| Metin PEKTAŞ Competition Law Partner | Beyza SARIPINAR Lawyer | Oğuzhan TUĞLA Trainee Lawyer |
ABSTRACT With the acceleration of digitalisation, e-commerce platforms have become fundamental trading venues for consumers and sellers. These developments have led to diversification of services offered in marketplaces and optimisation of transaction processes through sophisticated algorithms. In this context, BuyBox practices, which directly influence consumer preferences and shape visibility competition among sellers, constitute one of the practices that must be carefully evaluated from the perspective of competition law. Particularly in multi-seller platforms such as Amazon, Trendyol, and Hepsiburada, how BuyBox algorithms are structured; whether these algorithms give rise to risks of discrimination among sellers, self-preferencing, or price coordination remains at the centre of competition authorities’ focus. This article will examine the effects of BuyBox practices on competition law in light of recent decisions rendered by the Competition Board concerning Trendyol and Hepsiburada, as well as precedent evaluations by foreign authorities.
Keywords: Buybox, Algorithmic Pricing, Digital Marketplaces, Platform Economy.
1. The Concept and Operation of BuyBox The BuyBox algorithm determines the seller that will provide the highest benefit for the end consumer in cases where multiple sellers offer the same product, thereby bringing that seller’s offer to the forefront. This ranking provided by the algorithm creates a visibility advantage and directly affects the commercial success of the relevant seller. In our country, multi-category online marketplaces such as Trendyol, Hepsiburada, Amazon, and n11 actively implement the BuyBox algorithm. For instance, Amazon utilises the BuyBox area as the location on the product detail page where consumers conduct transactions through “Add to Cart” or “Buy Now” buttons.¹ Transactions conducted through this area are directed directly to the product of the seller who wins the BuyBox, and this situation provides a significant competitive advantage to the relevant seller.¹ Which seller the aforementioned algorithm will highlight depends on certain criteria that vary from platform to platform. Generally, product price, seller performance score, whether free shipping is offered, and cargo delivery time are among these criteria.² It is observed that the criterion with the highest weight among these elements is the product price. Sellers endeavour to reduce their prices, ship their products in a shorter time, offer free shipping options, and increase their service scores oriented towards customer satisfaction in order to win the BuyBox. As a result of these dynamics, prices paid by consumers for products decrease, service quality increases, and consumers’ search costs diminish. Consequently, the BuyBox practice contributes to the formation of competitive market outcomes with the aforementioned aspects.
2. Potential Competitive Concerns Notwithstanding the aforementioned efficiency gains, certain competitive concerns may arise as a result of BuyBox practices. In this framework, first and foremost, tacit collaborations between undertakings will be evaluated. Within this context, the determination of the BuyBox-winning seller not through price competition but as a result of direct or indirect collusion among competing sellers, or the provider making unilateral interventions regarding BuyBox allocation, gives rise to serious impediments from the perspective of competition law. In particular, sellers shaping the BuyBox practice through the provider’s direction without establishing direct communication among themselves enables undertakings to coordinate their existing and future behaviours. Such collusion is considered to constitute an agreement, concerted practice, or decision restricting competition within the scope of Article 4 of Law No. 4054 on the Protection of Competition (“Law No. 4054”) and therefore constitutes an infringement.³ On the other hand, the provider directing sellers not to win the BuyBox or directly determining the price level required for the BuyBox may prevent sales at low prices and may acquire the character of resale price maintenance. Such interventions may cause restriction of competition within the framework of a vertical relationship between the provider and the seller. Additionally, in cases where undertakings utilise the same dynamic pricing system, the possibility of establishing a hub-and-spoke cartel through these systems emerges before us as a significant matter. In this context, the provider offering a single algorithm and ensuring its adoption by competitors in the market results in the convergence of the relevant undertakings’ pricing. In such a system, although there is no direct information sharing among competitors, a single algorithm centralised in price determination enables the establishment of tacit coordination. In this structure where the probability of deviation from competition decreases, an environment is created where competitors can monitor price changes instantaneously, and in case one undertaking reduces its prices, it becomes possible for other undertakings to take countermeasures in a short period. In this context, price monitoring software and dynamic pricing systems enhance the functionality of hub-and-spoke cartels; they concretise horizontal coordination behaviours prohibited in competition law through technology. Therefore, the effects of the aforementioned algorithms on competition must be carefully examined, and the role of providers must be evaluated as a critical element regarding the establishment of concerted practices between undertakings.⁴ Finally, within the scope of algorithmic harm theories, it is accepted that the negative effects of algorithms on competition may materialise not only through coordinated behaviours but also through unilateral actions. It is observed that algorithms are subject to intensive examinations by foreign competition authorities, particularly within the scope of abuse of dominant position. This situation gives rise to serious suspicions that digital platforms establish their economic power through algorithms. In this context, algorithmic exclusionary practices may manifest themselves in the form of the undertaking adopting predatory pricing strategies to exclude from the market, the undertaking giving priority to products and services it offers itself, developing discriminatory discount policies, and creating market-foreclosing effects through practices such as tying or bundling. On the other hand, algorithmic exploitative behaviours appear in such practices as excessive pricing, imposition of unfair trading conditions, and price discrimination. All of these are evaluated as abuse of dominant position infringement within the scope of Article 6 of Law No. 4054.
