In its reasoned decision dated 16.01.2025 with number 25-02/72-40 on Meram Elektrik Dağıtım A.Ş. ("Medaş"), the Turkish Competition Board (the "TCB") has examined the alleged infringement by Medaş of Article 6 of the Law No. 4054 on the Protection of Competition (the "Law No. 4054") through discriminatory practices that would provide advantages to its own group companies in the evaluation of applications for unlicensed electricity generation.
As will be explained in detail below, Medaş has been found to have abused its dominant position through discriminatory practices by sharing competitively sensitive information with its affiliated companies, and an administrative fine of TRY 10,594,866.94 has been imposed on the undertaking.
- The Judicial Review
In consequence of the preliminary inquiry initiated by the TCB in 2016 upon a complaint received in 2015, the TCB had decided not to launch an investigation under its decision dated 02.03.2016 with number 16-07/134-60.
Upon application to the court of first instance, it was found by the Ankara 4th Administrative Court (under its decision dated 16.07.2018 with file no. 2016/3512 and decision no. 2018/1815, and the decision dated 16.07.2018 with file no. 2016/5542 and decision no. 2018/1816) that the non-initiation of an investigation by the TCB, while an investigation should have been launched, was unlawful considering the presence of serious evidence and indications, and the TCB's decision dated 02.03.2016 with number 16-07/134-60 was annulled.
Thereupon, by its decision dated 13.12.2018 with number 18-47/731-M, the TCB initiated an investigation in order to fulfil the requirements of the aforementioned court decision and, as a result, the TCB concluded that Medaş had taken objective criteria into account in its approval processes and there was no finding supporting the allegation of discriminatory practices by Medaş in favour of its group companies, and decided under its decision dated 14.11.2019 with number 19-40/669-287 that there was no infringement of Article 6.
Upon the complainant's application, the relevant administrative court1 annulled the TCB's decision on the grounds that, although there was no official correspondence indicating that the decisions regarding the land allocation had been notified to Medaş, the invitation letters of the Project Companies were cancelled on the same date; that this information had been acquired in advance and Cengiz Holding had acted accordingly; that it was also clearly established that Medaş had abused its dominant position by favouring its group companies in the solar power plant applications through exchange of competitively sensitive information; and that the TCB's decision was unlawful as it lacked sufficient evaluation on the alleged abuse of dominant position. This court decision was approved by the Court of Cassation2. Thereupon, the TCB decided to launch another investigation under its decision dated 13.07.2023 with number 23-31/595-M.
- The TCB's Assessments: Abuse of Dominant Position Through Discriminatory Practices
It is assessed that regional electricity distribution companies operate as a "natural monopoly" in carrying out the physical transmission of electricity at the local level and all related field operations, and therefore hold a local dominant position in each distribution area. Accordingly, it is stated that Medaş is in a monopoly position in the electricity distribution services market and, in the region where it operates, it is the only competent organisation that receives and evaluates applications for unlicensed electricity generation and provides the physical grid connection of unlicensed generation facilities at the end of the process.
The allocation by Medaş of its network capacity to undertakings within the same economic unity with it while rejecting other applications on unjustified grounds without observing the technical and legal criteria has been evaluated by the TCB within the scope of Article 6 of Law No. 4054. It is understood that some of the grounds for Medaş's rejection were based on regulatory requirements, while others resulted from the failure to meet the criteria set by the evaluation committee. It is assessed that, in its evaluations, Medaş uses objective legal and technical criteria for all applicants and that those criteria established by Medaş do not lead to any discriminatory practice.
Once the official documents that constituted the basis for the complainant's unlicensed solar power plant applications became invalid, the companies affiliated with Cengiz Holding made applications for the vacant capacity in less than 24 hours and those applications were accepted in October. Such short timeframe raised the suspicions that Medaş informed its parent company Cengiz Holding of the capacity that became available as a result of the cancellation. However, the TCB concluded that there was no infringement, stating that the incidents in question were attributable to reasons beyond Medaş's control and that there was no evidence meeting the standard of proof required under the competition law which demonstrates that Medaş had engaged in discriminatory conduct in favour of its group companies.
