Turkey: An Outlook Of 2018: A Window To The Perspective Of Turkish Competition Authority

Last Updated: 2 May 2019
Article by Dilara Yeşilyaprak

Turkish Competition Authority ("TCA") published its 2018 Annual Report ("Report") where it presents an overview of its activities in the past year. TCA's 20-year-long tradition of publishing annual reports is something the sector has become accustomed to by now, however this particular report is of great importance since 2018 was a vigorous year in terms of competition law. Some key notes from the report and our assessment in relation to 2018 outlook are as follows...

Opening remarks by the TCA's president

As repeatedly stated in the report, 2018 has been a fruitful year for the TCA in terms of international cooperation. In his preliminary remarks, President of the TCA, Ömer Torlak, emphasizes efforts of the TCA towards developing new international alliances and keeping up with globalization. Playing an active role in the Balkan Region, TCA signed cooperation protocols with the national competition authorities of Kosovo, Macedonia, Serbia and Albania during the course of 2018. Throughout the year, TCA also represented Turkey in the international platforms, examples being conferences and meetings organized by the Organization for Economic Cooperation and Development ("OECD"), United Nations Conference on Trade and Development ("UNCTAD"), International Competition Network ("ICN") and European Competition Network ("ECN").

Alongside international efforts, President Torlak also underlines the importance of raising awareness on competition law and competition advocacy within Turkish borders. To that extent, TCA conducted several activities and meetings with various universities, public institutions, non-governmental organizations and private sector representatives in Turkey in 2018. The insight gained by TCA in these gatherings were reflected in its sector reports. In 2018, TCA published a report on Turkish Hazelnut Industry and it continued its sector inquiries in fair organization, fast-moving consumer goods, music and electricity sectors. TCA continued to provide further insights on competition law matters through its publications under the Competition Journal, Competition Bulletin and via the 2018 M&A.

Focus on the economy

The Report specifically underlines the importance of competition rules and the TCA for economic stability and growth. It reminds the reader of the strategic and central importance of competition for the efficient operation of the market economy. In this regard, TCA differentiates itself from other regulatory agencies and points out how competition regulations serve the benefit of consumer welfare, price stability, foreign investments and economic growth.

TCA even goes one step further and reports the contribution it has made to the consumer welfare in 2018. Last year's approximated contribution to consumer welfare is reported to be 3.28 billion TRY (approx. 551.3 million USD)1. This statistic was first shared in last year's annual report and it seems like TCA will continue to concretize its contribution to the Turkish economy.

It is also evident from the SWOT analysis that TCA places economy in the centre of its mission. The need for development in the economic analysis capacity is seen as an opportunity by the institution - we are guessing that we will be observing more proactive involvements of TCA in this field in the future.

Speaking in numbers

Last year has seen the greatest number of cases overseen when compared to last 5 years. TCA decided on 355 cases with merger and acquisition ("M&A") cases being in the lead by constituting 63% of the cases. The statistics show that approximately 90% of the submitted M&A notifications have been granted permission by the TCA. Leading sectors in M&A filings were (i) food and agriculture, (ii) transportation and (iii) chemicals industries. The Report explicitly expresses that final decisions on M&A transactions were made within an average of 15 days following its notification.

Even though this may seem as a relatively short period, understanding the figures is very important for clearing any misinterpretations and misleading that may arise in corporate minds. . We presume that the TCA takes into consideration the final submission (the filing itself and the submission of responses to any potential information requests) in its average 15-day decision making period analysis while in practice firms usually start calculating the decision making period starting from the filing. Therefore firms' face a longer decision making period as the TCA tends to ask further questions (or sometimes even repeated confirmations) in majority of the filings. To put things into perspective, we would like to recall our detailed article regarding the period for M&A filings.

Moving on to investigations, firms were fined around 349 million TRY (approx. 58.7 million USD)2 due to infringements detected in conclusion of 23 investigations during the course of 2018. Last year, alongside the finalized the TCA also launched 24 investigations. When the sectoral breakdown of investigations is analysed, it is seen that the TCA focused mostly on regulated sectors. Having concluded investigations in IT, transportation, energy, pharma and petroleum sectors the TCA reminds regulated sectors that they must also keep an eye on competition law and its own set of rules.

On the litigation side, the number of cases filed against TCA decisions reached 149 in 2018, of which 127 of those are still ongoing.

Highlight legislative and structural matter

2018 has been a busy year also in terms of legislation and TCA's structure. TCA experienced a structural change following the decree-law mandating adaptation to the constitutional changes. As per the amendments, the members of TCA's Board are now appointed by the President of Turkey instead of the Council of Ministers. In the former legislation, members of the Board were being nominated by the Ministry of Commerce, Ministry of Development, Council of State, Court of Appeals and the Union of Chambers and Commodity Exchanges of Turkey. In the new system, a nomination system is not foreseen and the appointment is left to the sole judgment of the President of Turkey. Moreover, former degree related pre-requirements on subjects such as law, economics, engineering are no longer applicable, members holding a 4-year higher education diploma or with a higher level of education may qualify for appointment. Against this background, currently the TCA's Board is made up of Ömer Torlak, Mehmet Ayan, Arslan Narin, Adem Bircan, Şükran Kodalak, Hasan Hüseyin Ünlü and Ahmet Algan where Mr. Ünlü and Mr. Algan serve as the new entrants.

TCA implemented two significant legislative changes, the first one being the amendment of the Guidelines on Vertical Agreements ("Vertical Guidelines") and the second - The Guidelines on Cases Considered as a Merger or an Acquisition and the Concept of Control ("Merger Guideline").

You may access some previously written articles on the Vertical Guidelines here and here! By way of reminder, most favoured customer clauses have taken their place in the Vertical Guidelines as a matter worthy of notice in terms of both vertical (i.e. resale price maintenance) and horizontal (i.e. collusion, parallel pricing and price rigidity) relationships. In addition, the Guideline explicitly categorizes online sales as passive sales and overall, states that restriction on online sales of distributors are regarded to not benefit from block exemption.

Moving on to the second amendment, as elaborated in depth in one of our previous articles, Merger Guidelines changes the former interpretation of the what constitutes a single transaction. In the past, two or more acquisition transactions carried out between the same persons or parties within a period of two years constituted as a single transaction. However the amendment expands this interpretation of a single transaction by increasing the time period to three years and including transactions realized by the same undertaking in the same relevant product market in the new definition. The new Merger Guidelines also elaborate on the notification of the single transaction. According to the amended provision, such transactions can be notified post-closing if the following conditions are met;

  1. the transaction shall be notified to the Board without any delay, and
  2. the voting rights attached to the securities acquired shall not be used or if used, it shall be based on an exception recognized by the Board relation to preservation of full value of the investment.

Lastly, amendments are still being discussed for the Act No. 4054 on the Protection of Competition in order to further implement the European approach to our national legislation.

Looking into Future: Strategic Plan for 2019-2023

TCA released a Strategic Plan for the upcoming 2019-2023 period in which the vision and mission of the institution is revisited in order to establish a more efficient, dynamic and effective competition law policy. According to this Strategic Plan we expect to see TCA actively involved in implementation of competition law, competition advocacy and policy making fields. In order to achieve some progress in these fields, TCA is looking forward to amend the current legislation. Indeed, the TCA is keen to make changes to be able to respond quickly and accurately to violations and to expand its authorities with regards to collection of evidence.

Footnotes

1. As of April 29, 2018, 1 USD = 5.95 TRY.

2. As of April 29, 2018, 1 USD = 5.95 TRY.

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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