The TCA Prohibits a Transaction in Marina Sector

  
Just before Eid-Ramadan break in Turkey, we would like to inform you about a highly important decision adopted by the TCA on 9 July 2015, which was last Thursday. The decision is related to proposed takeover of Beta Marina and Pendik Marina by Setur Servis Turistik A.Ş., which is controlled by the Koç Holding, the largest conglomerate in Turkey. Regarding the transaction, the TCA had opened a phase-II investigation almost a year ago on 7 August 2014 in order to perform an in-depth analysis. 

Although there is still little information about the merits of the case, it is stated in the press release that Koç Holding would have a dominant position in the relevant market defined for Istanbul City Port Marina after the transaction and it would result in significant lessening of competition. According to the statistics published by the TCA every year, this is the 5th prohibition decision of the TCA. However, previous 4 prohibition decision was related to privatization of public entities. Therefore this decision can be regarded as the first of its kind.

We are also planning to give you more information about another important decision adopted last week regarding the conditional approval of Migros’s acquisition by Anadolu Group, which also owns the largest beer maker.

For now, happy Eid-Ramadan to you all.

TCA Hits Banks With Record Fines

In Friday evening, after the closing of stock exchange, the TCA has announced its long-awaited decision regarding major banks of Turkey. The TCA hits 12 major banks with record fines totalling 1,11 billion Turkish liras (around 480 million Euros). This amount exceeds the total fines imposed by the TCA since its establishment. Here are the percentages of the fines imposed on banks today (indicated by the red slice) compared to the total amount of the fines up to date.

banka cezalar1

This decision also broke another record in the history of the TCA which will celebrate its 16th anniversary next Friday. As can be seen in the graphics below, the fines imposed on five banks (indicated by red columns) have taken its place among the highest fines imposed on a single undertaking.

banka cezalar

The allegations investigated in the case include determination of deposit and credit interest rates, exchange of information, collusion on the increase of credit cards’ fees, and bid-rigging. Notwithstanding, the infringement was not regarded as a cartel. Hence the TCA started the calculation of fines in the range of 0.5%-3% instead of 2%-4%.

When we come to the adjustment factors, the TCA has not increased the fines because of the repeated infringement although it also imposed fines in 2011 on some of the banks that are fined today. On the other hand, the TCA applied mitigating factors in today’s decision.

All in all, the decision has already taken a significant place in the TCA’s history. It can also be asserted that the Authority has proved its maturity and sent a clear message to businesses that it will not tolerate any behaviour contrary to the Act how big or important you are for the economy as a whole.

Promotion Video of the TCA

The TCA has uploaded the long-awaited promotion video to its website, which is accessible at the right top corner of the Turkish version of the web page. The video, slightly over 4 minutes long, gives some basic information about what the benefits that competition brings to our lives and end with an assertive proposition: “if there is competition, so is happiness” (see here for more on the relation between competition and happiness).

Indeed, I noticed the video when I gave a break while reading a recent article by Nicolas Petit on “New Challenges for 21st Century Competition Authorities”. In the first part of the article, it is dealt with how competition authorities should provide guidance through negative (i.e. penalties, prohibition decisions) and positive enforcement techniques (i.e. issuing detailed clearance decisions). I would like to take this occasion to quote the part of the article on the mushrooming of these kinds of “advocacy gadgets”.

“Competition authorities like to look tough, but also like to look cool. This explains the mushrooming of advocacy “gadgets”, such as compliance movies, brochures, video games, comic strips, etc. Often, antitrust agencies present them as a source of guidance. Those instruments are, however, no surrogate for “positive enforcement”. They do not seek to clarify the substance of antitrust law. They simply try to raise awareness to the existence of competition rules. And when they do touch upon substantive issues, they stay at helicopter level. Finally, they do not originate from real life cases, they are very abstract. So whilst certainly useful, especially for new antitrust jurisdictions where market participants must be educated, advocacy instruments do not replace positive enforcement. “

After that, he gives the formula as to the optimal enforcement mix as follows:

“Optimal Compliance (OC) = deterrence through negative enforcement (D) + guidance through positive enforcement (G), with D>G; and D<1 and G>0.”

