Unfair Competition Regulation Under The Turkish Commercial Code And The Consumer Law - Trade Regulation & Practices

Introduction

Provisions of the Turkish Commercial Code numbered 6102¹ ("TCC") with respect to unfair competition includes important changes when compared to the abolished Turkish Commercial Code numbered 6762² ("fTCC"). By the new code, the concepts regarding unfair competition taking place within the general provision have been clarified, bases on which unfair competition concept is grounded are stated and the number of paragraphs, at which unfair competition cases have been mentioned in 10 paragraphs within numerus clauses principle within the former code, are increased. It has been aimed to harmonize the terms with respect to unfair competition with Law on Protection of Competition, Law on Protection of Consumers and Law on Prevention of Unfair Competition in Importation³.

The objective of the unfair competition provision in the TCC has been specified as the promotion of fair competition by seeking the interests of the whole participants (Art. 54/p.1). Whilst the provision in the fTCC regulating the objective of protection against unfair competition focuses on protection of the competitors against unfair competition, the TCC emphasizes the impediment of unfair competition in terms of the "whole participants". The said statement of "whole participants" refers to the persons and institutions, consumers and public⁴ who are engaged in economic activity. In other words, it has been clearly stated that the consumer is one of the parties who benefits from the provision of fair competition.

In this study, the relevance between the terms within the Law on Protection of Consumers numbered 6502⁵ ("LPC"), which was enacted in November 2013 and the unfair competition terms within the TCC, which focuses on the protection on consumers shall be analyzed.

I. Unfair Competition Terms for the Protection of Consumers and the LPC

1. Under the TCC, comparing itself, its goods, business products, activities, prices with the others, their goods, business products or prices in a false and misleading way, discrediting its competitor unduly or benefitting from its competitor's recognition or to get a third party ahead in similar ways, are exemplified as types of unfair competition (Art.55/1/a-5). This provision regulating the comparative advertisement recognized by the Turkish law with the TCC. Through the referred advertisements, a product is compared with another product by a clear and expressed emphasis. The subject matter of the comparison is persons, goods, business products, activities and prices. Comparative advertisements cannot directly be qualified as illegal. In order to make such qualification the relevant statements, explanations, components of comparison are required not to be true, in other words be false or misleading or the recognition or the products of the competitor shall be exploited, misrepresented or superior qualities shall be hidden from public⁶. The average consumer opinion shall be taken into consideration in the determination of the unfairness of an act. Judges will be considering the circumstances of the present case while analysing the advertisements and the views stated in the advertisements⁷.

In addition, the LPC aims the protection of consumers against misleading advertisements. As per Article 61, paragraph 3 of the LPC, no commercial advertising can be made if it misleads consumers, abuses their lack of experience and knowledge, jeopardizes their security of life and property, encourages the act of outrage and committing a crime, deranges the public health, abuses sick, old, disabled people and children. Advertisers are obliged to prove the accuracy of the statements taking place within the commercial advertisements (Art. 61/6).

Paragraph 5 of the same article allows the comparative advertising of competing goods or services which meet the same needs and attributed to the same purpose. However, Article 11 of the Regulation on Principles and Rules of Implementation on Commercial Advertisements and Announcements dated 14.08.2003 (Commercial Advertisement Regulation) sets forth the required conditions to be met in this respect. Accordingly, the name of the compared good, service or trademark is required to be mentioned, the compared goods or services are required to have the same qualification or specification and meet the same needs and lastly the relevant advertisement is required to be in compliance with the fair advertising principles and not mislead the consumers.

2. Misleading the consumers regarding the talent of itself or its competitors through offering some of its goods, business products or activities for sale under the supply price more than once, emphasising this especially via advertisements constitutes unfair competition (Art. 55/1/a-6). This situation is called misleading via specimen at Swiss doctrine. Here, the case is choosing some goods and selling them under the supply price as specimen and misleading the consumer in this way. Selling some chosen goods under the supply price as specimen does not always constitute unfair competition. Consumers are also required to be misled in order to determine such situation as unfair competition. In this case, the product does not indeed have the features in terms of price, amount and quality as the product sold as specimen has. Consumers going to the shop with the belief that they would purchase qualified product at a low price, are actually sold products with low quality or the same product at normal price. Misleading presumption is accepted for the case where the advertised price is lower than the supply price applied for the purchase of the same type of goods, business products or activities at similar quantity.

