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Competition in Turkey: Rising in Importance

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Turkey, like most emerging markets, did not adopt a Competition Law until the 1990s. The completion of the Customs Union with the EU was the main driver behind the December 12, 1994 enactment and subsequent implementation of Law no. 4054 on the Protection of Competition.

Since 2012, a number of developments have increased the importance of the Competition Law for all enterprises doing business in Turkey. First, the Turkish Competition Authority (TCA) adopted Communique no. 2012/2, which laid down admissibility rules with respect to complaints, and Communique no. 2012/3, which increased turnover thresholds for concentrations requiring prior authorization. As a result, the case load of the TCA dropped by nearly one third, enabling the Authority to concentrate on more significant issues.

Second, through a legislative amendment in 2012, the administrative courts of Ankara, Turkey’s capital, were established as first instance courts competent in appeals of decisions of the Competition Board. Previously, the competent court was the Council of State – the supreme administrative court – and this created a backlog of cases spanning many years. However, appeals at Ankara administrative courts, while significantly reducing the duration of lawsuits, has created a body of divergent jurisprudence, including some highly questionable decisions. TCA had to initiate/re-initiate investigations in several cases as the result of court rulings. This situation provides a strengthened motivation for complainants to apply to courts against unsatisfactory decisions, requiring the targeted enterprises to take part in the proceedings.

The TCA also made a serious effort to develop competition legislation. Several guidelines as well as a new communique concerning specialization agreements were adopted. Furthermore, proposals for the amendment of Law no. 4054 and the Fining Regulation were prepared, and a proposal concerning the Motor Vehicles Block Exemption Communique is under development. These efforts aim to deepen the alignment of Turkish competition law with that of the EU – and further decrease the TCA’s workload. However they fail short of addressing certain contentious issues, such as the legality of the Fining Regulation that sets down aggravating and mitigating circumstances with respect to fines and limits the discretion of the Competition Board. Critics argue that the Fining Regulation infringes both the Constitutional principle requiring punishments to be determined through law, and that Law no. 4054 does not provide a legal basis for the restriction of the Board’s competences. 

Turning our attention to enforcement activities, the last two years witnessed the toughest ever period in the TCA’s history. Most prominently, in 2013 the Board found 12 Turkish banks – including those owned by the state – guilty of fixing interests, and levied a total of TRY 1.2 billion (approximately USD 670 million) in fines, the most in its history. In 2014 the TUPRAS Petroleum Refinery was found to have abused its dominant position by excessive pricing and was fined TRY 412 million (approximately USD 182 million), the largest fine ever imposed on an individual enterprise. The Board diverged from international practice by not taking into consideration the costs of production, and relied on comparative prices (which were determined to be decreased more slowly than global prices). However the Board did not concentrate exclusively on major cases, and also fined driving courses all over Turkey for fixing prices. Because of the size of these enterprises, in some cases the fines were probably less than the money spent by the TCA on the investigations. The Board also fined TTNET, the dominant internet service provider, TRY 15.5 million (approximately USD 8 million) because certain files were deleted from a directory being reviewed by a TCA officer during a dawn raid.

However the TCA did continue its softer policy against vertical infringements, and preferred to issue decisions calling for the amendment of agreements unless hardcore breaches were discovered.

With respect to concentrations, 2014 witnessed the most number of transactions being subject to phase-II investigations and this resulted in commitments as well as the collapse of two sizable deals. The proposed amendment in Law no. 4054 involves changing the legal test applicable to concentrations significantly lessening competition, and may result in further scrutiny of such concentrations in the future.

Summing up, recent developments in Turkish Competition Law necessitate that all enterprises doing business in Turkey be more prudent with respect to compliance issues. 

By Sena Apek, Partner, Gur Law Firm

This Article was originally published in Issue 2.1. of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.