Turkey: The Board published its reasoned decision on Tire Industrialists Association’s request for negative clearance/individual exemption for the “Waste Management Strategies and Implementation Plan for Worn-Out Tires 2016-2020”

Last Updated: 12 October 2017
Practice Guide by ELIG, Attorneys-at-Law

The Board published its reasoned decision on Tire Industrialists Association’s request for negative clearance/individual exemption for the “Waste Management Strategies and Implementation Plan for Worn-Out Tires 2016-2020” (27.04.2017, 17-14/196-82).

The Turkish Competition Board (“Board”) published its reasoned decision on the application filed by Tire Industrialists Association (“TIA”), regarding the request for negative clearance/individual exemption for association of undertaking’s decision on the activities conducted pursuant to “Waste Management Strategies and Implementation Plan for Worn- Out Tires 2016-2020” (“2016 Waste Management Plan”).

Worn-out Tires Control Regulation

Pursuant to the Worn-out Tires Control Regulation dated 25.11.2006 and numbered 26357 (“WOT Regulation”) which is based on the principle of manufacturer’s liability, tire importers and manufacturers are obligated to collect, recycle and dispose of the worn-out tires (“WOT”), within the framework of the amounts determined within the same regulation.

The WOT Regulation indicates that the manufacturers are required to inform the Ministry of Environment and Urbanization (“Ministry”) regarding the tire tonnage that they have released to the market within the previous year, on an annual basis, in scope of the “quota application” provision. In this regard, for the purpose of fulfilling the obligations related to the worn-out tires, the manufacturers are required to establish their own waste management system or participate in an established waste management system.

In line with the principle of manufacturer’s liability foreseen under the WOT Regulation,  Brisa Bridgestone Sabancı Lastik Sanayi ve Ticaret A.Ş. (“Brisa”), Otomotiv Lastikleri Tevzii A.Ş. (“Continental”), Goodyear Lastikleri A.Ş. (“Goodyear”), Michelin Lastikleri A.Ş. (“Michelin”),Türk Pirelli Lastikleri A.Ş. (“Pirelli”) and Petlas Lastik San. ve Tic. A.Ş. (“Petlas”) have established TIA for the purpose collecting, recycling and disposing of worn-out tires from sellers, service providers, mechanics and similar organizations.

2016 Waste Management Plan

The Article 12 of “WOT Waste Management Strategies” within the 2016 Waste Management Plan designates certain WOT collection regions within Turkey and multiple collectors are able to operate within each of the designated regions.  According to 2016 Waste Management Plan, TIA will arrange tenders for the purpose of choosing the contractor that will conduct the collection, transportation and temporary storage of WOTs within the relevant region. 

As regulated under Article 10 of TIA 2016-2020 Implementation Plan, financial resources of WOT management system will be provided by;

  • contribution share collected by the consumers as regard to “polluter pays” principle
  • WOT collection and supply service sales conducted to WOT users with the prices determined by free market conditions
  • reimbursements made by the members of TIA for the expenses of organization, training, publicity and awareness raising events

In scope of the “Polluter pays” principle, for the purpose of ensuring the tire users’ contribution to the WOT management system expenses, a Recovery Contribution Share (“RCS”) will be collected per each tire sale conducted to the real persons and legal entities that give rise to  WOTs. RCS will be determined by the TIA according to the annual costs of WOTs collected each year and may be subject to revisions by taking into account the quota increases, inflation costs and the variations in fuel oil prices during the following years.

TIA emphasizes that the members will determine the tire prices on their own and will not exchange information regarding the new tire prices with the TIA or with the members on any stage of the application in question.

The Relevant Product Market and the Geographical Market

In its reasoned decision, (i) the Board defined the relevant product market as “WOT management systems”, (ii) determined the market which provides input to the relevant product market as “new tire production market” and (iii) determined the market procuring input from the relevant product market as “WOT recycling/recovery market”. In addition, the Board defined the relevant geographical market as “Turkey”.

The Assessment on the Formation of TIA and WOT Management Systems

Regarding the TIA structure, the Board emphasized that TIA accepts memberships according to the conditions under Article 5 of Association Regulation and there are no provisions that regulate different conditions for undertakings under the Regulation. In addition, the Board determined that members are free to resign from membership at any time they choose.

The Board indicated that for the purpose of ensuring competition in the waste management markets, multiple waste management systems should be established and the manufacturers should not be forced to participate in solely one single system. Therefore, the manufacturers should be able to come to terms with different systems for different portions of waste products they are required to collect. In this scope, the determination of membership fees pursuant to the waste amount that corresponds to the participation to the waste management system is especially prominent. 

In its assessment on the case file, the Board found that the TIA members are easily able to resign from TIA membership and there are no provisions obligating the undertakings to provide the waste products (i.e. WOT) solely to TIA. In this regard, the Board found that the manufacturers are also able to collect the waste products by way of concluding agreements with other waste management systems, which would enable the development of alternative systems.

