Oligopoly Market and Competition Law
Entrance
The behavior of businesses, one of the most fundamental actors in market economies, is central to the regulatory scope of competition law. Competition law aims to ensure the effective functioning of the free market mechanism, the protection of consumer welfare, and the increase of economic efficiency. In this context, oligopoly market structures are of particular importance from the perspective of competition law. This is because oligopoly markets are characterized by a small number of active undertakings, barriers to entry, and pricing decisions shaped by mutual interdependence.
In Turkish competition law, Articles 4, 6, and 7 of Law No. 4054 on the Protection of Competition ("RKHK") play a decisive role in the supervision of oligopolistic markets. In European Union ("EU") law, Articles 101 and 102 of the Treaty on the Functioning of the European Union ("CFE"), along with the decisions of the EU Commission and the European Court of Justice ("ECJ"), constitute the primary sources for the legal assessment of oligopolistic markets.
This study will first examine the definition, economic, and legal characteristics of oligopoly markets; then, it will address the violations, decisions, and legal consequences that oligopoly markets may cause within the context of Turkish competition law and EU competition law. Finally, the last section will offer suggestions for ensuring the effectiveness of competition law in oligopoly markets.
I. Definition and Characteristics of an Oligopoly Market
1. Economic Definition
Oligopoly is a market structure in which the production and sale of a particular good or service are controlled by a small number of enterprises. This structure is an intermediate form between perfect competition and monopoly. The main characteristics of oligopoly markets are as follows:
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Few vendors: The number of businesses dominating the market is limited.
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Barriers to entry: High capital requirements, access to technology, and regulations make it difficult for new entrants to the market.
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Interdependence: Firms make pricing and production decisions taking into account the behavior of their competitors.
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High concentration ratio: Market share is divided among a few firms.
2. Legal Definition
From a legal perspective, oligopolistic markets are identified by competition authorities through examination of concentration ratios, number of undertakings, barriers to entry, and price formation mechanisms. In Turkish competition law practice, the concepts of "oligopolistic coordination" or "covert cartel" are frequently raised in the decisions of the Competition Board.
II. Regulation of Oligopoly Markets in Turkish Law
1. Article 4 of Law No. 4054: Cartels and Agreements
The most common form of breach in oligopoly markets is through overt or covert agreements between undertakings.
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price fixing, production limitations, and territorial sharing are considered "restrictive of competition" under Article 4.
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In an oligopoly market, firms can develop coordinated behavior based on mutual dependence, even without explicit agreement. This is where a "tacit collusion" comes into play.
of the 11th Civil Chamber of the Supreme Court of Appeals, numbered 2017/4358 E., 2019/2211 K. , it is not necessary for the parties to reach an explicit agreement to determine whether an agreement restricts competition; de facto coordination also constitutes a violation.
2. Article 6 of Law No. 4054: Abuse of Dominant Position
In oligopoly markets, it is possible for several undertakings, rather than a single undertaking, to hold a dominant position.
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collective dominance is accepted in the decisions of the Competition Board.
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In this context, if oligopolistic coordination impairs the competitive structure of the market, undertakings may be held liable under Article 6.
For example, the Competition Board's Cement Decision No. 2011/54-1471-533serves as a precedent in identifying oligopolistic coordination.
3. Article 7 of Law No. 4054: Control of Concentrations
Oligopoly markets can become even more concentrated as a result of mergers and acquisitions.
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According to Article 7 of the law, mergers that create a dominant position or strengthen an existing dominant position are prohibited.
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The Competition Board is meticulously examining concentrations of activity, particularly in the banking, telecommunications, and energy sectors.
III. Oligopoly Markets in EU Law
1. ABİHA Article 101: Cartels and Coordination
In EU law, the most critical problem in oligopoly markets is "tacit collusion," or covert cartels.
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The CJEU’s “Dyestuffs” (1972) decisionestablished that price parallelism alone is not sufficient for a violation, but can be assessed together with elements of coordination.
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The “Woodpulp II” (1993) decisionstressed that, in order for parallel conduct in an oligopolistic market to be considered a violation of competition, there must be a convergence of wills between the undertakings.
2. ABİHA Article 102: Abuse of Dominant Position
In EU law, collective dominant position has been applied particularly in the telecommunications and aviation sectors.
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The “Airtours/First Choice” (2002) decisionidentified the elements of collective dominant position:
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Transparency in the market,
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Mutual penalty mechanisms between undertakings,
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Weak external competitive pressure.
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3. Mergers and Acquisitions
The EU Commission is introducing strict controls on merger regulations to prevent concentrations that distort the competitive structure of oligopolistic markets.
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“Kali & Salz” (1993) and “Nestlé/Perrier” (1992) decisions are important examples of evaluating the post-merger structure of oligopoly markets.
Conclusion
Oligopoly markets are among the most sensitive and difficult market structures to regulate from a competition law perspective. Turkish law, within the framework of Law No. 4054 and taking into account EU case law, aims to regulate oligopoly markets. However, the digitalized economy, algorithmic pricing, and artificial intelligence-based trading strategies are making the regulation of oligopoly markets even more challenging.
Therefore, both Turkish competition law and EU competition law need to adopt a more effective and proactive approach to prevent the detrimental effects of oligopolistic markets on consumer welfare.
IV. Problems Arising from Oligopoly Markets in Terms of Competition Law
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Rising prices and consumer losses
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Restriction of production and supply
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Decline in innovation
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Blocking new entries
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Damage to consumer welfare
In Turkish and EU practices, the risk of oligopolistic coordination is high, particularly in sectors with high barriers to entry and high transparency requirements, such as banking, telecommunications, energy, cement, and air transport.
V. A Comparison of Turkish and EU Law
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Turkish Law: The Competition Board, while examining oligopoly markets, references EU case law, but may adopt stricter interpretations in some cases.
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EU law has developed the concepts of collective dominant position and covert cartel in a more systematic way.
For example, the Competition Board's decision No. 2005/73-986 regarding GSM operatorshas similar characteristics to the "Airtours" case law in the EU.
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