Turkey: The Administrative Court Annulled the Board's Decision Not to Initiate an Investigation against Maysan Mando in Terms of Its Alleged Refusal to Supply

Last Updated: 5 March 2018
Article by Gönenç Gürkaynak Esq

Most Read Contributor in Turkey, March 2019

The 15th Administrative Court of Ankara ("Court") has recently rendered a decision[1] in which it annulled the Board's decision[2] not to initiate an investigation regarding the allegations that Maysan Mando Otomotiv Parçaları San. ve Tic. A.Ş. ("Maysan Mando") had distorted competition by way of (i) refusing to supply, and (ii) colluding with the competitors of Tok Oto Market ("Tok Oto") in order to exclude Tok Oto from the downstream market.

As background information, we note that Maysan Mando is a supplier of shock absorbers for a wide range of products, including passenger cars, light commercial vehicles, buses and heavy trucks, along with the railways and certain products with military applications. Tok Oto, a dealer of Maysan Mando, lodged a complaint before the Authority alleging the following: (i) Maysan Mando had the highest market share in the relevant market in Turkey, (ii) Maysan Mando had refused to supply its products to Tok Oto as a result of the pressure from Tok Oto's competitors, and therefore (iii) Maysan Mando had excluded Tok Oto from the downstream market.

In its assessment of the complaint, the Board started out by defining the relevant product market as "the market for sales of shock absorbers" and the relevant geographic market as "Turkey." The Board then proceeded with its evaluation of the allegations put forth in the case file, and indicated that the relevant allegations should be assessed within the scope of Articles 4 and 6 of the Law No. 4054.

In this regard, the Board first analyzed whether there were any agreements between Maysan Mando and its dealers that restricted competition under Article 4 of the Law No. 4054. The Board declared that the case handlers had not discovered or unearthed any documents or evidence during their on-site inspection supporting the allegation that Tok Oto's competitors had put pressure on Maysan Mando to refuse to supply its products to Tok Oto. Additionally, based on its review of the two e-mail correspondences between Maysan Mando and other dealers, the Board noted that not only Tok Oto but other Maysan Mando dealers had also made similar complaints regarding the delays in product supply. According to the Board's findings, the delays in Maysan Mando's product supply were closely linked with the change in its marketing strategy: In 2015, there was a record-high increase in the supply and demand of automobiles, which was closely followed by a significant increase in the original equipment manufacturers' ("OEM") demand for shock absorbers. According to the Board, given that Maysan Mando's production and supply capacity was not ready to meet such a significant increase in demand, Maysan Mando had prioritized supplying the OEMs and had used its limited capacity to meet the OEMs' demand, as this was deemed to be a more profitable strategy.

The Board then evaluated whether the delays in supply and the non-delivery of shock absorbers to Tok Oto had the object or effect of excluding Tok Oto from the market under Article 6 of the Law No. 4054. The Board indicated that the refusal to supply constitutes an anti-competitive behavior if it: (i) relates to a product or service that is indispensable for competing 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 found that the shock absorbers supplied by Maysan Mando were not indispensable for Tok Oto to effectively compete in the market for automotive spare parts. Accordingly, the Board concluded that Maysan Mando's refusal to supply was not likely to exclude Tok Oto from the relevant market and that it would not lead to the elimination of effective competition in the market. Therefore, the Board found that Maysan Mando's refusal to supply Tok Oto did not constitute an abuse of dominant position under the Law No. 4054. In conclusion, the Board decided not to launch a full-fledged investigation against Maysan Mando.

Tok Oto subsequently appealed the Board's decision before the Court on the grounds that (i) the Board's decision was unlawful and contrary to the law, (ii) Maysan Mando was in a dominant position in the relevant market, (iii) Maysan Mando had excluded Tok Oto from the relevant market, and (iv) the Authority had failed to investigate Tok Oto's complaints and allegations thoroughly.

In its review of the case, the Court stated that the Board must initiate a full-fledged investigation in cases where the evidence is not satisfactory or suitable to reach the conclusion that the behavior of the investigated undertaking that was the subject matter of the preliminary investigation did not constitute an anti-competitive act, decision or agreement. Accordingly, the Court found that: (i) Maysan Mando had ceased to supply shock absorbers to Tok Oto before the termination of their dealership agreement, (ii) the Board had taken into account the e-mail correspondence of Maysan Mando with other dealers, which indicated that there were short delays in its supply chain that were not permanent, (iii) since Tok Oto was a wholesaler, if Maysan Mando refused to supply its product to Tok Oto, then its customers might cancel their purchase orders from Tok Oto, and competition in the downstream market might therefore be diminished. Hence, according to the Court, this chain of events might eventually lead to price increases in the relevant market and subsequently cause consumer harm. The Court also found that the Board had decided not to initiate a full-fledged investigation and thus had failed to carry out a sufficient investigation and examination; whereas, according to the Court, it should have launched an extensive investigation in order to comprehensively evaluate the evidence and documents gathered during its preliminary investigation and to address and resolve every complaint put forth by Tok Oto, without leaving any doubts or lingering questions as to their merits.

In light of this analysis, the Court finally declared that the decision of the Board was not in accordance with the law and annulled the Board's decision. The Court's annulment decision also included the dissenting opinion of the Chief Justice of the Court, which stated that Maysan Mando had not been in a dominant position in the relevant market, given that: (i) there were two competitors of Maysan Mando in the market, (ii) the share of Maysan Mando products in the total turnover of Tok Oto was significantly low, and (iii) Maysan Mando had put its product deliveries on hold (for rational and justifiable reasons) for the same period of time to other dealers as well.

Following the judgment of the Court, the Board announced on its website that it had initiated a full-fledged investigation against Maysan Mando.[3]

[1] Ankara 15th Administrative Court (2016/3742 E., 2017/2794 K.)

[2] The Board's decision dated 18.02.2016 and numbered 16-05/107-48.

[3] The Board's decision numbered 17-39/630-M, announced on the Authority's website on December 19, 2017.

This article was first published in Legal Insights Quarterly by ELIG, Attorneys-at-Law in March 2018. 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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