Turkish Competition Roundup 2016
APRIL 2017 Istanbul, Turkey
We are pleased to welcome you to the inaugural Competition Roundup by Moroğlu Arseven. The publication aims to offer a comprehensive overview of Turkish law during 2016, as well as offer insight on trends and developments during the period. Topics covered include key decisions by the Competition Board, new investigations launched, legislative developments, as well as sector inquiries.
Overall, 2016 was a busy year in Turkish competition law circles. Indications suggest the Competition Board’s investigation-focused workload will continue through 2017. Among other things, significant recent developments arose regarding evidence standards for presumption of concerted practice, as well as within hub-and-spoke information exchanges. With new members joining in, the Board kept the pace of its enforcement up in the second half of 2017. We expect the Board to continue its rigorous enforcement for anticompetitive agreements and abusive unilateral conduct in 2017 as well. As anywhere around the world, application of competition law to the internet economy will be a priority of Turkish Competition Law enforcement. In this regard, we expect the vertical restrictions in online world will continue to occupy the Board’s agenda. Similarly, unilateral conduct of internet giants will be on the Board’s radar.
Competition law seems to occupy the agenda of the automotive industry in 2017. Enactment of the new block exemption regulation will require undertakings to embark on compliance-related work in 2017. We trust the following information will be useful and informative for the reader. If any aspects are of particular interest or importance, please do not hesitate to contact us to discuss further.
Regulatory Framework ..............................
Investigation Process .................................
Competition-Sensitive Agreements ...........
Top Fines ...................................................
2016 BOARD ACTIVITY .................................
Key Figures ................................................
Notable Decisions ......................................
Short Form Decisions ................................
Investigations launched .............................
SECTOR INQUIRIES ........................................
Cement Sector ...........................................
Movie Theatre Sector ................................
M&A Notifications ......................................
Motor Vehicle Block Exemption .................
R&D Block Exemption ...............................
Competition and Antitrust Practice ............
Contact Details ...........................................
Regulatory Framework Oversight and Enforcement
The Turkish Constitution requires the state to take all necessary measures to provide and promote healthy and orderly transactions for money, credit, capital, goods and services, as well as prevent de facto monopolies and cartels (Article 167). Accordingly, the Turkish Competition Authority (“Authority”) was established in 1997 according to Law No. 4054 on Protection of Competition (“Competition Law”). The Authority is an active, independent, autonomous administrative authority. The Competition Board (“Board”) operates as the Authority’s decision making body, conducting Preliminary Investigations and Full Scope Investigations, imposing administrative monetary fines for violations of the Competition Law. The Board considers issues and allegations regarding: • Restrictive trade and concerted practices (Article 4). • Applications for negative clearance and individual exemptions (Article 5). • Abuses of market dominance (Article 6). • Merger controls (Article 7). Information Gathering Powers The Board holds wide investigative powers to: • Request any information it deems necessary from any public institution, organization, undertaking and association of undertakings. Officials must provide the requested information within the determined period. • Examine the books, paperwork and documents of undertakings and associations of undertakings, plus take copies if needed. • Request written or oral statements about particular issues. • Perform dawn raids.
The Authority’s Structure The Competition Authority consist of: • The Authority’s President: Prof. Dr. Ömer Torlak • Two Vice Presidents: - Hakan Hüseyin Ünlü - Kürşat Ünlüsoy • Presidency, comprising the Authority’s President and two Vice Presidents. • The Competition Board, comprising seven members total, including the Authority’s President (table below) • The Main Service Units, which conduct inspections and issue audit reports (reporting to the Authority’s Vice Presidents). The Units comprise: - Five Inspection and Execution Departments. - Decisions Department. - Economic Analysis and Research Department. - Information Management Department. - Strategy Development and Budget Department. - External Relations, Training and Competition Advocacy Department. - Administrative Services Department. • Cartel and Onsite Inspection Support Unit (reporting to Hakan Hüseyin Ünlü).
The Board’s Composition
Role Chairman Vice Chairman Board Member
Current Occupant Prof. Dr. Ömer Torlak Arslan Narın Fevzi Özkan Dr. Metin Arslan Adem Bircan Şükran Kodalak Mehmet Ayan
Appointment Details Appointed by Council of Ministers for six year terms, from among Board Members. Appointed by Council of Ministers for six year terms. A third of Board Members are renewed every two years. There are no limits on Board Members serving multiple terms.
Investigation Process Preliminary and Full Scope
Consumers and companies have the right to complain to the Board about activities by undertakings which they believe have harmed competitive market structures in any way. The Board can also initiate ex officio investigations based on its own knowledge and observations.
The Board can expressly reject complaints which it does not consider serious. Complaints are deemed to have been rejected if the Board does not respond to the applicant within 60 days.
Full scope Investigation • •
The Board chooses to either initiate a Preliminary Investigation, or can also go directly to a Full Scope Investigation.
• In general terms, undertakings in a cartel formation can be completely released from monetary fines (or obtain a discount) by informing the Authority about the cartel’s existence. Up until the Board serves its investigation report, the undertaking which first submitted evidence which will lead the Board to the conclusion that Article 4 has been violated, can apply to be exempt from monetary punishment. Later undertakings can earn discounts of up to 50%, with rates varying depending on the order of their application.
A team of case-handers prepares a report within 30 days and presents it to the Board. The Board decides within ten days whether it is necessary to proceed to a Full Scope investigation.
• • • •
Initiated either directly, or after a Preliminary Investigation. Parties are notified within 15 days of the investigation beginning and asked to send their first written defense within 30 days. Complainants (if any) will be also notified. The investigation team drafts an investigation report and delivered this to the Board and parties. The investigation report evaluates all evidence obtained via information requests, as well as on-site inspections. Parties must send their second written defense within 30 days, responding the investigation report. The investigation team issue its supplementary opinion within 15 days of receiving the second written defense. Parties must send their third written defense within 30 days, responding to the investigation team’s supplementary opinion An oral hearing can be held, if the Board deems necessary, or a party requests. The Board must finalize its decision within: - 15 days of the oral hearing. - 30 days of the end of the investigation period (if no oral hearing occurs). Investigations generally last six months, but can be extended for a further six months, if necessary.
Competition-Senstive Agreements Negative Clearances and Exemptions
If an agreement potential causes competition law issues, the parties can ask the Board to review the proposed arrangement, by applying for either a Negative Clearance or Individual Exemption. and/or Individual Exemption. Negative Clearance The Board can grant a negative clearance certificate, which essentially indicates that, based on the available information, an agreement, decision, practice, or merger and acquisition is not contrary to Articles 4, 6 and 7. Individual Exemptions The Board can grant exemptions for interundertaking agreements, concerted practices and undertaking associations from the requirements in Article 4. Exemptions can be granted for fixed periods, or subject to certain conditions, and/or fulfillment of certain obligations.
Block Exemptions The Authority has issued a range of Communiqués providing exemptions for certain agreements and industries, including: • Certain aspects of vertical agreements. • Motor vehicle sector. • Research and development agreements. • Technology transfer agreements. • Insurance sector. • Specialization agreements. Agreements which meet the conditions for a block exemption are automatically exempted from Article 4. The parties do not need to apply to or notify the Board. The Board has also published guıdelines to assist in interpreting and applying block exemptions.
The Board must be satisfied that the circumstances meet all of these criteria: a) Ensure new developments and improvements, or economic or technical development in the production or distribution of goods, or provision of services. b) Benefit consumers. c) Do not eliminate competition in a significant part of the relevant market. d) Do not limit competition more than is necessary to achieve the goals in (a) and (b).
Top 15 Investigation Fines Undertakings and Groups of Undertakings 2011 onwards
Undertaking or Group of Undertakings
Bank Cartel (2013) Türkiye Petrol Rafinerileri A.Ş. Auto Manufacturers (2011) Mey İçki San. ve Tic. A.Ş. Turkcell İletişim Hizmetleri A.Ş. Bank Cartel (2011) Aegean Region Cement Producers Consumer Electronics Sellers and Manufacturers (2016) Cement Producers (2012) Mey İçki San. ve Tic. A.Ş. Turkcell İletişim Hizmetleri A.Ş. Türk Telekomünikasyon A.Ş. Türk Eczacıları Birliği İktisadi İşletmesi Frito Lay Gıda San. Tic. A.Ş. TTNET A.Ş.
Total Investigation Fines
9,996,403,098 ₺ 412,015,081 ₺ 277,421,483 ₺ 155,782,969 ₺ 91,942,343 ₺ 72,337,035 ₺ 70,915,527 ₺
Article 4 Article 6 Article 4 Article 6 Article 6 Article 4 Article 4
08-Mar-13 17-Jan-14 18-Apr-11 16-Feb-16 06-Jun-11 07-Mar-11 14-Jan-16
49,165,021 ₺ 41,512,531 ₺ 39,727,308 ₺ 33,983,792 ₺ 18,062,307 ₺ 17,908,674 ₺ 15,512,258 ₺
Article 4 Article 6 Article 6 Article 6 Article 6 Article 4 Article 16(d)
06-Apr-12 12-Jun-14 19-Dec-13 09-Jun-16 06-Dec-16 29-Aug-13 18-Jul-13
Banking Energy Automotive Food & Bev Telco Banking Cement Consumer Electronics Cement Food & Bev Telco Telco Pharma Food & Bev Telco
Fine (millions of Turkish Lira)
Türkiye Petrol Rafinerileri A.Ş.
