare.
Automatic Pricing Mechanisms Implemented by Trendyol and Hepsiburada under the Board’s Buybox Decision
In its Buybox decision, the Turkish Competition Board examined whether the automatic pricing mechanisms used by e-commerce platforms Trendyol and Hepsiburada violate Law No. 4054 on the Protection of Competition. The automatic pricing mechanism is a system that automates the price transitions of sellers who offer their products for sale on e-commerce platforms within the framework of certain rules. This system aims to reduce the time and transaction burden required for sellers to monitor and update prices on the platform. However, the mechanism is essentially designed to automate the competition between sellers for a place on Buybox. In the Buybox, different sellers selling the same product are gathered under a single heading; when a product is searched by users, the product of the seller who wins the Buybox is displayed first and ranked on the product page according to their Buybox score. Being featured in the Buybox is therefore crucial for sellers, as it directly influences their visibility to consumers and significantly impacts sales performance.
Sellers can update their prices through the automatic pricing mechanism offered by marketplaces, and they can determine how much below or above the price according to their own strategies. In this context, the three basic rules that sellers can determine are ‘Stay Below Buybox Price’, ‘Match Buybox Price’ and ‘Stay Above Buybox Price’. In the ‘Match Buybox Price’ rule, unlike the other two rules, it is not an option for the seller to enter any information in terms of amount or percentage; the seller is only expected to enter the ‘Lowest Applicable Price’ information.
In light of the above, the Buybox algorithm is taken as a reference in the automatic pricing mechanism applied by marketplaces. Considering that being featured in the Buybox is important for sellers in terms of visibility and sales, the parameters affecting the Buybox algorithm applied by marketplaces were also examined within the scope of the Board decision. The marketplaces argued that, the algorithm does not solely focus on price; benefiting from the automatic pricing rule does not necessarily guarantee that a seller will win the Buybox, as the algorithm operates based on multiple metrics. It was also emphasized that the use of the automatic pricing mechanism is not compulsory for sellers, as sellers may set prices through alternative means, and that the system primarily serves to save time and effort, particularly for those managing a large inventory. Consequently, the Board concluded that the automatic pricing mechanism is not mandatory for marketplace sellers.
As a result of its assessment of the case file, the Board acknowledged that automatic pricing mechanisms are not inherently restrictive by object in all circumstances and may, in fact, generate consumer benefits. In this regard, given that the use of the automatic pricing mechanism is not mandatory for sellers, prices are not solely determined based on the Buybox, the Buybox itself is calculated by the platform using variable parameters, there is no meeting of minds among sellers, and the system is designed to function in a differentiated manner, the Board concluded that the mechanism does not constitute a manifest and serious infringement in terms of its operation. On the other hand, the said mechanisms, offered to sellers by different marketplaces and functioning very similarly, are considered to pose a risk of causing price rigidity in the market, especially if the ‘Match Buybox Price’ algorithm is widely used. Although these systems are offered within the framework of individual and vertical agreements, when many sellers start to use the same algorithm, they may cumulatively cause anticompetitive effects at the horizontal level. In other words, sellers may indirectly harmonize each other's prices through algorithms without a conscious agreement. In this context, it is decided that the commitment proposals submitted by Hepsiburada and Trendyol to address the competitive concerns raised in this context are suitable to address the anti-competitive concerns.
Commitments Submitted by the Parties
To address the competition concerns raised within the scope of the file, commitments have been offered by the undertakings. Within this framework, the rule ‘Match to Buybox Price’, which poses a particular risk of leading to coordination, will be removed; and it has also been committed that under the existing rules ‘Stay Below Buybox Price’ and ‘Stay Above Buybox Price’, sellers will not be allowed to define rules that could result in the same outcome as the ‘Match Buybox Price’ rule, either in terms of percentage (0%) or amount (0 TL). Additionally, it has been committed that specific information regarding the automatic pricing mechanism – such as whether the mechanism is being used or how frequently a particular rule is applied – will not be provided to sellers; the use of this mechanism will not be mandatory; and no incentive equivalent to an obligation will be offered. Furthermore, it has been stated that the automatic pricing mechanism will not provide any advantage in the buybox algorithms, and that sellers using this mechanism will not receive higher scores in the buybox ranking solely for this reason.
