Turkey: The Mastervolt Decision: The Board's Attempt At Deviating From The European Competition Law Rules Is Rejected By The Court Of First Instance

The Ankara 7th Administrative Court ("Court") annulled the Board's decision1 in the investigation initiated against Mastervolt International Holding BV ("Mastervolt") and Artı Marin Elektrik Dış Ticaret Ltd. Şti. ("Artı Marin"), on the grounds that these undertakings had violated Article 4 of the Law No. 4054 through their agreements and conduct ("Judgement")2. The Judgement is highly noteworthy in the context of Turkish competition law, as the Court blocked the Board's attempt at conducting an effects-based analysis with respect to a prohibition of parallel trade that would have been in conflict with the relevant EU precedents.

The Board's investigation against Mastervolt and Artı Marin was aimed at determining whether these companies had violated Article 4 of the Law No. 4054 by restricting Eltesan Mobil Teknoloji Sistemleri San. ve Tic. A.Ş.'s ("Eltesan") sales of Mastervolt products in Turkey through parallel trade activities. The Board's investigation was initiated upon Eltesan's complaint.

Mastervolt is a Netherlands-based company, which manufactures energy solutions that are utilized in marine vehicles and platforms, solar energy fields and land vehicles. Artı Marin is the exclusive distributor of Mastervolt products in Turkey, and Eltesan is the exclusive distributor of Waeco products in Turkey.

In its investigation, the Board had chosen to leave the relevant product market definition open, since it determined that the relevant product market definition would not have any effect upon the Board's evaluation of the case, pursuant to Paragraph 20 of the Guidelines on the Definition of the Relevant Market.

In its substantive assessment of the case, the Board found that Artı Marin was the exclusive authorized distributor of Mastervolt and Eltesan was the authorized distributor of Waeco (which is a competitor of Mastervolt) in the market for mobile power equipment, such as energy invertors, convertors, and batteries. Moreover, the Board determined that, from the beginning of 2009, Eltesan had sold Mastervolt products in Turkey by engaging in parallel trade activities, in which Mastervolt products had been supplied to Eltesan by Mastervolt's authorized reseller in Austria (thus enabling Eltesan to challenge Artı Marin's exclusivity in Turkey by offering Mastervolt products at lower prices than Artı Marin). In this regard, the documents submitted by Eltesan revealed that Mastervolt products had been sold in Turkey since 2009, whereas the restrictive actions of the investigated parties (both jointly and separately) had occurred from 2010 to 2015.

In its decision, the Board cited the Consten and Grundig3 ruling of the European Court of Justice ("ECJ"), and held that the EU practice classifies the agreements restricting parallel trade as anticompetitive without further conducting any effects-based analysis, and that EU practice considers any behavior of this type to constitute a violation of the competition law rules.

Consequently, even though the Board clearly stated in its decision that, according to the EU precedents, the agreement between Mastervolt and Artı Marin on the restriction of parallel trade (which was concluded through e-mail messages) might be sufficient to find that the relevant parties' actions had breached competition law rules, the Board went on to say that, due to the structural differences between the EU and Turkey (such as the fact that the EU common market consists of different national markets, whereas the Turkish market is a single national market), the restriction of parallel trade in Turkey might lead to different outcomes than in the EU. Therefore, the Board emphasized that these structural differences might require case- specific assessments and might necessitate an effects-based analysis to determine whether there had been an actual competition law violation in Turkey in this case.

As a result of its assessment, the Board found that there was an agreement between Mastervolt and Artı Marin to restrict the sales of Mastervolt products in Turkey through other dealers (namely, Eltesan) by engaging in attempts to (i) discredit Eltesan's presence in the Turkish market, and (ii) prevent Mastervolt's non-Turkish distributors from supplying Eltesan with Mastervolt products. However, the Board held that Eltesan's sales of Mastervolt products had not decreased significantly throughout the period subject to investigation, and also found that Eltesan's turnover generated from the sales of the relevant products was not substantial. Therefore, the Board concluded in its assessment that the efforts of the investigated parties had not been clearly systematic and successful.

In light of the above, the Board decided that the information at hand was not sufficient to indicate the existence of a restrictive agreement between the investigated parties.

Eltesan subsequently filed an annulment lawsuit before the Court with respect to the Board's decision, on the grounds that the Board's assessment of the evidence in the case file had been flawed, and that the evidence was actually sufficient to prove a competition law violation.

In its assessment of the case, the Court first recalled the main principles and prerequisites for demonstrating the existence of a restriction of competition through agreements and concerted practices within the meaning of Article 4 of the Law No. 4054. The Court also underlined that the mere existence of a restrictive agreement or concerted practice between undertakings within the meaning of Article 4 of the Law No. 4054 would suffice for determining a competition law violation, and that there was no need to demonstrate that the restrictive practices in question had had 'successful' effects in the market in order to establish such a violation within the scope of Article 4. The Court held that, in the case at hand, even though it could be ascertained from the documents submitted by the defendant that the plaintiff's sales had not declined between 2011 and 2015, thus indicating that there had been no systematic and successful restriction of competition, the evaluation of the documents obtained during the investigation and those submitted by the plaintiff clearly revealed that the defendants had intended to restrict competition in the market. Therefore, the Court concluded that the evidence in this case demonstrated the existence of a violation within the meaning of Article 4 of the Law No. 4054.

Based on the foregoing considerations, the Court ruled that the Board's contested decision did not comply with the relevant laws and decided on its annulment.

Footnotes

1. The Board's decision dated May 11,2016 and numbered 16-16/278-122.

2. The Ankara 7th Administrative Court's judgement dated November 28,2018, with file number 2017/251 E 2018/2104 K.

3. Joined Cases 56 and 58-64, Établissements Consten S.à.R.L. and Grundig-Verkaufs-GmbH v Commission of the European Economic Community, ECR1966/299 [1966],


This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in March 2019. A link to the full Legal Insight Quarterly may be found here


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