Regulation with respect to prices takes place within Article 54 of the LPC. As per the said article, visible and readable labels including the tax included sales prices and unit prices as well as place of production and distinctive features are required to be put on the goods offered for sale or their packages. In the event the prices mentioned on the labels, tariffs or price lists and the price paid at the cash register differs, the price being in the consumer's favour will be applied. In discounted sales, the discounted prices of the goods and services as well as the prices, tariffs and price lists before the discount are needed to be mentioned on the labels.

The principles with respect to realising the price discount via advertisements are mentioned within the Commercial Advertisement Regulation. As per Article 7 of the referred regulation, advertisements may not include any statement or image that can directly or indirectly mislead consumers through giving inadequate information, leading ambiguity or giving false impression by asserting exaggerated impression regarding the value of goods or services and the actual total price to be paid. According to Article 10, paragraph (b) of the Regulation on the Principles and Procedures Regarding Radio and Television Broadcasts, consumers are required to be provided with the actual price information when declaring the sales prices and there should not be obvious difference between the declared discounted price and the price applicable in the market.

3. Misleading consumers through additional performances with respect to the actual prices is one of the behaviors and implementations that lead to unfair competition (Art.55/1/a-7). According to that provision consumers are misled regarding the actual price of the goods as they are provided with free gifts and premium-like advantages and therefore their freedom of decision making is violated.

4. Limitation of consumers' freedom of decision making especially through hard selling is another way of unfair competition (Art.55/1/a-8). What is implied here is not offensive advertising, but it is hard selling, in other words door step selling or selling made by deflecting people from the road. Every hard selling method is not considered within the extent of the said provision. In order to determine it as unfair competition, the hard selling method is required to have a specific feature. Such feature occurs when consumers are forced to purchase by being put into a difficult psychological situation and merely being driven into a corner⁸.

Art. 62 of the LPC regulates the unfair commercial practices. According to this provision if a commercial practice distorts the economic attitude of consumers significantly or if there is any possibility for such case, it is considered to be unfair. Practices having the misleading and offensive nature are especially specified within the article. Therefore, it is possible to say that actions constituting unfair competition in line with Art. 55/1/a-8 of the TCC, are at the same time prohibited under Art. 62 of the LPC. Moreover, the act of misleading consumers via additional performances, which is stated under the 3rd section of this study, may also be considered within this scope. The burden of proof for proving the fairness of the practice rests with the party performing such practice.

The regulation that will set out the principles for specifying and examining unfair commercial practices has not been issued, yet.

5. Hiding the features, amounts, purpose of usage, benefits or dangers of goods, business products or activities and misleading consumers through this way has been regulated as unfair competition (Art. 55/1/a-9). According to this sub- paragraph consumers are to be misled not only by statements but also with any sort of material including visual perceptions such as shapes of goods, their packaging style and presentation on the label. For instance, if the snacks in a big-sized snack pack fill only half of that pack, this will constitute an act of unfair competition⁹.

As per Article 8 of the LPC, goods which do not have one or more features mentioned in their packages, labels, introductory guides, operating manuals, portals, advertisements or announcements and not meeting the qualifications either informed by the seller or identified in technical regulations, are accepted as defective goods. Services which do not have the features informed by the relevant service provider, mentioned at portals or advertisements and announcements are also defective (Art.13). The relevant provisions of the TCC and the LPC with respect to the difference between the statements of the seller at the beginning and the features seen after the acquisition of goods, show resemblance with each other.

6. Abstaining from the indication of the commercial title at the announcements made to public through agreements regarding sales on installments or similar legal transactions, as well as not mentioning the cash or total sales price or imputed costs over the currency of Turkish Liras and annual rates (Art. 55/1/a-10) is another act of unfair competition. In addition to that, failing to indicate commercial titles at the announcements made to the public with respect to consumer loans or to make clear statements regarding the net amount of loans, total costs, effective annual interests (Art. 55/1/a-11) are also accepted as acts leading unfair competition.

Regulation regarding the sales on installments takes place between articles 17-21 of the LPC, whereas the consumer loan is regulated between articles 22-31 of the same code. The LPC does not include any term regarding the content of announcements to be made to the public with respect to such agreements.

On the other hand, as per Article 10, paragraphs (e) and (f) of the Commercial Advertisements Regulation, advertisements including the conditions of sales through rents, installments or other consumer loans may not be presented so as to cause misunderstanding with respect to cash prices, securities, payment plans, interest rates, total costs of goods or other sales conditions. Advertisements regarding lending a loan cannot include any statement that may mislead consumers on the type and term of loans, requested securities or other required features, conditions of reimbursement, actual interest payments and other possible payments.