Mey İçki San. ve Tic. A.Ş.
The Board’s largest fines from a single investigation in recent times was in 2013 for a Banking Cartel. It issued almost 10 billion Turkish Lira in fines, among 12 banks.
Top 30 Fines Individual Undertakings 2011 onwards
Undertaking Türkiye Petrol Rafinerileri A.Ş. Economic unity of Türkiye Garanti Bankası A.Ş., Garanti Ödeme Sistemleri A.Ş. and Garanti Konut Finansmanı A.Ş. Akbank T. A.Ş. Mey İçki San. ve Tic. A.Ş. Yapı ve Kredi Bankası A.Ş. TC Ziraat Bankası A.Ş.
Türkiye İş Bankası A.Ş. Turkcell İletişim Hizmetleri A.Ş. Türkiye Halk Bankası A.Ş. Türkiye Vakıflar Bankası T. A.O. Ford Otomotiv San. AŞ. Finansbank A.Ş. Doğuş Otomotiv Servis ve Tic. A.Ş. TOFAŞ Türk Otomobil Fabrikası A.Ş. Mey İçki San. ve Tic. A.Ş. Turkcell İletişim Hizmetleri A.Ş. Türk Telekomünikasyon A.Ş. MAİS Motorlu Araçlar İmal ve Satış A.Ş.
Denizbank A.Ş. Peugeot Otomotiv Pazarlama A.Ş. Türk Eczacıları Birliği İktisadi İşletmesi Frito Lay Gıda San. Tic. A.Ş. Toyota Pazarlama ve Satış AŞ. Hyundai Assan Otomotiv San. ve Tic. A.Ş. As Çimento San. ve Tic. A.Ş. TTNET A.Ş. HSBC Bank A.Ş. Göltaş Göller Bölgesi Çimento San. ve Tic. A.Ş. Akbank T.A.Ş. Yapı ve Kredi Bankası A.Ş.
Article 4 (Bank Cartel 2013)
Article 4 (Bank Cartel 2013) Article 6 Article 4 (Bank Cartel 2013) Article 4 (Bank Cartel 2013) Article 4 (Bank Cartel 2013) Article 6 Article 4 (Bank Cartel 2013) Article 4 (Bank Cartel 2013) Article 4 (Auto Manufacturers 2011) Article 4 (Bank Cartel 2013) Article 4 (Auto Manufacturers 2011) Article 4 (Auto Manufacturers 2011) Article 6 Article 6 Article 6 Article 4 (Auto Manufacturers 2011) Article 4 (Bank Cartel 2013) Article 4 (Auto Manufacturers 2011) Article 6 Article 6 Article 4 (Auto Manufacturers 2011) Article 4 (Auto Manufacturers 2011) Article 4 (Aegean Region Cement Producers) Article 6 Article 4 (Bank Cartel 2013) Article 4 (Aegean Region Cement Producers) Article 4 (Auto Manufacturers 2011) Article 4 (Auto Manufacturers 2011)
16-Feb-17 Food & Bev
41,512,531 ₺ 39,727,308 ₺ 33,983,792 ₺
1.50% 4.50% 0.45%
12-Jun-14 Food & Bev 19-Dec-13 Teleco 09-Jun-16 Teleco
18,062,307 ₺ 17,908,674 ₺
06-Dec-16 Pharma 29-Aug-13 Food & Bev
Key Numbers From the Board In 2016 Based on Decisions Published in 2016
26 Negative Clearance / Individual Exemptions
137 M&A Transaction Authorizations
77 Competition Violations
Board Decision: â&#x20AC;&#x153;Full-fledged investigation not necessaryâ&#x20AC;?
7 Full-Fledged Investigations
One or more dissenting Board member 7
Full-Fledged Investigations 1
2016’s largest fine:
155,782,969 TL Mey İçki San. ve Tic. A.Ş.
2016 fines ranged between
0.2% - 4.5% of undertaking turnovers
Board rejected requests to access investigation files on
Aegean Region Cement Producers
The Board’s reasoning in this decision reveals new approaches to: • Considering the nature of evidence. • Determining evidence’s impact and sufficiency. • Analysis of market structure. Most notably, the decision suggests the Board may have begun to treat any communication among competitors as evidence of concerted practice, even if this communication does not contain a clear link to anticompetitive outcomes.
Decision Type: Full Scope Investigation. Market: Aegean Cement Market. Complainant: Anonymous. Assertions: Multiple cement plants in the Aegean region were claimed to have: • Cooperated. • Seriously increased cement prices. • Shared customers. • Shared geographic areas. Board Ruling: All companies violated Article 4 (majority decision). Board Sanction: Combined total of 70,915,527 TL fines, based on either 3% or 4.5% of each company’s turnover.
The Board received an anonymous complaint stating that a group of cement companies had violated requirements for restrictive trade practices and concerted practices (Article 4). The Board’s investigation found that violations had occurred and imposed administrative fines on all companies, of either 3% or 4.5% of their total turnover. The fines amounted to a combined total of 70,915,527 Turkish Lira (≈$22 million and €20 million).
In reaching its decision, the Board considered: • Communication evidence. • Structural evidence. • Behavioural evidence. The most important piece of evidence in shaping the Board’s decision was an e-mail between employees of different undertakings, discussing meetings within the body of the Exporters’ Association of Cement, Glass, Ceramic and Soil Products. The Board attached significant weight to a reference in this email to an earlier sharing of detailed cement export statistics. The Board observed that undertakings had shared their stock amounts, plans regarding depleting clinker stocks, as well as future sales strategies. It also noted that the topics of meetings had not been limited to export presentations. The Board took this as indicating the possibility that shared information might be discussed before or after the meeting. The Board took the email as indication of cooperation. It determined that information sharing and price increases had violated restrictions on concerted practices (Article 4) in January-March 2013 and October-December 2014. The Board noted that the undertakings’ behaviours and market performance could not be explained by any reasonable and rational explanations other than the information exchange. Dissenting Minority Opinion One Board member (Ass. Prof. Dr. Tahir Sarac) gave a dissenting opinion in the decision. He claimed the evidence gathered and the Board’s lack of analysis on capacity utilization were insufficient to portray a cartel. (Decision number 16-02/44-14, dated 14 January 2016; published on the Competition Authority’s website on 31 May 2016)
Sinop Region Ready Mixed Concrete Producers
Decision Type: Full Scope Investigation. Market: Sinop ready mixed concrete market. Complainant: Anonymous. Assertions: Five ready mixed cement companies were claimed to have: • Cooperated. • Established a partnership for mutual manufacturing and commercialization. • Seriously increased cement prices. • Prevented transport of ready mixed concrete. Board Ruling: Horizontal agreement violated Article 4 (majority decision) Board Sanction: Combined total of 118,918 TL fines, based on 0.2% of each company’s 2014 turnover.
The Board received an anonymous complaint that five ready mixed cement companies in Sinop had cooperated, established a partnership for mutual manufacturing and commercialization, seriously increased cement prices, as well as prevented transportation of ready mixed concrete. The Board concluded that: • The Sinop ready mixed cement market displays characteristics of a market which violates competition rules. • A horizontal agreement between the parties could help them to coordinate prices, determine capacity output, as well as share customers and geographic areas. • Parties to the partnership created significant market power, preventing possible competitive actions by other parties. The Board held that all five companies violated requirements for restrictive trade practices (Article 4), imposing administrative fines on all companies for 0.2% of their 2014 turnover, amounting to a combined total of 118,918 Turkish Lira (≈$37k and €34k).
Dissenting Minority Opinion While the Board ruled that the partnership did not qualify for an individual exemption, two Board members (Kenan Türk and Ass. Prof. Dr. Tahir Saraç) gave a combined dissenting opinion, claiming: • The requirements for an individual exemption had been met on the basis that the sector’s actors came together due to geographical necessities, as well as scarcity of equipment and raw material. • Combining resources led to savings in equipment, fuel and workforce, with mixed cement prices staying at same level. Therefore, establishing such a partnership benefited both customers and the undertakings themselves. • All of the mixed cement companies wound-up their legal entities in order to merge with the partnership. The merger transaction was below the legislative turnover threshold for the Board to review. (decision number 16-05/117-52, dated 18 February 2016; published on the Competition Authority’s website on 2 June 2016)
Decision Type: Full Scope Investigation (short-form decision). Market: Rakı (alcohol) market. Complainant: Requested anonymity. Assertions: Mey İçki was claimed to have abused its dominant position via: • Discount practices • Arrangements with sales points regarding alcohol promotions and store layouts. Board Ruling: Mey İçki violated Article 6 (unanimous decision) Board Sanction: 155,782,969 TL fines, based on 4.22% of its turnover. The Board also ordered Mey İçki to take and cease certain actions.
