Turkish Competition Authority ("Authority") has been watching the multi-category e-marketplaces, which have become the main actors of e-commerce during the COVID-19 pandemic, and continues its research at great speed with a view to identify and eliminate the competitive concerns that the increasing digitalization may create in the sector. In this context, with the decision of the Competition Board ("Board") dated 11 June 2020 and numbered 20-28/353-M, a sector inquiry has been initiated with the aim of understanding the dynamics of the e-commerce sector, identifying possible competitive concerns in the sector and determining solutions such as policy-regulation changes to address them. On 7 May 2021, the Authority published its preliminary report ("Preliminary Report") of the sector inquiry regarding the e-marketplace platforms on 07.05.2021. With the finalization of the findings within the scope of the Preliminary Report, the Authority published on 14 April 2022 its final report ("Report") of the sector inquiry regarding the e-marketplace platforms.
What Does the Development Mean?
Along with the Authority's goals of adapting to global developments especially in the EU, its interest in digital markets and digitalization is increasing day by day. Although it revealed its main findings in the Preliminary Report, which is the first product of the sector analysis, the Authority has finalized the Report by taking into account the public's views on the findings, determinations, evaluations and policy recommendations in the Preliminary Report. The interactive workshop held on 06 July 2021 with the participation of sector players and stakeholders also played an important role in the finalization of the report. Overall, the Report has a rich content regarding e-commerce market in the global context by presenting global practices with examples from authorities such as the European Commission and OECD, and references to the decisions made by the authorities in a global context, as well as deeply addresses the Turkish market.
In this process, it should be noted that while the Authority focuses its attention on the e-commerce platforms on the Report, it also continues its in practice regarding ongoing investigations. Although the Board has completed its investigations on Nadirkitap and Google, the Board also added the investigations it had initiated about Sahibinden and Trendyol are currently ongoing. Considering all these developments, it is possible to say that the interest of the Authority in the digital economy is increasing day by day, and the secondary law legislations are on their way.
Developments Following the Preliminary Report
As part of the developments following the Preliminary Report, elements such as internet penetration, internet usage intensity, level of adaptation to digital innovations, online shopping trend, level of financial access development, increase observed in Turkey in terms of using financial services and e-commerce spending on a category basis, development of retail e-commerce and e-marketplaces were evaluated.
While the emphasis on digitalization is evident throughout the Report, the growth in e-commerce volume is expressed numerically with reference to various sources (e.g., TÜBİSAD, E-commerce Information Platform of the Ministry of Commerce, Digital, Statista) within the scope of the Report and on the basis of various parameters. In particular, referring to the June 2021 report of TÜBİSAD named "The Transformative Power of the Economy: E-Commerce Impact Analysis 2020", the global e-commerce volume, which was USD 4.3 trillion with a 26% growth in 2020, is estimated to be USD 4.9 trillion with a 4% increase in 2021. According to Digital 2021 data, it is stated that the retail e-commerce size of Turkey, which was measured as USD 8.05 billion in 2019, corresponds to USD 11.3 billion with a 40.3% growth for 2020. Statista's study, in which the retail e-commerce development of countries is estimated was also mentioned. Accordingly, global retail trade is projected to grow by an average of 8.1% between 2020 and 2024; Turkey is projected to be the country with the highest growth rate in the e-commerce market worldwide with an average annual growth rate of 20.2%.
Final Policy Recommendations
The theoretical framework in the Preliminary Report is reiterated through the findings on the current outlook of the market, key concerns regarding cross-platform competition, key concerns regarding intra-platform competition, and key concerns for consumers. For more detailed explanations regarding the related findings and concerns, you can access our legal alert concerning the Preliminary Report here.
The Report differs from the Preliminary Report mainly in terms of the explanations revealed in Section 6 titled "Conclusion and Policy Recommendations". The relevant section first briefly summarizes the important developments that have taken place in the e-commerce market since the publication of the Preliminary Report and the current structure of the market.
During preparation of the Report; stakeholder views expressed at the workshop, public opinions, developments related to the market after the publication of the Preliminary Report and ongoing legislative studies of the relevant public institutions played a significant role during the re-evaluation of the policy recommendations and the finalization of the policy proposals summarized above.
The policy proposals discussed at the Preliminary Report stage have been revised, and the following final policy proposals have been established within the framework of the evaluations.
Within the scope of the report, the summary table titled Competition Issues and Final Policy Recommendations contained in the Preliminary Report has been revised and finalized as follows:
- Legislative Study for Undertakings with Significant Market Power
The Authority signals that a legislative study aiming to identify digital platforms with significant market power and determining the obligations and behaviors that these undertakings must comply with as a premise will be completed soon. The main purpose of the legislative study is to adapt the competition law to rapidly increasing digitalization and sudden developments in the sector, and to enable all platforms to benefit from this change equally. In this sense, it is stated that the Authority, like some other competition authorities worldwide, is working on the need for additional regulations to competition law and aims to implement regulations that establish and protect competition in digital markets.
