Collaboration Or Collusion: The Thin Line For Associations Under The Law On The Protection Of Competition

An association of undertaking is a “common roof” built to shelter and bring together the competitors in a market. These structures provide a space for dialogue, education and representation.  Yet, beneath this roof, the close proximity of rivals creates a unique legal friction in terms of competition law risks.

Article 3 of Law No. 4054¹ defines an association of undertakings as "any kind of association, with or without legal personality, formed by undertakings to achieve specific purposes." The typical examples are trade associations, industry federations, professional chambers, exporters’ unions and any sectoral coordination platform or NGO. Some of these entities are established by  specific legislation (for example, Turkish Pharmacists Association organized under Pharmacists' Association  Law No. 6643), yet not all have such a legal basis for their establishment and are founded entirely through private initiative (Fertilizer Producers Association, Turkish Cement Manufacturers Association, etc. ). The common point in all these structures is that the members are independent economic entities, organized around "a specific purpose".  In addition to the wording of the law, another important element in determining associations of undertakings is "continuity."²  In this context, it is seen that undertaking formations that do not contain the element of continuity cannot be considered as associations of undertakings and will be evaluated more within the scope of the concept of agreements between undertakings expressed in Article 4 of Law No. 4054.

Since some of the associations of undertakings are established by and regulated through a specific legislation, whether decisions and practices of these types of associations are subject to competition law, and the scope of the Competition Board’s (the Board) jurisdiction in this area, has been the subject of various Board and court decisions. In a decision³ in which similar discussions were addressed, the Board stated that, even where sector-specific regulation exists, examining the anti-competitive effects of the conduct falls within the Authority’s field of duty and there is no obstacle to imposing sanctions where an infringement is established. In this context, any conduct by an association of undertakings that exceeds the authority and responsibilities explicitly granted to them by law or secondary legislation, to the extent that it restricts competition, falls within the Competition Authority’s field of duty.

What is “not” a decision of an association of undertakings?

While defining an association of undertakings may seem easy, in practice, it can be debatable whether actions restricting competition taken by undertakings within an association should be considered a decision of the association or an agreement between the undertakings who are considered as members. In this context, the Board exercises considerable caution in its scrutiny of communications and agreements among members of associations of undertakings. If the agreements are concluded between undertakings without the decision or support of the relevant association of undertakings, such agreements are assessed on their own merits as an agreement among competitors rather than a decision of an association of undertakings, and no sanctions are imposed on the relevant associations. Two examples illustrative of this evaluation are 1) the Board’s investigation and settlement decision⁴ concerning a group of engineers who were members of the Afyonkarahisar Representation of the Chamber of Geological Engineers, affiliated with the Union of Chambers of Turkish Engineers and Architects, and 2) its preliminary investigation decision⁵ concerning undertakings engaged in red meat producing activities. In the first decision, the subject of the investigation was that some engineers operating within the Union provincial representation jointly determined the fees for geotechnical site investigation report through a protocol.  In this case, The Board carefully scrutinized whether the protocol in question constitutes a decision of the Union provincial representation which is defined as an association of undertakings in terms of Article 3 of Law No. 4054  in the decision. The Board identified that the signature of a high-level representative of the Union provincial representation appeared on the protocol, yet it has been determined that the signature on the protocol was in the capacity as an engineering company owner rather than a deputy representative of the Union representation. Additionally, during the on-site inspections conducted, no decision of a Union representation constituting a violation of Law No. 4054 was found. As such, the Board concluded that the protocol and the preceding communication among certain engineers on WhatsApp do not reflect the will of Union representation even though the parties to the protocol are members of the Union representation.

In the red meat producers case, an ex officio investigation was initiated following news reports in the press about the increase in red meat prices. Among red meat producers, two producers’ unions were also investigated. The decision states that the “mutual assent” required under Article 4 of Law No. 4054 among meat producers could not be demonstrated. Besides, during on-site inspections conducted at the unions, no association of undertakings decision that could raise the issue of a violation of Article 4 of Law No. 4054 was found. Therefore, the Board did not impose a fine on the association even though the association provided a communication platform for the producers. On the contrary, where an association plays a facilitating role in an infringement or adopts decisions restricting competition between members, the Board finds the association of undertakings responsible for the anti-competitive action and imposes sanctions, as seen below.

Types of Risky Conduct concerning Associations of Undertakings

As platforms where competitors come together, associations of undertakings can create a relatively institutional environment that can facilitate coordination. While the competition law risks that may arise under the umbrella of an association are not different from those arising from agreements between undertakings, the most frequently encountered risks in practice can be listed as follows: a) Price coordination (setting minimum prices or tariffs, aligning discount policies etc), b) Exchange of sensitive information (future pricing strategies, production volumes, customer or supplier data) c) Market allocation (geographic or customer segmentation) d) Output or capacity restrictions (coordinated production limits, supply restrictions etc.) e) Membership restrictions (unjustified refusal to admit new members or discriminatory conduct).

