Turkey: The Board published its reasoned decision on the investigation conducted against Aygaz A.Ş.

Last Updated: 15 June 2017
Practice Guide by ELIG, Attorneys-at-Law

The Board published its reasoned decision on the investigation conducted against Aygaz A.Ş. (16.11.2016, 16-39/659-294)

The Turkish Competition Board (“Board”) recently published its reasoned decision on the investigation conducted against Aygaz A.Ş. (“Aygaz”), based on the allegations that Aygaz has violated Article 4 of the Law No. 4054 on the Protection of Competition (“Law No. 4054”) by way of determining the resale prices of its distributors. Aygaz, which is within the Koç Holding A.Ş. Enerji Grubu, is conducting activities with respect to manufacture, procurement, stocking and filing of LPG and the manufacture and sales of devices and products with LPG. Aygaz is conducting activities in Turkey through its brands Aygaz, Mogaz and Lipetgaz.

With respect to the definition of the relevant market, the Board indicated that in line with the previous Board decisions, the relevant product market can be defined as the auto gas distribution market and the relevant geographic market can be defined as Ankara and Konya; however, pursuant to the paragraph 20 of the Guidelines on the Definition of the Relevant Market, the Board did not make a precise market definition, since such definition will not alter the outcome of the case file. 

With regards to the allegations on the determination of the pump price difference between Mogaz and Aygaz branded stations, the Board found that among the information and documents obtained during the onsite inspection, there is solely one single document which may indicate that Aygaz has interfered with TMZ’s (a petroleum station in Ankara/Sincan) resale prices. Against this background, the Board noted that in a market with competitive characteristics, where many distributors are active and the prices are subject to rapid changes, the suppliers that intend to engage in resale price maintenance or determine the difference between the distributors’ resale prices, are expected to implement serious control, pressure, sanction/punishment mechanisms. Therefore, the Board indicated that it is not possible to conclude that Aygaz has determined the pump price difference between Mogaz and Aygaz branded stations solely by taking the relevant document, obtained during the on-site inspection, into consideration. The Board also added that even though it is admitted that Aygaz has engaged in such behavior, it should be acknowledged that the relevant interference is singular, solely referred to one single station and far from being systematic.

Under the assumption that Aygaz interferes with TMZ’s sales prices, the Board analyzed the extent that the interference could restrict competition. The Board indicated that even in case where the relevant market is determined as Ankara, it does not seem likely that an interference solely towards one single station could bring about appreciable competition law restricting effects within the market. The Board stated that another factor which is taken into consideration within the previous Board decisions[1] related to resale price maintenance is the existence of a systematic application. In this respect, the Board evaluated that Aygaz could not have acted with the intention of increasing auto gas prices solely by a potential interference with TMZ’s resale prices and that the relevant potential interference directed towards one single station is far from affecting Aygaz or Motogaz branded auto gas prices. Lastly, the Board asserted that another factor that is taken into consideration within the Board decisions[2] related to resale price maintenance is the market’s competitive structure and life cycle (whether the market is growing or not).  The Board indicated that pursuant to the Energy Market Regulatory Authority’s sectorial reports and the interviews conducted with sectorial players in scope of the case file, it is understood that there is intense competition in the auto gas sector and the relevant sector has consistently grown within the last 10 years. In light of the foregoing explanations, the Board concluded that there is no adequate information, documents and findings that could suggest a violation in terms of Article 4 of the Law No. 4054.

With regards to the allegations that Aygaz determines the resale prices of auto gas distributors, the Board reviewed the relevant allegations under three categories; namely (i) the agency status of Bulgaz and Eryıldız, (ii) the evaluations related to the Aygaz stations in Ankara and (iii) the evaluations related to the Aygaz stations in Konya. With regards to the first category, the Board found that the relationship between the relevant distributors within the period under review consists of an agency relationship, therefore indicated that whether Aygaz determined the relevant distributors’ resale prices does not fall within the scope of Law No. 4054. With regards to the second category, the Board determined that rather than a vertical relationship where the supplier offers products to distributors with a certain price; with respect to the vertical relationship established between the parties, the supplier’s sales price towards the distributor is determined by way of margin sharing, after the initial setting of a maximum price. This is due to the relevant legislation and the precedents determined during the period where the market was publicly controlled. Besides the foregoing, due to the fact that (i) the distributors are free to increase their sales prices up to the maximum price setting or apply rebates on their own margins, (ii) that the distributors can ask for support for applying additional discounts due to the margin system and (iii) there are no sanctions or punitive applications foreseen for distributors who alter the pump sales prices, the Board determined that there is no adequate information, documents and findings that could suggest a violation in terms of Article 4 of the Law No. 4054. With regards to the third category, the Board indicated that similar to the distributors in Ankara (evaluated under the second category above), the documents obtained during the on-site inspections, which may appear as if Aygaz has engaged in resale price maintenance, are derived from the application of the margin sharing system and therefore, there is no adequate information, documents and findings that could suggest a violation in terms of Article 4 of the Law No. 4054.

In light of the above, the Board concluded that Aygaz did not violate Article 4 of the Law No. 4054 and therefore did not impose any administrative monetary fine.

[1] The Competition Board’s 3M decision dated 04.07.2007 and numbered 07-56/669-232 

[2] The Competition Board’s Kütaş Teekanne decision dated 24.08.2006 and numbered 06-59/773-226; the Competition Board’s Yatsan decision dated 23.09.2010 and numbered 10-60/1251-469

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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