The proposed obligations set out in the Preliminary Report and considered under the proposal of the "Gatekeeper Regulation", it is also aimed to impose obligations that prevent undertakings with significant market power, commercial users to work with competitors that provide the relevant basic platform services, to provide offers to end users and enter into contracts with them through their own or different online access channels for the same products or services, to restrict or make it difficult for them to advertise their own goods or services through these channels, to prevent them from offering different prices or conditions for a particular good or service when working with competitors, in other words, an undertaking with significant market power to apply MFN clauses and exclusivity. According to the report, prohibiting such practices by undertakings with significant market power is important for the establishment of competition in the market.
In addition to the obligations included in the Preliminary Report, another obligation planned to be brought by the legislative work is related to the interoperability of basic platform services and ancillary services. According to the Report, ensuring both horizontal and vertical interoperability is among the important issues in this sense. Another obligation imposed on undertakings with significant market power through regulatory work is to establish platform transparency by providing commercial users with sufficient information about the scope, quality and performance, and principles of pricing of basic platform and ancillary service. According to the report, in this context, with a broad definition, making the relations between undertakings with significant market power and commercial users transparent and with a narrow definition, making the relations between e-marketplaces and sellers transparent, constitutes a critical area in terms of protecting and strengthening intra-platform competition.
In addition, the policy proposal of "notify the Board of all acquisitions it has concluded regardless of the notification thresholds stated under Communiqué No. 2010/4 Concerning the Mergers and Acquisitions Requiring the Approval of the Turkish Competition Board ("Communiqué No. 2010/4")" regarding the marketplaces with significant market power was implemented with the Authority's Communiqué No. 2022/2 on Amending Communiqué No. 2010/4, published in the Official Gazette No. 31768 on 4 March 2022. The relevant amendment introduces a new term into the merger control regime: "technology undertakings.". An additional notification obligation has been imposed in respect of the transactions in which these undertakings are parties to the relevant transaction. Regarding the relevant amendment within the scope of the report, the relevant regulation is intended to be useful in terms of eliminating the risk that transactions related to the acquisition of newly established and developing undertakings fall into the definition of technology undertakings defined under the Communiqué No. 2010/4, and specially e-marketplaces, may not be subject to competition authority audits.
- Strengthening the Secondary Competition Law Legislation
The Authority considers that the competition law principles should be implemented conservatively on the e-marketplace platforms market. The Authority believes that the secondary legislation should address issues such as assessment of MFN or exclusivity clauses by online platforms, and existing legislation should be both further clarified and strengthened.
Another area where it is considered necessary to strengthen secondary competition law legislation is related to exploitative practices of platforms. In this context, it is stated that (i) excessive data collection and privacy issues, (ii) consumers becoming vulnerable due to information asymmetry and limiting their choice based on correct information, and (iii) unfair contract terms/unfair commercial practices are being raised more frequently in platform economies with their exploitative nature. In this context, further practice is necessary on how the secondary competition law legislation will be reflected during the assessments within the scope of Article 6 of the Law No. 4054 on the Protection of Competition.
In addition to all these issues, within the scope of the legislation work carried out by the Authority, it was evaluated that an additional secondary competition law legislation study may be needed in order to identify the undertakings with significant market power, and to clarify the obligations expected to be imposed on these undertakings and the application conditions of the relevant legislation.
- "Code of Conduct of the Platform" Arrangement
At the heart of the Code of Conduct proposal is the concern that the asymmetric bargaining power between the platform that owns the e-marketplace and the sellers that are users of the platform service will expose the sellers to unfair trading conditions. For this reason, it is also emphasized within the scope of the Report that a "Code of Conduct of the Platform" is necessary to ensure objectivity, transparency, preciseness and predictability.
However, it was assessed that the Preliminary Report's Code of Conduct recommendation may need to be implemented on a broader scale, including in non-dominant e-marketplaces, and therefore it would be appropriate to implement it by the relevant Ministries rather than the Competition Authority. In this context, it is also stated that the Ministry of Commerce has been authorized to carry out the legislative work related to the relevant issue within the scope of the Economic Reforms Action Plan.
As the Authority has given its signals as of the Preliminary Report, Authority is well-aware of the need to the adapt to ongoing digitization of the economy. Within the scope of the Report, the Authority takes actions and establishes policies to address similar concerns with global competition authorities. It is expected that the legislative work in this direction will gain momentum with the finalization of the policy recommendations set out in the Preliminary Report within the scope of the Report.
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