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.

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.

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!

Sea Fight in Marmara…

Nowadays, we watch a very interesting sea-fight, which is not less interesting than the Battle of Trafalgar. Well… this one is in Marmara Sea and 2012…

On the north side there is TASS (Tepe-Akfen-Souter-Sera Joint Venture Group) which paid USD 862 million in June 2011 to buy through privatization process Istanbul Deniz Otobüsleri Sanayi ve Tic. A.Ş. (IDO). IDO, which is private since June 2011, is a ferry company founded in 1987 by the Istanbul Municipality to promote sea transport. (For a short history of IDO please click)

On the south side, we see Bursa Municipality and Negmar.

Well, it all started just after the privatization of IDO, which is the operator of many ferries in Marmara Sea. One, and the most profitable, line of IDO operates is Eskihisar-Topçular line. IDO is  (or may will be ”was”) the only one ferry company on Eskihisar-Topçular line. After the privatization, TASS decided to change the fixed prices and started new price policy, called as ”flexible” for passengers and cars. Like in the airlines, for example, TASS sold higher-priced last minute tickets and priced the seat preference option for the passengers. Moreover, TASS also raised the general prices. For example price for a car with one passenger to be carried through the Yenikapı-Bandırma line raised from TL 125 to TL 228. Transport price for a three-people family with car costed TL 412, while it had costed about TL 175 before.

People, who started to pay much more for the same tickets, raised their voices and made complaints about.  Turhan Tayan, a member of Turkish Parliament, submitted not only a parliamentary question to the Minister of Sea, transportation and Communication but also a bill of complaint to the Turkish Competition Authority, saying that TASS has breached the Article 6, of the Law 4054 (The Act on the Protection of Competition), abusing its dominance.

In the following days TASS stepped back and changed its price policy for IDO and decreased the prices for passengers and cars. TASS claimed that people could not understand the policy and pointed that this was a transition period and the passengers could not adopt to the new structure.

However, it seems that this  “pandemonium” attracted new rivals: Bursa Municipality and Negmar.

Bursa Municipality decided to start to operate a ferry line, called BUDO, between Bursa (Mudanya) and İstanbul (Kabataş) ports.

Negmar (Negmar Sea Transportation Company) is a partnership of Gübretaş, Nesma Yatırım Holding and İstanbul Lines. Negmar, like Bursa Municipality, announced to commence sea transfer on October 25, through the (Gebze) Eskihisar- Yalova (Topçular) line, which is one of the most profitable lines in the area since it prevents thousands of people  to drive through Gulf of İzmit especially during holiday seasons. It is estimated that through Eskihisar-Topçular line 4 million cars, which create TL 200 million ( about USD 112 million) turnover, are carried in a year.. About the subject, Negmar Chairman Abdullah Kutlu talked to daily Hürriyet and said  “We noticed that passengers were looking for new ventures, and decided to make this investment. We will transport passengers between Eskihisar and Topçular in five ships. We have currently bought three and will purchase two more.

The mayor of Bursa Municipality, which had signed a deal in August with a Norwegian firm to buy its first ferry, pointed the issue and told Hürriyet At first they thought we were bluffing, but we immediately jumped into action. Now we have bought two ships. … We are also about to sign an agreement for another two ships, [which may be] rented or purchased.

The main actor TASS is mad about this ongoing process. Hamdi Akın, chief executive of Akfen (a partner of TASS), talking to the business magazine The Lira, laid stress on the privatization process and the amount they paid and said that since they had paid USD 862 million to the İstanbul municipality to win the tender, the [new rival] companies should pay some amount as well. According to him, the ports that those companies will use could not be given just free. He also included that if the new rivals would come to the play, there should be an auction for them too. He concluded that otherwise they would file a suit.

Today, Brian Souter, a partner of TASS, told Financial Times that if a rival company starts to operate as a competitor in one of the lines purchased by TASS, TASS will re-evaluate its city-lines between the two sides of the Bosphorus, which is very vital for İstanbul’s daily life. In the FT article, there is an interesting point. According to FT Souter Investments said that it was “led to believe” by documentation provided by Istanbul municipality that “the route would be exclusive for a period of time”.

Well folks, in the following days we expect a harsh sea-fight in the the Marmara Sea, including international companies, municipalities, passengers and government organizations. We will see whether there will be one “Padisah” in the line or whether the “Janissaries” will overthrow him.

Sources: Hürriyet, HurriyetThe Lira, bursadabugun.com, Financial Times