Competition Board’s Pre-Investigation Decision in the Automotive Sector
Introduction
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. The Board initiated an ex officio pre-investigation in 2023, regarding the allegation that undertakings operating in the light, medium, and heavy class commercial vehicles sector violated Article 4 of Law No. 4054 on the Protection of Competition (“Law No. 4054”).
The Board has found that some undertakings operating in the light, medium, and heavy class commercial vehicle sector have their competitors’ vehicle stock numbers and price information offered to customers. Therefore, the Board considered that such data and information might constitute competitively sensitive strategic information. Accordingly, the Board initiated a pre-investigation based on the need to determine whether the relevant information was obtained through direct communication between competitors. This article discusses the Board’s findings and assessments in its decision1 evaluating the exchange of information in the automotive sector.
Relevant Market Definitions in the Decision
The decision provides detailed explanations regarding the definition of the relevant product market. Firstly, the Board emphasized that automotive production is broadly classified as passenger cars and commercial vehicles on a global scale. Commercial vehicles, which constitute the subject matter of the present case, are defined as vehicles that are used for transporting goods and passengers for profit and that have commercial license plates.The Board stated that commercial vehicles can be classified as light, medium, and heavy commercial vehicles according to their gross vehicle weight. Light commercial vehicles include pickup trucks, minibuses, and minivans. The midibus can be given as an example in the medium commercial vehicles group. The heavy commercial vehicles group contains trucks, buses, and trucks weighing over 3.5 tons.
The Board mentioned that heavy commercial vehicles above 3.5 tons differ from passenger cars and light commercial vehicles below 3.5 tons in terms of technical specifications, intended use, and consumer structure. These vehicles do not constitute substitutes. In this context, the Board stated that the relevant product market can be determined as the “heavy commercial vehicles market” by distinguishing between product groups, likewise its previous decisions2. However, the Board stated that it is not deemed necessary to determine the relevant product market, as it would not affect the assessments to be made within the scope of the file.
As for the definition of the relevant geographical product market, the Board stated that the relevant geographical market can be defined as Turkey in terms of the current file. On the other hand, the Board considered that there is no need to determine the relevant geographical market as it will not affect the assessments to be made within the scope of the file.
The Board’s Findings on the Documents
Many documents were obtained from the undertakings during the on-site inspections conducted as part of the pre-investigation. An examination of the documents reveals no direct correspondence between the competitor undertakings.
It is noteworthy that within the correspondence, undertakings shared price information related to their competitors, in their internal reporting. In most correspondence, the source of the relevant information is clearly indicated. It is understood that the source is usually the dealers of the competitor undertakings.
In addition, it is determined that the source of some data shared within the company is market data published by associations of undertakings operating in the sector such as the Automotive Distributors’ Association (“ODD”), Automotive Industry Association (“OSD”) and Heavy Commercial Vehicles Association (“TAİD”). Another source frequently referred to in the correspondence is the list prices published on the websites of competitors.
In some of the documents obtained during the on-site inspections, it is observed that the price information of competitor undertakings is shared in the correspondence without specifying the source. The Board concluded that, although there is no indication in the correspondence as to how the information regarding the prices of the competitors was obtained, the information in question was obtained through customers or dealers, as is the case in the sector.
The Board’s Evaluation on the Exchange of Information in the Automotive Sector
The Board concluded that undertakings operating in the light, medium, and heavy class commercial vehicles sector frequently obtain their competitors’ price offers. It is further stated in the decision that among the documents obtained within the scope of the on-site inspections, no document has been identified to indicate that price offers of competitor undertakings are shared directly between competitors to restrict competition. On the other hand, it was found that price information of the undertakings could be accessed during customer visits, through dealers, as a result of field studies, or through the undertakings’ websites. The Board noted that the purpose of the use of this information is to provide lower offers by the undertakings, to gain new customers, or to prevent the loss of existing customers.
The Board considered that, due to the way the sector operates, undertakings active in the industry can closely monitor the prices of competitors through market research, and that they can obtain information about the price offers of other market players through their customers, without the need for any additional effort. A bargaining scheme in which customers share the price offer received from one undertaking with another undertaking to obtain a better price offer and increase their bargaining power is quite common in the relevant sector. In addition, undertakings have easy access to each other’s market share data. It is understood that the relevant data can be obtained through ODD, OSD, TAİD, and Turkish Statistical Institute (“TÜİK”). Moreover, historical information is published publicly in the commercial vehicle sector reports and all competitors and customers operating in the sector have equal access to this data. Therefore, it is considered that the aforementioned information does not constitute a trade secret.
In light of this information, within the scope of its assessment of the market structure, the Board stated that the large number of players in the sector may make it difficult for undertakings to agree on possible coordination conditions and to produce cooperative results on prices. In addition, the Board stated that the most crucial pricing criteria in the sector are macroeconomic factors such as raw material and energy prices, inflation, exchange rate developments, and market conditions. Moreover, the Board considered that the rapid increase and volatility of prices make it difficult for undertakings to monitor each other’s sales prices easily.
The Board stated that the existence of product differentiation in the market and diversification in the services offered lead to differences in prices. Therefore, the Board pointed out that even if competitor price information is available, it is difficult to have complete information on how the price is determined and which services the price covers.
As a result of its evaluation, the Board determined that among the documents obtained within the scope of the pre-investigation, there are no documents indicating that the undertakings have violated Article 4 of Law No. 4054. Accordingly, the Board decided that there is no need to launch a full-fledged investigation against the undertakings that are party to the pre-investigation.
Conclusion
The exchange of commercially sensitive information between competitor undertakings may lead to a violation of competition law within the meaning of Article 4 of Law No. 4054. While determining the effect of the exchange of competitively sensitive information between competitors on competition, factors related to the structure of the market and the nature of the information shared are taken into consideration. In this context, the dynamics of the concrete case constitute the basis for the assessment of the effect of the exchange of information on competition.
An analysis of the Board’s pre-investigation decision regarding the automotive sector reveals that the established practices and market functioning in the market are essential in determining the conditions under which the exchange of information between competitive undertakings is anti-competitive. Indeed, in some markets, it may even be argued that, under certain conditions, the exchange of information may not be anti-competitive but pro-competitive. The Board’s pre-investigation decision in the automotive sector provides an updated perspective on the exchange of information and brings the importance of market conditions back to the agenda.
- The Board’s decision dated 17.08.2023 and numbered 23-39/723-247.
- The Board’s decisions dated 20.09.2012 and numbered 12-44/1350-455, dated 05.10.2011 and numbered 11-51/1288-453, dated 06.06.2012 and numbered 12-30/891-269, dated 21.10.2021 and numbered 21-51/714-355.
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