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….

www.enkisa.com/wp-content/uploads/2012/07/26772670_0001_7.gif

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.

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.

Sea Fight in Marmara II: TCA out of the game

Being lazy as an author in this blog is getting more difficult. Having delays in adding new posts, you face a pressure from our beloved co-editors. Well, I hope this post will make them smile. ;). I know they want this for the good of our readers and to keep them up to date. So do I.

You may remember my first post on the discussions about the privatization of IDO and rocket-prices afterwards. It seems that the behaviors of IDO have been examined by the TCA as it announced its reasoned decision (in Turkish) four days ago. Let’s try to focus on the highlights of this decision.

First of all, I think that it is interesting to see so many complainants including, beside a number of individuals, “Association of Consumers” and “Consumer Protection and Market Supervision Dept. of Ministry of Customs and Trade”. This might indicate that NGOs and governmental bodies become more and more aware of the practices of the TCA. Well, please do not get surprised. In Turkey, the TCA has still lack of reputation about its duties and authorities. But this may be a subject of another post.

Secondly, after the decision, we see that the TCA is now out of the game. It says, in its decision, that after analyzing the “flexible” prices, costs and profit levels, complaints were rejected and there was no need to start an investigation. In its competitive analysis, where no relevant markets were defined, it is stated that although IDO charged higher prices in its specific lines, in general, the profit levels were quite reasonable as IDO was incurring loses in some lines, while Pendik-Yalova line was a bit more profitable compared to others. And the flexible pricing system was found not exploitative since IDO, as stated in the decision, had tried to direct consumers to advantageous options and transferred the low costs created by those options to the customers via low-priced tickets.

Lastly, the ‘dissenting opinion’ of the TCA board member İsmail H. Karakelle in the reasoned decision is worth to be mentioned. Mr. Karakelle, in his dissenting opinion, refers to the TCA’s Official Opinion, which was given in the preliminary examination of the privatization of IDO before the tender. In the official opinion, the TCA expressed its competitive concerns on the block sale of IDO without any price regulation in specific lines. After emphasizing these points, Mr. Karakelle points to the need of a price regulation by the municipality or the relevant ministry.

All in all, we will see whether these episodes continue in the forthcoming days. The winter is coming!

Predator: The First Encounter

Title sounds like a sequel to the well known sci-fci movie serie but it’s not. It’s about a competition law case. According to the recently announced UN RO RO decision, TCA has encountered its first predator since it was established in 1997.

As it seen from the announced short decision (detailed one yet to be declared) TCA has ruled that the UN RO RO (an international maritime transportation company) imposed predatory pricing over the Pendik (İstanbul-Turkey) – Marseille (France) line and consequently excluded its rival -UND DENİZ- from the market. TCA fined UN RO RO for 841.199,70 TL, roughly 365.000 Euros (% 0,04 of its net sales).

Being the very first TCA decision on the subject, detailed decision is waited to form a frame for the predatory pricing analysis.

PS: Right before the UN RO RO decision TCA had dealt with another predatory pricing case involved Turkish Airlines but Authority had not found any infringement of the law.