The Board received an anonymous complaint alleging that Mey İçki San. ve Tic. A.Ş. (“Mey İçki”) abused its dominant position in the rakı market (Article 6). The complainant alleged that Mey İçki violated competition laws through its discount practices, as well as arrangements with sales points regarding alcohol promotions and store layouts. After a Full Scope investigation, the Board issued a shortform decision, fining Mey İçki 155,782,969 Turkish Lira. A long-form decision will follow, outlining the Board’s full reasoning for the decision and fine. The scale of the fine reflects the infringement’s duration and Mey İçki’s recidivism. However, the Board also considered and applied mitigating factors. The Board also ordered Mey İçki to: • Cease its practice of paying the whole discount amount under the sales contracts to sale points at the beginning of the discount period. The Board held that paying the full amount up front restricts competition by limiting sales points from wishing to work with other companies. • Cease discounts in the form of retroactive bulk payments. • For advance payments to sales points under the investment support agreement, the agreement must clearly state the investment’s nature and purpose. These agreements will be treated as separate from the purchase agreements. • For traditional sales channels: - Cease financial benefits related to rack and product layouts. - Provide a layout recommendation for only about 70% of visible rakı racks and only apply to Mey İçki products. • Remove a provision from its purchase agreements with sales points which requires sales points to display Mey İçki’s promotional material in alcoholic drink areas. (decision numbered 17-07/84-34, dated 16 February 2016; published on the Competition Authority’s website on 17 February 2017)
Decision Type: Preliminary Investigation. Market: Tire manufacturing market. Complainant: Requested anonymity. Assertions: Three tire manufacturers were claimed to have conducted indirect hub and spoke information exchanges via joint distributors, market research companies and related market associations. Board Ruling: No market effects could be determined from the information exchange, so Full Scope Investigation not initiated (unanimous decision).
The Board received a complaint alleging that three competitors in the tire sector (Goodyear, Bridgestone and Pirelli) had breached restrictive trade practices and concerted practices (Article 4). The complainant alleged the tire manufacturers had violated competition laws by exchanging information about tire sale units and negotiating price increases through their joint distributors, market research companies and related market associations (indirect hub and spoke information exchange). The Board’s preliminary investigation considered whether: • The objective of the practice is to restrict competition (a criteria determined by the UK Competition Appeal Tribunal’s Tesco decision). • The information exchange was strategic or could have been performed through another source. The Board concluded that the joint distributors had disclosed information to other competitor manufacturers in the upstream market, with the intention of bargaining on their own behalf. Therefore, the Board held the distributors’ practice was not intended to restrict competition.
The Board held that disclosure of consolidated historic data was not intended to restrict competition. However, it held that information exchanges made through research companies and sectoral associations will be deemed to restrict competition if: • Commercially sensitive competitive information is disclosed, • The data’s characteristics are important in terms of market structure, frequency of disclosure, or the disclosed information’s market coverage and participation, and • The anti-competitive effects of the violation can be seen in the market. In the present case, the Board could not determine the effects of the information exchange. Accordingly, it decided not to initiate an investigation because: • There was no written agreement or evidence to suggest that the object of the alleged conduct was to restrict competition. • Distributors make the information exchange indirectly • Some disclosures were made in the upstream market, outside the control of the tire manufacturers themselves. (decision numbered 15-44/731-266, dated 16 December 2015; published on the Competition Authority’s website on 16 February 2016)
Yandex complained to the Board that Google had established agreements with original equipment manufacturers which violated requirements for restrictive trade practices (Article 4) and also abused its dominant market position (Article 6). The Board interviewed market actors, such as Samsung, Avea, Sony, Turkcell, Vodafone, Telpa (General Mobile Turkey’s distributor) and ZTE. It also investigated usage rates for different mobile application stores and internet browsers.
Decision Type: Preliminary Investigation.
Market: Not defined, but the Board held that Google operates in: • Mobile communication systems. • App development. • App stores. • Online advertisement and marketing. Complainant: Yandex. Assertions: Yandex claimed that Google’s agreements with original equipment manufacturers violated restrictive trade practices (Article 4) and abuses its dominant position (Article 6). Board Ruling: The Board’s Presidency instructed Google to remove anti-competitive provisions from its agreements with original equipment manufacturers and to cease related practices (majority decision). Subsequent Developments: Administrative courts suspended execution of this decision in March 2017, meaning the Board will launch a Full Scope Investigation into the allegations, despite previously rulingthis to be unnecessary.
The Board’s preliminary investigation concluded that Google’s application store and internet browser have higher usage rates than other pre-installed applications on android phones. Therefore, the Board determined that Google products are consumers’ first choice. The Board noted that Google’s exclusivity agreements with original equipment manufacturers could prevent competition. However, it went on to say that these agreements do not prevent consumers from downloading other parties’ applications from the application store. This reflects the Board’s usual approach towards tying arrangements. Nevertheless, the Board concluded that although consumers are free to download any application from the application store, prioritizing best rated applications within the stores will eventually hinder market competition. Therefore, in order to guarantee a competitive market structure, the Board’s Presidency will prepare an opinion to Google, instructing it to remove anti-competitive provisions from its agreements with original equipment manufacturers, as well as to cease related practices (although no specific timeframe was set for this). (decision number 15-46/766-281, dated 28 December 2015; published on the Competition Authority’s website on 21 March 2016)
Decision Type: Preliminary Investigation. Market: Movie theatre market. Complainant: Requested anonymity. Assertions: The movie theatrechain was claimed to violate vertical price restrictions by fixing prices for tickets and cafe services in its franchise agreements. Board Ruling: Market effects of the restrictions were very limited and short in duration, Full Scope Investigation not initiated, provided the chain cease price maintenance behavior within 90 days (unanimous decision).
The Board received a complaint that Mars Sinema was fixing prices for ticket and cafe services in its franchise agreements. The Board’s preliminary investigation decision noted that Mars Sinema operates 73 movie theatres around Turkey, among which only two theatres operate under franchise agreements. Thus, despite Mars Sinema’s market power, the franchise agreements constituted only a small portion of its portfolio. The Board concluded that vertical price restraints in Mars Sinema’s franchise agreements applied to only two theatres, located in Ankara and Antalya, and these restraints only began in 2014. Therefore, the market effects of the restrictions were very limited and short in duration. The Board held that there was no need to proceed with a full-fledged investigation into the vertical price restrictions, provided Mars Sinema ceased its price maintenance behaviour within 90 days. (decision numbered 15-41/682-243, dated 20 November 2015; published on the Competition Authority’s website on 1 February 2016)
Mediterranean Region Cement Producers
Decision Type: Preliminary Investigation. Market: Bulk grey cement in Adana, Mersin, Osmaniye, Hatay, Kilis, Gaziantep and Kahramanmaraş. Complainant: Anonymous.
Assertions: Six cement producers in the Eastern Mediterranean region were alleged to have engaged in customer sharing and price fixing for bulk cement. Board Ruling: No further investigation necessary (majority decision).
The Board received an anonymous complaint about customer sharing and price fixing for bulk cement by six cement producers in the Eastern Mediterranean region.
The Board decided not to initiate a full scope investigation, concluding that despite the undertakings having common customers, there was no evidence to supporting the customer sharing allegations.
The Board noted: • The amounts and percentages of price increases by separate undertakings in February to April 2016 were not consistent. • Cement prices underwent a slight upward trend in 2014 and 2016 during March and February. However, prices actually decreased in this period in 2015. • Production costs increased in November 2015 to January 2016, with the first price increases following in March 2016. • Demand in February and March 2016 was much higher than in the same period for past years. • In February 2016, demand increased relative to the previous month. Demand also increased again in March 2016. • Demand increase prior to March 2016 (when the alleged violations occurred) were likely to increase prices. • Capacity utilization rates were high throughout 2016. Dissenting Minority Opinion
In a majority decision, the Board decided the price movements were likely the result of production cost increases and limited clinker capacities, declining to conduct further investigation. The Board considered bulk cement sales for the 2014 to 2016 period, focusing particularly on changes in sales volumes, price movements and other factors affecting cement costs. It considered the undertakings’ customer ranges, particularly focusing on whether customers between January 2014 and May 2016 made cement purchases from different undertakings.
One Board member (Fevzi Özkan) gave a dissenting opinion in the decision. He argued that almost all of the undertakings increased their prices between February 2016 and April 2016, despite the increases being for different percentages and quantities. He claimed this is an indicator of concerned practice because it cannot be reasonably explained by other factors. (Decision number 16-33/579-255, dated 13 October 2016; published on the Competition Authority’s website on 31 May 2016)
Beer Can Lids
Decision Type: Preliminary investigation. Market: Alu-lid cap systems market. Complainant: Efes. Assertions: Ecocaps' exclusive supply agreement with a single beer manufacturer in Turkey was claimed to abuse its dominant position (Article 6). Board Ruling: Ecocaps’ system is substitutable and not a necessity to act in the beer market, so Full Scope Investigation not initiated (unanimous decision).
