The Board published its reasoned decision on Bankalararası Kart Merkezi A.Ş.'s ("BKM") request to revisit/reexamine a previous decision[1] ("Rejection Decision") where the Board had rejected BKM's individual exemption request for some credit card information storage services.[2]

BKM is a trade association formed by 13 major banks in Turkey. It mainly operates as a payment system operator under Law No. 6493. BKM also offers services such as swap and settlement, online payment solutions, authentication, digital wallet services and credit card information storage.

BKM's credit card information storage service offers a system which is integrated with BKM member banks concerning storage of users' credit card information. This service enables businesses not to request, receive or store credit card information from customers. Instead, BKM acts as an agent by keeping customers credit card information for any type of transactions and store encrypted card information for repeated customer transactions. That way, customers would not be required to submit their credit card details for each transaction. This reduces the risk for businesses in storing sensitive data and their concerns relating to the compliance with the Payment Card Industry Data Security Standards.

Concerning its credit card information storage operations, BKM filed an individual exemption application before the Turkish Competition Authority ("Authority") in 2017 regarding its credit card information storage services. The Board granted these services an individual exemption for one year only.[3] The Board emphasized that even though the relevant services offered by BKM enabled overall efficiencies in terms of businesses, banks and customers, it was nevertheless possible that a considerable portion of the existing competition could be hampered in the market and therefore held that further developments must be closely monitored.

Following the one-year term, BKM made another application to the Authority concerning the extension of one-year exemption given in 2017. The Board rejected this request on the basis that BKM's credit card information storage services did not meet the conditions set under Article 5 of Law No. 4054.[4] In the Rejection Decision, the Board noted that although BKM's application was first perceived as a technical progress that is based on a different system than other payment institutions, the one-year period showed that the difference was in fact due to the integration banks provided to BKM, but not to rival payment institutions.

Following this Rejection Decision, BKM, the Turkish Association for Insurance, Reinsurance and Retirement Companies ("TSB") and Metlife Emeklilik ve Hayat A.Ş. ("Metlife") requested the Board to re-evaluate its Rejection Decision pursuant to Article 11 of Law No. 2577 on Administrative Procedure.

Nevertheless, due to (i) the developments observed in the market in the one-year exemption period, (ii) the existing relations of the banks with BKM and the positions of the other players in the market, and (iii) the structure of the market as well as the predictions of the current and potential competition in the market, the Board decided that its previous decision on the issue was in fact on point and the developments in the market have not satisfied the individual exemption requirements set out under Article 5 of Law No. 4054 in order to extend the duration of the exemption given previously.

In its assessment, the Board stated that it reviewed the one-year exemption period and concluded that a significant portion of the credit card information storage services market is closed to competition on the basis that BKM is the most important player in the market and that neither banks nor other credit card information storage service providers operate in such a way as to compete with BKM. The Board further indicated that while it is possible for banks to provide this service internally or to outsource it, the provision of this service under the roof of BKM, an entity formed by various banks competing at the horizontal level, had a negative impact on competition in the market.

BKM and TSB also brought up a new business model adopted by BKM, where BKM would cease its service delivery at retail level but position itself as a wholesale provider for credit card storage services instead. The Board stated that in case said services were to be provided by BKM to other credit card storage institutions; (i) credit card storage institutions would become dependent on BKM, (ii) provision of this service at wholesale level would reduce credit card storage institutions' incentive to invest in this field, (iii) commercially sensitive information belonging to credit card storage institutions, such as customer information, number of contracted businesses, etc. would be shared with BKM, and (iv) potential problems or flaws in BKM's system would damage the whole system. According to the Board, the termination of BKM's activities at retail level would not cease the foregoing competitive concerns since BKM and said institutions would remain competitors in digital wallet services. As a final remark, the Board highlighted that pursuant to the Rejection Decision, the provision of this service under the roof of BKM instead of banks alone would not create any efficiency in terms of Article 5(a) of the Law No. 4054 and BKM's provision of this service at wholesale level would not alter the situation.

In light of these evaluations, the Board decided not to revoke, alter or dismiss its Rejection Decision. Therefore, the Board rejected the re-examination application requesting extension of individual exemption for the credit card storage services offered by BKM.

[1] The Board's decision dated June 12, 2018, and numbered 18-19/337-167.

[2] The Board's decision dated November 22, 2018, and numbered 18-44/698-342.

[3] The Board's decision dated March 23, 2017, and numbered 17-11/134-61.

[4] 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).

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

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