Predatory Pricing Under Turkish Competition Law

Introduction

Predatory pricing under Turkish Competition Law is one of the most complex forms of abuse of dominance. It concerns situations where a dominant undertaking deliberately sets prices below an economically meaningful cost benchmark in order to exclude, discipline or weaken competitors, prevent market entry, or preserve and increase market power. The difficulty is that low prices are normally beneficial for consumers. Competition law should not punish aggressive price competition simply because competitors dislike it. At the same time, a dominant company may use artificially low prices as a strategic weapon to remove rivals and later harm consumers through higher prices, lower quality, reduced innovation or limited choice.

The principal legal basis is Article 6 of Law No. 4054 on the Protection of Competition, which prohibits the abuse of a dominant position in a market for goods or services within all or part of Turkey. Article 6 covers exclusionary conduct that prevents competitors from entering the market or complicates their activities, discriminatory practices, tying and other abusive strategies. Predatory pricing is not listed by name in Article 6, but it is treated as a form of exclusionary abuse where the legal and economic conditions are met.

The Turkish Competition Authority’s Guidelines on the Assessment of Exclusionary Conduct by Dominant Undertakings define predatory pricing as an anti-competitive pricing strategy in which a dominant undertaking accepts short-term sacrifice by pricing below cost in order to exclude existing or potential competitors, discipline them, or prevent their competitive behavior. The Guidelines also emphasize that although consumers may benefit from low prices in the short term, the restriction of competition may lead to higher prices, lower quality and reduced consumer choice in the medium or long term.

For businesses operating in Turkey, the key lesson is clear: low pricing is generally lawful, but a dominant undertaking must be able to justify its pricing strategy with objective commercial reasons, sound cost data and pro-competitive explanations. Predatory pricing analysis requires dominance, below-cost pricing or sacrifice, likely anti-competitive foreclosure, and consumer harm.

1. What Is Predatory Pricing?

Predatory pricing is a strategy where a dominant undertaking deliberately charges very low prices, often below cost, not merely to compete, but to eliminate or discipline competitors. The undertaking may accept short-term losses because it expects to benefit later from stronger market power.

In a normal competitive market, companies may reduce prices to attract customers, clear stock, respond to demand changes, enter a new market or compete aggressively. Such pricing is usually beneficial for consumers. Predatory pricing is different because its purpose and effect are exclusionary. The dominant undertaking does not simply offer better value; it sacrifices profit in the short term to weaken the competitive structure of the market.

The Turkish Competition Authority’s Guidelines focus on whether the dominant undertaking’s pricing behavior is likely to foreclose a competitor that is as efficient as the dominant undertaking. This approach aims to protect competition, not inefficient competitors. If an equally efficient rival could survive the price level, predatory pricing is harder to establish.

2. Why Predatory Pricing Is Difficult to Prove

Predatory pricing claims are difficult because low prices are usually desirable. Competition authorities must avoid chilling legitimate price competition. If every price cut by a strong company were treated as suspicious, dominant undertakings might avoid discounting, which would harm consumers.

Therefore, Turkish law requires a careful economic analysis. The complainant must show more than aggressive competition. It must show that the undertaking is dominant, that it engaged in below-cost pricing or short-term sacrifice, that the pricing strategy is likely to foreclose effective competition, and that the undertaking may benefit from the strategy through increased market power.

Turkish practice is generally cautious in predatory pricing cases. The Competition Authority must distinguish between pro-consumer discounting and exclusionary below-cost conduct. This requires cost analysis, market definition, dominance analysis, internal documents, pricing data, competitor effects and market dynamics.

3. Article 6 of Law No. 4054

Predatory pricing is assessed under Article 6 of Law No. 4054. The provision prohibits abuse of dominance by one or more undertakings. Dominance itself is not illegal. A company may become dominant because it is efficient, innovative, well-managed or commercially successful. The legal problem arises when dominance is abused.

Article 6 includes examples of abusive conduct, such as preventing competitors from entering the market, complicating competitors’ activities, applying discriminatory conditions to equivalent buyers, tying and restricting production, marketing or technical development to the prejudice of consumers. Predatory pricing may fall within the category of conduct that prevents competitors from entering the market or complicates their activities.

Therefore, a predatory pricing case begins with a dominance assessment. If the undertaking is not dominant, Article 6 will generally not apply. A non-dominant undertaking’s low pricing may harm individual competitors, but it is usually treated as normal competition unless it is part of a separate anti-competitive agreement under Article 4.

