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In Turkey, unilateral conduct of a dominant undertaking is restricted by article 6 of the Law on the Protection of Competition (Law No. 4054), which provides that ‘any abuse on the part of one or more undertakings, individually or through joint venture agreements or practices, of a dominant position in a market for goods or services within the whole or part of the country is unlawful and prohibited.’ Although article 6 of Law No. 4054 does not define what constitutes ‘abuse’ per se, it provides five examples of forbidden abusive behaviour, which comes as a non-exhaustive list and falls to some extent in line with article 102 of the Treaty on the Functioning of the European Union (TFEU). Accordingly, these examples include the following:
- directly or indirectly preventing entries into the market or hindering competitor activity in the market;
- directly or indirectly engaging in discriminatory behaviour by applying dissimilar conditions to equivalent transactions with similar trading parties;
- making the conclusion of contracts subject to acceptance by the other parties of restrictions concerning resale conditions such as the purchase of other goods and services, or acceptance by the intermediary purchasers of displaying other goods and services or maintenance of a minimum resale price;
- distorting competition in other markets by taking advantage of financial, technological and commercial superiorities in the dominated market; and
- limiting production, markets or technical development to the prejudice of consumers.
Pursuant to article 6, the abusive exploitation of a dominant market position is prohibited in general. Therefore, the article 6 prohibition applies only to dominant undertakings, and in a similar fashion to article 102 of the TFEU. Dominance itself is not prohibited; only the abuse of dominance is outlawed. Further, article 6 does not penalise an undertaking that has captured a dominant share of the market because of superior performance.
Dominance provisions, as well as other provisions of Law No. 4054, apply to all companies and individuals to the extent that they qualify as an undertaking, which is defined as a single integrated economic unit capable of acting independently in the market to produce, market or sell goods and services. Notably, state-owned entities also fall within the scope of the application of article 6.
The definition of dominance could be found in article 3 of Law No. 4054, which states it as ‘the power of one or more undertakings in a certain market to determine economic parameters such as price, output, supply and distribution independently from competitors and customers’. Enforcement trends show that the Turkish Competition Board (the Competition Board) is increasingly inclined to broaden the scope of application of the article 6 prohibition by diluting the ‘independence from competitors and customers’ element of the definition to infer dominance even in cases where clear dependence or interdependence on either competitors or customers exist (eg, the Board’s Coal Enterprise No. 04-76/1086-271, 1 December 2004; and Warner Bros No. 05-18/ 224-66, 24 March 2005).
When unilateral conduct is in question, dominance in a market is the primary condition for the application of the prohibition stipulated in article 6. For establishing a dominant position, the relevant market must first be defined and then the market position must be determined. The relevant product market includes all goods or services that are substitutable from a customer’s point of view. The Guideline on Market Definition considers demand-side substitution as the primary standpoint of market definition. Thus the undertakings concerned must be in a dominant position in relevant markets that are to be determined for every individual case and circumstance. Under Turkish competition law, the market share of an undertaking is the primary step for evaluating its position in the market. In theory, there is no market share threshold above which an undertaking will be presumed to be dominant. On the other hand, subject to exceptions, an undertaking with a market share of 40 per cent is a likely candidate for dominance, whereas a firm with a market share of less than 25 per cent would not generally be considered dominant.
In assessing dominance, although the Competition Board considers high market share to be the most indicative factor of dominance, the Competition Board takes other factors into account, such as legal or economic barriers to entry, portfolio power and financial power of an incumbent firm. Thus, domination of a given market cannot be defined solely on the basis of the market share held by an undertaking or of other quantitative elements, but other market conditions as well as the overall structure of the relevant market should be assessed in detail.
Collective dominance is also covered by Law No. 4054, as indicated in the aforementioned definition provided in article 6. On the other hand, precedents concerning collective dominance are not mature enough to allow for a clear inference of a set of minimum conditions under which collective dominance should be alleged. That said, the Competition Board has considered it necessary to establish an economic link for a finding of abuse of collective dominance (eg, Turkcell/Telsim No. 03-40/432-186, 9 June 2003).
