On June 13, 2018, the Board announced its reasoned decision[1] regarding the alleged abusive practices of Çiçek Sepeti internet Hizmetleri A.Ş. ("Çiçek Sepeti").
Upon Çiçek Satış A.Ş.'s ("Çiçek Satış" or "Complainant") complaint, the Board initiated a preliminary investigation against Çiçek Sepeti, an online retailer active in the sale of flowers, edible flowers (bonny food) and gifts (bonnygift). The Complainant alleged that Çiçek Sepeti had abused its dominant position in the online flower sales market and had obstructed and hindered its competitors' activities by way of: (i) applying predatory prices, (ii) spending significant amounts on advertising (and thus raising its rivals' marketing costs), and (iii) initiating unfair lawsuits against its rivals. In its assessment, the Board first defined the relevant product market as "online flower sales" and determined that Çiçek Sepeti held significant market power in the relevant market. Thus, the Board concluded that Çiçek Sepeti may be presumed to be in a dominant position in the relevant market, based on (i) the low potential/possibility of Çiçek Sepeti's rivals to establish competitive constraints, (ii) the entry barriers caused by the network effects in the market, and (iii) Çiçek Sepeti's wide distribution network.
The Board's detailed assessments on each of the Complainant's allegations as set forth below:
(I) Predatory Pricing
After conducting a price-cost analysis for the products in question, the Board observed that Çiçek Sepeti (i) did not sell products below cost, even when all of its costs were taken into account, and (ii) incurred losses only in "advertisement products" or "marketing products." Therefore, the Board
decided that the sales periods and the volume of these products were not sufficient to establish an anticompetitive foreclosure in the context of identifying a predatory pricing behavior.
(II) Spending Significant Amounts on Advertising and Marketing Expenses (and thus Raising its Rivals' Costs)
The Board noted that Çiçek Sepeti's advertisement costs had increased (in terms of total value) between 2015 and 2017, which is the time period that was subject to the preliminary investigation. However, the Board also observed that the ratio of these costs to Çiçek Sepeti's total sales had decreased compared to previous years. It was stated that this was a result of the positive impact of Çiçek Sepeti's strategy of decreasing its prices according to the (fluctuating) level of demand in the relevant market, which is considered by the Board as a factor indicating the absence of consumer welfare in the present case. Accordingly, the Board rejected the Complainant's allegation on this matter and concluded that Çiçek Sepeti's advertising and marketing policies had not led to market foreclosure or a decrease in consumer welfare.
(Ill) Initiating Unfair Lawsuits Against its Rivals (Sham Litigation)
The Board found that Çiçek Sepeti had frequently taken legal action regarding brand right violations and unfair competition claims against its rivals, who had allegedly exploited and misused Çiçek Sepeti's trademarks in the Google Adwords program. In this regard, the Board determined that the lawsuits initiated by Çiçek Sepeti had been aimed solely at protecting its own brand rights and that there was no evidence to indicate that Çiçek Sepeti had initiated these lawsuits for the purpose of obstructing or impeding its rivals' activities.
After the preliminary investigation phase, the Board decided that there was no evidence of an Article 6 violation, and decided not to initiate a full-fledged investigation against Çiçek Sepeti.
[1] The Board's decision numbered 18-07/111-58 and dated March 8,2018.
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in September 2018. A link to the full Legal Insight Quarterly may be found here.
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