Efes (a beer manufacturer) complained to the Board that Ecocaps (can lid manufacturer) abused its dominant position (Article 6) by refusing to sell a lid system in Turkey to any beer manufacturer except Tuborg, as per an exclusivity agreement between Ecocaps and Tuborg. Efes claimed that Ecocaps holds a dominant position for Alu-lid cap systems, with 100% of the market. However, the Board decided that Ecocap’s system is substitutable, since there is more than one hygienic cap system. The Board also added that access to Ecocap’s system is not a necessity to act in the beer market. The Board held there was no need to proceed with a full-fledged investigation. It also stated that the agreement between Ecocaps and Tuborg met the requirements for an individual exemption under Article 5 of the Competition Law. (decision number 16-04/69-27, dated 10 February 2016; published on the Competition Authority’s website on 29 April 2016)
A group of customers complained to the Board that Hatay Ro Ro Kombine Taşımacılık İşletmeleri A.Ş. (“Hatay RoRo”) had abused its dominant position in transporting vehicles on Ro-Ro routes between Middle East countries and Turkey via predatory pricing and discrimination between customers (Article 6). Decision Type: Preliminary Investigation. Market: Ro-Ro transport lines between Turkey and Middle East countries. Complainant: A group of Hatay Ro-Ro's non-shareholder customers. Assertions: A class of customers claimed Hatay Ro-Ro abused its dominant position via predatory pricing and discrimination between customer groups (Article 6). Board Ruling: The Board found price discrimination existed at one point between shareholder and non-shareholder customers, but no predatory pricing or customer discrimination existed. The Board chose not to initiate a Full Scope Investigation on the basis the discrimination had minimal market effect and the practice had ceased (majority decision).
The Board defined the geographic market in dispute as being Ro-Ro lines between Turkey and the Middle East countries. Hatay Ro-Ro operates using different departure/arrival ports and the Board deemed all of these lines to be substitutable for each other. The Board concluded that Hatay Ro-Ro holds a dominant position in the market on the basis that in October 2014, Iskenderun-Dubai was the only Ro-Ro line between Turkey and the Middle East. Only one other enterprise operated on the route, terminating operations the next month and leaving Hatay Ro-Ro as the sole enterprise operating in the market. Predatory Pricing The Board rejected the predatory pricing allegation against Hatay Ro-Ro. It held that Hatay Ro-Ro's agreement with an Egyptian port had been terminated, meaning transport ships were required to use the Suez Canal, legitimately accounting for the disputed additional costs.
Customer Discrimination Hatay Ro-Ro was established via combination of a group of Hatay-based transport companies. Therefore, certain Hatay Ro-Ro customers are also company shareholders. The non-shareholder customers claimed that Hatay RoRo deemed their vehicles to be non-priority and refused to transport these vehicles. Accordingly, the nonshareholder customers alleged that Hatay Ro-Ro discriminated between customers.
The Board held that Hatay Ro-Ro had abused its dominant position via price discrimination between customers (Article 6). However, it ultimately concluded there was no need to initiate an investigation against Hatay Ro-Ro because: • The discrimination had minimal effect on the market because non-shareholder customer comprised a small portion of Hatay Ro-Ro’s customers. • The practice was terminated in December 2015. Dissenting Minority Opinion
The Board rejected the allegation on the basis that Hatay Ro-Ro’s transport ships never operated at full capacity, so there were always space available for nonshareholder customers’ vehicles. Price Discrimination Non-shareholder customers claimed Hatay Ro-Ro discriminated between shareholder and non-shareholder customers in terms of price.
Hatay Ro-Ro acknowledged there had been a $200 price difference between customers between October 2014 and December 2015. However, on 8 December 2015, Hatay Ro-Ro decided the same prices would apply, irrespective of whether a customer was a shareholder or not.
One Board member (Kenan Türk) gave a dissenting opinion, claiming that a full investigation should be initiated based on the finding that a violation of Article 6 existed. He noted that there is no provision in the legislation that allows a full investigation to be avoided on the basis that the violation has ceased and discriminatory practices had a limited effect on the market. (decision number 16-01/12-5, dated 6 January 2016; published on the Competition Authority’s website on 28 March 2016)
Sakarya Ağır Vasıta Decision Type: Preliminary Investigation. Complainant: Sakarya Ağır Vasıta. Assertions: Sakarya Ağır Vasıta complained that Doğuş Oto refused to assign Sakarya Ağır Vasıta as the authorized service partner for Scania Trucks due to its partnership structure, violating conditions of the Motor Vehicle Block Exemption. Board Ruling: The Board found there was no need to proceed with a Full Scope Investigation against Doğuş Oto..
Sakarya Ağır Vasıta San. ve Tic. Ltd. Şti. (“SAV”) complained to the Board that Doğuş Otomotiv Servis ve Ticaret A.Ş. (“Doğuş Oto”) refused to assign SAV as the authorized service partner for Scania Trucks, contradicting provisions of a block exemption for vertical agreements in the Motor Vehicle sector. SAV claimed that Doğuş Oto's refusal was because SAV’s sole partner and director (Yusuf Solak) had previously been the director of a company (“Solak”) which Doğuş Oto had previously appointed as its authorized service agreement, but since terminated. SAV claimed the refusal reason was not related to repairmaintenance operations, as required by the block exemption. It argued that the partnership structure has no direct or indirect correlation with maintenance and repair services. Therefore, SAV asserted the refusal could not be deemed to be based on valid qualitative criteria. Doğuş Oto claimed the refusal was not based on personal reasons. Rather, Doğuş Oto claimed that the refusal was based on Yusuf Solak’s actions, which had previously led it to terminating the Solak’s authorized service agreement. The Block Exemption outlines certain types of selection approaches for distributors or authorized service partners. The Board concluded that Doğuş Oto had adopted a qualitative selective distribution system. Such a system involves using exclusively qualitative criteria to select distributors or authorized service partners. The nature of the relevant goods or services are established and consistent for all applicants who wish to become involved.
These criteria must not be applied to applicants in a discriminatory manner, nor directly limit the number of distributors or authorized service partners. The Board stated that in principle, a supplier’s qualitative criteria should only address maintenance and repair services. However, if a shop’s under-beam clearance is not sufficient to work on certain vehicles, this will be become a qualitative criteria when considering maintenance and repair services. The only quantitative criteria in this context are: • An authorized service provider’s shop size; or • An authorized dealer’s stock of cars. The Board concluded that there is no need to proceed with a full-fledged investigation against Doğuş Oto on the basis that: • Doğuş Oto has adopted a qualitative selective distribution system and determined criteria for such system. • The selection criteria could be known by anyone who wished to apply as an authorized service partner. • Doğuş Oto terminated its authorized service agreement with Solak based on Solak’s poor performance and consumer complaints about use of spare parts. • Yusuf Solak was informed about Solak’s poor performance when he was director of Solak. • Yusuf Solak resigned from Solak and founded Sakarya Ağır Vasıta. (decision number 16-33/577-253, dated 13 October 2016; published on the Competition Authority’s website on 23 December 2016)
Decision Type: Preliminary Investigation. Market: Nutritional supplements market. Complainant: Anadolumed. Assertions: Anadolumed claims that Solgar abused its dominant position by refusing to supply nutritional supplements to Anadolumed (Article 6). Board Ruling: Solgar does not have a dominant position, so cannot be deemed to violate Article 6 (unanimous decision). Full Scope Investigation not necessary.
Anadolumed complained to the Board that Solgar abused its dominant market position by refusing to supply nutritional supplements to Anadolumed (Article 6). The Board considered Solgar's market share in the nutritional supplements market, aiming to determine its alleged dominance. It looked at data from different sources (including the International Medical Statistics and Euromonitor), but could not identify a specific market share. Ultimately, the Board held that Solgar's market position was not strong enough to be considered dominant. The Board explained that for a refusal to supply to violate Article 6, an undertaking must hold a dominant position in the relevant market. It noted that the undertaking must not have an objective reason for refusing to contract and the refusal must be: • Related to a product or service which is indispensable for competing in the downstream market, • Likely to remove effective competition from the downstream market, and • Likely to cause consumers harm.
The Board stressed that Solgar not being in a dominant position is sufficient to end the investigation. However, to clarify other allegations, the Board continued its investigation regardless, based on an assumption that Solgar is a dominant player. Based on this assumption, the Board concluded there was no need to impose any fine on Solgar because: • Solgar is not involved in any downstream market activity. • Anadolumed operates only in resale and distribution of medicines, so contracting with Solgar is not a necessity for Anadolumed to compete with its rivals. • The products which Anadolumed could not obtain from Solgar could be obtained elsewhere. Therefore, the situation was not likely to cause harm to consumers. • Solgar’s refusal was based on Anadolumed’s economic instability, an objectively reasonable ground. • Solgar began to supply goods to Anadolumed after 2011. (decision number 16-05/116-51, dated 18 February 2016; published on the Competition Authority’s website on 31 May 2016)
Employee Statements During Investigations
Decision Type: Review of whether new facts change a past Board decision. Requested by the Authorityâ&#x20AC;&#x2122;s legal department.
Board Ruling: The Board ruled that the decision should remain unchanged since the statements had no prominent effect on the Boardâ&#x20AC;&#x2122;s assessment.
Issue: After a Board decision in 2011, an individual involved at the Preliminary Investigation phase confessed to suppling false and misleading information to the Board.
In making this decision, the Board changed its prior approach to the weight it gives to statements by employees who do not have official capacity to bind an undertaking.
A recent Board decision ruled that a person cannot represent and bind an undertaking during an investigation unless he or she is included in the undertaking’s authorized signatory list.
The Board’s approach contradicts prior decisions, which involved outcomes based on interviews with undertaking employees, regardless of the individual’s authority to represent and bind the undertaking in question.
