Competition Law (EU, USA, Turkey) 1. General Aspects of Competition Law 2. Creating Efficiencies in the Marketplace 3. Competition Law in the EU 4. Competition Law in the USA 5. Competition Law in Turkey

1. GENERAL ASPECTS OF COMPETITION LAW A) Purpose of Competition Law 1) To protect & promote competition – Why? 2) Addresses the whole competitive process in retail chain B) Positive Aspects of Competition 1) Cost efficiency, lower prices, innovation 2) Should result in higher level of consumer welfare 3) Although competition is good, uncontrolled is ??? C) Three Areas of Concern 1) Agreements between firms (acts of collusion) 2) Abuse of market power (dominant firms) 3) Too much concentration of power (mergers)

2. CREATING EFFICIENCIES IN MARKETPLACE A) Produce good/service with the least amount of resources B) Produce items that are most desired by community 1) Use resources in a good way 2) Be aware of changes in demand

C) C) “Law and Economics” Theory 1) Says laws and rules should be crafted to promote efficiency and wealth maximization 2) Dominant theory in the West through 1960s/1970s 3) Also used in tort cases (to see if a duty of care exists) B – burden/cost of taking precautions P – probability of injury L – loss/resulting injury (If B < P x L, then a duty of care exists) 4) Theory also influences insurance & competition law C)

1) Assumes that people make predictable, rational choices D) Critique of “Law and Economics” Theory 1) Assumes that people make predictable, rational choices 2) If a rule is good because it makes people “better off,” how do we define what we mean by “better off”? 3) Sometimes other legal values conflict with or supersede economic considerations (e.g., should organ or baby selling be allowed?) 4) Although efficiency may be a good by-product of laws, should it be the overall goal of laws? 5) Some forms of competition may negatively affect our ability to integrate, stay healthy, and trust each other

3. COMPETITION LAW IN THE EU A) Purpose of Competition Law is Not So Clear 1) Should it focus on efficiency alone? 2) Should it focus mainly on EU goal of market integration? 3) Should it focus on general market freedoms desired in democracies? 4) Should it try to promote multiple EU goals? B) EU Competition Law Originated from Many Different National Systems - Result was Arts. 101/102 of EU Treaty C) Trend has been to foster citizens’ overall “well-being” 1) Efficiency is not the only thing that promotes well-being 2) EU competition law promotes multiple policy objectives

4. COMPETITION LAW IN THE USA A) Greatly Influenced by “Chicago School” of thought B) Focus on Consumer Welfare (efficiency principles) C) Anti-Trust law should promote marketplace efficiency 1) Competition improves efficiency 2) Efficiency leads to consumer well-being (lower prices, better choices of goods, innovation)

A. Monopolistic Behavior Prohibited (single firm) USA - Sherman Act (1890) A. Monopolistic Behavior Prohibited (single firm) 1. Monopoly: single business has the power to fix prices and/or exclude competitors from the market 2. Attempts to monopolize are also prohibited 3. Examples of predatory/anti-competitive conduct: - stealing trade secrets - interfering with Ks that 3rd parties have with competitor - attempts to destroy competitor’s reputation - predatory pricing

B. Certain Trade Restraints are Prohibited (multiple firms) 1. Which ones? (all three elements must be present): a. Concerted action (collusion/conspiracy) b. Involving interstate commerce, which is an c. Unreasonable restraint of trade - Interferes w/law of supply and demand (reduces competition) 2. Some acts are inherently (per se) “unreasonable” a. Horizontal restraints (occur b/t competitors in same level of market) – e.g. price fixing, division of markets, boycotts b. Vertical restraints (occur b/t entities at different levels of manufacture/distribution process) – e.g. price fixing, territory restrictions, tying agreements, exclusive dealing agreements 3. Some acts are “unreasonable” because the anti-competitive effects outweigh the pro-competitive effects * Court looks at the reasons, scope, effects, and intent of action

USA - Clayton Act (1914) A. Targets Activity that Substantially Lessens Competition or Tends to Create a Monopoly B. Explicit Prohibitions (more specific than Sherman): 1. Predatory Pricing 2. Tying Arrangements / Exclusive Dealing Contracts a. Tying Arrangement - seller sells product to buyer on condition that buyer also takes a 2nd “tied” product along with the 1st (e.g., Microsoft operating system + software) b. Exclusive Dealing Contract - one party requires the other to sell and promote only the brand of goods supplied by first party 3. Certain Mergers (check market share / impact on competition) a. Horizontal - tends to eliminate a competitor b. Vertical - integrates firms that have supplier-retailer relationship

COMMONALITIES – USA / EU LAW A) Both Address “Agreements” (Collusions) 1) USA – Section 1 of the Sherman Act 2) EU – Article 101 of EU Treaty * This is where we see the greatest convergence in laws B) Both Address Single Firm Behavior (Abuse of Position) 1) USA – Section 2 of the Sherman Act 2) EU – Article 102 of EU Treaty * This is where we see the greatest differences in laws - USA law tends to focus on firms with a very large market share (relative to entire market) - EU law tends to focus on firms that are “dominant”