As explained by the TCB, in evaluating the applications, Medaş uses objective legal and technical criteria announced to the public for all applicants, and it is understood that the criteria established by Medaş are determined in a way that does not lead to any discriminatory practice. Based on the timing of the events, the court of first instance ruled that Medaş and Cengiz Holding had been in contact regarding the capacity allocation and the cancellation of the invitation letter; that Medaş had abused its dominant position by sharing competition-sensitive information with Cengiz Holding, thereby providing an unfair advantage to its affiliated companies over their competitors; and that Medaş's failure to wait for the outcome of the lawsuits filed by the complainant for the cancellation of the land allocation was also an indication of abuse of dominant position. In the light of this ruling, the TCB has found an infringement and imposed an administrative fine.
- Defences of Medaş
For the allegations constituting the subject matter of the investigation, Medaş suggested that the processes as to the evaluation of applications were carried out in accordance with the principle of equal treatment and the legislation; that Medaş did not conduct discriminatory practices in favour of its group companies and, in fact, the applications of other companies were also accepted in the same period and the applications of some group companies were rejected; and that it is a regulatory requirement to immediately handle the applications relating to available capacities.
Another noteworthy point is that the undertaking's turnover to be taken as the basis for the calculation of the fine is the turnover for 2018. The TCB took the turnover for 2023 as the basis in determining the fine. In this context, the fact that the investigation extends over a period of nearly ten years, with a considerable lapse of time between the occurrence of the infringement and the passing of the final decision, may raise questions from the perspective of legal certainty as to which year's turnover should be taken into account in the calculation of the fine. However, during the proceedings related to the Board's decision3 in the Incoming Sector case4, the applicant's similar claims were rejected on the grounds that paragraph 3 of Article 16 of Law No. 4054 explicitly provides that "the turnover generated at the end of the financial year closest to the date of the final decision shall be taken as the basis".
- Conclusion
The TCB concluded its review process, which began with a complaint filed in 2015 and extended over a period of almost a decade, in line with the reasoning in the decisions of the administrative judicial bodies, finding that Medaş allocated the grid capacity under its control to its group companies in advance based on information provided to them beforehand and thus placed those companies in an advantageous position over other applicants (i.e. competitors); that this practice was carried out through the sharing of competitively sensitive information with the undertakings within the same economic unity, leading to discriminatory treatment in the evaluation of applications; and that, as the sole undertaking authorised to control the grid access, Medaş failed to fulfil its obligation to exercise such authority in a neutral, transparent, and non-discriminatory manner for unlicensed generation applications.
In this context, it should be noted that the Medaş decision constitutes a precedent for vertically integrated undertakings with significant market power. The decision includes important assessments, particularly for scenarios involving group companies, on the requirement to avoid discrimination between undertakings in equivalent positions and to prevent the sharing of competitively sensitive information concerning market players with group companies or other affiliated undertakings in a manner that provides them with advantages, which they would otherwise not have, over their competitors.
Footnotes
1 The decision dated 17.05.2023 with file no. 2020/822 and decision no. 2023/1052 of the Ankara 10th Administrative Court
2 The decision dated 05.04.2024 with file no. 2023/1773 and decision no. 2024/856 of the 8th Administrative Chamber of the Ankara Regional Administrative Court.
3 The decision dated 21.11.2016 with number 16-40/662-296 of the TCB.
4 The decision with file no. 2017/2958 and decision no. 2018/1633 of the Ankara 11th Administrative Court, the decision with file no. 2018/2597 and decision no. 2019/350 of the 8th Administrative Chamber of the Ankara Regional Administrative Court, the decision with file no. 2019/1578 and decision no. 2019/2492 of the 13th Chamber of the Council of State.
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