• The Board holds wide investigative powers. Statements received from representatives and/or employees of undertakings under investigation are powerful tools in the Board’s arsenal. In the past, the Board has used employee statements as both primary and supporting evidence when concluding competition law violations. Background Mobile phone operator, Turkcell İletişim Hizmetleri A.Ş. (“Turkcell”), was alleged to have abused its dominant market position via actions towards distributers and dealers. MTK is an individual who submitted information against Turkcell to the Board at the preliminary investigation stage. He attended a complainants’ meeting with the case-handlers and made statements against Turkcell. The Board ultimately ruled against Turkcell in June 2011, fining the company 91,942,343 Turkish Lira. Turkcell appealed the Board’s decision to the Council of State. During these appeal procedures, MTK submitted a petition and a notarized statement confessing to earlier providing misleading information and false statements. He claimed all of the statements and information were untrue and he had been tempted by the complainants’ offers to act against Turkcell.
MTK was a Turkcell dealer, whose statements had only been recorded in one set of meeting minutes. These statements had no prominent effect on the Board’s assessment and determinations in the investigation report. Neither MTK’s name, nor the company which he acted as an unauthorized signatory for (Bilgi Teknoloji Telefon Sistemleri Tesksil San. Ltd. Şti., “Biltek”), were included in the investigation report. The decision was based on extensive assessment and analysis of information and documents from: - On-site inspection - Interviews with other market actors - Statements by Turkcell’s dealers - Precedents from the EU Commission and US Supreme Court.
The Board noted that rules regarding submission of misleading information only apply to undertakings. It ruled that since MTK is a natural person, who does not operate as an economical entity by himself, MTK could not be deemed to be an undertaking and had therefore not breached the relevant provisions of the Competition Law. The Board also considered the relation between MTK and Biltek, on the basis that MTK acted as an unauthorized signatory for Biltek and submitted misleading information to the Board. The Board held that MTK has no liability under the Competition Law because he could not legitimately represent or bind Biltek. However, it noted that MTK’s actions could violate the Turkish Criminal Code in terms of giving false statement when preparing official documents, as well as slander. Thus, the Board decided to file a criminal complaint against MTK via the public prosecutor’s office. Dissenting Opinion
The Latest Development The Authority’s legal department asked the Board to provide an opinion on whether MTK’s statements would change the merits of the case, as well as an assessment of MTK’s wrongful acts within the Competition Law’s scope. The Board reviewed the investigation report and concluded that it was satisfied that MTK’s misleading statements had not impacted the decision’s outcome. It noted that: • MTK was not one of the complainants in the case.
Three Board members (Kenan Türk, Adem Bircan, Metin Arslan) gave a combined dissenting opinion, arguing that the Board was unnecessarily limiting the scope of its own powers in the sense that: • The Board is not required to limit information to employees who have the power to officially bind the undertaking. • MTK was de facto representing Biltek and an organic link existed. The Board should have considered these two factors. (decision number 16-17/285-128, dated 18 May 2016; published on the Competition Authority’s website on 16 January 2017)
Co-operation Between Competing Insurers
Decision Type: Negative clearance/Individual exemption request. Agreement Subject: Co-operation and information sharing between competing insurance companies. Patries: Aksigorta and Acıbadem.
Board Ruling: The Board granted the individual exemption, noting that the entities should continue competing, despite the arrangement.
Two competing insurance companies wished to enter an agreement regarding co-operation for co-insurance, reinsurance and operational services. The parties applied to the Board seeking a negative clearance/individual exemption for this agreement. The Board’s decision is notable because it signalled that co-insurance and re-insurance agreements between competitors should be considered competition law sensitive. More specifically, information transfers under these arrangements (which are common in the insurance market) may require a re-evaluation from a competition law perspective.
The Agreement The agreement outlined co-operation between Aksigorta A.Ş. (“Aksigorta”) and Acıbadem Sağlık ve Hayat Sigorta A.Ş. (“Acıbadem”). It involved agreement that Acıbadem would: • Provide services to Aksigorta in operational matters related to existing health products. • Develop a new product to be sold and delivered to customers under the Aksigorta brand. • Provide services to develop a health insurance product, which Aksigorta would sell. • Co-insure and re-insure Aksigorta’s health insurance products.
The Board’s Decision In principle, it is important for the Board to evaluate competition restriction provisions in agreements concluded between undertakings which compete and operate in the same market. The Board noted that Aksigorta and Acibadem are engaged in competing activities for insurance services and in the relevant product market (the health insurance market). The Board conducted a negative clearance and individual exemption examination for the agreement. In general terms, a negative clearance application involves parties seeking the Board to determine that their agreement does not breach competition laws. If the Board declines a negative clearance application, the parties must obtain an individual exemption, or ensure the agreement falls into one of the block exemptions which apply to certain types of agreements. The Board declined the negative clearance application due to the confidentiality agreement, which involves sharing technical information between the parties. The Board considers this to be a restrictive practice. Accordingly, the parties were required to obtain an individual or block exemption for the agreement to proceed.
The Board’s decision does not include the specific agreement provisions. However, the decision reveals that the agreement contains restrictive provisions regarding: • Transfer of confidential and technical information, trade secrets, as well as customer and market information between the parties. • Determination of price, profit margin and re-insurance commission. • Making Aksigorta entering similar collaborations with other parties difficult.
The Board commented that co-insurance relationships fall within the scope of a block exemption. However, reinsurance relationships are not within the group exemption’s scope. Therefore, an individual exemption was required in these circumstances.
The parties have also entered a Confidentiality Agreement, committing to transfer technical information and trade secrets to each other, as well as all kinds of customer and market information.
(decision number 16-16/269-120, dated 11 May 2016; published on the Competition Authority’s website on 16 January 2017)
The Board ultimately granted an individual exemption for the agreement. In the process, it noted that competitor undertakings should continue to compete after concluding such an agreement.
Broadcasting Rights for the Turkish Basketball League
The Turkish Basketball Federation and Krea İçerik Hizmetleri ve Prodüksiyon A.Ş. (“Digiturk”) wished to enter an agreement whereby Digiturk obtained broadcasting rights for the Turkish Basketball League. The parties applied to the Board seeking an individual exemption for this agreement. The Board noted that broadcasting rights for sporting events has become increasingly important for television broadcasting in recent years due to a trend among television audiences towards on-demand broadcasting. However, due to the nature of sporting events, these broadcasts have not followed the same trends and have increased in significance as a result. Where broadcasting rights are sold collectively by a sporting federation (rather than separately by individual clubs), this can cause competition law issues by restricting the activities of the individual clubs to sell the rights as they wish. However, depending on the sales conditions, a federation’s sale of broadcasting rights can qualify for an exemption. The key factors for exemptions are provisional conditions, such as contractual exclusivity and duration. The Agreement
Decision Type: Individual exemption request. Agreement Subject: Exclusive television broadcasting rights for the Turkish Basketball League. Patries: Turkish Basketball Federation and Digiturk. Board Ruling: The Board granted an individual exemption on the basis that: • The agreement did not establish an exclusivity regime in the sense normally prohibited under completion laws. • The contact’s exclusive nature was reduced, offering benefits for customers.
The Board found that the word “exclusivity” was widely used in the Digiturk agreement. However, the agreement contains significant differences from usual “exclusive” broadcasting contracts. The Board found the agreement did not establish classic exclusivity in the sense usually referred to in competition law. Rather, the Board found the agreement required Digiturk to: • Broadcast at least two of the five live matches per week, free-of-charge to audiences. • Grant a sub-license to another broadcasting company. The agreement’s validity and applicability depends on Digiturk signing the separate sub-license agreement, as well as this separate agreement remaining in force until the end of the license period. The Digiturk agreement will also automatically terminate if the sub-license agreement is terminated. The Board’s Decision The Board unanimously agreed to grant an individual exemption for the broadcasting agreement. It noted that the agreement’s watered down exclusivity actually offered consumer benefits. Accordingly, a consumer who wants to watch Turkish Basketball League matches can watch them live and free of charge twice per week, as well as a 26-minute weekly summary program. Therefore, the Board concluded that consumers will benefit from Digiturk obtaining the broadcasting rights. (decision number 15-41/678-240, dated 20 November 2016; published on the Competition Authority’s website on 28 January 2016)
Short Form Decisions
Short Form Decisions Published in 2016
The Board issued a number of administrative fines during 2016, with the reasoning behind these sanctions to be published at a later date. The following is a selection of notable recent decisions.
Restrictive Trade and Concerted Practices Undertakings
Four undertakings in Antalya’s tourism sector.
İzmir Chamber of Jewellers.
Maintaining re-sale price of gold. Imposing sanctions on jewellery shops which do not follow its practices.
Violation of Article 4. Combined total fines of 8,327,970 Turkish Lira; ranging between 0.35% and 2% of gross 2015 incomes. Long Form Decision published in March 2017.
Violation of Article 4. Fined 4,740 Turkish Lira; 2.25% of gross 2015 income. Long Form Decision published in January 2017.
11 undertakings operating in the consumer electronics, computer and console games sector
Determining resale prices in the computer and console gaming market.
Violation of Article 4. Combined total fines of 54,326,631 Turkish Lira.