4. Dominance as the First Requirement

A predatory pricing allegation requires dominance. Dominance means the ability to act independently from competitors, customers and suppliers in a relevant market. The assessment requires defining the relevant product and geographic market and analyzing market shares, entry barriers, buyer power, brand strength, network effects, access to data, economies of scale, financial strength and control over key inputs.

A high market share may indicate dominance, but it is not the only factor. In digital markets, dominance may arise from data advantages, network effects, user lock-in, platform dependency and ecosystem control. In industrial markets, dominance may arise from capacity, patents, essential inputs, distribution power or regulatory barriers. In retail markets, dominance may be less likely where consumers can switch easily among many alternatives.

Without dominance, predatory pricing is unlikely as an Article 6 abuse. This is logical because a non-dominant company normally cannot recoup losses or eliminate competition sustainably. If a small firm cuts prices below cost, larger rivals may respond, consumers may benefit, and the firm may simply lose money.

5. Relevant Market Definition

Relevant market definition is central to predatory pricing analysis. A company may appear powerful in a narrow segment but weak in a broader market. Conversely, a company may seem ordinary in a broad market but dominant in a specific niche.

The relevant product market includes products or services that consumers regard as interchangeable based on characteristics, price and intended use. The relevant geographic market concerns the area where competitive conditions are sufficiently homogeneous. In digital markets, geographic market definition may be complex because services may be accessible nationally or globally, while regulation, language, payment systems, local consumer habits and logistics may still create national market boundaries.

Predatory pricing cases often involve disputes over market definition. A defendant may argue that the market is broad and competitive. A complainant may argue that the market is narrower and that the alleged predator has substantial market power.

6. Cost Benchmarks in Turkish Predatory Pricing Analysis

Cost analysis is the heart of predatory pricing. The Turkish Guidelines state that the first stage of predatory pricing analysis is to assess whether the dominant undertaking made a short-term sacrifice through its pricing behavior. The Guidelines identify average avoidable cost as a possible starting point for determining whether the undertaking incurred avoidable losses through the conduct.

The Guidelines explain that if a dominant undertaking prices all or part of its output below average avoidable cost, it is incurring a loss that it could have avoided by not producing that output. Failing to cover average avoidable cost indicates short-term sacrifice and suggests that an equally efficient competitor could not serve the targeted customers without loss.

In some exceptional circumstances, the Authority may also consider long-run average incremental cost. This benchmark may be more suitable in markets with very low variable costs, high fixed costs, network industries, technology markets or markets involving high research and development investment. The Guidelines state that if price is above long-run average incremental cost, equally efficient competitors can generally continue operating without loss, and the conduct will not be considered predatory pricing.

7. Average Avoidable Cost

Average avoidable cost, often abbreviated as AAC in English, refers to costs that the undertaking could have avoided if it had not produced the relevant output. In many ordinary short-term cases, AAC may be close to average variable cost because variable costs are the costs most easily avoided in the short run.

However, AAC may also include certain fixed costs where the undertaking made additional investments specifically to implement the alleged predatory strategy. For example, if a dominant firm adds temporary capacity, increases marketing expenditure or creates a targeted discount system specifically to attack a rival, some related costs may become relevant in the cost analysis.

AAC is useful because it asks a practical question: did the dominant undertaking lose money that it could have avoided? If yes, the conduct may indicate sacrifice. But cost below AAC is not the only possible evidence. Internal documents showing a plan to eliminate competitors may also be important.

8. Long-Run Average Incremental Cost

Long-run average incremental cost, or LRAIC, includes all costs that the undertaking incurs to produce a specific product or service in the long run. It is usually higher than AAC because it includes product-specific fixed costs.

LRAIC may be particularly important in technology, telecommunications, digital platforms, network industries and research-intensive markets. These markets may have low marginal costs but high fixed costs. For example, a digital platform may have very low cost for serving one additional user, but very high fixed costs for software, infrastructure, data processing, marketing and product development.

If only short-term variable costs were considered, a pricing strategy in such markets might appear lawful even where it fails to recover product-specific long-run costs and excludes equally efficient rivals. For this reason, the Turkish Guidelines recognize that LRAIC may be a relevant benchmark in appropriate cases.

9. Short-Term Sacrifice

Predatory pricing requires some form of sacrifice. The dominant undertaking must accept losses or forego profits in the short term. Sacrifice may be shown through cost-price comparison or through direct evidence such as internal documents.

