The Board published its reasoned decision concerning the request for negative clearance for the "Standardized and Binding Framework Agreement" ("SBFA"), published by the Banks Association of Turkey ("BAT"). The Board refused to grant negative clearance to the SBFA, as it was found to include anti-competitive restrictions within the meaning of Article 4 of Law No. 4054. The Board did not grant an individual exemption to the SBFA either, as it did not fulfill the cumulative conditions for individual exemption, as set forth in Article 5 of Law No. 4054[1].

BAT applied for negative clearance for the SBFA, which would be put into mandatory use by each member bank of BAT for providing individual banking services to their customers. BAT's application focused on the following arguments: Firstly, BAT argued that existing legislations already regulated the types of banking services included in the current banking services agreements ("BSAs"). Thus, by excluding the parts covered by the existing regulations, the SBFA would prevent unnecessary repetition and provide explicit standard agreements. BAT also assured the Board that banks would preserve their decision-making mechanisms on competition-sensitive parameters, such as the scope of the services, fees, commissions and interests, among others. In addition, banks would have to offer a separate body of supplementary agreements to their customers for the services and products which were not included in the SBFA. In other words, the SBFA would constitute the most fundamental form of the banking services agreement. Banks would freely choose the scope, terms and conditions of the other banking services that would be separately offered to their customers.

As an alternative argument, the BAT asserted that current BSAs consist of no fewer than 40 to 50 pages of documents and that they involve a variety of different forms of services and products. Customers do not even read these lengthy agreements, nor do they require such services, according to the BAT. The proposed SBFA would prevent such a waste of resources (including the time and cost involved in processing such lengthy agreements) and ultimately reduce operational costs. It would also simplify the implementation of such agreements so as to enable customers to more easily and effectively compare competitive indicators for the banking sector, such as fees, commissions, and other costs.

In its assessment, the Board compared the proposed SBFA with the existing BSAs. It then noted that some of the products, services and provisions that were excluded in the SBFA would ultimately enable customers to be informed of the applicable terms of their agreements. The exclusion of such services and provisions would deprive customers of the opportunity to foresee the legal scope and ramifications of the proposed SBFA.

With regard to the application for negative clearance, the Board evaluated the SBFA's purpose and effect on restricting competition and found that, although the SBFA did not necessarily aim to restrict the competition, it would not be possible for the banks to increase their product diversification under the SBFA, as it did not allow any customization depending on the specific needs of the customer. Therefore, the Board concluded that the implementation of the SBFA would restrict the effective competition within the meaning of Article 4 of Law No. 4054.

Subsequent to assessing and denying the request for negative clearance, the Board proceeded to evaluate whether the SBFA fulfilled the following cumulative conditions under Article 5 of Law No. 4054 for an individual exemption: (i) The agreement must contribute to the improvement of the production or distribution of goods or to the promotion of technical or economic progress, (ii) the agreement must allow consumers a fair share of the resulting benefit, (iii) the agreement should not afford the parties the possibility of eliminating competition with respect to a substantial part of the products in question, and (iv) the agreement should not restrict the competition beyond what is strictly necessary to get the aforementioned positive effects.

BAT argued that the SBFA would lead to a number of efficiency gains (such as minimizing operational costs and paper expenditures, which can amount up to TL 1 billion per year), which would then be passed on to and benefit customers as a decrease in credit interest rates. Moreover, BAT also asserted that, as the SBFA was written in a plain and clear language, it would enable customers to easily compare banks in terms of interest rates, commissions, expenses, etc., and to choose or change banks accordingly.

With respect to the efficiency gains resulting from the minimization of operational costs benefitting customers, the Board noted that there are several fundamental factors affecting customers' decisions to switch banks. In other words, the Board asserted that customers find other aspects of their relationship with their banks to be just as significant as the costs of switching. In addition, customers are already aware of the costs associated with their banking activities, such as interest rates, commissions, and other expenses. These costs are laid out in an additional information sheet appended to the actual standard BSAs, which are published on the banks' websites. Therefore, the Board concluded that customers are already informed of these parameters and have the opportunity to compare them with those offered by other banks.

The Board further determined that the uniform application of the SBFA could actually restrict consumers' choices and expectations. Since all member banks would be obligated to use the SBFA in their fundamental banking services, customers would be deprived of any alternatives. As a result, the Board asserted that the SBFA would not lead to significant gains in efficiency as proposed by BAT. On the contrary, the uniform SBFA could actually restrict consumer choice, since bank customers would be forced to sign the non-negotiable BSA with no alternatives. In case the customers refused to sign the uniform agreements, they would be denied all basic banking services.

As to the simplified and clarified language of the SBFA, the Board stated that banks wishing to attract more customers in this manner could simply clarify their current BSAs and clearly inform customers of competitively sensitive parameters, such as interest rates, fees and commissions. Since customers have access to a variety of platforms where they can obtain information on these costs, the Board did not find any causal link between the suggested efficiency gains and the uniform application of the SBFA.

As a result, the Board held that the "Standardized and Binding Framework Agreement Published as a Professional Classification Recommendation by the Banks Association of Turkey" did not fulfil any of the conditions under Article 5 of Law No. 4054, and therefore could not be granted an individual exemption.

[1] The Board's decision numbered 16-26/440-198 and dated August 4, 2016.

This article was first published in Legal Insights Quarterly by ELIG, Attorneys-at-Law in March 2017. A link to the full Legal Insight Quarterly may be found here.

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