Turkey: Seeking "Competitive Disadvantage" In Abuse Of Dominant Position

Last Updated: 24 March 2016
Article by Şahin Ardiyok and Guniz Cicek

Upon the cancellation decision of the Administrative Court, the Turkish Competition Authority (TCA) reevaluated the complaint that the General Directorate of State Airports Authority (GDSAA) abused its dominant position in airport management by discriminating among airlines with respect to slot allocation in airports. The claim regarded charging different rental tariffs to the airports' old airlines (signing leases before 2006) and the new airlines (signing leases after 2006). The new rate is four times more than the previous one.

TCA accepted that the activities of GDSAA, which has a dominant position on "airport management regarding slot assignment market," are secondary degree discrimination, and using different rates for the airlines having an equal position to the GDSAA and signing leases on different dates, could be assessed as discrimination according to the administrative court decision. TCA also accepted that the mentioned activities could cause the loss of airlines. However, TCA decided that the reasons alleged by the GDSAA are accepted as reasonable, and the rate of the rental costs over all costs of the airlines are not high enough to cause a competitive disadvantage; therefore, the mentioned activities are not regarded as abuse. Thus, TCA did not impose any penalty to the GDSAA.

"Discriminatory treatment" in legislations and case law

First of all, it should be stated in terms of this decision that EU and Turkish practice are taken into consideration together while making assessment of the abuse of a dominant position. In the decision, after defining "discrimination," the discriminatory treatments of the undertaking in the dominant position which cause secondary degree damages are assessed under article 102/2 (c) of the TFEU and article 6 of Act no. 4054 (Turkish act on the protection of competition.) In paragraph 2, item (c) of article 102 of TFEU, "applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage" is stated as an example for abuse treatments. In paragraph 2, item (b) of article 6 of Act no. 4054, the term "discrimination" is mentioned as an example for abuse treatments by stating that "making direct or indirect discrimination by offering different terms to purchasers with equal status for the same and equal rights, obligations and acts."

As seen from the above explanation, the letter of the provision concerning discrimination in EU legislation is different from the letter of the provision stated in Act no. 4054 from the point of "equivalent transactions – equal purchasers and competitive disadvantage." However, in the decision, it was stated that in the practice, the second paragraph, item (b) of article 6 of Act no. 4054 is interpreted as meaning similar to what is mentioned in EU legislation, and a previous decision of the TCA was given as an example on the same matter. In the decisions of Cine-5 and Coca Cola, the TCA had sought some conditions together such as enterprises that make discrimination must be competitive, must use different prices to equivalent transactions and must place other trade parties at a competitive disadvantage in order to be deemed abusive.

When the EU and Turkish case law are assessed together, it will be seen that having the same trade content, trade conditions, and a short period between the transactions are evaluated on the physical and operational similarities among the goods or services that are subjected to different treatments. While assessing whether the different treatments cause competitive disadvantage for the undertakings which are exposed to these treatments, it is sought that the undertaking in dominant position must be an indispensable trade party; the difference must occur because of the treatment of this party; the difference must be realized significantly and must continue for a long time; and the goods or services subjected to the different treatment must have a large share in the consumer costs.

The decision mentioned price discrimination, but ...

In the decision, while assessing the discrimination, it was evaluated respectively that whether the airlines are assessed as equal purchasers or not, whether the different conditions are determined for equal purchasers via the implementation of GDSAA, and finally whether the different treatment placed the airlines at a competitive disadvantage or not. In addition, any reasonable ground of these treatments are taken into consideration.

At the end of the examination, the TCA accepted that GDSAA implemented different prices to airlines having equal status via previously the double slot allocation tariff and later excluding some areas out of the tariff.

On the other hand, regarding the assessment of whether the treatment of GDSAA causes a competitive disadvantage or not, the TCA decided that the share of hire purchases paid by the airlines for allocated places in the airports, in the total expenditures of the enterprises, is at a limited degree over the potential of creating a competitive disadvantage due to the difference between the prices.

In addition to this, the defenses mentioned below and alleged by the GDSAA, were assessed as "objective necessity" by the TCA within the framework of article 6 of Act no. 4054:

  1. Hire contracts are subjected to private law, and increasing the rental costs according to the new tariff is not possible in accordance with the provisions of the hire contracts that protect the airlines.
  2. Due to the current economic conditions and the supply-demand balance, the new tariff, which is higher than the old one, was necessary for the new leases.

It is hard to agree with the TCA on the point of accepting the reasons above as reasonable ground. In fact, it is understood that while the GDSAA can remove the double tariff implementation completely via non-tariff implementation applied in early 2008 upon the first decision of the TCA in 2007, instead of decreasing the difference between the two tariffs; the GDSAA let the discrimination continue by alleging that some legal problems might occur.

As a consequence, the most important critique that can be made on this decision is that the discrimination caused by different tariffs before and after 2006 is occurring; this condition creates a disadvantageous situation in terms of competition for the airlines signing hire contracts after 2006; and this treatment is assessed as a kind of discriminatory activity as stated in article 6/b of Act no. 4054.

On the other hand, one of the most important conclusions drawn from this investigation period is, while making assessment under article 6 of Act no. 4054, the conditions of "whether the alleging infringement creates competitive disadvantage or not" which is not mentioned in article 6, is sought by the TBA through the EU implementations with other conditions stated in article 6. Finally, this conclusion carries the interested party one step forward from others with regard to Turkish antitrust practice.

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.

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Şahin Ardiyok
Guniz Cicek
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