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Sibel ÖZTÜRK

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LL.M., Partner

Information Exchange Between Competitors from a Competition Law Perspective

* Sibel ÖZTÜRK, LL.M.

The exchange of information between undertakings, which is an important subject of competition law[1], constitutes one of the areas that are sometimes considered "competitive" and sometimes "restrictive of competition" in competition law. Because the exchange of information can be very beneficial for competitors, consumers and the competition process, on the other hand, the exchange of "certain types of information" under "certain market conditions" can pose dangers in terms of the competition process. [2] Accordingly, it is important in terms of competition law to clarify which types of information exchanges are within the scope of competition-limiting behavior and which are within the scope of negative determination or exemption.

Information exchange refers to the fact that more than one undertaking operating in the same market shares all kinds of business data, either explicitly or implicitly, "unilaterally" or "mutually". Information exchanges between competitors can create coordination between competing undertakings, limit competition or facilitate the follow-up of a cartel agreement being implemented by the undertakings by having information about the sales price, production amount, stock status and customers of their competitors. On the other hand, information exchanges can allow efficiency gains by eliminating the information asymmetry between the parties and allowing enterprises to compare themselves with their competitors and reducing the research costs of enterprises and consumers.[3]

According to the Turkish Competition Board, information exchanges that are in the nature of an agreement for the purpose of determining the price or quantity, or that facilitate the functioning of the cartel by ensuring that it complies with the agreed rules, are directly described as "cartels". On the other hand, information exchanges that give rise to efficiency gains may be included in the scope of negative determination or exemption according to their nature.

Whether information exchanges between competitors will have a limiting effect on competition depends on two main variables. These are the "structure of the market concerned" and the "characteristics of the information shared."[4]  The main elements related to the structure of the market; the degree of concentration of the market, its transparency, stability, complexity and similarity (symmetry) of the undertakings in the market.[5]

In this context, in tight oligopolies, collaborative results are more likely to occur as a result of an exchange of information. In contrast, in markets with large numbers of buyers and sellers, information exchanges are less likely to have anti-competitive effects.

As for the transparency of the market, as the market becomes transparent, the likelihood of collaborative results will increase, an exchange of information that significantly increases transparency in the market is more likely to restrict competition than an exchange of information that does not make a significant contribution to making the market transparent.

Regarding the degree of complexity of the market and whether the market has a stable structure; It is more difficult for undertakings to achieve collaborative results in a complex market structure than in markets that show stable structure.

Finally, in symmetrical market structures where undertakings are similar in terms of costs, demand, market shares, product range, capacity, etc., since competitive motives will also be similar, the information exchange carried out in symmetrical market structures increases the possibility of coordination between undertakings.

Therefore, in the context of "elements related to the structure of the relevant market", it can be stated that coordination between undertakings is more likely in markets that are sufficiently transparent, concentrated, uncomplicated, stable and symmetrical.[6]

When we look at the exchange of information in terms of the characteristics of the shared information, the most important issues here are whether the information is competitively sensitive (strategic) information. When we look at the exchange of information in terms of the characteristics of the shared information, the most important issues here are whether the information is sensitive to competition (strategic) information. As accepted in the Turkish Competition Board’s Guidelines on Horizontal Cooperation Agreements, information on price, quantity, customers, costs, turnover, sales, purchases, capacity, product qualities, marketing plans, risks, investments, technologies, Research and Development programs and similar information are competitively sensitive and information about price and quantity is expressed as information with the highest strategic quality. These are followed by information on cost and demand.[7]

Other issues that are important in terms of the characteristics of the shared information; "age of shared data", "degree of market coverage", "aggregated or undertaking-based data", "frequency of information exchange", "whether the shared information is publicly available".

In this context, it should be noted that the exchange of historical data is less likely to restrict competition than the change of current and future data. Although there is no determination regarding the age of the data, according to the Turkish Competition Board, whether the data is up-to-date or not should be evaluated on a sector-by-sector basis.

With regard to aggregated/undertaking-based data; It should be noted that the exchange of information aggregated in such a way as to make it sufficiently difficult for any undertaking to determine its individual data is much less likely to cause restrictive effects on competition than the exchange of information on an undertaking basis. Because, the exchange of information on the basis of the undertaking will make it easier for the undertakings to reach a common understanding of the market, as well as make it possible for the parties to develop punishment strategies by targeting the undertakings that deviate from the agreement or enter the market.

In terms of the frequency of information exchange, it should be stated that frequent information exchanges increase the risk of collaborative outcomes. On the other hand, when evaluating the restrictive effects of information exchange on competition, the degree to which the undertakings engaged in information exchange cover the relevant market is taken into consideration; that the impact of competition is only possible when it comes to sharing information covering a large part of the relevant market, is expressed in the decisions of the Turkish Competition Board.[8]

On whether the exchange of information is open to the public; It is stated that the "exchange of information that is genuinely publicly available" is not expected to constitute a violation of Article 4 of the "Law on the Protection of Competition". “Genuinely publicly available information" refers to information that is equally accessible to all competitors and customers in terms of the costs of accessing information. Accordingly, the exchange of genuinely publicly available information is less risky for competition.[9]

Another important issue in terms of information exchange in competition law, as expressed in the Guidelines on Horizontal Cooperation Agreements, there is no difference between an undertaking's unilateral disclosure of its competition-sensitive information by means of mail, e-mail, telephone calls, meetings to its competitors who explicitly or implicitly accept them, and the fact that many undertakings inform each other about their objectives and plans.[10]

The Guidelines state that even if an undertaking has only attended a meeting where its pricing policy is explained to competitors, it can be considered under Article 4 of the Act, even if no agreement has been reached to raise prices. It also states in the Guidelines that when an undertaking is sent any form of competitively sensitive information by its competitor, if the undertaking does not give a clear response that it does not wish to receive such information, the undertaking shall be deemed to have accepted that information and changed its conduct in the market based on that information.

Conclusion

The exchange of information between undertakings can be carried out in a wide variety of ways. Information may be shared directly or indirectly between competing undertakings. The exchange of information can be the main subject of an agreement or part of another horizontal agreement. Just as the exchange of information can be very beneficial for competitors, consumers and the competition process, the exchange of "certain types of information" under "certain market conditions" can pose dangers for the competition process.

In this context, whether the information exchanges between competitors will have a limiting effect on competition depends on two main variables, which are; are "the structure of the relevant market" and "characteristics of shared knowledge". Elements related to the structure of the relevant market; the degree of concentration of the market, its transparency, stability, complexity and similarity (symmetry) of the undertakings in the market. It should be noted that coordination between undertakings is more likely in markets that are sufficiently transparent, concentrated, uncomplicated, stable and symmetrical.

Issues that are important in terms of the characteristics of the shared information; whether the information is strategic or not, "age" of the shared data, "degree of market coverage", "aggregated or undertaking-based data", "frequency of information exchange", "whether the shared information is publicly available". In this context, it should be noted that information exchanges related to historical data that do not cover the relevant market to a large extent, that are not frequent, aggregated and are genuinely publicly available, will cause less concern in terms of competition.