Contacts with partner accommodation facilities including: Price and quota parity clauses, and Most Favoured Customer clauses.
Violation of Article 4 Fined 2,543,992 TL. Turkish Lira.
Submitting Misleading Information to the Competition Authority Undertakings
Türk Telekomünikasyon A.Ş.
Brought wrong or misleading documents to an investigation into possible abuse of a dominant position via the pricing of its tariffs and special offers.
Violation of Article 6. Fined 7,551,954 Turkish Lira; 0.01% of gross 2015 income. Long Form Decision published in January 2017.
Short Form Decisions
Abuse of Dominant Market Position Undertakings
Ankara Uluslararası Kongre ve Fuar İşletmeciliği Merkezi A.Ş.
Abused its dominant position by rejecting to contract without legitimate reasons.
Türk Telekomünikasyon A.Ş.
Abused its dominant position by rejecting to contract without legitimate reasons.
Abuse of dominant position via exclusionary effects of Most Favoured Customer clauses.
Türk Eczacıları Birliği İktisadi İşletmesi
Luxottica Gözlük Endüstri ve Ticaret A.Ş.
Abuse of dominant position via exclusivity agreement with foreign drug suppliers to procure foreign pharmaceuticals which are: Not licensed in Turkey, and Licensed in Turkey but commercially not available to the market.
Abuse of dominant position.
Mey İçki San. ve Tic. A.Ş.
Abuse of dominant position.
Violation of Article 6. Fined 268,043 Turkish Lira; 1.5% of gross 2015 income. Long Form Decision published in March 2017. Violation of Article 6. Fined 33,983,793 Turkish Lira; 0.45% of gross 2015 income. Long Form Decision published in January 2017. Violation of Article 6. The first time the Board recognized that a price parity clause could violate competition laws. Fined 427,977 Turkish Lira. Board ordered Yemeksepeti to revise its agreements with restaurants and terminate implementation of Most Favoured Customer clauses. Long Form Decision published in January 2017. Violation of Article 6. Fined 18,062,307,32 Turkish Lira; 1.5% of gross 2015 income. Board sent an opinion letter to the Ministry of Health and Social Security Institution regarding opening the foreign pharmaceutical procurement market up to increased competition. Violation of Article 6 Fined 1,672,647 Turkish Lira; 0.75% of gross 2015 income. Published February 2017. Violation of Article 6 Fined 155,782,969 Turkish Lira; 4.21% of gross 2015 income. Published February 2017 – See page 12.
Investigations Launched in 2016
The Board initiated a number of new investigations during 2016. The following is a selection of notable investigations recently launched by the Board.
Volkan Yolcu Taşımacılığı Seyahat Nakliyat Ticaret A.Ş. Öz Edirne Birlik Mustafa Altunhan
Abuse of dominance by terminating contracts with a bus company without a legitimate reason (Article 6).
Lüleburgaz Chamber of Drivers and Motorists
Abuse of dominance by refusing to rent an office in Lüleburgaz Bus Terminal to a bus firm without legitimate reason (Article 6).
Electricity distribution companies: Akdeniz Elektrik Dağıtım A.Ş. CLK Akdeniz Elektrik Perakende Satış A.Ş. Ak Den Enerji Dağıtım Ve Perakende Satış Hizmetleri A.Ş.
Abuse of dominance via discriminatory actions (Article 6).
33 insurance companies in the traffic insurance market.
Restrictive trade practices and concerted practices by collective and simultaneous price increases (Article 4).
Ten ready mixed cement producers operating in İzmir.
Restrictive trade practices and concerted practices by establishing a cartel (Article 4).
Burdur Representation Office of Union of Chambers of Turkish Engineers and Architects. 13 self-employed mechanical engineers.
The Board’s traditional approach to electricity distribution companies it to not initiate full-fledged investigations.
Restrictive trade practices and concerted practices by establishing a common pool of money and sharing profits (Article 4).
Turkish Pharmacists’ Association and seven pharmacist chambers.
Abuse of dominance in its actions to distribute prescriptions to pharmacies (Article 6).
Five iron and steel companies
Restrictive trade practices and concerted practices (Article 4).
Musical Occupation Organizations
Abuse of dominance (Article 6). Restrictive trade practices and concerted practices (Article 4).
Trakya Cam Sanayii A.Ş.
Abuse of dominance (Article 6). Restrictive trade practices and concerted practices (Article 4).
Sector Inquiries Shedding light on future enforcement approaches
The Board conducts inquiries into various sectors which considered or suspected to suffer from competition law problems. The Authority uses sector inquiries to gain a better understanding and perspectives on competition dynamics in these investigated markets.
Inquiries can lead the Authority to initiate preliminary or full-scoped investigations into specific undertakings operating in the problematic market. The findings outlined in sector inquiry reports also shed light on the Authorityâ&#x20AC;&#x2122;s future enforcement approaches. After publishing sector inquiry reports, the Board generally organizes workshops, inviting interested parties to submit their comments about the reportâ&#x20AC;&#x2122;s findings.
Sector Inquiry Cement Movie theatre services Wholesale & retail energy sales Motor vehicles Pharmaceutical Natural gas Fast moving consumer goods Red meat Vehicle driving courses Banking (card acceptance) Fuel oil
Report Date November 2016 April 2016 January 2015 May 2014 April 2013 July 2012 May 2012 January 2011 February 2010 November 2009 June 2008
Seasonal Sales and Relation with Pricing The cement sector has a periodic demand structure, noted in the Board’s past decisions. The report found that demand reduces in September-October, reviving in March-April. Investigation defendants frequently argue that price increases are related to periodic demand changes and are caused by economic necessity. Nevertheless, the report concludes that in the Board’s violation decisions, prices did not line up with the demand pattern. Rather, the Board found that when demand decreased, there were no relative price reductions. The upward movements of price periods operate independent of the demand pattern. Therefore, the Board found that investigation defenses based on the periodic demand structure failed to have satisfactory economic basis. The Board places low weight on hypothetical defences, which ignore other information and documents. “Maverick” Firms “Maverick” firms cause discomfort to other market players by making agreements on anti-competitive issues. Attempts can be seen by other companies to take the maverick out of the market. If this is not possible, attempts are seen to convince the maverick be part of an anticompetitive agreement.
Cement Sector November 2016
Vertical Integration and Manipulation of the Ready-Mixed Concrete Market Vertical Integration within the cement market or readymixed concrete market can raise uncertainty about whether a price or region sharing agreement exists. Cement producers show a tendency to make horizontal agreements in the classical sense. The ready-mixed concrete market can be manipulated via the power derived from vertically integrated structures. It is possible to increase the price or profit levels in the ready-mixed concrete market by limiting the competitiveness of producers which are not operating in the cement market. Therefore, it is important to consider cumulative effects when examining the cement or ready-mixed concrete market, as well consider changes in price or cost. Customer Sharing and Unusual Price Movements
The sector inquiry was not conducted to pinpoint specific competition law violations by a particular undertaking, or a group of undertakings. Rather, it aims to make a competitive analysis, reflecting the long-term and holistic view of the market structure, as well as behaviors of independent market players in many different aspects, based on micro data-sets taken from undertakings and customers. The Authority’s Experience in the Cement Sector The report outlines the structure of the cement sector in Turkey and in the world, as well as development of competition law processes in this sector, including discussion of past Board decisions. Particularly noteworthy are explanations of sector characteristics and problems which have influenced Board determinations during investigations, as well as approaches taken against these problems.
Customer sharing produces the same economic results as price determination. Therefore, almost all Board decisions inspected customer sharing and price determination claims together, examining price levels in this context. When evaluating extraordinary pricing claims, the Board considers whether price changes can be explained by economic and rational reasons. It considers whether the price change can be explained by parameters such as cost, capacity, stock quantities, demand structure, general economic indicators, growth, and external markets affecting price formation. In other words, the Board does not directly consider a price increase alone to be a violation. It does not accept seasonality defenses regarding price changes. Rather, the Board reaches a conclusion using all inspection and evaluation tools available. New Entrances to the Market and Entry Barriers The report notes that the cement industry’s problematic competitive issues create entry barriers, inhibiting new entries in a sufficient, timely and predictable manner. The report notes both economic and legal entry barriers.
Economic Analysis of the Cement Industry
The report outlines four economic analyses of the cement sector: 1. Statistical Industry Analysis 2. Price-Cost-Demand Analysis 3. Joint Pricing Analysis 4. Efficiency and Competition Analysis
The report concludes that: • City-based shares of undertakings are highly variable. These shares can be used to interpret the market power of undertakings in particular cities. • The top five undertakings generally realize 50-60% of market production. • Each city is dominated by a certain undertaking. • The number of cities where a particular undertaking conducts sales activities is usually limited to 10-20 cities (but can exceed 50). • Determinations can vary for bulk and bagged cement, but have not changed much over the years. This is a sign of stability in the market.
Statistical Industry Analysis National Analysis The report concludes that: • Between 2010 and 2014 (excluding 2012) the cement sector grew well above both the Turkish economy and the construction sector. • After 2013, the cement price inflation is clearly above the inflation rate. • There is no direct reflection of the seasonal demand on cement prices. • Production and sales follow a parallel course but production is always higher than sales. Therefore, a supply surplus and a positive stock situation exists. • Prices have risen above inflation, excluding a price decrease between the end of 2012 and the beginning of 2013. • Price levels are not directly related to cement sales (demand), seasonality and supply surplus in general terms. City Analysis A key finding is that there is no clear positive correlation between price and concentration in the cement sector. Even when the concentration level is relatively low, price levels remain close to those in high concentration observations. The report concludes that: • Combining graphs / charts with the market concentration for undertakings and price level shows the market shares and power of undertakings is low at a national level. However, this changes in favor of certain undertakings in certain cities. • Significant differences exist for concentration levels between cities. • The level of concentration may have been negatively affected by the number of undertakings making sales to the cities. However, this effect is quite limited for some cities. • There is no clear positive or negative correlation between the concentration level, the number of undertakings, and the average prices in the cities. • Price differences within the same city may have increased due to the rise in number of undertakings selling to the same city.
Product Analysis The report concludes that: • Bulk cement is sold more than bagged cement. • At least 60% of annual cement sales are bulk cement. • The price of bulk cement is higher than bagged cement. • There is high degree of similarity in price trends for certain (but not all) bulk cement products. • Price movements for differentiated bagged cement products are very close to each other. Client and Client Type Analysis Purchase differences were detected for different groups of customers: dealer, industrial, contractor, ready-mixed concrete plant etc. The report concludes that: • While the customer range for bulk cement is primarily ready-mixed concrete facilities, bagged cement is mostly sold through dealers. Dealers occupy a considerable customer share for undertakings, but the largest customer group for several undertakings is ready-mixed concrete plants. • Customer types preferred CEM I 42.5 and CEM II 42.5 products. Some customers use these products in a very intensive way and some purchase a wider range of products. • Similarities in price movements are seen over time. However, prices can be quite close to each other and quite different and/or high prices may be offered to customers. For example, offered to rival ready mixed concrete facilities, public sector or non-governmental organizations. • Most customers purchase from a single company (particularly for bagged cement). • Almost half of customers use only one product. However, rare cases exist with customers purchase up to 12 products.
The Authority’s Conclusions
The report concludes. • Price changes are mostly made via previous-period price alterations. • No specific correlation is seen between price and cost changes over long or short terms. • If an undertaking’s cement production cost decreases, the price of cement does not always decrease. Rather, it may even increase. • There is no long-term balance relationship between price and demand in cities outside Hatay and Karabük. • The effect of current and past demand changes cannot be observed on prices in important consumption regions such as Ankara, İzmir, Antalya, Adana, Mersin, Diyarbakir, Trabzon.”
Joint Pricing Analysis
The term “Joint Pricing” in the report does not refer to any claims or evidence of violation, butrather is used to emphasize that firms are maximizing their profit in any kind of togetherness. Real prices were compared with the hypothetical prices which would emerge from hypothetical alliances between cement firms aiming to maximize their profits.
The report concludes. • Sector participants are engaged in Joint Profit Maximization. • Joint Pricing can originate from: - Oligopolistic structure - Rational choices - Concerted action or collusion between undertakings.
Efficiency and Competition Analysis
The report calculates an efficiency score using bulk CEM I 42.5 production and input cost data for the production of this product alone, as well as the total gray cement production and the input cost data for this production.
Competition problems identified in individual Board decisions still exist across the sector. Complaint petitions to the Board frequently mention high price increases and district sharing in this sector. However, it is beyond the report’s scope to determine whether this is due to: - Competition violation (as claimed in petitions), or - Rational preferences of firms in the context of oligopolistic dependence. Evaluating the sale price of grey cement within the scope of price increase claims does not reveal a direct relation between economic parameters such as seasonality, demand, and cost. Econometric simulations reveal that undertakings in most regions acted with “Joint Profit Maximization” behaviour. Since firms with low activity were considered in the calculations, firms operating in the sector should increase their efficiency. High efficiency brings low costs. However, when the price-activity relationship was examined, it was observed that high prices exists despite high efficiency for CEM I 42.5 and all gray cement types. In terms of market share claims, the industry is far behind the expected competitiveness level, primarily due to distribution of sales volumes. More than half of cement usage in cities was obtained from inner city terminals and there are usually two undertakings conducting sales into a city on the same dates. However, the report could not determine whether an increase in the number of undertakings selling to cities creates downward pressure on prices. Market shares throughout the country are generally consistent, with about 50% of the market dominated by five undertakings. All findings strongly suggest the market concentrates on regional and even provincial internals, and that competitive dynamics are not working effectively.
The average variable costs are calculated for the same period as the efficiency scores. When compared, it was found that there was a negative relation between them. Accordingly, the average variable costs decrease as the efficiency scores increase.
Movie Theatre Sector April 2016
The Authority published a sector inquiry on movie cinemas, outlining competition law-related conditions in different aspects of the sector, such as production, distribution and screening. The report was updated to include information about the recent merger of AFM and MARS and its effect of the sector. Notably, the report comments on the link between movie cinemas and shopping malls in Turkey.
Notable Court decisions regarding the cinema sector The report considers important decisions from the United States, European Union and Turkey. It particularly mentions: • Paramount Pictures (United States). • Acquisitions discussed by English courts. • Warner Bros.-2 (Turkey). • MARS/AFM merger (Turkey).
General information on cinema sector State of the sector after MARS/AFM merger The report outlines general information about the Turkish cinema sector, with determinations about production, distribution and screening markets. It notes that there appear to be no competition-restricting practices in Turkey, such as mandatory price or quantity restrictions in the production chain. Movie theaters began to be located in shopping malls from the 2000s in Turkey, with 71% of movie theaters currently located in shopping malls. This factor is an increasing issue within competition law examinations. Sector shaping digital transformation progress The report considers transformation of 35mm film to digital copies and the digital transformation progress. It examines the virtual print fee system and effects of this system on the Turkish cinema sector.
The report thoroughly reviews the AFM/MARS decision, making determinations about the state of the sector after the decision. The report observes that growth in screening appears to be moving in parallel with the growth of the shopping mall sector. It notes that movie theaters which will be built in all of the 61 new shopping mall projects and MARS will operate 33 of these movie theaters. The report also comments that from the end of 2014, MARS began operating in the production, distribution and screening markets, constituting vertical integration. Although this situation worries some in the sector, a recent Board decision states there is no proof that MARS has undertaken any competition-restricting acts while benefiting from this vertical integration.
M&A Notifications Legislation update
In February 2017, Turkey amended the legislation governing notification of mergers and acquisitions to the Board. Post-transaction notification The Board can now be notified after a transaction is realized in certain circumstances if control of the related undertaking is obtained via security purchases made by different sellers through serial transactions in the stock exchange (Article 10). Accordingly, such post-transaction notification can occur if: â&#x20AC;˘ The transaction is notified to the Board without delay; and â&#x20AC;˘ Voting rights attached to the securities are not exercised, or such rights are exercised according to an exception recognized by the Board in order to ensure the full value of the investments are maintained
Determining party turnovers Calculation methods for determining each transaction party's turnovers have changed (Article 8). Accordingly, two or more transactions by the same persons, parties, or undertaking, within the same related product market, within a three-year period will now considered to be a single transaction in terms of party turnovers under Article 7. Board obligation to re-establish thresholds removed The Competition Board's obligation to re-establish the thresholds for mergers and acquisition transactions every two years has been repealed (Article 7(2)).
Motor Vehicle Sector Block Exemption
In 2011, the Authority launched an inquiry into the motor vehicle sector, aiming to freshen competition-related legislation and keep pace with EU developments in this area. The inquiry investigated whether the existing block exemption was successful in creating a more competitive market structure. The Authority conducted comprehensive surveys on sales of motor vehicles, the maintenance and repair services market, as well as the spare parts market. It ultimately concluded that legislative changes were necessary and the block exemption for distribution agreements in the motor vehicle sector received an overhaul in February 2017. Changes aimed to address problems encountered during implementation of the scheme, as well as experiences gained from similar exemptions in other sectors. Market share threshold drops to 30% for quantitative selective distribution systems Certain market thresholds for distribution systems have now been abolished. Rather, quantitative selective distribution and exclusive distribution systems can now only benefit from block exemption if the related undertaking has less than 30% market share (Article 5 of Communiqué No. 2017/3). Previously, to benefit from the block exemption, market shares were set at: • 30% for exclusive distribution systems. • 40% for quantitative selective distribution systems. There continues to be no specific market share threshold set for qualitative distribution systems.
General exemption conditions To benefit from the block exemption, certain general conditions were previously required to be met (Article 4 of Communiqué No 2005/4). These conditions have now been removed on the basis that they interfere with the parties’ contractual freedom and the intended outcome can be achieved via other means. Accordingly, these (previously mandatory) general conditions for agreements have now been removed: • The right to transfer rights and obligations stemming from a vertical agreement of the authorized distributor or service to another undertaking in the supplier’s distribution network must not be limited. • Termination notices must - Be made in writing. - Include detailed and objective termination reasons. • Parties must resolve disputes stemming from fulfillment of the agreement’s obligations before an independent expert or tribunal. Only the termination notice terms remain as a general condition for agreements to qualify for the block exemption. According to these, termination notice periods must be: • Six months if the agreement term is five years or more. • At least two years if the agreement term is indefinite.