Dominance under merger control rules
Structural changes through which an undertaking attempts to establish dominance or strengthen its dominant position (for instance, in cases of acquisitions) are regulated by the merger control rules established under article 7 of Law No. 4054. Nevertheless, a mere demonstration of post-transaction dominance is not in itself sufficient for enforcement under the Turkish merger control rules, but rather ‘a restriction of effective competition’ element is required to deem the relevant transaction illegal and prohibited. Thus the principles laid down in merger decisions can also be applied to cases involving abuse of dominance.
On a separate note, mergers and acquisitions are normally caught by the merger control rules contained in article 7 of Law No. 4054. However, there have been cases – albeit rarely – where the Competition Board found structural abuses through which dominant firms use joint venture agreements as a backup tool to exclude competitors, which is prohibited under article 6 (eg, Biryay, No. 00-26/292-162, 17 July 2000).
As mentioned above, the definition of abuse is not provided under article 6 of Law No. 4054. It only contains a non-exhaustive list of certain forms of abuse. Moreover, article 2 of Law No. 4054 adopts an effects-based approach for identifying anti-competitive conduct, with the result that the determining factor in assessing whether a practice amounts to an abuse is the effect on the market, regardless of the type of conduct at issue. Notably, the concept of abuse covers exploitative, exclusionary and discriminatory practices. Theoretically, a causal link must be shown between dominance and abuse. The Competition Board does not yet apply a stringent test of causality, and has, in the past, inferred abuse from the same set of circumstantial evidence employed in demonstrating the existence of dominance. Furthermore, abusive conduct on a market different to the market subject to dominant position is also prohibited under article 6. The Competition Board found that incumbent undertakings had infringed article 6 by engaging in abusive conduct in markets that are neighbouring to the dominated market (eg, Türk Telekom, No. 02-60/755-305, 2 October 2002; and Turkcell decision, No. 01-35/347-95, 20 July 2001).
Guidelines on the Assessment of Exclusionary Abusive Conduct by Dominant Undertakings
The Competition Authority recently published Guidelines on the Assessment of Exclusionary Abusive Conduct by Dominant Undertakings (Guidelines on Exclusionary Abuses) in order to: describe the factors that the Competition Board shall take into consideration when assessing exclusionary abusive conduct by dominant undertakings under article 6 of Law No. 2010/4; and to increase transparency, thus minimising the uncertainties that may arise in the interpretation of the article by the undertakings. To that end, the Guidelines on Exclusionary Abuses are intended to be instructive not only for dominant undertakings in a market, but also for other undertakings such as their competitors, customers and suppliers. The Guidelines on Exclusionary Abuses is also in line with its European Commission’s Guidance on the Commission’s enforcement priorities in applying article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings.
Specific forms of abuse
Under Turkish competition law, specific forms of abuse are apparent. Price and non-price competition may amount to an abusive conduct under article 6. The Competition Board has, in the past, found incumbent undertakings to have infringed article 6 by engaging in discriminatory behaviour concerning prices and other trade conditions (eg, TTAS, No. 02-60/755-305, 2 October 2002; and Türk Telekom/TTNet, No. 08-65/1055-411, 19 November 2008).
As mentioned above, both exploitative and exclusionary abuses fall within the prohibitions provided under article 6. On the other hand, exploitative prices or terms of supply may be deemed an infringement, although the wording of the provision does not contain a specific reference to this concept. The Competition Board has condemned excessive or exploitative pricing by dominant firms in the past. However, complaints filed on this basis are frequently dismissed because of the Competition Authority’s reluctance to micromanage pricing behaviour.
Although article 6 does not explicitly refer to rebate schemes as a specific form of abuse, rebate schemes may also be deemed to constitute a form of abusive behaviour. In particular, in Turkcell (No. 09-60/1490-37, 23 December 2009), the Competition Board condemned the defendant for abusing its dominance by, among other things, applying rebate schemes to encourage the use of the Turkcell logo and refusing to offer rebates to buyers that work with the competitors. In addition, in Doğan Holding (No. 11-18/341-10, 30 March 2011), the Competition Board condemned Doğan Yayın Holding, the biggest undertaking in the media sector in Turkey, for abusing its dominant position in the market for advertisement spaces in daily newspapers by applying loyalty-inducing rebate schemes.