3. BuyBox Practices in Competition Board Decisions Under this heading, recent decisions rendered by the Competition Board concerning Hepsiburada and Trendyol will be addressed.
3.1. Hepsiburada Decision⁵ The investigation initiated by the Competition Board regarding Hepsiburada’s BuyBox practices was concluded upon acceptance of the commitments submitted by Hepsiburada. In the decision, the BuyBox practice employed by Hepsiburada was stated to be a mechanism that aggregates these products under a single heading in cases where there are multiple sellers of the same product, and thus brings the seller who wins the BuyBox with determined algorithm metrics to the forefront when that product is searched. It was indicated that with this system, when the user clicks the “Add to Cart” or “Buy Now” button, the product that has won the BuyBox is added to the cart. It was stated that when determining the price on the seller’s sales screen, three fundamental conditions emerge on the Trendyol screen as “Stay Below BuyBox Price”, “Equalise to BuyBox Price”, and “Stay Above BuyBox Price”. In the evaluation conducted by the Board, it was revealed regarding competitive concerns that the automatic pricing mechanism developed by Hepsiburada through BuyBox could influence the decision-making mechanisms of sellers in the buyer position, thereby creating an effect similar to hub-and-spoke cartels. Furthermore, it was emphasised in the decision that competitive concerns could also arise regarding the matter of price fixation, which was evaluated as a clear and severe infringement. As a result of the aforementioned concerns, Hepsiburada submitted the commitments set forth below to the Board’s evaluation:
- The “Equalise to BuyBox Price” option will be removed from the automatic pricing mechanism, and only the “Stay Below BuyBox Price” and “Stay Above BuyBox Price” options will be presented to sellers.
- Hepsiburada will not compel sellers to use the automatic pricing mechanism and will not offer any incentive that would lead to the same result as compulsion.
- The use of the automatic pricing mechanism by sellers will not be included as a criterion in the BuyBox algorithm, and the use of the automatic pricing mechanism will not be incorporated among the parameters in the BuyBox algorithm.
- Data belonging to other sellers regarding the use of the automatic pricing mechanism, such as “Automatic pricing mechanism is used for this product”, “….number of sellers use automatic pricing mechanism for this product”, “….rule was established for this product for ….number”, will not be shared with sellers.
- Among the aforementioned commitments, the removal of the “Equalise to BuyBox Price” option from the automatic pricing mechanism will be implemented within two months from the notification of the short decision, while the others will be implemented together with the short decision.
- The commitments will be implemented by Hepsiburada on an indefinite basis.
- In order to ensure that compliance with the commitments can be monitored, Hepsiburada will submit a report to the Authority annually, commencing one year after the notification of the reasoned decision. With the Board finding the submitted commitments adequate, the investigation initiated concerning Hepsiburada was terminated.
