Turkish Consumer Electronics Sector under Antitrust Investigation

Atari“The prayer of an angry gamer is so powerful that server gods hear it instantly and help the one. Thus if  you don’t want to face the rage of the gods you’d better not piss a gamer off.”

A legend from the age of empires.

In February the TCA opened an investigation into the following undertakings which operate in computer and video game consoles retail business in Turkey: Aral Game, Bimeks, D&R, Teknosa and Vatan Computer.

The reason behind this investigation was the alleged RPM aggreement and anticompetitive cooperation between Aral Game, which is a (or the) major video game importer/distributer in Turkey, and abovementioned retailers. This investigation was welcomed by the Turkish gamers as they celebrated this intervention and expected that it would solve the rocket prices in video games in Turkey. A quick googling shows that the gamers were already discussing the high video game prices and the pricing policy in forums even with a petition, with over 10,500 petitioners, calling gamers to a boycott. They also blamed world-wide game developers like Ubi-Soft, Sony and Microsoft for not acting against those high prices in Turkey.

Well, the story does not end here. A couple of days ago the TCA announced that Gold Computer and Kliksa which are other two major technology retailers, were also included in this investigation while it widened the scope of the investigation from video/console games to consumer electronics and three more undertakings, LG Electronics Turkey, Media Markt Turkey, and Türk Philips, were also included.

With this last decision almost all major electronic distributors, retailers and  producers, including international chains,  in Turkey are now under an antitrust investigation which had started with a focus on just video games but then its scope extended covering the markets for consumer electronics. The investigation may be regarded as industry wide since it would be very difficult for a Turkish consumer to think about any other electronics retailer apart from those under investigation. The widened investigation is still about the breach of Article 4 of the Act No: 4054 which is on anti-competitive agreements.

Constitutional Court of Turkey: Legislative Act Against Minimum Tariffs for Professional Unions is Constitutional

Constitutional Court of Turkey, which is the final court of appeal in Turkey before the European Court of Human Rights, just released a judgement (on the Official Gazette dated 16 July 2015, page 43 -in Turkish) that is quite crucial as it shows the approach of the judiciary to the anti-competitive acts of professional associations.

Constitutional Court of Turkey

The story may be considered to begin in 2006 when Law no: 5477 amended the relevant article of the law of Turkish Medical Association (not the dentists) no: 6023 such that the association could not fix the minimum prices for medical services given by the physicians anymore. This amendment was quite controversial at the time but the amendment is still valid. It may not be a coincidence that this amendment was compatible with the official opinion of the TCA given as a result of the decision related to the preliminary investigation on Turkish Medical Association in 2003. There are other decisions and opinions of the TCA related to the professional unions, which are not mentioned here for the sake of a medium-long post (!). But if you are interested you can read this paper (Çokgezen and Toksoy 2013) and this expertise thesis (2004) about the struggle between TCA and professional unions – sorry both are in Turkish.

Well, in 2011, similar to the story of Turkish Medical Association, a legislative decree (KHK: 663 -in Turkish-) amended the article 11 of the Law of Turkish Dental Association, which is a professional union established by law and subject to governmental regulation in addition to having administrative authorities in many areas related to the dental profession. This article had authorized the association to set the minimum prices of dental consultation and treatments every year. With the legislative decree in 2011 this authorization was limited such that the association could only release guide tariffs and could not set the prices anymore.

After this amendment CHP, (Republican People’s Party, which is not the right wing party despite the connotation of its name) the main opposition party in the Great National Assembly of Turkey (GNAT), appealed against this to the Constitutional Court of Turkey saying that the association should have the authority to set the prices relying on the Article 135 of Turkish Constitution which declares that:

ARTICLE 135- Professional organizations having the characteristics of public institutions and their higher bodies are public corporate bodies established by law, with the objectives of meeting the common needs of the members of a given profession, to facilitate their professional activities, to ensure the development of the profession in keeping with common interests, to safeguard professional discipline and ethics in order to ensure integrity and trust in relations among its members and with the public; their organs shall be elected by secret ballot by their members in accordance with the procedure set forth in the law, and under judicial supervision…

However with its judgement (Dated 04 December 2014 and numbered E.2013/114 K.2014/184) the Constitutional Court rejected the claims of CHP and approved the relevant part of the amendment implemented by the above-mentioned decree. This judgement was also appealed and again it was overturned by the court.

While rejecting the request for annulment of the amendment, the constitutional court underscored that “although fixed minimum tariffs may be considered to be compatible with the ruling (facilitating professional activities, ensuring the development of the profession in keeping with common interests etc.) of Article 135 of the constitution, this article does not entail price fixing nor does entitle the organizations to fix the tariffs…” and “... fixed minimum tariffs are not a must for efficient and competent health services” and ruled that in the light of Article 135 entitling the professional organizations to fix prices shall be appraised by the legislative body.

This is not a judgement related to a specific TCA decision which is subject to supervision of administrative courts and the Council of State as the court of appeals. However it shows that the approach of the highest judicial court in Turkey, which is apparently compatible with the TCA’s opinions and decisions, declares that price fixing can not be considered as a vested right of the professional organizations according to the constitution.