Predatory pricing may be regarded as a form of abuse, although the Competition Board has never condemned an undertaking on the basis of predatory pricing (apart from in Turk Telekom, which concerns margin squeeze rather than straightforward predatory pricing), as evidenced by many precedents. The Competition Board is considerably familiar with the elements of predatory pricing (eg, Trakya Cam, No. 11-57/1477-533, 17 November 2011; Denizcilik İşletmeleri, No. 06-74/959-278, 12 October 2006; and Feniks, 23 August 2007).
On the other hand, as mentioned above, due to the Competition Board’s reluctance to micromanage pricing behaviours, complaints on the basis of predatory pricing are frequently dismissed. It has been observed that high standards are set for bringing forward predatory pricing claims.
In line with EU jurisprudence, price squeezes may amount to a type of abuse in Turkey. The Competition Board is known to closely scrutinise allegations of price squeezing, and recent precedents (eg, Turk Telekom/TT Net, No. 08-65/1055-411, 19 November 2008) involved an imposition of monetary fines on the basis of this form of abuse.
Exploitative prices or terms of supply may be deemed an infringement of article 6, although the wording of the law does not contain a specific reference to this concept. The Competition Board condemned excessive or exploitative pricing (eg, Belko, No. 01-17/150-39, 6 April 2001) by dominant firms in the past.
Refusals to deal and access to essential facilities are forms of abuses that are frequently brought before the Competition Authority. Therefore, there are various decisions (eg, POAS, No. 01-56/554-130, 20 November 2001; Eti Holding, No. 00-50/533-295, 21 December 2000; AK-Kim, No. 03-76/925-389, 12 April 2003; and Çukurova Elektrik, No. 03-72/874-373, 10 November 2003) by the Competition Board on this matter.
Although exclusive dealing, non-compete provisions and single branding normally fall under the scope of article 4 of Law No. 4054, which governs restrictive agreements, concerted practices and decisions of trade associations, such practices could also be raised within the context of article 6. On that note, the recently revised version of Block Exemption Communiqué No. 2002/2 on Vertical Agreements no longer exempts exclusive vertical supply agreements of an undertaking holding a market share above 40 per cent. Thus, a dominant undertaking is now an unlikely candidate to engage in non-compete provisions and single branding arrangements.
Tying and leveraging are among the specific forms of abuse listed in article 6. The enforcement track record indicates no cases where the incumbent firms were fined as a result of tying or leveraging. On the other hand, the Competition Board ordered some behavioural remedies against incumbent telephone and internet operators in some recent cases in order to have them avoid tying and leveraging (see TTNET-ADSL, No. 09-07/127-38, 18 February 2009).
Although limiting output, markets or technical development is one of the specific forms of abuse listed in article 6, according to the enforcement track record, there has not been any case where the incumbent firms were found to infringe article 6 as a result of limiting output, markets or technical development. Furthermore, despite the fact that the issue of intellectual property rights is more important than ever before, the precedents of the Competition Board do not yet include a finding of an infringement on the basis of abuse of intellectual property rights since this issue has not been brought before the Turkish Competition Authority.
As mentioned above, the list of specific abuses present in article 6 is not exhaustive and it is very likely that other types of conduct may be deemed as abuse of dominance by the Competition Board. On the other hand, it is worth mentioning that the enforcement track shows the Competition Board has not been in a position to review any allegation of other forms of abuse, such as strategic capacity construction, predatory product design or product innovation, failure to pre-disclose new technology, predatory advertising or excessive product differentiation.
Since Law No. 4054 does not recognise any sector-specific abuses or defences, certain sectoral independent authorities have competence to control dominance in the relevant sectors. For instance, according to the secondary legislation issued by the Turkish Information and Telecommunication Technologies Authority, firms with a significant market are prohibited from engaging in discriminatory behaviour between companies seeking access to their network and, unless justified, from rejecting requests for access, interconnection or facility sharing. Similar restrictions and requirements are also regulated for the energy sector. Therefore, although the sector-specific rules and regulations bring about structural market remedies for the effective functioning of the free market, the Competition Authority is the only regulatory body that investigates and condemns abuses of dominance.
The national competition authority for enforcing competition law in Turkey is the Competition Authority, a legal entity with administrative and financial autonomy. The Competition Authority consists of the Competition Board, presidency and service departments. As the competent body of the Competition Authority, the Competition Board is responsible for, inter alia, investigating and condemning abuses of dominance. The Competition Board has seven members and is seated in Ankara. The service departments consist of five main units. There is a ‘sectoral’ job definition of each main unit.
