Turkey: The Impact Of Competition Law On Foreign Direct Investments

Last Updated: 10 October 2007
Article by Arif Esin

The liberalization trend inclined by the globalization process has necessitated the worldwide harmonization of two major dynamics: Intellectual and Industrial Property Rights and Competition Law.

As a result of the Uruguay Round, the developed countries accepted to diminish gradually the customs duties vis-à-vis the developing countries. In return, the developing countries undertook to put into effect intellectual and industrial property rights and competition law for the purpose of sustaining a liberal market economy.

In the beginning of 2000s, the customs duties for industrial products are determined to be completely eliminated and unfair competition practices are to be precluded through national competition rules in domestic markets and through anti-dumping and anti-subsidy regulations concerning unfair competition in importation in foreign markets.

Turkey has rapidly and successfully harmonized its regulations concerning intellectual property rights and unfair competition in importation. The same success was also in the retarded harmonization of the competition law.

The application of intellectual property rights and the introduction of competition law in Turkey, are the results of international obligations regarding WTO Agreement and Customs Union Decision.

In fact, the articles 32, 33 and 41 of the Decision of the Association Council No. 1/95 of 6 March 1995 provide competition rules to be applied for the proper functioning of the Customs Union. These articles are actually identical with the articles 85, 86 and 90 of the Treaty.

Furthermore, Turkey has accepted the effectiveness of the case-law constituted by the Institutions of the EC pursuant to the article 39(2)(a) of the Decision of the Association Council No. 1/95. Thus the cases of EC Court of Justice have been adopted to the national legislation.

In addition, Turkey has been obliged to adopt the new arrangements of EC concerning the competition rules to its legislation within one year.

Accordingly, Turkey put into effect the Act on the Protection of Competition No. 4054 as of December 7, 1994. However, the appointment of the Members of the Competition Authority have been realized on March 5th, 1997 and the Competition Authority started functioning on the date of March 7, 1997.

The Competition Authority has administrative and financial independence. In other words, no any political and administrative organ, body, or person can order or give directives to affect the final decisions of the Authority. Thus, the Authority is independent in carrying out its tasks.

The Competition Authority, by a rapid structuring, has established the Competition Board, employed experts and published three Regulations and four Notifications. The Competition Authority is completing its arrangements in order to commence functioning actively in November, 1997.

The Act on the Protection of Competition No. 4054 prohibits the agreements, decisions and concerned practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition, the abuse of dominant position and the unlawful mergers and acquisitions.

The Act on the Protection of Competition No. 4054 includes three fundamental prohibitions:

The first fundamental prohibition; is the agreements, decisions and concerted practices of the undertakings, which cause the prevention, distortion or restriction of competition. Such practices and decisions are in particular:

  • Fixing purchase or selling prices or forming the trading conditions concerning purchase and sales;
  • Sharing the markets or sharing and controlling the sources and elements of the markets;
  • Control the quantities of supply or demand;
  • Preventing the new competitors in the market or impeding the activities of the already existing competitors;
  • Applying dissimilar conditions to equivalent transactions with other trading parties;
  • Maintaining purchase or resale conditions.

The second fundamental prohibition, is the abuse of dominant position in the whole market for goods and services or in a substantial part of it.

Such abuses may, in particular, consist of:

  • Preventing the new competitors in the market or impeding the activities of already existing competitors;
  • Applying dissimilar conditions to equivalent transactions with other trading parties;
  • Maintaining purchase or resale conditions;
  • Distorting competition in a market by means of taking financial, technological and commercial advantages of dominant position in another market;
  • Restriction of production, marketing or technical development.

The third fundamental prohibition, is the mergers and acquisitions, which would create or strengthen the dominant position of one or more undertakings in the market or in a substantial part of it.

The primary fact at this point is; the requirement of notifying the mergers and acquisitions to the Competition Authority where the combined market share of the undertakings concerned exceeds 25% or where their combined aggregate turnover is more than 10 billion TL.

