Turkey: The Competition Board Imposed an Administrative Fine on Türk Telekomünikasyon A.Ş. for Abusive Refusal to Deal Practices

The Turkish Competition Board ("Board") published its reasoned decision on the full-fledged investigation conducted against Türk Telekomünikasyon A.Ş. ("Türk Telekom").1 The case arose out of the allegations that Türk Telekom had violated Article 6 of the Law No. 4054 on the Protection of Competition ("Law No. 4054") by abusing its dominance through delaying, hindering, and/or preventing facility-sharing request applications made by third parties, as alleged by the complainants Vodafone Net İletişim Hizmetleri A.Ş. ("VodafoneNet"), Superonline İletişim Hizmetleri A.Ş. ("Superonline"), and TurkNet İletişim Hizmetleri A.Ş. ("TurkNet").

Türk Telekom, a privatized company incorporated under the provisions of the Telegraph and Telephone Law No. 406 and private law, offers services related to land phones, mobile phones, data, Internet and value added services in Turkey. Türk Telekom has a legal duty to share the infrastructure that it holds and maintains in Turkey for the provision of electronic communication services with the other operators that are active in Turkey in the same product market.

In its reasoned decision, the Board first assessed its competence within the electronic communications sector and stated that Türk Telekom should conduct itself in accordance with

the provisions of the regulations issued by the Information and Communication Technologies Authority ("ICTA") regarding the duration, pricing, and other procedures and principles of facility-sharing services. By also referring to the case law of the Turkish administrative courts, the Board further stated that ICTA's regulations do not prevent the Board from conducting an evaluation of whether Türk Telekom's practices in response to the facility-sharing applications made by the complainants would give rise to a competition law violation under the provisions of the Law No. 4054.

The Board defined the relevant upstream product market as "physical infrastructure elements, such as duct, channel, sub-duct, manhole, pole, tower and unlighted fiber market" and the downstream market as the "physical infrastructure market," which it took into account in its evaluation of the allegation of abuse of dominance through refusal to supply, under Article 6 of the Law No. 4054.

The Board then conducted an evaluation to determine whether Türk Telekom held a dominant position within the relevant product market. The Board stated that, due to the specific characteristics of the sector, the most convenient indicator for the determination of market shares is the actual length of the physical network infrastructures, as it provides an insight regarding the size of the infrastructure that the undertaking is responsible for sharing. To that end, the Board found that, among the market players, Türk Telekom has the most widespread infrastructure, which enables access to nearly all households in the country. The Board also stated that (i) there are various legal and economic barriers for new players who intend to enter the relevant product market, (ii) it does not seem likely that any alternative operator will have the potential to limit or curtail Türk Telekom's market power in the short term, and (iii) countervailing buyer power is relatively low within the relevant product market, since the alternative undertakings need Türk Telekom's widespread infrastructure to reach end-users and there are no such alternatives. Based on these considerations, the Board concluded that Türk Telekom held a dominant position both in the upstream market for "physical infrastructure elements, such as duct, channel, sub-duct, manhole, pole, tower and unlighted fiber" and the downstream market for "physical infrastructure."

The Board then assessed the complainants' allegations within the scope of Article 6 of the Law No. 4054, as well as the Turkish Competition Authority's Guidelines on the Assessment of Exclusionary Abusive Conduct by Dominant Undertakings, and asserted that the refusal to deal constitutes an anti-competitive behavior if it (i) relates to a product or service in the upstream market that is indispensable for the activities of undertakings which compete in the downstream market, (ii) is likely to lead to the elimination of effective competition in the downstream market, and (iii) is likely to lead to consumer harm. Based on these conditions, the Board assessed whether Türk Telekom's conduct in question constituted a "refusal to deal" that would qualify as an abuse of dominance under Article 6 of the Law No. 4054. With respect to the first condition, the Board found that Türk Telekom's infrastructure components are indispensable for other operators' ability to build their own physical infrastructures for the provision of the electronic communication services (i.e., the downstream market), and for their ability to compete effectively with Türk Telekom on the downstream market. The Board concluded that the second condition had also been met, considering Türk Telekom's high level of market share compared to its competitors, and due to the fact that Türk Telekom competes with the undertakings that are active in the downstream physical infrastructure market and that need Türk Telekom's upstream products for their activities in the downstream market. Thus, Türk Telekom's refusal to supply is likely to lead to the elimination of effective competition in the downstream market. Finally, as for the third condition, the Board held that Türk Telekom's refusal to supply prevents the fiber optic network from evolving and consequently prevents new undertakings from introducing more innovative products to the market, and that various cost efficiencies would have arisen without such behavior by Türk Telekom. Therefore, the Board concluded that Türk Telekom's conduct was likely to lead to consumer harm. Based on the foregoing, the Board determined that the conditions for establishing a refusal to deal had been met.

After having determined the existence of the refusal to deal by Türk Telekom, the Board further assessed whether Türk Telekom's behavior in question gave rise to de facto or potential market foreclosure, and could thus be considered as a violation of Article 6 of the Law No. 4054. Following a detailed analysis of the complainants' facility-sharing procedures, the Board found that Türk Telekom's refusal to supply had significantly extended the length of the procedure for the relevant operators' facility-sharing applications and had caused several damages to them. Furthermore, in order to determine if the refusal to supply practices in question had given rise to de facto market foreclosure, the Board also examined route lengths in terms of facility sharing and found that the levels of sharing remained highly limited. In light of the foregoing, the Board decided that the facility-sharing procedures had not been efficiently implemented and that Türk Telekom's refusal to deal practices had hindered the competitors' activities and had led to anticompetitive market foreclosure.

As a result of the foregoing examinations, the Board decided that Türk Telekom's refusal to provide access to the infrastructural elements constituted "abusive conduct" within the meaning of Article 6 of the Law No. 4054. Accordingly, the Board unanimously decided to impose an administrative monetary fine of TL 33,983,792.76 (approximately EUR 8.5 million at the prevailing exchange rate), which corresponds to 0.45% of Türk Telekom's turnover generated in its financial year of 2015.

The Board's decision is noteworthy, as it is one of the rare occasions in which a dominant company has been sanctioned for refusal to deal and also due to the Board's detailed assessment and explication of the criteria to be taken into consideration for determining an abusive refusal-to-deal practice.

(1)The Board's reasoned decision numbered 16-20/326-146, and dated 9 June 2016.

This article was first published in Legal Insights Quarterly by ELIG, Attorneys-at-Law in June 2017. A link to the full Legal Insight Quarterly may be found here.

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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