7. Using agreement methods including missing or false information with regard to the subject matter of agreements, prices, payment conditions, terms of agreements, rights of withdrawal, termination or payment of the remaining debt before the due date; within the agreements offered or executed for sales on installments or consumer loans (Art. 55/1/a-12) also constitutes unfair competition.

Article 4 of the LPC headed "basic principles", regulates the characteristics of agreements that needed to be drawn up in written according to the code. Accordingly, agreements and the informative statements are required to be written at least in the font size of twelve, in a precise language, clear, simple and readable way. Conditions of agreements cannot be altered against interests of consumers.

Moreover, Article 23 of the LPC imposes obligation on creditors or loan agents (if any) for providing consumers with pre-contractual information. In this respect, pre-contractual information form including the conditions of the loan agreement offered by such persons is required to be provided to the consumer within a reasonable period prior to the execution of the concerned agreement.

Interest rates taking place within fixed term consumer loan agreements are required to be fixed, as well. In the event, contractual interest, effective annual interest or total cost of loan is not mentioned, the concerned loan is provided as interest-free. Showing the effective interest rate lower causes the calculation of contractual interest in this regard (Art. 25).

8. Usage of transaction conditions contrary to good faith is one of the acts constituting unfair competition (Art. 55/1/f). Standardized terms of contract are regulated under the unfair competition law for the first time through this sub-paragraph. Accordingly, persons using previously written standardized terms of contract, which considerably vary from legal regulation to be applied directly or through interpretation or foresees the distribution of rights and liabilities considerably contrary to the characteristics of the agreement, will be considered to be acting against good faith.¹⁰

Unfair terms are regulated under the LPC. In a similar way, unfair term has been defined as an agreement term, which is included to an agreement without being subject to negotiation and causes imbalance against the consumer so as to constitute contradiction to the good faith in terms of the rights and obligations of the parties arising out of such agreement (Art. 5). Terms described as unfair are null and void. In the event the content of an agreement term could not be affected by the consumer due to fact that it was prepared beforehand and takes place within a standard agreement, that agreement term is accepted not to be negotiated with the consumer. The language of agreements is required to be plain and precise.

II. Liability

a. Within the Scope of the TCC

1. Civil Action

As per article 56 of the TCC, any person whose interests related to its customers, loans, professional reputation, commercial activities or other sorts of economic interest are damaged or may face with such threat due to the cases mentioned hereinabove and other unfair competition events, may claim the followings;

Detection of whether the act is unfair or not,
Prohibition of unfair competition,
Elimination of the financial situation occurred as a result of unfair competition, correction of the statements if the unfair competition has been arisen due to false or misleading statements, and destruction of the instruments and goods that have been effective for realizing the act of unfair competition if it is inevitable for the prevention of violation.
Compensation of the losses and damages if there is fault,
Payment of non-pecuniary damages if the conditions stated under article 58 of the Turkish Code of Obligations are met.

At these civil actions, persons falling within the extent of the concept "whole participants", which is explained hereinabove, will have the ability to act in the capacity of plaintiff and defendant¹¹.

According to the TCC, plaintiffs are the persons or some organizations whose interests related to its customers, loans, professional reputation, commercial activities or other sorts of economic interest are damaged or may face with such threat due to unfair competition. Such organizations are chambers of commerce and industry, trade corporations, exchange markets and other professional and economic unions that are authorized to protect economic interests of their members in accordance with their statutes as well as the non-governmental organizations and entities having the public nature that protect the economic interests of consumers in line with their statutes. The condition of "having the right of filing a lawsuit either by themselves or the members of their branches in line with paragraphs one and two" for the referred organizations has been deemed necessary by the TCC, as well. Moreover, Art. 13 of the Code of Civil Procedures grants associations and legal entities the right of taking a legal action in order to protect the interests of their members and the persons they represent.

Furthermore, non-governmental organizations and the entities having the public nature, which protect the economic interests of consumers in accordance with their statutes, will also be able to take legal actions. Although, consumer associations' right of taking a legal action has not been clearly stated under the fTCC, the doctrine had considered it within the scope of the concept of economic union protecting the economic interests of its members due to the purpose of protecting consumers¹². Therefore, it can be seen that such consideration has been regulated together with the TCC.

Lastly, customers, whose economic interests have been harmed or who face with such threat, may also take such legal actions; however, they cannot claim for the destruction of instruments and goods.

Persons that may be defendants of the referred legal actions are competitors, customers, third parties not being tradesman, employees and media institutions¹³.

It can be a discussion point whether or not consumers can be plaintiffs of the legal actions mentioned hereinabove. However, the leading argument on this subject is that consumers may also act as plaintiffs of such legal actions. As mentioned hereinabove, unlike fTCC, the TCC aims to protect the interests of not only competitors but also the whole participants. With the phrase "whole participants" it is meant the real and legal persons, consumers and the public which are in economic activity.

Provisions regarding the unfair competition are applicable not only between tradesmen¹⁴. They also comprise acts of persons not involved to competition. There is no provision among the relevant articles that conditions the presence of competition relationship between the perpetrator and injured parties of unfair competition. Therefore, consumers are also deemed within the extent of the concept of customers, who can take legal actions due to the prejudice of their economic interests as a result of unfair competition, as regulated under Art. 56/2 of the TCC¹⁵. While interpreting the unfair competition provisions, not only the interest of competitors but also the protection of the market's operation is also taken into consideration. The objective of protecting consumers aimed by the code also supports this argument¹⁶.

Contrary to fTCC, the TCC grants the right of taking the referred legal action not only to the customers whose economic interests are prejudiced but also to the ones who are under such threat. Accordingly, in addition to the consumers whose economic interests are prejudiced, consumers who are under such threat will also be plaintiffs of such lawsuits.

2. Criminal Action

As per Article 62 of the TCC, the followings incur criminal liability;

Performing one of the unfair competition acts set forth under Article 55 on purpose,
Providing false or misleading information on purpose with respect to its personal situation, products, business products, commercial activity and business in order to enable the preference of its offer and proposal instead of its competitors,
Misleading employees, proxies or other assistant persons in order to procure obtaining production and trade secrets of employers or their clients,
Not precluding the unfair competition act performed by employees or workers or their proxies which requires punishment while doing their jobs although being informed by the employers or their clients or not rectifying the false statements.

Persons performing the above listed acts shall be sentenced to imprisonment or imposed on administrative fine up to two years upon complaint of one of the persons who have the right to take legal action in line with Article 56.

As per Art. 64/2 of the fTCC, the persons engaged in the said acts would be sentenced to imprisonment or imposed on administrative fine up to one year or be punished with both. The punishments within the new TCC (Art. 62) have been raised when compared to the fTCC. However, unlike the fTCC, the judge may not impose concurrently both punishments. As per Article 63, in the event legal entities act so as to incur unfair competition while conducting their activities, Article 62 shall apply to the members of organs and shareholders who act or require to be acting on behalf such legal entity.

b. Within the Scope of the LPC

Before dealing with the legal actions that can be taken within the scope of the LPC, the procedure for applying to the Consumer Arbitration Committee is worth to mention. According to Article 68 of the code, it is compulsory to apply to the;

Consumer Arbitration Committee of the District for the disputes arose for the amount below two thousand Turkish Liras,
Consumer Arbitration Committee of the City for the disputes arose for the amount below three thousand Turkish Liras,
Consumer Arbitration Committee of the City for the disputes arose for the amounts between two thousand and three thousand Turkish Liras, at the cities having the status of Metropolitan Municipality.

The referred amounts shall be subject to increase in the ratio of revaluation to be determined and declared in line with the duplicated article 298 of the Tax Procedure Law. Consumer Arbitration Committee does not accept the applications with respect to the disputes amounts of which exceed the referred ones.

However, the said dispute resolution method does not create an obstacle for consumers to try alternative dispute resolution methods in line with the relevant legislation.

In accordance with Article 70 of the code, the decisions of the Consumer Arbitration Committee are binding and they are applied in line with the provisions of the Execution and Bankruptcy Law related to the carrying of a decree into execution. Consumer Courts shall evaluate the objections to be raised against the said decisions within fifteen days as of the date of their notification. Awards of the Consumer Court with regard to the said objections are final.

In line with Article 73 of the LPC, in addition to the Consumer Arbitration Committee, disputes arising out of the actions of consumers and the practices towards consumers are within the jurisdiction of Consumer Courts. Lawsuits filed by the concerned Ministry, consumers and consumer organizations before such courts are exempted from charges.

Consumer organizations, relevant public institutions and the Ministry may file a lawsuit before the Consumer Courts if there is any matter relating to consumers and existence of the threat of contradiction to the code for the purposes of the provision of;

Awarding an injunction for avoiding from or ceasing such threat,
Determination of the situation contrary to the law and its ceasing.

Consumers, consumer organizations and the Ministry can file a lawsuit in the event that a series of goods turns out to be defective offered for sale for the following purposes;

Determining that the concerned series of goods are defective,
Ceasing the production and sales,
Removal of the defection,
Recall of the products held in hand for sales purposes.

In the event it has been determined through a court decision that the concerned goods are defective, the court may, depending on the nature of the defect award ceasing the sales of the concerned goods temporarily or removal of the defect.

The Ministry shall pay the expert's fee of the legal actions taken by the supreme boards of consumer organizations as well as the awarded attorney's fee at the legal actions concluded against plaintiffs. In the event the lawsuit is concluded against the defendant, expert's fee shall be collected from the defendant in line with the Law on the Collection of Public Receivables (Art. 73/3). Payment of attorney's fee that shall be calculated in accordance with the minimum attorney fee tariff and over the proportional tariff shall also be decided at the actions of objections taken against the verdicts reached by Consumer Arbitration Committees in favor of consumers (Art. 70/6).

Conclusion

Provisions regarding the unfair competition of the Turkish Commercial Code numbered 6102 enacted in 2011 have been drafted with a perception emphasizing the protection of not only competitors but also consumers. Unfair competition acts exemplified within the concerned article have been extended so as to include the acts against consumers. Hence, consumers whose economic interests are damaged due to unfair competition acts or who are under such threat will be able take legal actions before courts.

It is detected that the terms regarding the unfair competition performed against consumers and the regulations of the Law on Protection of Consumers which was enacted on 2013 but not entered into force yet, show resemblance with each other. Consumers are under protection against the acts regulated under the TCC which constitute unfair competition in terms of the LPC as well. In other words, the consumer who has the right to take a legal action due to an unfair competition act can also file a lawsuit due to the same act within the extent of the LPC. Moreover, as long as the dispute amount is in line with the amounts specified under Article 68, consumers will also have the chance to apply to the Consumer Arbitration Committee.

It is worth mentioning that since the legal actions taken before the Consumer Courts are exempted from charges, it will be more advantageous for consumers to apply to the remedies possible within the extent of the terms of the LPC.

Footnotes

1 Official Gazette (OG) Date: 14/02/2011, Number:27846

2 OG Date: 09/07/1956, Number:9353

3 Mustafa Can, Ticaret Kanunu Tasarısına Göre Haksız Rekabet, TBB Dergisi, Sayı 69, 2007, p.151-175, p. 153.

4 Statement of Grounds for the Turkish Commercial Code ("Statement of Grounds")

5 OG Date: 28/11/2013, Number: 28835.

6 Statement of Grounds, Art. 55.

7 Statement of Grounds, Art. 55.

8 Statement of Grounds, Art. 55, Reha Poroy/Hamdi Yasaman, Ticari İşletme Hukuku: 6102 Sayılı TTK Nazara Alınarak, İstanbul, Vedat, 2012, p. 337.

9Statement of Grounds, Art. 55.

10 Can, ibid, p. 166.

11 Poroy/Yasaman, ibid, s. 349-350.

12Kemal Şenocak, İşletme Personelinin Ayartılması Meselesinin Haksız Rekabet Hükümleri Çerçevesinde (TTK m. 56 vd.) Değerlendirilmesi, AÜHFD, Cilt: 50, Sayı:2, 2001, p. 209.

13 Poroy/Yasaman, ibid, p. 351.

14 Poroy/Yasaman, ibid, p. 350.

15 Şenocak, ibid, s.209-211., Mehmet Özdamar/İsmail Ermenek, Haksız Rekabet Davaları ve Korunan Menfaat, FMR, Cilt: 7, Sayı: 2007/3, p. 64, It is possible to assert that the arguments defended when the fTCC was in force are afortiori effective for the TCC, which emphasises the objective of protecting consumers.

Mehmet Yılmaz, Türk Ticaret Kanunu ve Türk Ticaret Kanunu Tasarısında Haksız Rekabete İlişkin Genel Hükümlerin Karşılaştırılması ile Kötüleme ve Reklamlara İlişkin Özel Haksız Rekabet Halleri, İstanbul Barosu Dergisi, Cilt: 80, Sayı: 4, 2006, p. 1479-1536, p. 1486, Zeynep Derya Tarman, Haksız Rekabetten ve Aldatıcı Reklamlardan Doğan Uyuşmazlıklarda Uygulanacak Hukuk, İstanbul, Beta Yayınları, 2011, p. 40.

16 Abuzer Kendigelen, Hukuki Mütalaalar (Mahkeme Kararları ile Birlikte), İstanbul, Arıkan Basım Yayım Dağıtım, 2006, p.13, 14.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Turkey: Unfair Competition Regulation Under The Turkish Commercial Code And The Consumer Law