This kind of mergers and acquisitions are prohibited to the extent they restrict competition and create dominant position. In addition, the mergers and acquisitions realized after the effectiveness of the Act are to be notified to the Competition Authority.

In spite of these fundamental prohibitions, the Act on the Protection of Competition No. 4054 provides exemption to certain categories of agreements, decisions and concerted practices having the effect of restricting competition in the form of:

  • block exemptions;
  • individual exemptions;
  • exemption via negative clearance provided that it aims to contribute to promoting technical or economic progress in the production or distribution of goods or providing services and allow consumers a fair share of the resulting benefits. But this does not bring any prejudice to the right of withdrawal of exemption or negative clearance.

On the other hand, the Act provides no exemption for the prohibition regarding the abuse of dominant position.

The categories of agreements and practices under the scope of block exemptions are related to:

  • exclusive distribution (Notification No: 1997/3);
  • exclusive purchasing (Notification No: 1997/4);
  • technology transfer;
  • selective distribution for motor vehicles;
  • specialization;
  • research and development;
  • franchising;
  • maritime transport services;
  • air services;
  • insurance sector.

The agreements including provisions which do not exceed the limits prescribed by the Block Exemption Notifications shall be exempted from the application of prohibitions within the meaning of Article 4 of the Act.

On the other hand, for the agreements including provisions restricting competition which exceed beyond the limits prescribed by the Block Exemption Notifications, individual exemption or negative clearance may be requested, if the agreement has or will have the effect of engendering economic and technological improvement in production/distribution for the benefit of the consumers.

However, it is not possible to request individual exemption or negative clearance for the prohibition concerning the abuse of dominant position.

Consequently, the OECD studies demonstrate that the economies, which conform to the conditions mentioned so far and which are refined from imperfect competition, register a 15% rate of GDP growth.

As to the impact of the Competition Law on foreign direct investments in Turkey, the FDI will be affected to the same level as the Turkish undertakings, since our legislation does not permit any national discrimination. In other words, according to the Act on the Protection of Competition, every undertaking is subject to same treatment.

On the other hand, when the economic effects of the FDI with regard to competition rules are evaluated, it can be concluded that there are two different types of foreign direct investments in Turkey.

I classify them as good and bad natured foreign direct investments.

The reason for the entrance of foreign direct investment to the Turkish market, which arrived before the transition period of export-led liberal economy system and in the period when import substitution policy was in effect, is evident: engaging in production with low technology oriented to domestic market which is protected by customs borders and in which protection of human rights is inadequate.

Correspondingly, most of the foreign firms have objected the idea of elimination or reduction of some customs duties during the negotiations of the Customs Union as some of the Turkish firms. The firms, who hold this approach, are today uncomfortable with the functioning of the Competition Law.

Nevertheless, there also exists good natured foreign firms in Turkey which have expanded extensively in the market. This party operates by relying on the quality standards in production, produces goods oriented both to exportation and domestic market and extends the scope of Turkish industry to international competition.

As a matter of fact, this party has supported Turkey's prospective objectives during the Customs Union negotiation. Hence, they played a significant role in the result of the negotiations. Accordingly, today they support and wait for the proper functioning of the Competition Law.

From the media, we may detect the applications of some of the foreign firms distorting competition as some of the domestic firms. There exists firms which employ certain actions incompatible with law concerning market sharing, boycotts for provision of goods or services, etc. The other foreign firms are also discomforted by these illegitimate applications.

More significantly, if necessary measures for these unfair applications are not taken, new foreign direct investments in Turkey will be prevented. Just as black money shoots good money, unfair competition excludes fair competition from the market.

Fortunately, it is clear that the Competition Authority is powerful and assured to eliminate unfair competition applications from the market.

From now on, Competition Law and Competition Authority is the guaranty for the execution of liberal market economy.

Today, the foreign investments favor entering the markets where parliamentary democracy and liberal market economy are in force. And, these firms plan long-term investments in these countries. If long-term foreign direct investments are to be encouraged, both domestic and foreign firms shall accept the superiority of Competition Law.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions