Investigations regarding distribution and authorized supply companies ("ASCs") that the Competition Board has been conducting are nearing completion. The process that started with the first decision of the Mediterranean Electricity1 ("CK decision") continued with the Enerjisa decision2. The Competition Authority's final decision is expected to be rendered after submission of the oral defense regarding Gediz-Aydem.
The Competition Authority took a more active role and conducted various investigations on the electricity distribution and supply markets, especially after the Electric Wholesale Market and Retail Sales Sector Research3 ("Sector Research"), which was completed in 2015.
However, in the CK and Enerjisa decisions, the Competition Authority made some important determinations that shall be discussed for a long time to come, and it also answered questions that have been unanswered for some time. As a result of the decisions that are of great importance in terms of distribution companies and the ASCs, the Competition Authority's "red lines" were announced both in terms of distribution and supply markets. Thus, the Competition Authority has set new rules on electricity trading.
Beginning of the Competition Law Investigations in the Electricity Market
Immediately after privatization in the distribution sector, which was completed in 2013, claims regarding aggravation of activities of independent supply companies and consumers' change of suppliers have been brought to the agenda4. These claims were rejected by the Competition Board on the grounds that privatizations have just been completed, and as the work on decomposition has just begun, there is insufficient evidence as to the justifiability of the claims, and that the preliminary investigations carried out are "sufficiently stimulating" for the distribution companies.
Particularly in 2014, allegations were made that were very similar to the allegations discussed in the recent investigations and were brought before the Competition Authority, but the Board provided an opinion under the Article 9/3 of Law numbered 4054 instead of conducting an investigation5. The Competition Authority did not determine that a clear violation had been committed, especially in the Sector Investigation, despite the detailed determinations and various warnings about distribution companies and ASCs. For this reason, although the Competition Authority Sector Research has stated that it has become more difficult to change suppliers for consumers due to the activities of the distribution companies and ASCs, and the activities of the independent supply companies (ISCs) have been aggravated, it has not opened an investigation. This practice of the Competition Authority was heavily criticized at the time, as the allegations made concerned competitive violations that can deeply affect the liberalization process in the electricity sector. By the year 2016, the Competition Authority decided to open an investigation in relation to the same allegation that it had not yet commenced any investigation, nor had it provided any opinion.
Allegations that were discussed in the CK and Enerjisa Decisions
Claims that are dealt with in both decisions can be considered as abuse of dominant positions, in general. These allegations may be summarized as aggravation of the activities of competitor suppliers, aggregation of the transition of the eligible consumers to the ISCs, and discrimination in favor of the ASCs. In particular, it is possible to make some determinations as to how the Competition Authority assessed these actions through the CK decision, and justified the published decision. The Competition Authority has examined issues such as sharing of data that is qualified as strategic information with ASCs, distribution companies' aggregation of the activities of other suppliers in order to provide an advantage to ASCs, and the use of employees of distribution companies in the field of retail electricity commerce, in detail. Similarly, claims regarding incomplete or incorrect meter readings of the non-paying consumers who supply electricity from ISCs, and that the ISC's customer information has been shared with the ASCs by the distribution companies, are amongst violation claims that are examined in the aforementioned decisions.
Definition of the Relevant Market and Determination of the Dominant Position
In the aforementioned decisions, the Competition Authority follows a different approach from the related market definitions in its previous decisions, especially in the retail electricity trading market. The Competition Authority has made much narrower market definitions in the decisions of the CK and Enerjisa, and has determined that distribution companies, operating in distribution regions, as well as ASCs, are in dominant positions. Within this context, regarding the distribution of electricity which is a natural monopoly, the related market is determined as "electricity distribution service," and provinces where these distribution companies operate is determined as the geographical market.
The related market for electricity retail sales is divided into various sub-markets6.
With regard to Electricity sold to Consumers who are below the Non-paying Consumer Limit: Consumers do not have the right to choose suppliers and, therefore, they must access electricity from ASCs, and the mentioned supply activity is defined as a separate product market. The related geographical market has also been identified as the provinces where the ASC operates.
As for Consumers who are above the Non-paying Consumer Limit: The relevant market has been divided into sub-categories as clients of the industry, residences and businesses, and demonstrate different characteristics. Electricity sales activities regarding the aforementioned consumer groups have been identified as separate but related product markets by the Competition Authority. In addition, a subdivision has been made on the basis of the customers of the industrial group, and the customers connected to the transmission line system, and the customers connected to the distribution line system, have been determined as different related product markets. Within this framework, related product markets for retail electricity commerce in terms of non-paying consumers are as follows:
- The electrical retail market for industrial customers connected to the system at the transmission level;
- The electrical retail market for industrial customers connected to the system at the distribution level;
- The market of electricity retail sales made to commercial customers; and
- The market of electricity retail sales made to residential customers.
Relevant geographical markets are for industrial customers who are connected to the system at the transmission level: Turkey, for industrial customers connected to the distribution system level; provinces where the ASC operates, and also for residential customers; the area where the ASC operates.
It should be noted that in the CK decision, there is a long relevant product market section based on detailed market analyzes that were not easily found in the decisions of the Competition Authority until recently. This can be seen as a sign that the Competition Authority is more rigorous about the relevant market, and that it is analyzing the market more intensively.