The Guidelines state that direct evidence may include a detailed plan prepared by the dominant undertaking showing an intention to incur sacrifice to exclude a competitor, prevent entry or stop the emergence of a new market.

Examples of direct evidence may include internal emails stating that the company will price below cost until the competitor exits, board presentations describing a strategy to “discipline” a new entrant, pricing models showing expected losses followed by future price increases, or documents identifying a rival as a target.

A company’s internal language is therefore important. Aggressive but lawful competition should be described accurately. Employees should avoid wording that suggests exclusionary intent unless that is genuinely and lawfully justified by competition on the merits.

10. Anti-Competitive Foreclosure

Below-cost pricing alone is not always enough. The conduct must be likely to cause anti-competitive foreclosure. This means that the pricing strategy must be capable of excluding or weakening effective competitors in a way that harms competition.

The Turkish Guidelines state that, in predatory pricing analysis, the Authority assesses whether the dominant undertaking’s pricing behavior is likely to lead to anti-competitive foreclosure. The Guidelines also clarify that actual exit of competitors from the market is not necessary. A dominant undertaking may prefer to discipline a competitor and force it to follow the dominant firm’s pricing behavior rather than push it completely out of the market.

This is important. A predatory pricing case may succeed even if the rival remains in the market, if the conduct prevents it from competing effectively. For example, a dominant platform may set prices at a level that stops a smaller rival from expanding, obtaining financing or reaching scale. The rival may survive but become competitively weak.

11. Recoupment and Consumer Harm

In many jurisdictions, predatory pricing analysis considers whether the dominant firm can recoup its short-term losses after rivals are weakened. Turkish Guidelines do not require intervention only where prices later rise above pre-predation levels. The Guidelines state that consumer harm may also exist where the conduct prevents or delays a price decrease that would otherwise have occurred.

This is a flexible approach. It recognizes that consumer harm can take several forms. After predation, the dominant undertaking may increase prices. But it may also reduce innovation, lower service quality, limit choice, impose worse terms, increase commissions, or prevent future competitive pressure from emerging.

In digital markets, recoupment may be indirect. A platform may offer below-cost prices on one side of the market to gain users, exclude rivals and later monetize through advertising, data, commissions or ecosystem control. Therefore, recoupment analysis must account for multi-sided business models.

12. Selective Predatory Pricing

Predatory pricing may be selective. The Guidelines state that it may be easier for a dominant undertaking to engage in predatory conduct where below-cost prices are applied only to certain customers because this limits the losses borne by the undertaking.

Selective predation may occur where the dominant undertaking targets customers of a new entrant, offers special discounts only in regions where entry occurs, matches or undercuts only the rival’s key accounts, or applies below-cost pricing only on products where the rival competes.

Selective pricing can be harder to detect than market-wide below-cost pricing because the dominant undertaking may remain profitable overall. The analysis must therefore examine customer-level, region-level or product-level data.

13. Predatory Pricing in Digital Markets

Digital markets create special predatory pricing questions. Many platforms offer free or very low-priced services to users while earning revenue from advertisers, commissions, data, subscriptions or another side of the market. A price of zero does not automatically mean predation. Many digital business models are legitimately based on free access.

However, digital platforms may still engage in predatory pricing if they use below-cost or unsustainably low pricing to exclude rivals and strengthen market power. The Turkish Competition Authority has stated that digital market abuse cases under Article 6 have become a significant part of its workload, and it has identified data ownership, network effects and platforms’ simultaneous roles as marketplace owners and sellers as possible sources of abuse concerns.

Digital predation may involve below-cost subscriptions, free delivery, subsidized commissions, below-cost advertising, free premium features, targeted underpricing against entrants, or cross-subsidization from other ecosystem services. The analysis must consider multi-sided platform economics, network effects, monetization strategy and long-term market structure.

14. Recent Digital Enforcement Context

Predatory pricing allegations continue to appear in digital market enforcement discussions in Turkey. In September 2025, Reuters reported that the Turkish Competition Authority launched an investigation into Spotify concerning possible discriminatory practices and predatory pricing in the online music streaming market; the probe was reported to examine whether Spotify’s algorithms favored certain rights holders and whether subscription pricing in Turkey unfairly hindered competitors and rights holders.

An investigation is not a finding of infringement. However, it shows that predatory pricing is not merely a traditional industrial pricing issue. It may arise in online music, streaming, platforms, subscription services, app ecosystems, food delivery, e-commerce, online advertising and other digital sectors.

Companies operating digital platforms in Turkey should therefore build competition law review into pricing, subscription, algorithmic recommendation and promotion strategies.

