Coordinator in Supervision and Enforcement Department III Assessing the Competitive Effects of Loyalty Rebates Turkey Experience ICN UNILATERAL CONDUCT WORKSHOP 02.11.2019- RSA Burak BÜYÜKKUŞOĞLU Coordinator in Supervision and Enforcement Department III bbuyukkusoglu@rekabet.gov.tr *All views in this presentation are those of the author and may not necessarily be interpreted as the official view of the Turkish Competition Authority. 1

EFES PILSEN (2011) Allegation: Exclusive practices at the retailers by contracts or de-facto practices Position of the undertaking and its rival(s): Efes Pilsen dominant position beer producer with a market share of %80-85, closest rival market share is %15-20. Relevant market conditions (entry/exit barriers), customers/suppliers market/buyer power Foreclosure Effect - Single product with individualized retroactive/top-slice rebates - Rebates offered change store by store - Rebates; if buying amount/target increases compared to previous period - Rebates; if the determined threshold succeeded -Contracts, no exclusivity clause, 1-3 years with targets 2

EFES PILSEN (2011) Foreclosure Effect - Targets can only be fulfilled hopefully, at the end of contract period, compared to store's previous years’ sales - Targets cover at least one year of total beer demand, sometimes more. - Rebates from %4 to %15 (Includes free of charge products) - Not correlated with the purchasing amount - *Strongly focused on the retailers where rival company was also in - Incentives to unwilling to switch the entire demand or prevent the rival entering into retailer. - After the rebates offered the rivals exited/couldn’t supply to the retailers, rebates leaded exclusivity.

EFES PILSEN (2011) Foreclosure Effect - Efes’s market share increased (%85-90), rival’s declined (%10-15). - Duration: From 2006 till 2010 - Rival business is not profitable. Hard to retaliate. - Direct or indirect evidence of exclusionary strategy (Intent) - Internal documents showed the intent «with agreements/negotiations we achieved exclusivity» «After achieving exclusivity, our market share increased» «Offering %3, %5 discounts for not selling rivals» No justification: No consumer benefit ,consumers product range decreased The retailers took the advantage of rebates. Competition was harmed, fined. 4

CONCLUSION FROM THE CASE LAW Dominant companies must be careful in their rebate policies Best rebates may be the rebates that consumers directly benefit. The rebates must not exclude rivals both from the store and the market Uncomplicated rebates preferred (simplicity is the best) Short term lasting/promotional rebates preferable Standardized rebates safer than individualized ones, less discretion to salesman Rebates better be correlated with the purchasing amount Contracts on targets with no due time are safer The rebate percentage/target better not to constitute a significant part of the customer rebate. If there is some intent, things are getting more difficult for the firms. Justifications hard to be accepted for the dominant companies if there is no consumer benefit. 5