3.2. Trendyol Decision⁶ The investigation initiated by the Competition Board regarding Trendyol’s BuyBox practices was concluded upon acceptance of the commitments submitted by Trendyol in the decision. The BuyBox practice employed by Trendyol was stated to be a mechanism that aggregates these products under a single heading in cases where there are multiple sellers of the same product, and thus brings the seller who wins the BuyBox with determined algorithm metrics to the forefront when that product is searched. It was indicated that with this system, when the user clicks the “Add to Cart” or “Buy Now” button, the product that has won the BuyBox is added to the cart. It was stated that when determining the price on the seller’s sales screen, three fundamental conditions emerge on the Trendyol screen as “Stay Below BuyBox Price”, “Equalise to BuyBox Price”, and “Stay Above BuyBox Price”. In the evaluation conducted by the Board, it was revealed regarding competitive concerns, similar to the Hepsiburada decision, that the automatic pricing mechanism developed by Trendyol through BuyBox could influence the decision-making mechanisms of sellers in the buyer position, thereby creating an effect similar to hub-and-spoke cartels, and that competitive concerns could also arise regarding the matter of price fixation, which was evaluated as a clear and severe infringement. As a result of the aforementioned concerns, Trendyol submitted the commitments set forth below to the Board’s evaluation:
- Trendyol will not compel its sellers to use the automatic pricing mechanism.
- When defining rules in Trendyol’s automatic pricing mechanism, no specific seller or sellers will be targeted.
- The “Equalise to BuyBox Price” rule type in the automatic pricing mechanism will be removed.
- The use of the automatic pricing mechanism will not be taken into account as a parameter in Trendyol’s BuyBox algorithm.
- Sellers will not be able to access information regarding which products and to what extent other sellers using the automatic pricing mechanism have defined rules.
- Sellers will be informed about the features of the automatic pricing mechanism. Training content regarding the operation of the automatic pricing mechanism will be made accessible to sellers.
- Competition Law trainings will be provided to Trendyol employees to raise awareness regarding the concerns within the scope of the investigation and the submitted commitments.
- Trendyol will submit an Independent Auditor Report to the Authority annually for a period of 3 years regarding the commitments. With the Board finding the submitted commitments adequate, the investigation initiated concerning Trendyol was terminated.
4. BuyBox Practices in Foreign Authority Decisions In this framework, the approaches of foreign competition authorities regarding BuyBox practices will be examined, and the differences between these two approaches will be scrutinised.
4.1. The Case Filed Regarding Amazon’s BuyBox Practices in the USA⁷ The US Federal Trade Commission (“FTC”) together with 19 states filed a lawsuit against Amazon.com Inc. in the US District Court for the Western District of Washington in 2023 alleging violations of competition law. Within the scope of the lawsuit, it was alleged that Amazon engaged in illegal monopolisation particularly through pricing algorithms in the online store market and online seller services markets, and thereby harmed consumers. As a result of the proceedings, Amazon’s objections within the scope of federal antitrust laws were rejected, and the claims were accepted. In the case at hand, particularly the operation of Amazon’s BuyBox mechanism and three different pricing algorithms were examined. In the first algorithm, it was alleged that Amazon excluded third-party sellers who sold their products at lower prices elsewhere from the BuyBox on its own platform. Given that BuyBox visibility affects 98% of sales on Amazon, it was alleged that this practice created a serious competitive disadvantage for third-party sellers. The court evaluated that these claims reasonably demonstrated that competition was restricted within the scope of Section 2 of the Sherman Act. In the second algorithm, it was alleged that Amazon updated its own product prices by instantaneously copying the prices of other retailers, and thereby prevented “perfect competition” conditions in the market. It was accepted that this practice could also constitute an infringement within the same scope. Thirdly, it was stated that the algorithm named “Project Nessie” constituted an independent competition violation aimed at pulling up consumer prices by triggering competitors’ price increases. The court found the FTC’s “unfair method of competition” claim sufficient only under Section 5 of the FTC Act for this algorithm and accepted an independent Section 5 claim in a federal court for the first time in forty years. Consequently, the court ruled that the allegations that Amazon restricted competition with its pricing algorithms must be evaluated seriously; and decided that the litigation process should continue for all of Amazon’s federal antitrust claims.
