Business Law

HUB AND SPOKE CARTELS IN COMPETITION LAW

PREAMBLE

In the recent decisions of the Competition Board (the “Board”) regarding the Topla-Distribute Cartels, which appear as a relatively new concept in Competition Law, some important points regarding the “Cartelization” activities of various undertakings are highlighted. Therefore, in this article, first of all, the place of Collect-Distribute Cartels in our Competition Law will be examined in the light of Board Decisions, and some decisions that can serve as an example will also be emphasized.

First, if it is necessary to define what a cartel is in general; In the Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Limiting Competition, and Abuse of Dominant Position, the cartel; agreements restricting competition and/or concerted practices between competitors for fixing prices; allocation of customers, providers, territories, or trade channels; restricting the amount of supply or imposing quotas and bid rigging. There is no definition in the Law No. 4054 on the Protection of Competition (“Law”) regarding what a Hub and Spoke Cartel is, but as a result of the Board’s decisions and within the scope of the Guidelines on Horizontal Cooperation Agreements (“Guidelines”), information exchange between enterprises has been made. It is known that there is a competition law violation that it has created.

In the light of this general definition, it can be understood more clearly what exactly Hub and Spoke Cartels are. As aware, there is a supply chain structure in the markets until the stage of presenting a product from the raw material to the consumer. The main actors that make up this supply chain can be counted as suppliers, retailers, and consumers. Vertical and horizontal interaction is established between the actors in this supply chain. In this context, a vertical interaction is established between the supplier and the retailer, while a horizontal interaction is established between two competing retailers in the same market. Although not every information exchange during this interaction is considered as a violation of Competition Law by cartelization, there are some criteria taken into account in order to conclude that a Hub and Spoke Cartels have been formed. Due to the nature of Hub and Spoke cartels, there must be a concerted action aimed at creating price unity among competitors on a horizontal plane. 

In this context, competitors operating in the same market on a horizontal plane, by means of an actor operating on a vertical plane, can provide information about each other’s sensitive information (such as determining the sales price, price increase rates or coordination of price change dates, when and to what extent periodic discounts will be made). information must be exchanged. The party providing information exchange on the vertical plane may be the supplier or a third party completely outside of the supply chain. In this case, if the exchange of information is provided through a third party, it may be possible for the third party to be subject to sanctions. 

In a nutshell, if it is necessary to summarize the criteria necessary for the formation of Collect-Distribute Cartels under certain headings;

  • information sharing must be occurring between competitors on the horizontal plane and through the vertical actor,
  • the shared information must be sensitive information to the extent that it affects the competition,
  • making conscious and multiple times regarding the determination of the sales price required.

BOARD DECISION ON HUB AND SPOKE CARTELS

Decision Regarding the Investigation of the Pricing Behaviors of Chain Markets Engaging in Retail Food and Cleaning Products Trade and Producer and Wholesaler Level Enterprises Which Are Their Suppliers During the COVID-19 Pandemic Process (“Decision”)

In the Decision of the Board on 28.10.2021, because of the investigation initiated ex officio pursuant to Article 41 of the Law, with the claim that sales prices and price increases are coordinated through “direct or indirect contacts through joint suppliers” by means of cartelization among five retail undertakings.

  • The prices of 33 products examined within the scope of the report, in which it was determined that high price increases were made, are immediately brought to a reasonable level following the short decision notification, in full compliance with the pricing policies applied on 1 March 2020, related to the purchase price/production cost and similar objective criteria, and to be attested,
  • Informing the Institution about price increases in food and cleaning products in the scope, format, and period to be determined by the Institution, until the investigation process is completed,
  • Announcement of price increases in the channels where discounts, campaigns and promotions are already announced, as of the notification of the short decision,
  • Sharing the Report with the Ministry of Commerce and the Ministry of Food, Agriculture and Livestock by transforming the Report into the opinion of the Institution, in order to carry out studies to determine whether there are unfair commercial conditions in the contractual relations between the markets and the suppliers and considering that the findings in the report may have policy implications, especially regarding the food supply chain.

An interim measure was issued against it.

Regarding the violation, which the Board pointed out in the relevant Decision, which has the characteristics of Hub and Spoke Cartels, and which includes agreements or concerted practices that restrict competition in matters such as fixing prices or quantities among competitors, sharing customers or regions, colluding in tenders. An unprecedentedly large penalty has been given and judicial remedy is open in Ankara Administrative Courts regarding this penalty.


Fatmanur Ayışık

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