September 2021 – The commitment mechanism entered Turkey's competition law scene in 2020 following an amendment to Law No. 4054 on the Protection of Competition ("Competition Law"). With this new tool, the Competition Board may decide (i) not to turn a preliminary investigation into a full-fledged investigation, or (ii) to end an on-going full-fledged investigation by making a proposed commitment package binding on the relevant party, provided that it deems the submitted commitment package adequate to eliminate all identified competition law concerns. As such, on 2 September 2021, the Board closed its investigation against Coca-Cola Satış ve Dağıtım A.Ş.1 ("CCSD") based on the commitments proposed.
Undertakings and associations of undertakings may propose commitments for infringements (except for violations of hard-core restrictions such as price fixing, territory or customer allocation, or restricting output) and request the Board to close their case. Details for the commitment mechanism's application are specified in Communiqué No. 2021/2 on Commitments for Preliminary Investigations and Investigations on Anticompetitive Agreements, Concerted Practices, Decisions and Abuse of Dominant Position ("Communiqué on Commitments"), which entered into force in March 2021. However, after the amended law of June 2020, there were several instances where the Board decided to end investigations before the Communiqué on Commitments came into effect (please refer to our article on Communiqué on Commitments here!).2
CCSD is active in the market for non-alcoholic commercial beverages with a broad product range. In terms of the case at hand, the Competition Board opened an investigation against CCSD to establish whether CCSD violates Competition Law by preventing the sale of competing products at final outlets.
Following CCSD's application for commitment and negotiations, the Board announced its decision to terminate the investigation by making the relevant commitment package binding, considering that the proposed commitment package is "proportionate to competitive concerns, suitable for resolving the concerns, can be implemented in a short period of time and can be applied effectively".3
One of the interesting points within the scope of the case is that it updates a decision that the Board rendered concerning CCSD 14 years ago.4 In its previous decision, the Board thoroughly discussed the non-alcoholic commercial beverages sector and decided that CCSD, which was determined to enjoy a dominant position in terms of carbonated beverages, should end the exclusive dealership agreement for its products (i.e., the practice of having only CCSD products at the point of sale).
The most striking point in the previous decision was that it stipulated an obligation to make 20% of CCSD-owned coolers accessible to competitors at outlets with a sales area of less than 100 m² where there is not a cooler belonging to competitors. Given that these practices create de facto exclusivity, they were caught by the Board's radar. Indeed, the Board has drawn lines for these practices, both in its recent Unilever decision (our assessment is accessible here) and in its previous Mey İçki5 and Efes6 decisions.
In its recent decision, the Board expanded the scope of the rule that 20% of coolers be reserved for competitor products and decided that 25% of CCSD's beverage cabinets must be available for use by its competitors at sales areas in traditional sales channel under 100 m2, and at points in the on-site consumption channel.
As evident from both the CCSD decision of 2007 and the Efes decision of 2008, in the relevant period the allocation of 20% of cooler volume to competitor products was considered sufficient to ensure effective competition. However, in recent case law, we observe that the area that should be made accessible for competitors has in fact expanded. For example, in the recent Unilever decision, the Board ruled that Unilever dominates the Turkish ice cream market with its brand Algida and therefore 30% of ice cream cabinets should be reserved for competitor ice cream products, as placing competitor products in freezers it supplies to sales points leads to de facto exclusivity. In a similar manner, in 2017, the Board decided that due to its practices in the raki market, Mey İçki could only use 70% of the shelf and display line-up at sales outlets and must allocate 30% of such space to competitors.
Considering that CCSD products are placed both in coolers and on shelves, it is quite remarkable that the Board accepted the 25% ratio proposed by CCSD, as this is below the 30% limit determined in recent investigations where administrative fines were imposed on the undertakings subject to the investigation. We are awaiting the Board's reasoned decision concerning the criteria according to which the ratio that should be opened to competitors for the establishment of effective competition is evaluated.
The accepted commitment package includes the following elements:
- Instead of a single contract, three separate contracts will be drawn up for "cola drinks", "other carbonated products" and "non-carbonated products". In other words, the practice of concluding a single contract for the entire product range will be abandoned.
