The Authority has published the Board's reasoned decision1 rejecting the joint negative clearance/individual exemption application of the Association of Air Conditioning and Refrigeration Manufacturers ("ISKID") and the Association of Natural Gas Appliances Industrialists ("DOSIDER"), regarding the decisions of their executive boards with respect to the release of a public information ad. The ad in question was planned to be made jointly by these associations and was intended to be released as a public information ad by the Turkish Ministry of Trade's Department of Consumer Protection.
The applicants, ISKID and DOSIDER, were defined by the Board as associations of undertakings; thus, their conduct was considered to fall within the scope of the Law No. 4054. ISKID was established to address the problems of climatization sector in Turkey and to work for the development and advancement of the sector, with members currently representing 90% of the climatization market in Turkey. DOSIDER is active in the enhancement of services regarding appliances that work with natural gas and ensuring that consumers receive appliances and services that are up to the applicable standards. A substantial number of undertakings are members of both associations and active in the relevant sectors in Turkey.
The parties explained in their negative clearance/individual exemption application that after-sale services for climatization products are provided by both authorized and independent services. The authorized service providers are generally in a contractual vertical relationship with the suppliers in the market, and can therefore utilize the trademarks and logos of the suppliers, along with the title "authorized service." The application also stated that a number of independent service providers are in breach of the Law No. 6769 on Intellectual Property ("Law No. 6769"), by using the suppliers' trademarks and logos and the term "authorized service" without receiving authorization or license from the suppliers, and thus misleading the consumers. The parties also contended that consumers who have used the independent services have been publishing their complaints about the suppliers themselves via online platforms and other channels.
As a result, the claim brought forth by the parties was that the brand image of the suppliers had been harmed. Lastly, the parties also declared that, once the Board had reached a decision on the current application, they would also apply to the Supreme Council of Radio and Television ("RTÜK") in accordance with the Public Information Ads Circular ("Circular") for their joint public information ad. To that end, the applicants claimed that, although they would pursue legal action regarding the misleading advertisements made by the independent services, the need for creating consumer awareness was also paramount due to the large number of independent services in existence, which rendered it difficult to pursue comprehensive legal action.
Prior to its substantial assessment on the case, the Board requested an opinion from the Ministry of Trade's Department of Consumer Protection and Market Monitoring ("Department of Consumer Protection") with respect to the application. In summary, the Department of Consumer Protection made the following points in response to the Board:
- Pursuant to the Law on the Protection of Consumers, commercial advertisements are required to be factually correct and in line with those principles laid out by the Board of Advertisement, such as the principles regarding public morality, order of law, and the rights of individuals; therefore, advertisement are not allowed to mislead consumers or abuse or exploit their lack of knowledge.
- Similarly, the Regulation on Commercial Advertisements and Unfair Commercial Practices declares that names, emblems, logos or other identifying elements pertaining to a third party, such as certifications, diplomas, permits or accreditations cannot be used to mislead consumers, and any intellectual property owned by a third party cannot be used in an unfair manner.
- In this context, those service providers that falsely advertise themselves as "authorized" are penalized by the Board of Advertisement; consequently, it would be beneficial to prepare public information ads to prevent any wrongdoing vis-à-vis the consumers.
In its assessment regarding the relevant market, the Board noted that, due to the activities of both associations, the relevant market assessment would be twofold. For climatization, the Board determined that the relevant market consists of boilers, radiators, air-conditioning for households, as well as central air-conditioning for malls, hospitals, etc. For natural gas, the sales and after-sale services for appliances that operate with natural gas were included in the relevant market definition. The Board noted that most members of DOSIDER were also active in climatization, and thus, members of ISKID as well.
With respect to the relevant product market definition, the Board considered that the actual sales of products constitute the "primary" market, whereas the market for spare parts, repair and maintenance services and other services required after the initial sales of the relevant products were defined as the "aftermarket' or "secondary" market. The Board observed that, as the application in question concerned the after-sale service providers, the application would also have possible effects on the secondary market. However, the Board refrained from putting forth a conclusive product market definition, whereas it defined the relevant geographic market as "Turkey."
Subsequently, the Board defined public information ads as informative or educational films and audios, which are deemed to serve public welfare by RTÜK and which are regulated by the Law No. 6112 on the Establishment of Radio and Television Enterprises and Their Media Services ("Law No. 6112") and the relevant Circular adopted by RTÜK. Pursuant to the Circular, the content of public information ads must be informative or educational, and such ads cannot serve the purpose of advertisement, carry any secret commercial communication or advertisements, and cannot include names, trademarks, logos, images, activities or products of those parties that have been involved with the preparation of such public information ads.
In its assessment, the Board initially observed that the application alleged that the trademarks, logos and the word "authorized" were being utilized contrary to the Law No. 6769, and that the independent services were therefore misleading the consumers.
To that end, the Board stated that, even though new regulations could be introduced by regulatory bodies with respect to the unfair utilization of trademarks and logos, regardless of whether it constitutes unfair utilization as per the Law No. 6769, a public information ad that will target all independent private services could not be granted a negative clearance, as this could create a negative perception about all private independent services, regardless of whether they had actually breached the law.
Consequently, the Board examined whether the application for the public information ad could be granted an individual exemption under Article 5 of the Law No. 4054, which regulates the exemption regime. As a result of this evaluation, the Board found that, in the case at hand, the primary and obvious effect of the public information ad would be to direct consumers away from independent private services and towards authorized services. To that end, the Board declared that there was no factual evidence which demonstrated that consumers were always harmed when they used independent private services. On the contrary, the Board held that consumers believed that they could receive services from independent private services for cheaper prices that were nearly equivalent in quality to those provided by (more expensive) authorized services.
Furthermore, the Board considered that the wording of the public information ad, which read "(...) you could even be charged unnecessarily if your product is within the warranty period," did not satisfy the criteria for receiving an individual exemption. In the Board's view, this was because the enhancement of consumer rights relating to warranties is a matter that should be dealt with through specific legal regulations, rather than a public information ad that may affect the operation of the market.
For the third condition (i.e., not eliminating competition in a significant part of the market), the Board noted that the proposed public information ad had the potential to lead consumers towards authorized services for the life span of their products, and thus to restrict the competition in the relevant market by excluding the independent private services from the secondary market.
In conclusion, the Board decided to reject both the negative clearance and individual exemption applications submitted by ISKID and DOSIDER with respect to the relevant public information ad. Overall, this decision constitutes an interesting outlook with regard to assessing the consumer welfare and the competition in the market from different legal perspectives, which interconnect multiple legal disciplines, such as intellectual property, public advertisement and competition law.
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.
1. The Board's decision dated April 4, 2019, and numbered 19-14/186-84.
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