June 2021 – In 2020 the Turkish Competition Authority (“TCA”) launched a sector inquiry on e-marketplace platforms to determine the current and potential risks emerging from the rapid growth of e-marketplace platforms in the highly digitalised era. On 7 May 2021, the preliminary report was published.
As the report observes, rapid developments in internet technologies are radically changing business models in many sectors around the globe. Online platforms, which are at the centre of digitalisation, create numerous benefits. However, this is in a sense a “double-edged sword,” as rapid changes also bring new risks and challenges. The TCA acknowledges in its report that the rapid growth of e-commerce in Turkey has taken place relatively quickly in comparison to other countries. Accordingly, the TCA conducted its sector inquiry in order to fully understand the competitive and anti-competitive effects of the e-marketplace business model and the practices of e-marketplaces to determine appropriate policies and create better tools to prevent elements that hinder competition in this field.
The first section of the report paints a general picture of retail e-commerce activities in Turkey. The concept of retail e-commerce is briefly defined, and the development of retail e-commerce over the years is examined alongside the factors affecting its development. The report cites a study that estimates the retail e-commerce development of countries worldwide, which states that global retail e-commerce in 2020–2024 will grow annually by 8.1% on average, and that Turkey will rank in first place with an annual average growth rate of 20.2%. The sectoral distribution of e-commerce in Turkey is also examined in the report. In 2019, “travel and accommodation” services took the largest share among the categories, followed by “fashion and beauty” in second place and “electronic and media products” in third place. The category of "toys, do-it-yourself and hobby" ranked in fourth place among the categories. When retail e-commerce volumes in 2019 and 2020 are compared, there was a 53.3% year-on-year contraction in the “travel and accommodation” category, 42.5% in the “fashion and beauty” category, and a 40.8% decline in the “electronic and media products” category. On the contrary, there was a 45.4% increase in the “toy, do-it-yourself and hobby” category, which can be understood as a reflection of the effects of the Covid-19 outbreak, given that people tried to learn new hobbies at home. Needless to say, the Covid-19 outbreak also acted as a catalyst that accelerated market changes and growth.
The second part of the report examines the global development of e-marketplaces and the business models of Amazon and Alibaba, the two most well-known examples of e-marketplaces operating globally. The growth and development strategies they follow is closely analysed in order to understand the market dynamics of e-commerce. For example, Amazon promises to deliver the most products to its customers at the lowest price and with the fastest delivery and follows strategies that will strengthen its retailer and marketplace roles in order to fulfil this promise. The report notes that Amazon and Alibaba have structured their business models on the long-term goal to maintain customer loyalty, and that their work has paid off.
The third section of the report examines the current situation of e-marketplaces in Turkey, including the position of e-marketplaces from the consumer perspective and the behavioural tendencies of consumers. The substitutability of e-marketplaces regarding alternative channels from the consumer perspective is also set out. Correspondingly, an overview of the leading multi-category e-marketplaces in Turkey is presented. The fastest growers in terms of retail e-commerce volume are multi-category e-marketplaces such as Amazon Turkey, Hepsiburada, N11 and Trendyol, which offer one-stop shopping for consumer products. Studies indicate that currently Trendyol is the most preferred among consumers in Turkey. Studies show that consumers prefer online shopping to physical stores based on (i) affordable prices, (ii) time efficiency, and (iii) product variety. On the other hand, the main reasons that the consumers prefer not to shop online is determined to be (i) no specific reason, (ii) the desire to see/touch the product, (iii) difficulty to return, (iv) concerns regarding sharing personal data, and (v) fear of getting deceived by sellers.
In light of the above it is understood that online channels and physical stores respond to different needs of consumers, and accordingly, these two channels do not constitute an alternative to each other from the consumer perspective. Within the framework of the survey findings and explanations given above, it is observed that in the eyes of consumers, multi-category e-marketplaces are differentiated from physical stores and other online sales channels. Consequently, this segregation is evident in all age groups, but it increases even more towards lower age groups. Considering that the lower age groups will become the main consumer group over time, it is possible to predict that the aforementioned distinction will continue to increase in the future. The data provided in this section of the report reveals that multi-category marketplaces do not experience competitive pressure either from physical stores or from the sellers' own e-commerce sites.
The fourth section of the report includes the basic economic characteristics of e-marketplaces. In this context, the market structure and operational features that contribute to the market power of e-marketplaces—such as network externalities, multiple access, economies of scale and scope, multilateralism and their “data-driven-ness”—are evaluated. Market disruptions such as high barriers to entry, expansion and the tendency to evolve into a single market are also addressed. The report states that the market structure that contributes to the market power of e-marketplaces and the functioning of the market are based on the platform business model and economy. Platforms have an economic structure and operation that distinguishes them from traditional markets. If the definition of “platform” is concretised in terms of e-marketplaces, it is possible to define e-marketplaces as multilateral platforms that bring together different user groups, such as potential advertisers, as well as sellers and buyers/consumers, and mediate or facilitate transactions between these groups.
The fifth part of the report analyses the possible competition problems arising from e-marketplaces. For this purpose, concerns were evaluated under three main headings, which are: problems that may hinder cross-platform competition; problems that may hinder intra-platform competition; and consumer concerns. Problems that may hinder cross-platform competition are subdivided into (i) the most-favoured-customer condition, (ii) exclusivity, and (iii) applications limiting multiple access on both the consumer and seller side. Problems hindering intra-platform competition, on the other hand, are categorised as (i) discrimination among vendors operating in the marketplace, (ii) marketplace product and vendor rankings, (iii) data collected by marketplaces, (iv) associated services offered by marketplaces, (v) unfair commercial practices, and (vi) the tendency of marketplace sellers to form (hub-and-spoke) cartels. Moreover, competition problems with respect to consumer concerns are designated as (i) price-based concerns, (ii) consumer addiction and loyalty practices, and (iii) data-based concerns.
The last section of the report is devoted to policy recommendations for prominent competition concerns in line with the findings, determinations and evaluations of the sector inquiry. In this context, it was considered that it would be appropriate to propose three measures to address competition concerns: (i) to review and update secondary legislation in order to eliminate uncertainties in the implementation of current competition law rules in terms of platforms and strengthen the application; (ii) to implement a "Platform Code of Conduct" on the basis of "objectivity", "transparency", "openness" and "foreseeability" in order to ensure that the market produces fair results for all participants and to serve as a reference in bilateral relations for the asymmetric bargaining power that dominates the overall market; and (iii) to determine “gatekeepers” and implement the behaviours that they are obliged to avoid with an ex-ante legal regulation.
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