The Assessment on WOT Collection Activities 

Pursuant to the 2016 Waste Management Plan, Turkey will be divided to eight WOT collection regions according to conditions of recovery and recycling facilities, geographical features, means of transport and the amount of tires in the relevant region. TIA will organize a tender to choose contractors which will engage in collection activities, transportation and temporary storage of WOTs within the relevant region.

In this respect, the Board found that the most significant difference between TIA’s 2016 Waste Management Plan and its 2010 Waste Management Plan, which has been granted individual exemption for the period limited with five years due to the provisions relating to the determination of WOT contribution share, exclusivity in favor of the collector and the restriction of the collectors’ rights of marketing the WOT (the Board’s decision dated 27.10.2010 and numbered 10-67/1422-538), the exclusivity system where solely one collector was operating on behalf of TIA has been abolished. Therefore, the 2016 Waste Management Plan enables the operation of multiple collectors in each region. 

The Board also analyzed whether the collectors’ marketing rights are restricted. In this scope, the Board indicated that the collectors are deemed to have marketing rights when they are able to deliver the waste products to any recovery facility they choose; whereas they are not deemed to have marketing rights when they are obliged to deliver the waste products to the recovery facilities determined by the waste management systems.

In this respect, the Board found that the marketing rights of the collected WOTs solely belong to TIA, since according to the information submitted in scope the application, the contractors are not able to market the products collected on behalf of TIA. TIA submits that this practice is essential in terms of its obligations towards the Ministry.

Furthermore, the Board assessed TIA’s position in the relevant market and found that TIA is the only institution authorized by the Ministry; however there are also other undertakings, that are not members to TIA and responsible for the collection, transportation, recovery and recycling of the WOTs.

Negative Clearance and Individual Exemption Analysis

The Board found that (i) the designation of prices (i.e. RCS) by competitor undertakings gathered under the roof of an association of undertakings, which is deemed as one of the factors that constitute tire prices and (ii) the revision of RCS during the following years fall within the scope of Article 4 of the Law No. 4054. In addition, TIA’s proposed practices of retaining the marketing rights of the WOTs, which prevents the collectors from delivering the WOTs to any recycling or recovery institution they desire, also falls within the scope of Article 4 of the Law No. 4054. In this regard, the Board determined 2016 Waste Management Plan cannot be granted negative clearance, since the relevant regulations are within the scope of Article 4 of the Law No. 4054.

In the light of the foregoing the Board conducted an analysis to see whether 2016 Waste Management Plan can benefit from individual exemption in scope of Article 5 of Law No. 4054.

To be eligible for individual exemption, a restrictive agreement/practice/decision must (i) ensure new developments and improvements, or economic or technical development in the production or distribution of goods and in the provision of services, (ii) allow the consumers a fair share of the resulting benefit, (iii) not eliminate competition in a significant part of the relevant market and (iv) not limit competition more than what is compulsory for achieving the goals set out in sub-paragraphs (i) and (ii). This is not an alternative test and all conditions must be cumulatively met for an individual exemption.

The Board determined that the first condition is met since, WOT collecting activity promotes efficiency and reduces cost which will enable the market work in a better way and enable new entries to the market.

The Board found that the second condition is met, since the collection of WOTs separately by each undertaking is not preferable due to economies of scale and fixed costs. Therefore, the establishment of independent systems by each manufacturer would give rise to consecutive investments in the relevant sector, where fixed costs are prominent. In addition, as stated under Article 5 of the WOT Regulation, WOT causes environmental pollution and damage which threatens human health, hence collecting WOTs in the fastest manner possible is of utmost importance. 

As regards to the third condition, the Board stated that producers/exporters that are not members of TIA fulfill their obligations under WOT Regulations by themselves or through the other collectors. In addition, agreements between collectors and TIA does not include any exclusivity clauses in favor of TIA which means that collectors may work with undertakings other than TIA, participate in tenders and operate in different regions. Bearing in mind that (i) TIA has indicated its target as fulfilling its obligations foreseen under the WOT Regulation and (ii) that the members will determine the tire prices on their own and will not exchange information regarding the new tire prices with the TIA or with the members on any stage of the application in question; the Board determined that the association’s decision would not eliminate competition in a significant part of the relevant market. In this respect, the Board found that the agreement further satisfies the third condition provided under Article 5 of Law No. 4054.

Lastly the Board found that the fourth condition is met, since when the responses obtained from undertakings active in the market are evaluated, LASDER’s practices on assigning the WOTs by way of tenders are convenient in terms of establishing a competitive market structure and in addition, the undertakings are not obligated to deliver WOTs exclusively to TIA under the 2016 Waste Management Plan. Therefore, the Board decided that the decision of association will not limit competition more than what is compulsory for achieving the goals set out in sub-paragraphs (i) and (ii) of Article 5 of the Law No. 4054.

Ultimately, in light of the above, the Board decided to grant individual exemption for the period of five years to the association of undertaking’s decision regarding the activities conducted pursuant to “Waste Management Strategies and Application Plan for Worn-Out Tires 2016-2020”.

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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