Turkey: The Turkish Competition Board Reassessed The Allegations Of Refusal To Supply Against Maysan Mando Further To The Administrative Court's Annulment And Imposed An Administrative Monetary Fine For Resale Price Maintenance

The Authority published the Board's reasoned decision1 reassessing its previous decision2 not to initiate an investigation against Maysan Mando Otomotiv Parçaları San. ve Tic. A.Ş. ("Maysan Mando"), subsequent to the annulment of this decision by the 15th Administrative Court of Ankara ("Court"). The allegations included that Maysan Mando had distorted competition by way of (i) refusing to supply, and (ii) colluding with the competitors of Tok Oto Market ("Tok Oto" or the "Complainant") in order to exclude Tok Oto from the downstream market.

As background information, Maysan Mando is a supplier of shock absorber 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 that (i) Maysan Mando had the highest market share in the relevant market in Turkey due to its reasonably priced products, (ii) Maysan Mando verbally informed Tok Oto that it will no longer supply its products to Tok Oto and thus refused to supply its products to Tok Oto due to Tok Oto's competitors' pressure, and therefore (iii) Maysan Mando 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 "production and sales of shock absorbers", "sales of automotive spare parts" and "distribution and sales of shock absorbers" taking into consideration the activities of both Maysan Mando and the Complainant. The relevant geographic market is defined 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 its substantive assessment, the Board first assessed whether Maysan Mando violated Article 4 of the Law No. 4054 by way of determining the resale prices of its dealers' products through its supply agreements. In this regard, the Board stated that resale price maintenance behaviors constitute a vertical restraint and such practices are generally considered to restrict intra-brand competition. In accordance with Article 6 of the Block Exemption Communiqué on Vertical Agreements in the Motor Vehicles Sector ("Communiqué No. 2017/3"), the prohibition of the distributor's freedom to determine its own selling price is considered as one of the restrictions which aims to prevent competition and the agreements containing such restrictions are excluded from the block exemption regime provided under the Communiqué No. 2017/3.

The Board also emphasized that, considering that price is one of the most important elements of competition, resale price maintenance practices constitute a competition constraint by object and it is not possible to grant an individual exemption under Article 5 of the Law No. 40543. As a result of the close competition between the dealers, it was found that there would be no incentive to make investments to reduce the distribution costs of the dealers and therefore there will be no improvement in the products and services offered by the dealers, which ultimately indicates that no consumer benefit can occur. In short, subsequent to the on-site inspection and documents submitted as evidence, the Board found that Maysan Mando had determined the resale price of its dealers from 2014 to 2018, which falls under the scope of Article 4 of Law No. 4054. Furthermore, the Board stated that Maysan Mando's behavior did not benefit from either Communiqué No. 2017/3 or Article 5 of Law No. 4054 governing the individual exemption regime. Thus, the Board concluded that Maysan Mando had infringed Article 4 of the Law No. 4054 by way of resale price maintenance.

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 downstream market within scope of Article 6 of the Law No. 4054 governing the abuse of dominance. 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.

In the case at hand, the Board stated that subsequent to the investigation that was initiated further to the Court's annulment decision, it was found that the Complainant continued to distribute shock absorbers. The Board evaluated the ratio of Maysan Mando products within the Complainant's overall sales. The Board thereon noted that between 2012 and 2015, the ratio of Maysan Mando products in the Complainant's sales were low and thus, the lack thereof would not prevent the Complainant from being active in the spare parts market. As for a narrower market for shock observers, the Board found that even though the ratio of Maysan Mando products decreased, the ratio of other product brands had increased. Accordingly, the Board found that Maysan Mando's products were not indispensable because the alternatives in the same market as Maysan Mando products were also included in the Complainant's sales. Thus the indispensability criterion was not satisfied and an infringement within the meaning of Article 6 of the Law No. 4054 did not occur.

The Board ultimately decided unanimously that (i) Maysan Mando did not abuse its dominant position within the meaning of Article 6 of Law No. 4054; but that (ii) its dealership agreements violated Article 4 of Law No. 4054; and that the conditions for the relevant agreements benefiting from the block exemption regime under the Communiqué No. 2017/3 or from the individual exemption regime under Article 5 of Law No. 4054 were not satisfied. Accordingly, the Board decided to impose an administrative monetary fine on Maysan Mando.

Moreover, the Board also decided that the dealership agreements entered into with Maysan Mando's dealers could benefit from block exemption under the Communiqué No. 2017/3, provided that the terms of the agreements are amended in line with the provisions under Communiqué No. 2017/3 and the duration of the non-compete obligation therein is limited to 5 years.

In conclusion, despite the fact that the Board had taken an approach of adopting effect basis analysis for investigations on resale price maintenance behaviors in certain decisions, there is reason to believe that the Board's recent decisions including Maysan Mondo are signaling the departure from such approach. Indeed, the Board did not adopt an effect analysis in the case at hand but rather decided the relevant resale price behavior to be a restriction by object.

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

Footnotes

1 The Board's decision dated June 20, 2019 and numbered 19-22/353-159.

2 The Board's decision dated February 18, 2016 and numbered 16-05/107-48.

3 Article 5 of Law No. 4054 sets out four requirements which must be satisfied by the undertakings in order to obtain an individual exemption: (a) ensure new developments and improvements, or economic or technical development in the production or distribution,(b) benefit the consumer from the abovementioned,(c) not eliminate competition in a significant part of the relevant market, (d) not limit competition more than what is compulsory for achieving the goals set out in sub-paragraphs (a) and (b).

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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