15. Predatory Pricing vs. Promotional Pricing

A key distinction must be made between predatory pricing and lawful promotional pricing. Companies may run discounts, launch campaigns, seasonal sales, introductory offers, loyalty campaigns or clearance sales. Such conduct is generally lawful where it is temporary, economically justified and not designed to exclude competitors.

A new entrant may price aggressively to gain customers. A non-dominant firm may discount to survive. A dominant firm may respond to competition with price reductions if it remains within lawful limits and does not engage in below-cost exclusionary conduct.

Promotional pricing becomes risky where a dominant undertaking repeatedly targets competitors, prices below relevant costs, uses internal documents showing exclusionary intent, and applies the strategy until competitors exit or weaken.

16. Predatory Pricing vs. Loss-Leader Strategy

Retailers and platforms sometimes use loss-leader pricing, where one product is sold at a loss to attract customers who may purchase other profitable products. This may be lawful where the company is not dominant, the practice is temporary, and consumers benefit without foreclosure.

For a dominant undertaking, however, loss-leader strategies require caution. If the loss-leading product is used to exclude competitors in that product market or related markets, Article 6 concerns may arise. The analysis should consider whether the losses are commercially justified, whether the pricing is targeted at rivals, whether competitors can match the price, and whether the strategy harms competition.

17. Predatory Pricing and Margin Squeeze

Predatory pricing should be distinguished from margin squeeze. Predatory pricing usually concerns below-cost pricing by a dominant undertaking in a market where it competes. Margin squeeze occurs where a vertically integrated dominant undertaking supplies an upstream input to downstream competitors and also competes downstream, setting wholesale and retail prices so that an efficient downstream competitor cannot profitably compete.

Both are exclusionary pricing abuses, but the legal tests differ. Predatory pricing focuses on below-cost retail pricing and sacrifice. Margin squeeze focuses on the spread between upstream and downstream prices. In some markets, the same conduct may raise both issues, especially in telecoms, energy, digital advertising, logistics, payment systems or platform services.

18. Evidence in Predatory Pricing Cases

Evidence is central in predatory pricing investigations. The Turkish Competition Authority may examine:

Cost accounting records
Price lists
Customer-level discount data
Campaign documents
Board presentations
Internal emails
Business plans
Market entry monitoring reports
Competitor tracking files
Regional pricing data
Product-level profitability
Subscription and monetization models
Algorithmic pricing rules
Consumer data and platform metrics

The defendant should be able to explain its pricing with credible commercial reasons. Examples include cost reductions, efficiency gains, inventory clearance, temporary campaign strategy, response to demand changes, entry into a new product segment, competition from rivals, economies of scale or consumer acquisition strategy.

However, explanations must be supported by documents. A post-investigation justification may be weak if internal records show a different motive.

19. Defenses and Objective Justifications

A dominant undertaking may defend its pricing strategy by showing objective justification or efficiencies. For example, low prices may result from cost efficiencies, economies of scale, temporary stock clearance, perishability, seasonal demand, introductory launch strategy, matching competition, technological improvements or increased capacity utilization.

The Turkish Guidelines recognize that efficiency defenses may be considered where relevant conditions are met. They also note that predatory conduct is generally unlikely to create efficiencies, but the Authority may consider arguments such as low pricing enabling scale economies or market expansion where the required conditions are satisfied.

A strong defense should show that the pricing strategy benefits consumers, is not exclusionary, is proportionate, and does not eliminate effective competition. The undertaking should also show that less restrictive alternatives were not available.

20. Compliance Program for Dominant Undertakings

Dominant or potentially dominant undertakings should implement specific pricing compliance procedures. Ordinary sales freedom may not be enough where the company has market power.

A pricing compliance program should include:

Relevant market and dominance monitoring.

Cost benchmark analysis before aggressive campaigns.

Legal review of below-cost pricing.

Documentation of commercial justification.

Customer-level discount approval rules.

Review of targeted pricing against new entrants.

Controls over internal language.

Monitoring of competitor effects.

Digital platform pricing audits.

Review of algorithmic pricing tools.

Training for sales, finance, strategy and product teams.

The company should also maintain accurate cost accounting. Predatory pricing cases often turn on cost benchmarks. If cost data is unreliable, the company may struggle to defend its pricing.

21. Practical Checklist Before Launching a Low-Price Campaign

A dominant or potentially dominant company should ask:

Are we dominant or close to dominant in the relevant market?

What is the relevant product and geographic market?