Conclusion
Pricing algorithms offer features that can positively impact competition by enhancing the competitiveness of undertakings and enabling consumers to compare prices more effectively. However, the way these algorithms are used may give rise to anti-competitive concerns, as they can facilitate tacit collusion among undertakings without the need for any written agreement or physical interaction, and maintain such collusion. In this context, as demonstrated in the Competition Board’s Buybox decision, it is crucial to carefully examine the effects of algorithms on competition and to take necessary precautions to preserve a healthy competitive environment on digital platforms.
- The Board’s decision dated 03.10.2024 and numbered 24-40/950-409; The Board’s decision dated 03.10.2024 and numbered 24-40/951-410.
All rights of this article are reserved. This article may not be used, reproduced, copied, published, distributed, or otherwise disseminated without quotation or Erdem & Erdem Law Firm's written consent. Any content created without citing the resource or Erdem & Erdem Law Firm’s written consent is regularly tracked, and legal action will be taken in case of violation.
Other Contents
No-poach agreements, which have become one of the most prominent concepts in global competition law in recent years, are defined in the Glossary of Competition Terms as “agreements, whether direct or indirect, whereby one undertaking agrees not to make job offers to, or hire, the employees of another...
The Competition Board (“Board”) has broad powers to request information from undertakings. The legal basis for this authority is provided by Article 14 of Law No. 4054 on the Protection of Competition (“Law No. 4054”). Under this provision, the Board may request any information it deems necessary from public...
Competition authorities around the world have increasingly focused on labor market infringements under competition law, issuing new regulations and guidance recently. Notable examples include the U.S. Department of Justice and Federal Trade Commission’s joint guidance, the Japanese Fair Trade Commission’s...
Chapter 8 of the General Data Protection Regulation (“GDPR”) sets out the legal remedies available to data subjects in the event of a breach of their rights under the GDPR. Accordingly, each data subject has a right to lodge a complaint with the supervisory authority of the Member State in which they reside, work...
Mergers and acquisitions play a critical role in shaping the competitive structure of the market. Although such transactions can lead to positive outcomes such as the provision of products and services at lower prices, the development of new products and technologies, and improvements in quality, they may also...
The Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Restricting Competition, and Abuse of Dominant Position (“Former Regulation on Fines”), which entered into force upon its publication in the Official Gazette dated February 15, 2009 and numbered 27142, was...
In the past years, the Turkish Competition Board (“Board”) has closely monitored the activities of undertakings operating in the retail sector. As a result of the Board’s record of administrative fines, horizontal type of violations in the retail sector have been highly publicized. Vertical violations such as resale price...
In recent years, numerous automobile manufacturers have announced their goals to reduce carbon emissions, with many brands setting net-zero carbon targets spanning from production processes to the lifecycle of their vehicles. While ongoing debates persist regarding the significantly higher carbon footprint of...
Under Article 15 of Law No. 4054 on the Protection of Competition (“Law No. 4054”), the Competition Board (“Board”) may conduct on-site inspections at the undertakings’ premises when it deems necessary in fulfilling the duties assigned to it. During the on-site inspection, the Board is authorized to examine all...
Agreements and information exchanges between undertakings in labor markets have recently been examined in various preliminary investigations and investigations initiated by the Turkish Competition Authority (“Authority”). Following the investigations in which some undertakings were subject to...
The Turkish Competition Board’s (Board) decision regarding the acquisition of the international road transport business line of Ekol Lojistik AŞ (Ekol) by DFDS A/S (DFDS) has been one of the most prominent transactions on the competition law agenda recently...
The Competition Board (“Board”) has broad powers to request information from undertakings. The Board’s authority to request information arises from Article 14 of the Law No. 4054 on the Protection of Competition (“Law No. 4054”). Under the relevant provision, the Board may request any information it deems...
Doğuş Otomotiv Servis ve Ticaret A.Ş. (Doğuş) applied to the Turkish Competition Authority for an exemption for the practice of recommending basic wages to be applied to sales and after-sales service employees of its authorized dealers and distributors...
