Turkey: The Board published the reasoned decision on the preliminary investigation conducted against Yataş Yorgan ve Yatak San. ve Tic. A.Ş.

Last Updated: 22 March 2018

The Board published the reasoned decision on the preliminary investigation conducted against Yataş Yorgan ve Yatak San. ve Tic. A.Ş. (27.09.2017; 17-30/487-211)

On January 9th, 2018 the Turkish Competition Board (“Board”) published its reasoned decision dated September 27, 2017 and numbered 17-30/487-211 following its preliminary investigation based on the allegations within the application filed by Doğtaş Kelebek Mobilya San. ve Tic. A.Ş. (“Doğtaş”) that Yataş Yorgan ve Yatak San. ve Tic. A.Ş. (“Yataş”) has violated Article 4 of the Law No 4054 on the Protection of Competition (“Law No 4054”). The allegations are concerned with the claims that through its “best price guarantee” campaign, Yataş is restricting competition by either acting in cooperation with its independent retailers or pressuring them with abusive pricing policies.

Doğtaş is a company active in various sectors such as furnishing, tourism, construction etc., while Yataş is active in the manufacture of beds, sofas, sofa suites within the furnishing and home textile sectors. Yataş currently owns 5 active brands, including ENZA HOME and YATAŞ BEDDING and is a public company exporting its products to over 45 countries.

Information on the Sector and the Relevant Market

The Board initially provides information on the overview of the sector and indicated that Turkish furnishing sector is a traditional one, including a great number of family companies and ateliers. According to the TURKSTAT and MOSDER records there are 29.346 producers and 32.382 retailers, therefore around 61.728 firms in operation. The sector is concentrated around İstanbul, Ankara, Bursa and Kayseri. 

The Board determines that the undertakings in the sector can be grouped under three categories as set out below and estimates that the total market share of the first two groups listed below is around 65%-70%. 

  1. First group includes concept stores with a widespread target market and firms on a smaller scale and do not pursue branding opportunities (also known as ‘no-name’ firms). It is found that although these entities do not generate large amounts of turnover, they have the largest shares in the market due to their multitude.
  2. Alongside the mentioned small-scale undertakings a serious number of undertakings operate off-the-record.
  3. The third group consists of the undertakings that are known for their brand image with respect to furnishing production and distribution. Amongst this group, Boydak Group is in a leader position alongside the Doğtaş-Kelebek Group, Yataş Group, Vanessa, Yatsan, Moda Life and etc.

The Board finds that the products manufactured by YATAŞ consist of sofas, beds, sofa suites, modular furnishing and home textile and although the products in the lower segment serve similar purposes, they differ in context of price, quality and qualifications. The Board indicates that while the relevant product market could be defined on a product-group basis, namely “bed”, “sofa”, “home textile”, “modular furnishing” and “sofa suites”, it notes that the “best price guarantee” campaign is not limited to a specific product group but covers a wide range of products. The Board ultimately leaves the relevant product market definition open, since such definition will not produce any effects on the conclusion of its assessment and defines the relevant geographical product market is listed as “Turkey”.

The Initial Assessment on Yataş’s Conduct

The allegations are concerned with the claims that through its “best price guarantee” campaign, Yataş is restricting competition by either acting in cooperation with its independent retailers or pressuring them with abusive pricing policies. In this regard, the complainant requests the Board to ensure the application of the sanctions adopted in its past decisions concerning most favored customer (“MFC”)/most favored nation (“MFN”) clauses.

However, the Board states that the MFN/MFC clauses can be seen in context of classic vertical agreements regarding resale and lately, in between online platform retailers and their suppliers. It further states that the MFN/MFC conditions can restrict the competition by giving rise to coordination, cartels and market entry barriers but could lead to positive outcomes as creating efficiencies, protection of trademarks and reduction of costs. Nevertheless, the Board notes Yataş’s best price guarantee conditions reviewed for the purposes of the case at hand are concerned with the guarantee that the campaigned prices will be the lowest price offered by Yataş until the end of the year. Therefore, the Board concludes that the application in question falls under the scope of resale price maintenance rather than MFN/MFC practices.

