Advertising Restrictions in Competition Law; Non-Targeting and Negative Matching

Introduction: Winds of Change

Jules Verne says, “Everything on earth has a limited lifespan, nothing that will exist forever can be created by human hands”. Perhaps change is the only constant concept in all our lives. Despite two major world wars and countless periods of crisis, humanity has been undergoing a great change and transformation in the last century. We now have faster cars and more technology in our lives. As a result, we have a busier work schedule and unfortunately less time to devote to our loved ones. The winds of change that have been blowing at great speed in the last century have widely forced us all to adapt to the changing times.

The technology that has entered every part of our lives today has undoubtedly opened the doors of a completely different world in terms of e-commerce. We now encounter advertisements made over the internet everywhere in our lives. Search engines find countless alternatives for whatever you are looking for, whatever you are interested in, and bring it to you instantly as you browse the internet. In other words, while technology provides us with a door to the world through a keyboard, it also makes us pay for it with advertisements. As they say, free cheese is only in a mousetrap and if a product is free, rest assured that you are the real product.

Competition law, which has always been a dynamic area of law, has been undergoing a major transformation, especially in the last five years. The winds of change are currently blowing against the giant technology companies, whose sails were previously blown by these winds, with full force and in the form of a hurricane.

Negative Matching Agreements and Competitive Concerns

Online ads are the easiest and most effective way to reach new consumers or promote your new products. Thus, search-based online advertising services aim to display relevant ads on the search results page for searches that users make using specific words in search engines. In other words, if you are looking for a red car, you will see two types of results on your search results screen: “organic” (generic) results and “sponsored” links. “Sponsored” results appear at the top of the results screen and “organic” results appear below them. The algorithm of search engines scans the web pages and instantly lists the most relevant results for your search under “organic” results. However, the “Sponsored” results above are search-based advertisements where websites pay for certain keywords to rank high among the results corresponding to the search.

It is generally accepted that a standard user will usually click on the top web pages in the first one or two pages of search results and be directed to that page. Therefore, if you are not at the top of the search results, you will not be able to easily reach consumers and deliver your products to them. For many undertakings, being at the top of these “sponsored” results is a must in order to reach new customers and promote their brand. But it is not always that easy. A search engine determines which “sponsored” results it will include in response to a search based on the “keywords” selected by advertisers. Advertisers pay for each click on “sponsored” links. If more than one advertiser targets the same keyword and wants to be at the top of the “sponsored” results when that keyword is searched, they have to win the auction.

Particularly in terms of online advertising, undertakings target their brands, generic words, or slogans that are identified with their own brands under “sponsored” results and pay high prices for them. From time to time, competitors targeting well-known brands can attract consumers who would otherwise be drawn to another brand. For example, when you produce a new cola drink, another way to increase your awareness among consumers is to target the names of cola drink producers in the market as words. If you pay more for these words in an auction, you can appear in online searches above those who have registered these words as registered trademarks. Since many inattentive consumers will click on the first-ranked result, your website can attract significant traffic by capitalizing on the awareness of someone else’s brand. Of course, this may cause serious inconveniences in terms of intellectual and industrial rights regulations, and unfair competition provisions in commercial law and you may have to pay compensation. Therefore, there may be disputes on this issue from time to time. In particular, some words that are not registered as trademarks can also be used for advertising. If competitors advertise and target these words, it legally creates a gray area. Because it is not always possible to decide whether there is trademark infringement. While it is possible to close some words to the use of your competitors due to trademark rights, sometimes it is not possible to prohibit competitors from advertising on these words when these words are general, words that are in everyone’s daily life. In such a case, in addition to brand names, such general words can also be targeted and advertised by competitor undertakings.

Sometimes, even if you do not target your competitor’s brand with the words you advertise, there may be misunderstandings on the “sponsored” results screen due to the words you use in common. Therefore, even if the words that make up your competitor’s brand are not targeted, you may be ranked below your competitor on the “sponsored” results screen due to the algorithm used by search engines and the commonality of other targeted words. This is exactly where negative matching offers a definitive solution. By including your competitor’s brand in the negative keywords, you can avoid such misunderstandings.

A “negative keyword” is defined as a type of keyword that prevents your ad from being triggered by a specific word or phrase. This prevents your ads from being shown to anyone searching for the negative keyword. For example, when you add the term “free” as a negative keyword to your campaign or ad group, you are ensuring that it will not show your ad for any searches containing the term “free”. To make an analogy, if online ads are like a car, negative matching is like the steering wheel of that car, a mechanism that determines who your ads will not be shown to. In accordance with competition law sensitivities, communications between competitors about negative matching agreements can be seen as an agreement restricting competition. This is because the consumers who search can view fewer alternatives in the case of negative matching and consumers can make choices from a more limited result screen.

Turkish Competition Authority’s Approach to Non-Advertising and Negative Matching Agreements

The Turkish Competition Authority’s (“Authority”) approach to both advertising restriction agreements and negative matching agreements under this general concept was first revealed with the Modanisa Decision^[1] dated 25.11.2021 and numbered 21-57/789-389. The Authority made its first decision on this issue upon the request for negative declaratory/exemption regarding the Settlement Agreement concluded between the undertakings named Modanisa and Sefamerve, which used Google advertisements extensively. Firstly, the obligation not to advertise the brand was evaluated in the decision. The Authority determined that the narrow obligation not to advertise the trademark, the obligation not to target only the name of the registered trademark, does not exceed the limits of the protection of the trademark right. In the case of the broad obligation not to advertise the trademark, it is evaluated that since advertisers agree not to advertise another advertiser’s trademark together with combinations of words not related to the trademark (brand name and non-brand words), all searches containing such word combinations will be restricted.

Negative matching agreements are also analyzed for the first time in the aforementioned Decision. According to the Decision, even if the rival undertakings do not target each other’s brand names, they directly prevent the visibility of the rival undertaking due to negative matching when an undertaking’s brand name is searched, and these are considered as customer/market sharing between competitors. The Modanisa Decision was actually a beginning. This decision, which made a great noise, actually paved the way for new discussions. Many analyses such as the impact of negative matching practices on the relevant market, how many search results were affected, etc. were not analyzed and negative matching agreements were classified as clear and hard-core violations.

Deutsche Bahn Decision of the German Federal Cartel Office 

The Deutsche Bahn decision^[2], a very recent decision of the German Federal Cartel Office (“Cartel Office”), contains important findings on the advertising restrictions of undertakings that hold a dominant position and their impact on the e-commerce market. The decision, dated 26 June 2023, focuses on Deutsche Bahn’s online digital mobility practices in the field of rail passenger transportation. These practices in the area of digital mobility generally consist of digital solutions for journey and schedule planning and include the provision of certain information such as timetable information and connection possibilities. Deutsche Bahn also offers the chance to combine rail-only transport with car rental, buses, and rental bicycles. This means that on Deutsche Bahn's website or online app, you can not only buy tickets for rail transportation but also other services that can be combined with it, such as car rental, buses, or bicycles.

The decision first analyzes the market power of Deutsche Bahn. Deutsche Bahn is a vertically integrated undertaking with a very high market share. In other words, Deutsche Bahn carries out both infrastructure operator, transporter, and ticket sales activities in a vertically integrated manner. Deutsche Bahn, which has recently entered the field of digital mobility services, provides services such as car rental, car sharing, bus, and bicycle rental to its customers. Deutsche Bahn markets these services through online channels and applications such as bahn.de and DB navigator. However, Deutsche Bahn competes with platforms that integrate different types of mobility services. Deutsche Bahn has significant market power and therefore dominates, both because of its market shares in rail transportation and its brand recognition. Because Deutsche Bahn is an infrastructure operator, it has the opportunity to integrate the connection information and tickets of all 50 local transport associations in the Federal Republic of Germany and all competing rail transporters into its platforms.

This information is so valuable that consumers use Deutsche Bahn-owned channels such as bahn.de and DB navigator for around 90% of their ticket and route searches, despite the presence of competitors. Deutsche Bahn also signs distribution agreements with ticketing platforms, whereby they integrate DB’s transport data into their applications.

The Cartel Office finds that Deutsche Bahn’s activities in the «integrated mobility services» market violate competition. This is because Deutsche Bahn refuses to share instant data on rail transportation (accidents, breakdowns, delays, etc.). Therefore, rival platforms cannot access instant data such as delays and cancellations, which are of great importance for passenger transportation. This situation negatively affects the reliability and functioning of competing platforms, making their operations difficult.

The second violation concerns advertising restrictions in distribution agreements with competing platforms. The Cartel Office is also examining the impact of advertising restrictions in contracts signed by Deutsche Bahn. Accordingly, platforms that have signed distribution agreements to receive timetable and breakdown data from Deutsche Bahn are prohibited from advertising terms such as «DB Bahn», ICE, or bahn.de. Rival platforms are therefore unable to target these words, which are critical for rail transportation and are the most commonly used words in consumers’ online searches. This significantly reduces their visibility with consumers. In other words, competitors’ effectiveness in the market is significantly reduced by these advertising restrictions.

In its decision, the Cartel Office not only finds an infringement but also orders the removal of the advertising restrictions in the contracts signed by Deutsche Bahn. In this respect, the decision examines the impact of advertising bans together with the conditions of the relevant market. In its assessment of the decision, the Monopolies Commission’s approach to the quality problems in rail transportation through the lack of competition in the relevant market is also very important. The Monopolies Commission even recommends unbundling and heavy regulation in this market. Perhaps this is why the Cartel Office has issued a very detailed decision that changes the conditions of the market from top to bottom.