Access to Instagram was blocked ex officio by the Information and Communication Technologies Authority (ICTA) as of 2.08.2024. Under Article 8 of Law No. 5651 on the Regulation of Publications on the Internet and Combating Crimes Committed Through These Publications, ICTA can issue an ex officio access...
It is well known that agreements between employer undertakings with regards to their employees, such as wage-fixing and non-poaching agreements, along with competitively sensitive information exchanges have been under the scrutiny of competition authorities all over the world, including the Turkish Competition...
Automotive is one of the sectors in which the world’s most significant investments are made. The Competition Board (“Board”) has been closely interested in the automotive sector over the years and has conducted various examinations and studies in this field...
Competition authorities around the world continue unabated to investigate competition concerns arising from data collection and processing activities of digital platforms and impose severe sanctions as a result...
The startup ecosystem in Turkey has experienced notable growth in recent years. In the last quarter of 2023, 81 startups secured a combined investment of around 60 million dollars. While the number of investments remained consistent when comparing the third quarter periods of 2022-2023, there was a decrease...
Hub and Spoke cartel is a type of violation that is not clearly defined and regulated under Law No. 4054 on the Protection of Competition (“Law No. 4054”). Decisional practices of foreign competition authorities, particularly the UK Competition and Markets Authority’s decisions (“CMA”), are instructive concerning...
The Competition Board ("Board") made an addition to its line of decisions on resale price maintenance with its decision on Sunny Elektronik Sanayi ve Ticaret A.Ş. ("Sunny") . In its decision, the Board thoroughly examined the allegations regarding Sunny's involvement in maintaining resale prices and restricting...
It is observed that the Competition Authority (“Authority”) has recently scrutinized various industries such as fast-moving consumer goods, labor market, pharmaceuticals, and cement. When the reasoned decisions of the Competition Board (“Board”) published in October are examined, it can be seen that the...
Jules Verne says, “Everything on earth has a limited lifespan, nothing that will exist forever can be created by human hands”. Perhaps change is the only constant concept in all our lives. Despite two major world wars and countless periods of crisis, humanity has been undergoing a great change and...
At the meeting of the Fédération Internationale de Football Association (“FIFA”) held on 16 December 2022, the FIFA Council approved the FIFA Football Agents Regulations (“FFAR”). In the FFAR, various amendments have been made, such as the introduction of a maximum service fee limit that football agents are...
Resale Price Maintenance (RPM) is still considered a hardcore restriction under the recently revised Vertical Block Exemption Regulation (VBER), which means that it cannot benefit from a statutory exemption under Article 101(1) TFEU, unlike certain other types of vertical agreements. However, it has been debated...
In competition law, it is important to accurately determine the concept of undertaking, especially in terms of mergers and acquisitions. Therefore, the concept of economic entity aims to reveal the economic units covered by the undertakings. The relationship between the concept of economic entity and family ties comes...
In these days when the Competition Board (“Board”) frequently imposes administrative fines for preventing on-site inspections and both the Competition Authority (“Authority”) and undertakings take legal and technical measures regarding on-site inspections, a striking development has occurred. In its decision...
Online advertising has become an important source for businesses for promoting products and services and meeting consumers, as a result of the rapid development of information technologies and increase in the use of internet. Delivering targeted messages to consumers at the right time through the digital...
Selective distribution systems refer to a type of distribution system in which suppliers commit to selling the contracted goods or services directly or indirectly to distributors selected based on specified criteria, while the distributors commit not to sell the said goods or services to unauthorized...
Fast-moving consumer goods is undoubtedly one of the sectors that the Competition Authority has been working most intensively since the COVID 19 pandemic. Among the most important developments of this period was the Sector Inquiry initiated on Fast Moving Consumer Goods (“FMCG”) Retailing...
In the decision of the Constitutional Court ("Constitutional Court" or "Court") dated 09.11.2022, numbered 2020/67 E. 2022/139 K. (the "Decision"), the annulment of certain articles of the Law Amending the Law on the Protection of Competition No. 4054 ("Law No. 7246") was requested...