After Sweden, Italy and France, The TCA also investigates Booking.com

According to a recent press release (in Turkish) the TCA has opened an antitrust investigation on Booking.com B.V. and its Turkish subsidiary Bookingdotcom Destek Hizmetleri Limited Şirketi. According to the press release, the main reason of the investigation is the “best price guarantee” policy of the world’s most popular online reservation portal, which is examined under the Article 4 and 6 of the Act on The Protection of Competition no 4054, which are on anti-competitive agreements and abuse of dominance, respectively.

Booking.com was recently investigated by the national antitrust authorities of Sweden, Italy and France but the investigations were closed in April in a coordinated approach of the authorities by accepting the commitments of booking.com, which were found to be dissatisfying by the hotel industry of Europe.
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Turkcell fined for abuse of dominance as Council of State annulled the previous decision

According to the Turkish Competition Authority’s (TCA) press release, Turkcell, the leading GSM operator in Turkey, was fined approximately TL 40 million  (USD 20 million) by the TCA although it had avoided a fine in the first decision of the preliminary inquiry–which was annulled. The decision, dated 19 December 2013, concluded that Turkcell had abused its dominant position in GSM services used in Vehicle Tracking Services (VTS) market in Turkey by “complicating its competitors’ activities by means of its exclusive practices related to vehicle tracking services….

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According to the press release, in the decision it was also stated that Turkcell should avoid similar conduct and it is expected to announce that its business partners in vehicle tracking services market and their dealers can cooperate with competing operators, there are no barriers to launch competing operators’ services and they could participate in competitors’ campaigns and they are not under any contractual or actual obligations to the contrary- in order to establish competition, in accordance with the Article 9/1* of  the Act on The Protection of Competition no 4054.

It would be interesting to recall the annulled decision (here in Turkish) of the preliminary inquiry on the same issue, dated 02 April 2008 and numbered 08-27/306-97. In this decision the Turkish Competition Board concluded that an investigation was not needed and Turkcell had not breached the Article 4 and 6 of the Act on The Protection of Competition no 4054, which are on anti-competitive agreements and abuse of dominance, respectively. The analysis of abuse of dominance in the annulled decision pointed the infant market structure of vehicle tracking systems and stated that “no evidence was found on whether Turkcell has closed the market to the competitors and excluded them, despite its high market share”. However with its judgement dated 13 February 2012, the Council of State annulled (the judgement is here in Turkish) this decision of the preliminary inquiry as the complainant and plaintiff Vodafone –the main competitor of Turkcell in Turkey- appealed.

In its judgement the Council of State pointed that the TCA had already detected that Turkcell is in a dominant position in the market and an increase in its market share is certain. Moreover, the Council also stated that the case of alleged abuse of dominance should have been analyzed in an investigation where Turkcell’s behavior of forcing its consumers to refuse to deal with Vodafone should have been taken into account as the inferior infrastructure, low market shares and alleged opportunities of the competitors were not enough to conclude, without assessing Turkcell’s influence, that the market is not closed to the competitors. And, as a result, the TCA had started the investigation on the issue, which was resulted with the above-mentioned fine.

This fine is almost half of the approximately TL 92 million fine imposed by the TCA on Turkcell, the leading mobile phone operator company (having 35 million customers in mobile market only in Turkey) which does business also in other fields of communication industry and also in different countries (like Georgia and Azerbaycan),  for a different conduct in 2011 (here is the related post) where it was decided that Turkcell had abused its dominant position by its practices directed at its distributors and dealers.

* Article 9/1 of  the Act on The Protection of Competition no 4054:  If the Board, upon informing, complaint or the request of the Ministry or on its own initiative, establishes that articles 4, 6 and 7 of this Act are infringed, it notifies the undertaking or associations of undertakings concerned of the decision encompassing those behaviour to be fulfilled or avoided so as to establish competition and maintain the situation before infringement, in accordance with the provisions mentioned in section Four of this Act.

Turkey’s “largest industrial enterprise” Tüpras hit with record fine for abuse of dominance

According to Turkish Competition Authority’s (TCA) press release (English version is here) the Turkish Petroleum Rafineries Co. (Tüpraş), the largest enterprise in Turkey was fined by the TCA  TL 412 million (approx. USD 200 million ) for abusing its dominance by “pricing and contractual practices ”.  According to the press release it was also decided to send official opinions to Tüpraş on obligation to stop the practices that caused the breach, and to relevant public authorities within the sector on fixing the failure of the price regulation mechanism in the industry in favor of consumers.

The fine of TL 412 million is the highest fine faced by a single company in the TCA’s history, almost equal to 2 times of the fine on Garanti Bank which was the record holder with TL 213 million fine in 2013 for participating in anticompetitive agreements among a number of banks-mentioned in a related post.

Tüpraş, owned by one of the largest conglomerates in Turkey Koç Holding since it was privatized in 2006, is the company controlling all of the refining capacity in Turkey with four oil refineries having processed 22 million tons of crude oil creating USD 26 billion net sales just in 2012 according to its 2012 annual report.

According to the press release while Tüpraş was fined for breach of Article 6 of the Act on The Protection of Competition no 4054, which is on abuse of dominance, it was decided that it and its joint venture Opet (a petroleum distributor company in Turkey) did not breach the Article 4 of the Act on The Protection of Competition no 4054, which is on anticompetitive agreements.

The details of the decision and how the breach was interpreted by the Turkish Competition Board will be appear in the reasoned decision which will -probably- be held here as soon as released.