The exemplary decision of the Board regarding the price fixing and supply restrictions through the decision and practices of association of undertakings is the decision⁶ concerning the Central Union of Egg Producers and its 12 affiliated local unions. Firstly, in the decision the Board reiterates the fact that professional chambers, tradesmen's chambers, unions, cooperative unions, and producer unions are accepted as associations of undertakings under Article 3 of law no 4054, despite being established by law. It is also stated in parallel to the Board’s precedents that the actions of associations which are mere exercise of their powers arising from legislation are excluded from the scope of Law No. 4054. In this respect, first the Board determined that the aforementioned unions are primarily within the scope of Agricultural Producer Unions and Central Unions. The Unions were established with the approval of the Ministry in accordance with the provisions of the Agricultural Producer Unions Law No. 5200 (Law No. 5200) and the Regulation on the Establishment Procedures and Principles of Agricultural Producer Unions. Second, the Board determined that the presidents of the producer associations, through their meetings, and communication through messaging applications agreed on a base price for egg sales, known as a reference price, and disseminated this price to numerous egg producers across the country. It was concluded that both the price fixing and the suggestions to reduce production capacities through the unions constituted a violation of Article 4 of Law No. 4054. Third, although Law No. 5200 includes monitoring market prices among the duties of producer associations, the Board stated that this duty aims to observe market prices, increase the marketing potential of products, and find solutions to the problems of market stakeholders. The fact that producer associations monitor the prices formed in the market and inform their members by following past prices does not constitute the basis of the violation identified. As a result, the Board imposed administrative fines on the egg producer associations for exceeding the powers granted to them by Law No. 5200 and engaging in behavior that restricted competition.

Another interesting case is the Board’s Konya Jewelers Association decision⁷. It was found that the association had attempted to determine purchase and sale prices for different types of gold and that a price list titled as a “recommendation” had been published for the purpose of setting purchase and sale prices. Although the price was “recommended”, various sanctions were imposed by the association on members who did not comply with the prices on the list. While no infringement was established for the member undertakings, the association was imposed an administrative fine on the ground that it had violated Law No. 4054 through price fixing.

In another Board decision,⁸ the allegation that undertakings operating in the white meat sector had come together and determined meat prices for dealers was examined. In the decision, administrative fines were imposed on nine undertakings operating in the white meat sector on the ground that they had violated Article 4 of Law No. 4054 by coming together at meetings organized by senior executives to jointly determine the price level and/or by exchanging information aimed at controlling supply. In addition, since a significant portion of the communications aimed at controlling the domestic meat prices took place during the board meetings of the association of undertakings named the Association of White Meat Industrialists and Breeders, and because that association played a facilitating role for the infringement, an administrative fine was also imposed on the association of undertakings. In another earlier decision⁹ concerning white meat sector, the Board investigated a different producers' association and its role in determining white meat prices. In the decision, the Board imposed an administrative fine on the association and, on the grounds that the association's president played a decisive role in the infringement, also imposed an administrative fine on the president herself.

Compliance Strategies for Associations of Undertakings

Effective compliance for associations should begin with structuring how interaction occurs. Meetings must follow clear agendas, avoiding any discussion of competitively sensitive topics, such as pricing, costs, future strategies. Written records should be kept to document that discussions remained within lawful boundaries. Additionally, associations should adopt internal competition law guidelines that regulate information exchange between members. Even seemingly harmless outputs, - circulars, recommendations or sectoral reports- should undergo prior legal review to ensure they don’t create an environment facilitative of coordination.

Equally important is building a culture of awareness and accountability within the association. Board members and staff should receive regular competition law training, with practical guidance on identifying and avoiding high risk conduct. Where associations operate under other regulator frameworks that require a degree of coordination, they must clearly distinguish between actions that are explicitly mandated by law and those that remain discretionary. This distinction is critical to ensure that necessary cooperation does not cross the line into conduct prohibited by Law No. 4054.

Footnotes

^{1 The Act On The Protection Of Competition, No. 4054}

^{2 The Board's decision dated 24.07.2008, and numbered 08-47/663-257}

^{3  The Board's decision dated 01.10.2018, and numbered 18-36/583-284}

^{4 Decision no: 23-50/981-358 Date : 26.10.2023}

^{5  Decision no: 23-48/906-323 Date : 12.10.2023}

^{6 Decision no: : 23-50/980-357 Date : 26.10.2023}

^{7 Decision no: 13-10/152-75 Date : 14.02.2013}

^{8 Decision no: 19-12/155-70 Date : 13.03.2019}

^{9  Decision no: 09-57/1393-362 Date : 25.11.2009}

Click here to read this article, along with all other newsletter articles, on our newly launched, reader-friendly microsite: here.

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.