From the time Act No. 4054 on Protection of Competition ("Competition Act") was adopted in 1994 until mid-2020, the Turkish Competition Law has not integrated the De Minimis Rule or a commitment mechanism for procedures other than merger control proceedings. That said, the need for ensuring procedural economy, decreasing the workload of the Turkish Competition Authority ("TCA") case-handlers, and overall shortening competition law procedures have always been a necessity in Competition Law as it is the case in almost all areas of the law. 

Article 9/3 of the Competition Act: a quasi-commitment procedure?

In the absence of regulation regarding commitments, the TCA used Article 9/3 as a quasi-commitment procedure once every while. To refresh our memories, the said article provides that the TCA, before deciding on an infringement of the Competition Act, shall inform in writing the undertaking or associations of undertakings concerned of its opinions concerning how to terminate the violation. Therefore, ultimately the decision not to initiate an investigation or terminate an ongoing one depended on a commitment by relevant undertakings to take certain steps and/or terminate conduct violating the Competition Act. In other words, although not regulated in the Competition Act or any other secondary legislation, the TCA has put in place a quasi-commitment procedure to ensure procedural economy.

One good example of the TCA implementing the De Minimis Rule and a commitment procedure ahead of time is the preliminary investigation decision regarding allegations that Hayal Seramik (Qua Granit) has violated the Competition Act by imposing territorial boundaries and preventing sales of distributors outside these designated territories.

A recap of the Hayal Seramik (Qua Granit) Decision

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Qua Granit produces ceramic and granite products, including wall and floor tiles. Qua Granit has a three-channel distribution system including (i) distributors, (ii) project team channel (concerns sales to construction sites), and (iii) retail. The allegations subject to the preliminary investigation are that Qua Granit has allocated certain cities to each distributor and closely monitors that distributors are not selling to customers outside these territories. Therefore, customers are often obliged to Qua Granit products at a higher price in their cities, although a lower price is available at distributors operating in different cities. Based on the findings of the on-the-spot inspection and interviews with distributors, the TCA determines that Qua Granit prevented distributors' active and passive sales.

A. Restriction of active sales

The TCA determines that the market share of Qua Granit is substantially below the 40% threshold1 and the relevant market is very competitive, with many players all having market shares similar to each other. Considering that Qua Granit does not restrict sales of its distributors' customers, the TCA decided that the active sale restriction imposed by Qua Granit would benefit from the block exemption.

B. Restriction of passive sales

Restriction on passive sales does not benefit from the block exemption. The TCA also provides that such a restriction would only benefit from the individual exemption in exceptional circumstances which do not apply to the case at hand.

To fine or not to fine?

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The TCA determined that the restriction of passive sales by Qua Granit is a violation of the Competition Act that does not benefit from block exemption or individual exemption. Yet, the TCA taking into consideration (i) the competitive nature of the market, (ii) low market share of Qua Granit, (iii) competitors' position in the market, and (iv) the engagement of distributors with several brands, decided that risk of this conduct negatively affecting the market and the distributors were low.

In the meantime, Qua Granit proposed the following commitments:

  • Amendment of distributor agreements to exclude any passive sale restriction and sanctions thereof,
  • Clear inform the distributors on their rights and responsibilities within the scope of the distribution system of Qua Granit and
  • Put in place an effective competition compliance program and competition law training.

In conclusion, the TCA decided not to initiate an investigation but to send a notification as per Article 9/3 expressing that competition law proceeding will be initiated unless Qua Granit removes all provisions in agreements amounting to a passive sale restriction and ceases all practices to ensure compliance with such restriction effective immediately.

When neither the De Minimis principle nor a commitment process was in play, the TCA effectively applied both procedures in its Qua Granit Decision. The TCA decided not to initiate an investigation but to ensure that Qua Granit terminates the violation and complies with commitments proposed to the TCA.

This creates an expectation that the TCA adopts the same approach (i.e., refrain from initiating an investigation) towards all undertakings in the same position to ensure equality and foreseeability in the implementation of Competition Laws.

What has changed since then?

As an ever-developing area of law, the Turkish Competition Law welcomed, on 24 June 2020, Law No. 7246 on the Amendment of the Law on Protection of Competition ("The Amendment") which introduced many changes in the Competition Act to ensure harmonization with European Union competition rules and procedures.

One of the amendments introduced was the addition of a new article to the Competition Act regarding implementing the De Minimis Principle2. The recent article provided that the TCA had the authority to decide not to initiate an investigation concerning conduct that does not significantly restrict competition. That said, the rule was not applicable where hard-core infringements of Competition Law such as price-fixing, region and customer allocation, and supply restriction.

For the first time, the Amendment also introduced the opportunity to propose commitments to eliminate competition law issues subject to an ongoing preliminary investigation or an investigation. The TCA is provided with the authority to accept these commitments as binding and decide not to initiate an investigation or terminate an ongoing investigation if it decides that commitments proposed can resolve said competition law issues. Similarly, the Rule on Commitments3 excluded hard-core infringements of Competition Law.

Both articles provided that rules and procedures concerning implementing both amendments would be regulated with secondary legislation. In that regard, the De Minimis Communique4 and the Communique on Commitments5 were later published on 16 March 2021 in the Official Gazette. 

Footnotes

1. The market share threshold to benefit from the block exemption for vertical agreements is amended as 30% as of 5 November 2021.

2. Article 41/2 of the Act no: 4054 on Protection of Competition Law.

3. Article 43/3 of the Act no: 4054 on Protection of Competition Law.

4. Communiqué on Agreements, Concerted Practices and Decisions and Practices of Associations of Undertakings that do not Significantly Restrict Competition (2021/3).

5. Communiqué on the Commitments to be Offered in Preliminary Inquiries and Investigations Concerning Agreements, Concerted Practices and Decisions Restricting Competition, and Abuse of Dominant Position (2021/2).

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.