In terms of distribution services, distribution companies are found to be dominant in the area in which they operate. In terms of sales of retail electricity, it is determined that the ASC is dominant in the markets of "electricity retail sales made to industrial customers connected to the system at the distribution level," "electricity retail sales made to commercial customers," and "electricity retail sales made to residential customers." Relevant product markets and dominant position determinations are the same in both the CK and Enerjisa decisions. This point also shows that the practice of the Competition Authority in this respect shall continue as such in the future.
In the CK decision, the behaviors examined by the Competition Authority in the sense of Article 6 of Law No. 4054 are listed, below:
Giving ASCs access to competition-sensitive information that is
within the body of the distribution company, and actions of
distribution companies that provide competitive advantages to ASCs.
- Proving ASC access to the competition-sensitive information of the distribution company, and providing competitive advantages to the ASC in this manner.
- Irregular and erroneous meter readings of the distribution companies regarding the customers of ISCs.
- Group: Actions regarding the aggregation of the change of suppliers of non-paying customers, and increase of transaction costs.
- Consumers' participating in the ASC portfolio without a contract.
- Simultaneous conclusion of retail sales contracts (subscription agreements) and bilateral agreements.
- Compelling consumers to conclude bilateral agreements with the ASC.
- ASC concluding bilateral contracts with the paying consumers, and including the said consumers into its portfolio.
- ASC receiving an undated form regarding change of suppliers from consumers that it has concluded agreements with.
b) At the Stage of Supply of Electricity
- ASC sending a cut-off notification to non-paying consumers in violation of the legislation.
- ASC shifting some of the non-paying consumers between non-paying and paying portfolios.
- Aggregation of the change of suppliers through various provisions in the contracts and in practice.
The Competition Authority evaluates the various evidence obtained in terms of the behaviors listed, above. In this respect, the issues related to the legal unbundling rules in the electricity sector, such as giving ASCs access to sensitive information, which is occasionally done through e-mails and similar means between the distribution company and ASC, and the distribution staff performing various activities on behalf of the ASCs, have been examined, in detail.
In this context, various explanations are given as to how the Competition Authority's sectorial regulations and competition law rules can be applied together. Furthermore, the decision does not deal with the act of violating the rules of discrimination, frequently, but examines the cases of abuse of dominant positions, which are carried out by violating the rules of legal unbundling under the scope of the investigation. Thus, the Competition Authority emphasizes that it examines competition law violations in the form of abuse of dominant positions that can arise as a result of the violation of the legal unbundling rules between the distribution companies and the ASC, not the violation of the legal unbundling rules, uniquely.
The Competition Authority unanimously decided that the distribution companies and ASCs operating in the reviewed regions are in violation of Law No. 4054 for abuse of dominant positions, in both the CK and Enerjisa resolutions. The determination that both distribution companies and ASCs are dominant in the relevant product markets, and that abuse of these dominant positions has been determined is important. It should be noted that the relevant market is defined as quite narrow in both cases.
In many respects, these decisions are likely to lead to radical changes in the electricity sector. In this sense, the most vital results can be observed in terms of supplier changing processes for non-paying consumers. As is stated by the Competition Authority, it is important to prevent any obstacles in the process of changing suppliers for consumer welfare, although the activities of ISCs are aggravated by the current market conditions, and it is difficult for them to enter the regions of ASCs. Only if this condition is met, will a strong and competitive retail electricity sales market be possible. Otherwise, it will be difficult to achieve consumer well-being, which should be reached through liberalization in the electricity sector.
1 http://www.rekabet.gov.tr/Karar?kararId=537b366a-8bd7-4821-8760-43592452b711 (Access: 30.08.2018).
3 Ayrıntılı bilgi için Rekabet Kurumu'nun Elektrik Toptan Satış ve Perakende Satış Sektör Araştırması http://www.rekabet.gov.tr/Dosya/sektor-raporlari/10-elektrik-toptan-sati, (Access: 30.08.2018).
4 "Başkent Elektrik Dağıtım A.Ş." decision of the Competition Board dated 6.11.2013 and numbered 13-62 / 857-365; "Sakarya Elektrik Dağıtım A.Ş" decision dated 6.11.2013 and numbered 13-62 / 856-364, "Boğaziçi & Akdeniz Elektrik Dağıtım A.Ş." decision dated 29.1.2014 and numbered 14-05 / 83-36, http://www.rekabet.gov.tr/Karar?kararId=ddd2a419-fe4c-40a4-830e-8ef7ab8b307f (Access: 30.08.2018).
5 For detailed decisions regarding the subject; AYEDAŞ Decision dated 22.10.2014 and numbered 14-42/761-337 http://www.rekabet.gov.tr/File/?path=ROOT%2f1%2fDocuments%2fGerek%C3%A7eli+Kurul+Karar%C4%B1%2f14-42-761-337.pdf (Access: 30.08.2018); CLK Decision dated 22.10.2014 and numbered 14-42/762-338 http://www.rekabet.gov.tr/File/?path=ROOT%2f1%2fDocuments%2fGerek%C3%A7eli+Kurul+Karar%C4%B1%2f14-42-762-338.pdf (Access: 30.08.2018) ; Gediz-Aydem Decision dated 03.12.2014 and numbered14-47/860-390. http://www.rekabet.gov.tr/File/?path=ROOT%2f1%2fDocuments%2fGerek%C3%A7eli+Kurul+Karar%C4%B1%2f14-47-860-390.pdf (Access: 30.08.2018).
6 For detailed information, CK decision, p.24 ff.
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