In Turkish competition law, certain types of mergers and acquisitions are subject to Turkish Competition Board’s (“Board”) approval in order to gain legal validity. Pursuant to Article 7 of the Law No. 4054 on the Protection of Competition (“Law No. 4054”), the Board is competent to define mergers and acquisitions...
Recently, the Competition Board (the Board) had imposed administrative fines on banks and financial institutions for failing to respond to the request for information within the scope of a preliminary investigation.[i] The request for information that lays the groundwork for the administrative fine imposed by...
Amazon, a world-famous company, is an e-commerce company that operates the world’s largest online shopping platform. In the backstage, Amazon is a data-driven company whose retail decisions are mostly driven by automated systems, fueled by the relevant market data. That being said, Amazon has a dual...
The right to make on-site inspections is one of the Competition Board’s (“Board”) most important tools for revealing whether Law No. 4054 on the Protection of Competition (“Law No. 4054”) has been violated. The effective use of this authority is quite important in terms of obtaining fruitful results from...
“Harese” is an interesting Arabic word. There is a thorn that camels love very much in the desert. The camel eats the thorn with great greed. So much so that, its mouth bleeds as it eats, but it doesn't stop eating. The taste of the thorn is mixed with the salty taste of its own blood. This mixed taste drives the camel...
Turkey’s leading pay television service provider, Krea İçerik Hizmetleri ve Prodüksiyon A.Ş. (“Digiturk”), is frequently the subject of complaints made to the Competition Authority (“Authority”). In fact, the Competition Board (“Board”) issues a new decision about Digiturk almost every year. In these decisions...
The French Competition Authority (Autorité de la Concurrence), within the scope of the competition law proceeding initiated upon the complaint of Criteo SA (“Criteo”), accepted the commitments proposed by Meta Platforms Inc., Meta Platforms Ireland Ltd., and Facebook France...
While the scope of Competition Board’s (“Board”) power to conduct on-site inspections has increased with the introduction of Guidelines on Examination of Digital Data during On-site Inspections (“Guidelines”), nowadays the amount of monetary fines imposed on undertakings continue to...
The hub and spoke cartel, which is a relatively new type of violation in terms of Turkish competition law, is defined as the indirect exchange of information between two independent undertakings which are horizontal competitors on the supplier or retailer level, through another undertaking...
The settlement mechanism has only recently been introduced to Turkish competition law practice. It entered into force with the amendment made to the Law on the Protection of Competition (“Law”) numbered 4054 on 16.06.2020, and has been in effect for less than two years. In this relatively...
Due to their increasing share in the economy and rapid growth rate, e-marketplace platforms have come under the increasing scrutiny of the Turkish Competition Authority (“Authority”) as well as many competition authorities around the world...
Pursuant to the Amendment Communiqué Concerning the Mergers and Acquisitions Requiring the Competition Board’s Approval (“Amending Communiqué”) published in the Official Gazette dated March 4th, 2022 and numbered 31768, certain amendments have been introduced...
The Competition Board (“Board”) has recently published a reasoned decision in which it evaluated BSH Ev Aletleri Sanayi ve Ticaret A.Ş.’s (“BSH”) request for negative clearance or exemption with regard to its practice of prohibiting authorized dealers from making sales through online marketplaces...
Shahmaran, a Mesopotamian myth, is believed to take place in Tarsus. According to the myth, the shah of snakes is the immortal and omniscient "Shahmaran." Shahmaran is described as a beautiful woman living in her cave with her snakes...
During the COVID-19 pandemic, competitive concerns about the pricing behavior of chain markets, manufacturers, and wholesalers engaged in the retail trade of food and cleaning supplies led to an investigation by...
When the past decisions and the recent decisions of the Competition Board (“Board”) are examined, a significant increase can be observed in the number of decisions where the Board found hindrance or obstruction of on-site inspections. This situation shows that...
The European Commission began investigating the collusive behavior of Credit Suisse, UBS, Barclays, RBS, and HSBC in the Foreign Exchange (forex) spot trading market in 2019. With the recent press release dated 02.12.2021, the Commission announced that the case is now closed...
Digitalization, in particular, necessitates the rewriting of competition law rules. Competition law is at the center all questions regarding e-commerce and digital platforms. The aforementioned platforms, which have become prominent due to innovations in...