Resale Price Maintenance (RPM) from a Competition Law Perspective

The Board initially provides information on RPM from a competition law perspective and indicates that RPM could occur when the manufacturer directly or indirectly obligates the reseller to a fixed, minimum or maximum price; therefore restricting the reseller from independently determining its own resale prices, which would in turn fall under the scope of the Article 4(a) of the Block Exemption Communiqué on Vertical Agreements No. 2002/2 (“Communiqué No. 2002/2”)

The Board states that in its previous decisions similar to the content of the case file,[1] the Board has adopted an effect based and more flexible approach with respect to the RPM analyses. In this regard, the Board has taken the following matters into consideration in scope of its analyses; 

  • The purpose of the undertaking concerned for engaging in RPM;
  • The position and power of the supplier within the market;
  • The structure of the market and the density of intrabrand competition;
  • Whether the RPM leads to a maintenance of a single price by suppliers/distributors within the market;
  • Whether there is an explicit unity of will  between the suppliers or distributors regarding RPM; and
  • The effects of RPM within the market.

Yataş’s Best Price Guarantee Campaign and the Analysis under Article 4 of the Law No 4054

The Board initially states that Yataş’s best price guarantee campaign reviewed for the purposes of the case at hand are concerned with the guarantee that the campaigned prices will be the lowest price offered by Yataş until the end of the year. The Board indicates while an undertaking’s RPM conduct can be evaluated under the scope of the Article 4 of the Law No. 4054, pursuant to the Article 5 of the same law, certain agreements could be exempt from the application of Article 4 due to the efficiencies that may arise.

According to the Communiqué No. 2002/2 the market share of %40 threshold is amongst the conditions foreseen for the vertical agreements to benefit from the block exemption.  Therefore the Board notes that Yataş, as mentioned above, competes in a market where a great number of little scale manufacturers and corporate brands such as Boydak, İstikbal, Mondi and etc are active in. Therefore, the Board determines that Yataş’s market share in the relevant market does not exceed %40 and therefore Yataş’s agreements with its distributors falls under the block exemption. However, the Board notes that in cases the agreement encompasses any of the restrictions listed under Article 4 of Law No 4054, including RPM, it would not be covered by block exemption. 

The Board evaluates that “It is possible that resellers will not be able to sell the relevant products for a price lower than the guaranteed price after the campaign period and therefore in actuality, the guarantee of the best price could result in the designation of a minimum price.” However, as a result of its evaluation the Board concluded that;

  • No indication was found regarding Yataş is intervened to resellers prices with the best price guarantee campaign;
  • Resellers can sell products with prices different than the advised prices;
  • No documents were found indicating that resellers were sanctioned for sales made with prices different than the prices advised;
  • The competition is high amongst the brands within the sector, a great number of undertakings are active in the market and when considered that none of these undertakings have significant market power, the possibility of the best price guarantee to result in resale price maintenance is decreasing;
  • On the other hand, it is understood that Yataş’s best price guarantee campaign has two justifications. Firstly, to utilize campaigns in order to prevent the perception on “expensive products” in concept stores, secondly, to prevent negativities arising from the  expectation of lower prices (specifically on periods prior to wedding season) to result in the decrease or postponement of demand and this causing a fluctuated demand structure.
  • Even though these two justifications would not be categorized as “reasonable grounds” in the existence of price fixing that would eliminate infringement attribution, due to the market structure and no evidence of price fixing, it is possible to accept that these justifications are sufficient to demonstrate Yataş’s intentions.

Ultimately, in light of the above, the Board decided not to initiate full-fledged investigation and that Yataş’s actions are not in violation of Article 4 of the Law No 4054.

[1] Board’s decisions dated 24.08.2006 and numbered 06-59/773-226; dated 15.11.2006 and numbered 06-84/1059-306; dated 11.1.2007 and numbered 07-01/12-7; dated 4.7.2007 and numbered 07-56/669-232; dated 2.8.2007 and numbered 07-63/767-275; dated 27.5.2008 numbered 08-35/462-162; dated 15.7.2009 and numbered 09-33/725- 165; dated 25.11.2009 and numbered 09-57/1365-357; dated 23.06.2011 and numbered 11-39/838-262; dated 02.11.2011 and 11-55/1434-509; dated 23.02.2012 and numbered 12-08/249-80; dated 13.06.2013 and numbered 13-36/468-204; dated 18.07.2013 numbered 13-46/588-258; dated 16.01.2014 and numbered 14-02/35-14;  dated 08.05.2014 and numbered 14-17/322-140.

This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

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