Rebate Systems in Turkish Competition Law

According to the Guidelines on the Assessment of Exclusionary Conduct by Dominant Undertakings, rebate systems refer to discounts offered to customers in return for them engaging in a certain purchasing behaviour. Even though there is no explicit provision under the Turkish competition law regime that deems rebate systems illegal per se, rebate systems may give rise to competition law concerns under Article 4 (prohibiting restrictive agreements) and/or Article 6 (prohibiting abuse of dominance) of Law No. 4054 on the Protection of Competition (Law No. 4054).

The most fundamental distinction in the classification of rebate systems is between “single-product rebates” and “package rebates”. Single-product rebates are discounts tied to the purchase of a single product, whereas package rebates represent discounts that are tied to the purchase of more than one product or market. Rebate systems that include standard purchase volume target(s) and accompanying standard discount rates, applicable without discrimination to all customers, can be characterised as “standardised rebates”. However, where the relevant rebate systems include purchase targets that are adjusted depending on the demand of each customer or customer group, they are characterised as “individualised rebates”. Rebate systems are also classified into retroactive rebates and top-slice rebates, depending on the scope of the discount. Rebate systems in which the customer can get discounts from the undertaking offering the rebate, for all of its purchases within the relevant period if it exceeds the threshold amount, are called “retroactive rebates” or “all-units rebates”, while rebate systems in which the customer can only get discounts for its purchases over the rebate target are called “top-slice rebates”.

The Turkish Competition Board (Board) has evaluated whether the undertaking under review has abused its dominance through its rebate system in many different instances. The Board has generally analysed rebate schemes based on two main theories of harm: (i) the loyalty-inducing potential of the relevant rebate system, which may, in turn, create de facto or potential exclusionary effects (similar to the effects of non-compete obligations) on competitors; (ii) the discriminatory potential of the relevant rebate system amongst equally situated customers, which may, in turn, distort competition in the downstream market. In addition, the Board’s decisional practice also includes a variety of other factors that are relevant to the determination of whether a given rebate system is likely to result in exclusionary effects towards competitors. One of the most significant of these elements is the length of the reference period associated with the rebate. Particularly, for a retroactive rebate, the loyalty-inducing potential is considered to increase along with the reference period. This is because a longer reference period translates into more purchases on which the buyer stands to gain a discount if it meets the rebate target and, therefore, greater switching costs. Other factors taken into consideration include (i) the level of market power the dominant undertaking possesses (in other words, the extent of dominance); (ii) the extent of the market covered by the rebate system; (iii) the magnitude of the discounts; (iv) whether the dominant undertaking specifically targeted to harm its competitors; as well as (v) any specific characteristic of the relevant market that is pertinent to the analysis. Additionally, the existence of exclusionary intent, if any, is a separate inquiry relevant to the rebate system’s assessment but should be conducted based on evidence that demonstrates such intent.

For more information on rebate systems in Turkish competition law, please feel free to reach out to ELIG Gurkaynak at +90 212 327 1724 or through gonenc.gurkaynak@elig.com.