Turkey: The Board's Reasoned Decision On The Istanbul Metropolitan Municipality: "Is The Municipality An Undertaking Within The Meaning Of Competition Law?"

Last Updated: 31 May 2018
Article by Gönenç Gürkaynak Esq

Most Read Contributor in Turkey, March 2019

The Board's reasoned decision1 regarding the allegations that the Istanbul Metropolitan Municipality (İstanbul Büyükşehir Belediyesi Başkanlığı) ("Municipality") had violated the Law No. 4054 through certain activities regarding the right of way, was published on the Authority's official website. In its reasoned decision, the Board primarily assessed whether the Municipality could be deemed and treated as an "undertaking" within the meaning of the Law No. 4054.

In its complaint to the Authority, the Turkish Competitive Telco Operators Association2 (Serbest Telekomünikasyon İşletmecileri Derneği) ("TELKODER") stated that, in accordance with the Law No. 5809 on Electronic Communications ("ECL"), a number of its members conduct their businesses by obtaining authorization for infrastructural operations. It was also asserted that such authorizations can only be fully and efficiently utilized when the related "right of way" is also granted. TELKODER claimed that (i) the Municipality denied the operators an excavation permit between the years 2012 and 2014, (ii) the main contracts relating to the right of way on metro routes and funicular railway routes were terminated in 2016 without any legal basis, (iii) the Municipality denied applications for excavation permits and directed the operators to İstanbul Elektronik Haberleşme ve Altyapı Hizmetleri San. ve Tie. A.Ş. (a company incorporated by the Municipality) ("ISTTELKOM")3, (iv) the Municipality forced other undertakings to enter into an agreement with ISTTELKOM for facility sharing, (v) the provision within the tariff of the Municipality regarding the right of way, which indicates that subsidiaries of the Municipality could use the right of way without paying a fee, is discriminatory, and (vi) the Municipality is an "undertaking" which acts as a provider of the right of way, and its subsidiary ISTTELKOM functions as an infrastructure operator.

In this respect, TELKODER alleged that the Municipality and ISTTELKOM, which constitute a single economic unity, had violated Article 4 of the Law No. 4054 by foreclosing the market through a vertical agreement.

The Board held that, in the absence of any explicit definition for public undertakings under the Law No. 4054, and pursuant to the Board's settled case law, public undertakings could either have an independent legal identity or they could be established within central, regional or local administrative bodies. Additionally, the Board stated that, in light of its settled case law on this topic, if public authorities conduct economic activities (even without a separate legal identity), they should be deemed as "undertakings" within the meaning of the Law No. 4054, except for acts that are carried out with the authority and power granted to them based on their public duties.

The Board found that establishing and operating the infrastructure that is necessary in order to provide a public service is an integral part of such public service itself. In this respect, the Board determined that actions taken by the Municipality with respect to its decisions on whether to grant an excavation permit regarding the use of the right of way, based on its public power as a provider of the right of way under the ECL and the Regulation on the Transition of All Types Of Cables and Similar Equipment Used in the Fixed and Mobile Communications Infrastructure or Networks ("Regulation on the Right of Way") are a part of its public service duties. Therefore, the Board ruled that the Municipality cannot be deemed as an undertaking under Article 3 of the Law No. 4054 with regard to such activities. To that end, the Board concluded that the decision of the Municipality not to grant an excavation permit could not be deemed as an abuse of dominant position under Article 6 of the Law No. 4054, and thus, the Board declined to initiate an investigation against the Municipality on this front.

However, the Board decided to investigate the competition law concerns that could potentially arise from the Municipality directing applicants to ISTTELKOM by way of declining to grant them excavation permits. In this respect, the Board ultimately decided to send an opinion letter to the Municipality, in line with its duty to foster and promote competition.

It follows from the reasoned decision of the Board that the right of way is essential for the sustainability of electronic communication services. Moreover, it is undoubtedly true that public authorities are obligated to address the "right of way" requirements in compliance with the applicable legislation. That being said, sector representatives claimed (before the Ministry of Transport, Maritime Affairs and Communications) that, after the adoption of the regulation regarding the right of way, municipalities had started to use the excavation licensing process as an illegitimate source of revenue.

As set forth in detail within the Board's reasoned decision, under the Regulation on the Right of Way, any request for a right of way must be granted if certain conditions are satisfied, so long as it is not exempted under that regulation. The Board's decision also emphasized that, according to the same regulation, public authorities and institutions have certain additional obligations, which can be listed as follows: (i) they should primarily evaluate applications without any delay, (ii) they should conclude evaluations within sixty (60) days, (iii) they should not discriminate against operators, and (iv) the evaluation process should be transparent. The Board also mentioned that the principle of aiming to secure an effective and sustainable competitive environment is emphasized in the Regulation on the Right of Way. However, it should be noted that the regulation does not introduce any sanctions against those parties that fail to fulfill these obligations or that infringe on these principles.

As a result of its preliminary investigation, the Board dismissed the allegations that the Municipality had denied excavation permits to the operators. Moreover, the Board stated that there was no written evidence indicating that the Municipality had directed operators to ISTTELKOM. That being said, the Board explicitly stated that, since ISTTELKOM had attained a significant amount of business with respect to providing the right of way (except from the "Protocol for Facility Sharing" and the Municipality's "Public Bid for Infrastructure Enlargement for 2017," which ISTTELKOM had won in its second year), serious suspicions had arisen that the Municipality had been directing the operators to ISTTELKOM. Nevertheless, the Board reiterated that this behavior could not be examined under the Law No. 4054, since the Municipality did not qualify as an "undertaking" within the meaning of competition law rules. The Board also indicated that the termination of the main contracts for the right of way on metro routes and funicular railway routes were acts of a purely administrative nature, and thus the Municipality could not be deemed as an "undertaking" for these acts either.

With respect to the allegations that the Municipality and ISTTELKKOM had violated Article 4 of the Law No. 4054 by using a vertical agreement to prevent the use of the right of way by other operators and thereby foreclosing the market, the Board reiterated that the Municipality did not qualify as an "undertaking" under Article 3 of the Law No. 4054, and thus, it could not violate Article 4 of the Law No. 4054.

After addressing the allegations contained within the case file, the Board decided to provide certain explanations on whether entities comprising a single economic unit could violate Article 4 of the Law No. 4054 through vertical agreements. In this respect, the Board first declared that separate entities within the same economic unit constitute a single undertaking for competition law purposes. Accordingly, the Board asserted that even a "cartel agreement" between companies within the same economic unit could not be assessed as an anti-competitive agreement. The Board also stated that, even if the Municipality were considered to be an undertaking for the purposes of the case file, an anti-competitive vertical agreement between the Municipality and ISTTELKOM could not be evaluated under Article 4 of the Law No. 4054, since these two entities are part of the same economic unit.

In conclusion, the Board decided that there were no legal grounds to initiate a full-fledged investigation against the Municipality pursuant to Article 41 of the Law No. 4054. However, in light of its duty to foster and promote competition, the Board decided to send an opinion letter to the Municipality regarding certain competition law concerns that might arise if the Municipality handled the requests for right of way in a discriminatory manner.


1. The Board's decision numbered 17-30/489-222 and dated September 27,2017.

2. This is the official English name that the association uses on its website. However, a better translation would be "Turkish Association of Independent Telecommunications Operators."

3. ISTTELKOM was founded by the Municipality in 2012 in order to address the needs in the areas of information technologies and electronic communications, and to make contributions to solutions for infrastructure problems in the telecommunication industry.

This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in June 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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