For distribution of motor vehicles: • Direct non-compete obligations can now be imposed on buyers for up to five years, but cannot extend beyond the term of the agreement. • For indirect non-compete obligations, the minimum purchase requirement has increased from 30% to 80%. Any obligation imposed on buyers to purchase a certain minimum percentage of goods, services or substitutable items from the seller (or from another undertaking selected by the seller) may be deemed to be an “indirect non-competition obligation” if the quantity is determined based on the buyer’s purchase amount during the previous calendar year. The existing system continues to operate for spare parts distribution, as well as supply of maintenance and repair services. Accordingly, agreements containing the following cannot benefit from the block exemption: • Direct non-compete obligations on distributors. • Provisions which impose minimum purchase requirements of more than 30% of the distributors sales during the previous calendar. However, an exception is introduced for (i) spare part distribution networks established by independent spare part suppliers and (ii) maintenance and repair service chains. Direct or indirect non-compete obligation can be imposed by such networks and chains, so long as the non-compete is limited to five years. Equivalent spare parts
Non-compete and Multi-branding Previously, there was no distinction between noncompete obligations at different levels of the market. The market has now been differentiated into three segments: • Distribution of motor vehicles. • Distribution of spare parts. • Maintenance and repair services.
The definition of equivalent spare parts has been amended for clarity. Accordingly, “Equivalent Spare Part” is now defined as a part produced to replace original parts used in assembly of a motor vehicle that complies with criteria such as mass, size, material, functionality, etc., determined in comparison with the original part as a result of the test and inspection methods set forth by relevant legislation.
R&D Sector Block Exemption
In March 2016, the block exemption for R&D agreements was amended. Major changes applied to the market threshold, exemption period, joint exploitation of R&D results, as well as agreement clauses which disqualify R&D agreements from accessing the block exemption. The updated R&D block exemption represents a more compatible regulatory structure with EU standards than previously existed in Turkey. Significant changes included: • The definition of R&D studies was expanded. Previously, specialization in research, development, production or distribution was required for a R&D study to benefit from the block exemption. The Communiqué now states that specialisation in the context of research and development or exploitation is enough. • A new definition for paid R&D was introduced and these activities became included in the block exemption’s scope. Accordingly, paid R&D now refers to R&D which is carried out by one party, but financed by another. • Agreements became eligible to benefit from the block exemption if they involve the joint use of results and meet market share thresholds. The scope of this concept was expanded by changing “joint use of results” to become “joint exploitation”. • A single market share threshold of 40% was introduced, whether an R&D agreement relates to: - One of the parties. - An undertaking controlled by parties. - A third undertaking appointed by parties together. • If the parties are not competing undertakings in the same market, the market share threshold assessment will not apply to their R&D agreement.
Parties are prohibited from using technical information and R&D results independently of each other, if the agreement only addresses R&D. Confidential business information and undisclosed information became excluded from the scope of the prohibition. An exemption period applies if the R&D results will be jointly used, beginning on the date the product is first launched in Turkey. The exemption period was increased from five to seven years. Agreements cannot benefit from the block exemption if they involve joint determination of the product’s sale amount, or limitations on a party independently determining the sale amount. An exception was introduced to the effect that this prohibition will not apply if the R&D agreement involves joint exploitation of the results. Agreements which include certain obligations cannot benefit from the block exemption. The block exemption was amended to exclude agremments which contained obligations not to: - Challenge the validity of intellectual property rights about and/or related to R&D results after completion of R&D or termination of the agreement. - Grant licenses to third parties to manufacture the contract products, or to apply the contract technologies if the agreement does not provide for the joint exploitation of the results or the joint exploitation of the results. If there is no joint exploitation clause, or in practice there is no de factor exploitation by the parties, there can be no restriction on third party licensing under the R&D agreement. Provisions were introduced for assessing and applying the market share threshold, similar to the Block Exemption Communiqué on Vertical Agreements (Communiqué No. 2002/2)
Our Competition and Antitrust Practice
Turkish competition laws prohibit anti-competitive agreements and abuses of dominance. As with many other jurisdictions, Turkey also has competition laws requiring merger control reviews. Moroğlu Arseven thoroughly understands the requirements and enforcement approaches of both the Turkish Competition Authority and its global counterparts. Following all recent developments in competition law allows us to build up a strong understanding and experience level, which in turn enables us to effectively and efficiently guide clients in a business-minded manner during matters involving complex competition law issues.
Advisory Services We offer a full range of competition law advisory services to support our clients’ international and domestic operations in horizontal and/or vertical relations, pricing issues, parallel trade, standard-setting activities, as well as licensing and other competition-sensitive arrangements. We have wide experience revising day-to-day contracts and business practices in terms of Turkish competition laws and best practices. We regularly support clients with reviewing, planning and executing regulatory filings for the necessary exemptions and clearances applicable to restrictive agreements and practices.
Merger Control Moroğlu Arseven has significant experience in Turkish merger control issues. Our end-to-end services stretch from initial notifiability analyses, through to counseling during all steps of complex merger control reviews conducted by the Turkish Competition Authority. We have extensively counseled clients in mergers, acquisitions and joint ventures, obtaining approvals by handling the review process for such notifications with the view to mitigating the risk of delay which exists during review by the Competition Board. Moroğlu Arseven collaborates with many international law firms for the Turkish merger control aspects of foreign-to-foreign transactions.
Compliance Programs & Training Seminars Establishing and maintaining efective competition law compliance programs create efficiencies by adopting preventive measures, as well as raising competition law awareness for executives and our clients’ employees. Moroğlu Arseven pinpoints its clients’ specific expectations, designing compliance programs in line with such expectations and market-specific dynamics. Our indepth understanding of competition legislation enables our clients to mitigate or avoid related risks.
Moroğlu Arseven has a solid background in organizing workshops and trainings for domestic and international clients, as well as their representatives and employees. These workshops support risk and cost reductions by providing an in-depth grasp of how competition laws impact daily operations, including specific risk areas. We also assist clients to establish antitrust and competition compliance programs.
Investigations Our firm provides clients with full support during all phases (both written and oral) of competition law investigations. Moroğlu Arseven has represented defendants and complainants in a broad range of industries before the Turkish Competition Board, involving complex competition law issues. Our experience includes cartels, restrictive horizontal and/or vertical arrangements, concerted practices and abuses of dominance. We are also familiar with handling leniency application procedures before the Competition Board.
Litigation We represent our clients before the administrative judicial bodies during challenges to the Competition Board’s decision. We also represent clients in civil actions for damages.
Key Contact Competition and Antitrust
Bora leads competition law matters at Moroğlu Arseven, with more than nine years’ experience in all aspects of the field.
Bora İkiler, LL.M. Counsel E : email@example.com D : +90 212 377 47 45
Bora’s expertise allows the firm to integrate competition law advice into wider advice regarding transaction structuring, strategy and risk assessment during corporate and commercial transactions. His specialist advice contributes to the firm’s fullservice package, particularly during M&A and daily corporate counselling matters. His work includes a wide range of industries, including beverages, banking, health, cement, automotive, retail, cosmetics, ticketing and broadcasting. Key competition areas Bora advises on include: •
Merger control filings and initial notifiability analysis.
Developing and implementing customized compliance programs.
Filings for block and individual exemptions.
Clearances for restrictive agreements and practices.
Developing, auditing and amending company policies.
Conducting mock dawn raids.
Tailored staff training seminars.
Advising on vertically integrated business models.
Advising on supply and distribution arrangements.
Advising on competition aspects of M&A transactions.
Localization projects for global clients.
Cartels and price control requirements.
Situations involving actual and perceived abuse of dominance.
Investigations by the Competition Authority.
2016 and 2017
Since 2014 Since 2015 40
Moroğlu Arseven is a full-service law firm with broadly demonstrated expertise and experience in all aspects of business law. Established in 2000, the firm combines a new generation of experienced international business lawyers and acclaimed of counsels who have academic, judicial and practical experience in private law. Its dynamic and dedicated team is able to analyse the legal framework and provide flexible solutions for clients doing business in Turkey. The firm serves local clients in international markets and international clients in Turkey. The firm represents and serves a diverse clientele, in a wide range of industries. These include manufacturing, retail, energy, banking and financial markets, construction and real estate, pharmaceuticals, life sciences, information technologies, telecoms, media, entertainment and sports. In-depth sector knowledge ensures seamless service across practice areas, enabling the firm to meet all of a client’s legal needs in Turkey.
A : Abdi İpekci Caddesi 19-1 Nişantaşı 34367, Istanbul, Turkey T : +90 212 377 47 00 F : +90 212 377 47 99 www.morogluarseven.com
Moroğlu Arseven is an Istanbul-based full service law firm, registered in Turkey and licensed to practice Turkish law by the Istanbul Bar. Association.This document is prepared by Moroğlu Arseven for general information purposes only. It is prepared in accordance with the Attorneyship Law numbered 1136, regulations based on such law and the professional rules of the Union of the Turkish Bar Associations. In particular, the regulations prohibiting advertisement by attorneys at law. The content may not be re-produced or adapted without prior written approval from Moroğlu Arseven. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on as legal or other advice.