The Competition Board has relatively broad investigative powers. It may request all information it deems necessary from all public institutions and organisations, undertakings and trade associations. Officials of these bodies, undertakings and trade associations are obliged to provide the necessary information within the period fixed by the Competition Board. Failure to comply with a decision ordering the production of information or failure to produce on a timely manner may lead to the imposition of a turnover-based fine of 0.1 per cent of the turnover generated in the financial year preceding the date of the fining decision (if this is not calculable, the turnover generated in the financial year nearest to the date of the fining decision will be taken into account). Where incorrect or misleading information has been provided in response to a request for information, the same penalty may be imposed.
Article 15 of Law No. 4054 also authorises the Competition Board to conduct on-site investigations. Accordingly, the Competition Board can examine the books, paperwork and documents of undertakings and trade associations and, if need be, take copies of the same; request undertakings and trade associations to provide written or verbal explanations on specific topics; and conduct on-site investigations with regard to any asset of an undertaking.
Law No. 4054 therefore grants the Competition Authority with vast authority to conduct dawn raids. A judicial authorisation is obtained by the Competition Board only if the subject undertaking refuses to allow the dawn raid. While the mere wording of the law allows oral testimony to be compelled of employees, case-handlers do allow delaying an answer so long as there is a quick written follow-up correspondence. Therefore, in practice, employees can avoid providing answers on issues that are uncertain to them provided a written response is submitted in a mutually agreed timeline. Computer records are fully examined by the experts of the Competition Authority, including deleted items.
Officials conducting an on-site investigation need to be in possession of a deed of authorisation from the Competition Board. The deed of authorisation must specify the subject matter and purpose of the investigation. Inspectors are not entitled to exercise their investigative powers (ie, copying records, recording statements by company staff, etc) in relation to matters that do not fall within the scope of the investigation (ie, that which is written on the deed of authorisation). Refusing to grant the staff of the Competition Authority access to business premises may lead to the imposition of fines.
The minimum amount of fine was set as 14,651 lira for 2013 and 15,226 lira for 2014. It may also lead to the imposition of a periodic daily fine of 0.05 per cent of the turnover generated in the financial year preceding the date of the fining decision (if this is not calculable, the turnover generated in the financial year nearest to the date of the fining decision will be taken into account) for each day of the violation.
Sanctions and remedies
The sanctions that could be imposed for abuses of dominance under Law No. 4054 are administrative in nature. In the case of a proven abuse of dominance, the incumbent undertakings concerned shall be (separately) subject to fines of up to 10 per cent of their Turkish turnover generated in the financial year preceding the date of the fining decision (if this is not calculable, the turnover generated in the financial year nearest to the date of the fining decision will be taken into account). Employees or members of the executive bodies of the undertakings or association of undertakings (or both) that had a determining effect on the creation of the violation are also fined up to 5 per cent of fine imposed on the undertaking or association of the undertaking. Law No. 4054 makes reference to article 17 of the Law on Minor Offences and there is also a Regulation on Fines. Accordingly, when calculating the fines, the Competition Board takes into consideration factors such as the level of fault and amount of possible damage in the relevant market, the market power of the undertakings within the relevant market, duration and recurrence of the infringement, cooperation or driving role of the undertakings in the infringement, financial power of the undertakings, compliance with the commitments and so on, in determining the magnitude of the monetary fine.
Articles 9 and 27 of Law No. 4054 entitle the Competition Board to order structural or behavioural remedies; that is, to require that undertakings follow a certain method of conduct such as granting access, supplying goods or services or concluding a contract. Failure by a dominant firm to meet the requirements so ordered by the Competition Board would lead it to initiate an investigation, which may or may not result in the finding of an infringement. The legislation does not explicitly empower the Competition Board to demand performance of a specific obligation such as granting access, supplying goods or services or concluding a contract through a court order.