As far as I know, the Brazilian and Singapore competition agencies take the lead in this area as they have many advocacy gadgets such as brochures, videos, and animes etc. When we get back to the Turkish side, I should admit that it is a very late effort for a 15-year old authority albeit useful. It would not be a surprise if the TCA gets a similar video prepared about leniency in the near future like many other competition authorities did.

For a Fistful of Turkish Liras

As you are familiar with from our previous posts, we are nearly obsessed with the amendments which were made to the Competition Act in 2008. The reason for that obsession is that these changes were regarded as a massive opportunity for Turkish Competition Law enforcement. Introduction of new instruments such as leniency and fines on individuals as well as the requirement to issue regulations on fines (and leniency) are the prominent innovations of the new act.

Apart from that, fixed amount of fines for procedural infringements, i.e. providing false or misleading information, failure to submit to the inspection etc., was replaced with fines that are based on a percentage of annual gross revenue of undertakings. Furthermore, the amendments have brought a lower limit for procedural infringements while it removed the lower limit for substantive infringements of competition law.

This lower limit, which was set as 10.000 Turkish Lira, has been regularly increased by the Competition Board at the beginning of every calendar year pursuant to the relevant legislation in Turkish law. In this regard, the amount was determined as 11.200, 11.446, 12.327, 13.591, and 14.651 Turkish Liras for calendar years 2009, 2010, 2011, 2012, and 2013 respectively.

All of these brings us to the topic of this post: when we look at the track record of the TCA, it is seen that a considerable number of undertakings’ fines for substantive violations are below the lower limit which is determined for procedural violations. You can see the table below for the information about the cases where substantive fines imposed are lower than a procedural fine if imposed. It also gives the ratio between the number of undertakings fined below the lower limit and the total number of undertakings fined in the same case.

Fistful of liras

In the same period, a total of 227 undertakings was fined, which means that 22,03 % of these undertakings’ fines were below the lower limit which is set for procedural infringements. However, we are yet to come to the most interesting part of the story. In Medical Gases case, for instance, the amount of the fine imposed on one of the undertakings investigated was only 0,42 Turkish Lira (around 20 cents Euro).

Given that the first and foremost goal of the Competition Act is to prevent and deter substantive infringements, it becomes questionable to remove the lower limit for substantive violations of competition law. It is also interesting that the amendments bring a lower limit for procedural violations whilst removing the one for substantive violations. I guess the legislator simply thought that these amendments would not lead to such a low level of fines at all.

Turkcell Judgment of The Council of State

turkcell-logo

Last week, we have been informed that the Council of State has rendered a stay of execution order (available here) with regard to the TCA’s decision imposing nearly 92 million Turkish liras (equivalent to 42 million Euros) fine to Turkcell, the largest mobile phone operator in Turkey. The reasoning behind the court judgement is again related to procedural grounds.

As a reminder, the TCA’s decision, which was adopted in June 2011, concluded that Turkcell had abused its dominant position by its practices directed at its distributors and dealers and it was resolved that an administrative fine of TL 91,942,343.31 be imposed on Turkcell. That is still the highest fine ever imposed on a single company. However it was a highly controversial decision that 2 members had dissenting opinions while other 4 members concluded that Turkcell committed an infringement although one of them had a concurring opinion.

According to the Council of State, opinion of one of the Competition Boards’ members is not a concurring opinion despite its title says so, instead it was a dissenting opinion in its nature. Therefore the Competition Board must have been met second time to be able to decide on the matter due to the Article 51 of the Competition Act. Since that article, which sets out meeting quorum for the Competition Board, stipulates;

“In its final decisions, the Board convenes with the participation of at least a total of five members including the Chairman or the Deputy Chairman, and it decides via the parallel votes of at least four members.

Where the necessary quorum for the decision cannot be attained in the first meeting, the Chairman ensures that all members participate in the second meeting. However, if not possible, the decision is made via the absolute majority of the participants in the meeting. In this case, the quorum for the meeting may also not be less than the one mentioned in the first paragraph. In case of a tie vote in the second meeting, the vote of the side of the Chairman is deemed preponderant.”

At this point, it not difficult to guess what the TCA will do. In the light of its previous practice in relation to similar judgments of the court, it will cure this procedural defect in its decision and adopt a new decision imposing the same amount of fine. Hence we will reach to the same place by following a different path.