Is the campaign price below average avoidable cost?

Is it below long-run average incremental cost?

Is the campaign targeted at a specific rival, customer group or region?

Do internal documents mention excluding, disciplining or weakening competitors?

Is the campaign temporary and objectively justified?

Can we prove efficiencies or consumer benefits?

Could an equally efficient competitor survive this pricing?

Will the campaign prevent entry or expansion?

Is the pricing linked to another market or platform side?

Have legal and finance teams reviewed the strategy?

If these questions raise concerns, the pricing strategy should be revised before implementation.

22. Risks for Complainants

Companies alleging predatory pricing should also prepare carefully. A complaint based only on “the competitor’s prices are too low” will usually be weak. The complainant should provide market definition arguments, dominance evidence, price-cost indicators, targeted conduct evidence, foreclosure effects, internal market data, customer loss evidence and information showing that the conduct is not ordinary competition.

Predatory pricing complaints must avoid appearing as an attempt to prevent legitimate discounting. Competition law protects competition, not competitors. A complainant should therefore focus on harm to the competitive process and consumers, not merely its own reduced profits.

23. Administrative Fines and Legal Consequences

If predatory pricing is found to violate Article 6, the Turkish Competition Board may impose administrative fines. Under Law No. 4054, substantive violations of Articles 4, 6 and 7 may result in fines of up to 10% of annual gross revenues. Managers or employees with decisive influence may also face personal exposure under the law’s fining framework.

The Board may also order the undertaking to terminate the abusive conduct. In platform or network markets, remedies may involve changes to pricing, commissions, subscription models, access rules, campaign structures or algorithmic systems. Private damages claims may also follow if competitors or customers can prove harm caused by the abuse.

24. Predatory Pricing in Merger and Investment Strategy

Predatory pricing risks may also appear in merger control and investment strategy. A dominant company acquiring a loss-making rival may argue that the target’s low prices were unsustainable. Conversely, a merger may raise concerns if it eliminates a low-priced competitor and allows the dominant firm to recoup previous losses.

Investors should examine whether a target’s pricing strategy is legally sustainable. A startup offering free or subsidized services may be commercially acceptable, but if it is controlled by a dominant group and used to exclude competitors, competition risk may arise.

Due diligence should review pricing models, cost structures, market position, internal documents, competitor targeting and regulatory history.

Conclusion

Predatory pricing under Turkish Competition Law is a sophisticated form of exclusionary abuse. It is assessed under Article 6 of Law No. 4054, which prohibits abuse of dominant position. Low prices are not unlawful by themselves. On the contrary, price competition is one of the central benefits of competitive markets. The legal problem arises when a dominant undertaking accepts short-term sacrifice by pricing below relevant cost benchmarks in order to exclude, discipline or weaken competitors and thereby harm competition.

The Turkish Competition Authority’s Guidelines define predatory pricing as a strategy where a dominant undertaking prices below cost in the short term to exclude existing or potential competitors, discipline them, or prevent their competitive behavior. The Guidelines use average avoidable cost as an important starting point and recognize long-run average incremental cost as a relevant benchmark in certain markets, especially technology, network and high fixed-cost industries.

A finding of predatory pricing does not require that competitors have already exited the market. It may be enough that the conduct prevents effective competition, disciplines rivals or delays competitive pressure. Consumer harm may appear through later price increases, lower quality, reduced innovation, limited choice, or prevention of price decreases that would otherwise have occurred.

Digital markets add new complexity. Free services, below-cost subscriptions, cross-subsidization, data monetization, network effects and platform ecosystems require careful economic analysis. The Turkish Competition Authority has identified abuse of dominance in digital markets as an increasingly important enforcement area, and recent digital investigations show that predatory pricing allegations remain relevant in platform sectors.

For dominant undertakings, the safest approach is proactive pricing compliance. Aggressive pricing should be supported by reliable cost data, objective commercial justifications, clear documentation and legal review. Sales, finance, strategy, product and data teams should understand that below-cost pricing by a dominant company can create serious legal exposure. For complainants, predatory pricing claims must be supported by evidence of dominance, below-cost sacrifice, likely foreclosure and harm to the competitive process.

In Turkey’s active competition enforcement environment, predatory pricing is not merely a theoretical abuse. It is a real risk for dominant companies in traditional industries, regulated sectors and digital platforms. A well-designed competition compliance program can help businesses compete aggressively while avoiding pricing strategies that may be interpreted as exclusionary abuse under Turkish Competition Law.