Availability of damages
A dominance matter is primarily adjudicated by the Competition Board. Enforcement is also supplemented with private lawsuits. Articles 57 et seq of Law No. 4054 entitle any person who is injured in his business or property by reason of anything forbidden in the antitrust laws to sue the violators to recover up to three times their personal damages plus litigation costs and attorney fees. Therefore, Turkey is one of the exceptional jurisdictions where a triple-damages clause exists in the law. In private suits, the incumbent firms are adjudicated before regular courts. Because the triple-damages clause allows litigants to obtain three times their loss as compensation, private antitrust litigations increasingly make their presence felt in the article 6 enforcement arena. Most courts wait for the decision of the Competition Board and build their own decision on that decision. The majority of private lawsuits in Turkish antitrust enforcement rely on refusal to supply allegations.
Recent enforcement action
The recent enforcement trend of the Turkish Competition Authority showed that it is becoming more and more interested in the pricing behaviours of dominant undertakings, since over the past three years there have been several pre-investigations and investigations launched by the Turkish Competition Authority in relation to this aspect of the competition law principles in Turkey, such as the Turkish Airlines/Pegasus (30 December 2011, No. 11-65/1692-599) and Turkcell (24 November 2011, No. 11-59/1516-541) investigations, and the Efes Pazarlama (18 July 2012, No. 12-38/1085-344), IDO (01 November 2012, No. 01.11.2012) and DHMI (24 April 2012, No. 12-21/561-159) pre-investigations.
The following cases are the most recent landmark decisions regarding abuse of dominance, which were issued by the Turkish Competition Board in 2013 and 2014.
Tüpraş (17 January 2014, No. 14-03/60-24)
The Turkish Competition Board recently concluded the high-profile competition law investigation against Tüpraş, Turkey’s biggest energy company, and OPET, one of Turkey’s biggest fuel oil companies. The Competition Board found that Tüpraş abused its dominant position through abusive pricing practices and contracts. It imposed an unprecedented administrative monetary fine of 412 million lira on Tüpraş, the equivalent of 1 per cent of Tüpraş’s annual turnover for 2013. This is the highest fine levied on a single undertaking in the Competition Authority’s enforcement history, with an amount almost double of the previous highest fine on a single undertaking (the monetary fine of 213.4 million lira against Garanti Bankası, one of the biggest banks in Turkey).
The Competition Board did not find sufficient evidence of an article 4 violation (anti-competitive agreements), so cleared Tüpraş and OPET of the allegations. Therefore, OPET received no fine as the Competition Board did not find any violation on the part of OPET. Finally, the Competition Board decided to deliver an opinion to the public authorities concerned that pricing mechanisms for refineries should be restructured in a manner to yield consumer benefit. Tüpraş will also be warned to avoid similar behaviour.
Frito Lay (29 August 2013, No. 13-49/711-300)
Following the complaint made by Kraft Gıda Sanayi ve Ticaret AŞ (Kraft), which asserts that Frito Lay abused its dominant position in the market for packaged potato chips by engaging in systematic, deterrent actions against Kraft’s distributors and aggravating its competitor’s activities, and that Frito Lay executes exclusive contracts with the sales points and thus infringed article 6 of Law No. 4054, the Competition Board initiated an investigation. At the end of the investigation, the Competition Board concluded that the actions of Frito Lay subject to the complaint were an infringement of article 4 of Law No. 4054 as Frito Lay conducts exclusionary behaviours such as engaging in exclusive relations with end-sale points, and thus the Competition Board imposed a fine of 17.9 million lira on Frito Lay.
Turkcell (19 December 2013, No. 13-71/988-414)
Following the decision of the 13th Chamber of the Council of State annulling the decision of the Competition Board dated 2 April 2008 No. 08-27/306-97, the Competition Board initiated an investigation to find whether Turkcell İletişim Hizmetleri AŞ (Turkcell) infringed Law No. 4054 by obstructing its competitors’ activities by means of its exclusive practices related to vehicle-tracking services.
At the end of the investigation, the Competition Board concluded that Turkcell had violated article 6 of Law No. 4054 by obstructing its competitors’ activities by means of its exclusive practices related to vehicle tracking services and thus imposed a fine at a rate from 4.5 per cent of its annual gross revenue at the end of fiscal year 2012, which amounts to 39.7 million lira on Turkcell. It is also concluded that Turkcell is expected to announce that its business partner vehicle-tracking firms and their dealers can cooperate with competing operators, there are no barriers to launching competing operators’ services, they can participate in competitors’ campaigns and they are not under any contractual or actual obligations to the contrary.
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