4.2. European Commission’s Decision Regarding Amazon’s BuyBox Practices⁸ The European Commission (“Commission”) launched a formal investigation on 17 July 2019 to determine whether Amazon’s use of confidential data of independent sellers operating in its online marketplace violated competition law. Following this initial investigation, on 10 November 2020, the Commission initiated a second investigation regarding Amazon’s BuyBox practices and Prime programme. While the first examination evaluated whether Amazon distorted competition by using competitor sellers’ data in its own retail decisions; the second investigation focused on whether the BuyBox and Prime systems unfairly favoured Amazon’s own products and sellers who preferred Amazon’s logistics services. The Commission stated in its preliminary assessment reports that Amazon held a dominant position in the German and French online marketplaces and abused this dominant position. In particular, it was evaluated that in the BuyBox practice, Amazon systematically brought to the forefront its own retail products and sellers using Amazon’s logistics services; this situation reduced independent sellers’ chances of competing and adversely affected consumer welfare. Additionally, Amazon’s access to competitor sellers’ data by virtue of its position as platform operator and using this data for its own benefit was also regarded as a serious competition infringement risk. Upon these findings, Amazon submitted commitments to address the European Commission’s competition concerns. On 20 December 2022, the Commission made the final commitments submitted by Amazon binding. Amazon committed to making a second BuyBox offer more visible, ensuring neutrality among logistics service providers in the Prime programme, ensuring data protection for independent carriers, and making arrangements that would facilitate sellers’ exit from the Prime system. The duration of the commitments was determined as seven years and was ensured to be valid in all existing and future Amazon marketplaces in the European Economic Area.
CONCLUSION Although improvements regarding consumer welfare occur with BuyBox practices, it appears probable that many exclusionary and exploitative effects concerning tacit collusion, hub-and-spoke cartels, and abuse of dominant position may emerge in such practices. Indeed, in the decisions rendered by both the Competition Board and foreign authorities on this matter, attention has been drawn to the aforementioned anti-competitive effects. We observe that competition authorities utilise different competition law instruments against these risks in digital marketplaces. In the US model, violation detection and punishment were pursued with classical antitrust logic, and legal liability was attempted to be established through the court process. In contrast, the European Commission and the Competition Board preferred to directly restore competitive balance by imposing behavioural obligations through the commitment procedure. Additionally, while the structural effects of algorithmic pricing on competition were addressed more intensively in the FTC case, discrimination and competition problems based on data usage that emerged in the Commission decision were brought to the forefront. In the future, it is expected that competition authorities will intervene more closely in algorithmic decision systems and increase platforms’ transparency obligations. Therefore, practices such as BuyBox will continue to occupy a central position in competition law as strategic mechanisms that shape not only intra-platform competition but the general market structure.
¹ Transactions conducted through this area are directed directly to the product of the seller who wins the BuyBox, and this situation provides a significant competitive advantage to the relevant seller.
² Generally, product price, seller performance score, whether free shipping is offered, and cargo delivery time are among these criteria.
³ Such collusion is considered to constitute an agreement, concerted practice, or decision restricting competition within the scope of Article 4 of Law No. 4054 on the Protection of Competition (“Law No. 4054”) and therefore constitutes an infringement.
⁴ Therefore, the effects of the aforementioned algorithms on competition must be carefully examined, and the role of providers must be evaluated as a critical element regarding the establishment of concerted practices between undertakings.
⁵ The investigation initiated by the Competition Board regarding Hepsiburada’s BuyBox practices was concluded upon acceptance of the commitments submitted by Hepsiburada.
⁶ The investigation initiated by the Competition Board regarding Trendyol’s BuyBox practices was concluded upon acceptance of the commitments submitted by Trendyol in the decision.
⁷ The US Federal Trade Commission (“FTC”) together with 19 states filed a lawsuit against Amazon.com Inc. in the US District Court for the Western District of Washington in 2023 alleging violations of competition law.
⁸ The European Commission (“Commission”) launched a formal investigation on 17 July 2019 to determine whether Amazon’s use of confidential data of independent sellers operating in its online marketplace violated competition law.