- Rebates, promotions and discounts will only be valid for the same type of beverages: The contracts for cola, other carbonated and non-carbonated products and flavoured and plain soda, water-mineral water, fruit juice-ice tea, energy drink, and sports drink sub-categories will be distinguished. In other words, when a sales point purchases a product in the cola category from CCSD, the benefit (such as a free product) provided by CCSD in relation to this purchase may not concern a different product category. For example, flavoured soda will not be given as a promotion for the purchase of cola.
- No exclusivity on non-carbonated products: Except in some exceptional cases, CCSD will not be able to prevent sales points from selling competitor products in terms of non-carbonated products.
- Contract periods will be limited to 2 years: With certain exceptions, CCSD's contract terms will be limited to two years, and sales points will be able to terminate the contract without paying any penalty if the quantity contracts are valid for more than two years.
- Competitor products without coolers will be placed in CCSD's coolers: Regardless of whether a competitor has a cooler other than from CCSD at the sale point, competitor products without a cooler will have 25% of the space in CCSD's coolers.
- New arrangement to purchase conditions: The phrase "by regular and continuous purchases" will be preserved only in the contracts of sales points that receive cash support. That said, provisions regarding rebates, discounts or promotions will be removed from the contracts. In addition, there will be no penalty clause for non-compliance with this statement.
- Obligation to inform: CCSD will inform consumers and outlets regarding the commitments.
- Arrangements regarding the existing contracts will be completed within one year from the official service of the reasoned decision, and compliance in terms of other clauses of the commitment package will be completed by 31 December 2021.
- The Competition Board's reasoned decision dated 10 September 2007 will be taken as the basis for the issues that are not included in the commitment text.
We understand that the Competition Board has decided that it is appropriate to eliminate competitive concerns with new measures, considering changes in the sector in the intervening 14-year period since its 2007 decision.
As mentioned above, CCSD is not the first investigation that has been terminated within the framework of the commitment mechanism. The Board previously closed investigations carried out against Airports Ground Services; S System Logistics; MNG; Insurance Association of Turkey and OSEM Certification; Yemek Sepeti; Turkish Airlines; and Çiçeksepeti based on the commitments submitted. Ending the on-going investigation regarding CCSD indicates that we will more than likely encounter similar examples in the future and that the Board will use its limited resources more effectively.
In conclusion, in line with the commitment package offered by CCSD, the Board expects that:
- with the new cooler access rule, the opportunity of competitors to place their products at sales points will increase,
- consumers will have a broader product choice at sales points,
- the competitive concerns arising from the strength of CCSD's product portfolio will be eliminated by separating the carbonated and non-carbonated products and by including sub-categories,
- competitive elements will become comparable in the relevant markets in terms of both competitors and outlets,
- the level of awareness in terms of the commitments to be implemented will increase thanks to the notifications to be made by CCSD,
- the level of competition in the market will increase by reducing the contract periods (with some exceptions); and
- the level of competition in markets will increase by ending the exclusivity arrangement with respect to non-carbonated products (with some exceptions).
1. CCSD is a subsidiary of CocaCola İçecek A.Ş., which is an anchor bottler and part of the Coca-Cola System.
2. Turkish Competition Board's Ground Services (05.11.2020, 20-48/655-287), S System Logistics (10.12.2020, 20-53/751-335), MNG Airline Cargo (10.12.2020, 20-53/746-334), Insurance Association of Turkey and OSEM Certification (07.01.2021, 21-01/8-6), Yemek Sepeti (28.01.2021, 21-05/64-28), and Turkish Airlines (11.03.2021, 21-13/169-73) decisions.
3. See, https://www.rekabet.gov.tr/tr/Guncel/coca-cola-satis-ve-dagitim-as-tarafindan-7409bb358f10ec118143005056b1ce21 (only available in Turkish).
4. Turkish Competition Board's Exemption Decision on CCSD dated 10.09.2007 and numbered 07-70/864-327.
5. Turkish Competition Board's Mey İçki decision, dated 16.02.2017 and numbered 17-07/84-34.
6. Turkish Competition Board's Efes decision, dated 10.04.2008 and numbered 08-28/321-105.
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