INTRODUCTION
The primary objective of competition law is to ensure and preserve an effective competitive environment in the market. Within this framework, agreements and practices that distort competition, particularly cartels, are subject to strict scrutiny by the Competition Authority. While horizontal and vertical agreements are among the well-known types of cartels, the increasing prevalence in recent years of hub & spoke cartels, which may be described as a hybrid of these two forms of infringement, has attracted particular attention. Hub & spoke cartels typically arise in relationships between suppliers and retailers and constitute a form of infringement that restricts competition through indirect means.
In this type of cartel, an indirect communication network is established between competing retailers (the spokes) through a supplier (the hub), allowing the coordination of prices and other commercial terms such as advertising arrangements. As can be seen, in this mechanism, competing suppliers operating at the same level of the market do not communicate directly with one another; instead, the coordination is facilitated by the central undertaking. For this reason, the detection and analysis of this structure, which involves a complex competition law infringement, may require a lengthy and detailed investigation.
A. ELEMENTS OF HUB & SPOKE CARTELS
Markets are, in principle, structured along a supply chain, with multiple actors operating at each level. From a competition law perspective, the relationships between these actors are defined as follows: relationships between actors operating at the same level are referred to as "horizontal relationships," while relationships between actors operating at different levels within the same or related markets are referred to as "vertical relationships."
For a hub & spoke arrangement to exist, at least three actors are required: one vertical relationship and two horizontal relationships. Depending on the horizontal and vertical relationships involved, competition-restricting agreements concluded between competitors operating at the same level of production or distribution (horizontal infringements) and agreements restricting competition between manufacturers, suppliers, or retailers located at different levels of the supply chain (vertical infringements) constitute the basis of hub & spoke infringements. Hub & spoke cartels combine these two types of infringements by enabling an indirect horizontal coordination between competitors, which is carried out through a supplier and therefore also involves a vertical relationship.
In this cartel structure, a supplier or distributor (the hub) typically facilitates the coordination of prices or other commercial conditions by collecting price information from competing retailers (the spokes) in the market and transmitting this information to other retailers. The critical element here is that competition is restricted through indirect means, even though there is no direct communication between competitors. Although such indirect communication is difficult to detect, the existence of certain elements is required in order to establish an infringement in hub & spoke cartels. First and foremost, it is a constitutive element of the infringement that the parties know, or at least are aware, that the information received from the supplier actually originates from a competitor. Acting as a kind of "information hub," the supplier builds a bridge between competitors and, in doing so, exerts a decisive influence on prices.
Moreover, it is sufficient that such an exchange of information pursues an anti-competitive object or produces a competition-restricting effect on the market. In such cases, the Competition Authority examines in detail whether the parties are engaged in intentional cooperation and how their conduct affects market dynamics.
B. TYPES OF HUB & SPOKE CARTELS
Hub & spoke cartels may be classified into different categories based on their mode of implementation. One of the most common types involves infringements carried out through price coordination. In such cases, the supplier acts as a central node by collecting price information from different retailers and transmitting it to their competitors, thereby ensuring that prices are fixed at a certain level. This type of practice increases the risk of higher prices for consumers and adversely affects market competition. On the other hand, price coordination carried out by third parties that operate independently of the market in which the actors are active may also be considered a type of hub & spoke cartel.
Another significant type arises through the coordination of discounts and promotions. In this model, the supplier distorts the competitive process by sharing information on discounts and promotional campaigns offered to retailers with their competitors. As a result, campaigns and discounts observed in the market do not reflect a genuinely competitive environment for consumers, but rather emerge as the outcome of pre-determined and coordinated pricing policies. In addition, stock and distribution coordination constitutes another type of hub & spoke cartel. A supplier may restrict competition by coordinating supply volumes and stock levels among competitors. This may lead to price manipulation by creating artificial surplus or shortages in the market. It is observed that such types of infringements are addressed in the Competition Authority's decision no. 21-53/747-360 dated 28.10.2021. The common feature of these infringements is the indirect exchange of information facilitated by the supplier and the use of such information in a manner that restricts competition among competitors. Although the detection of hub & spoke cartels is challenging due to the absence of a direct agreement, they constitute one of the types of infringements that the Competition Authority examines with particular scrutiny.
C. ASSESSMENT WITHIN THE SCOPE OF COMPETITION AUTHORITY DECISIONS
The Competition Authority has conducted various investigations into hub & spoke cartels and has adopted significant decisions in this regard. Among these, the Chain Markets Decision constitutes a critical example, both as the largest fine ever imposed in the history of the Competition Authority and in terms of understanding the manifestation of hub & spoke cartels in Türkiye.
In the Competition Authority's Chain Markets Decision no. 21-53/747-360 dated 28.10.2021, the investigation conducted into Türkiye's five leading major supermarket chains provides a significant example for the detection of hub & spoke cartels. In this investigation concerning Migros, Şok, BİM, and other major retailers, it was determined that the market chains indirectly exchanged price information with one another through common suppliers.
As a result of the investigation, it was revealed that supplier companies transmitted the price information obtained from one retailer to other retailers, thereby leading to the fixing of prices at a certain level. This practice distorted market dynamics, caused consumer prices to increase, and resulted in a serious restriction of competition. The Competition Authority qualified this conduct as a hub & spoke cartel and imposed administrative fines on the relevant retail chains.
The decision emphasized that, even in the absence of a direct agreement between competing retailers, the indirect exchange of information through suppliers constitutes a competition law infringement. Accordingly, this decision may be regarded as a significant milestone in the detection and sanctioning of competition infringements carried out through indirect information exchange.
CONCLUSION
Agreements concluded by undertakings operating in the same market in violation of Article 4 of Law No. 4054, such as price fixing, the sharing of customers, suppliers, regions, or trade channels, the restriction of output or the imposition of quotas, and bid rigging,are considered to fall within the scope of cartels.
Hub & spoke cartels have emerged as a complex type of infringement that is receiving increasing attention in competition law. These cartels differ from traditional cartel structures as they incorporate both horizontal and vertical infringement elements, which also makes their detection more difficult. The indirect exchange of information between competitors through suppliers restricts market competition and leads to adverse outcomes for consumers.
The Competition Authority's Chain Markets Decision constitutes a significant example in terms of the detection and sanctioning of such infringements. This decision demonstrates that stricter scrutiny will be applied to competition infringements carried out through indirect information exchange and that deterrent sanctions will be imposed.
In conclusion, in the fight against hub & spoke cartels, it is of great importance that both suppliers and retailers act in compliance with competition law rules. Competition authorities must conduct more comprehensive analyses to detect such infringements, and companies, in turn, are required to act in accordance with the principle of transparency throughout this process.
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