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TCA Getting Closer to Commitment Decisions: Esgaz Case

TCA Getting Closer to Commitment Decisions: Esgaz Case

Turkey
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Commitment is a procedural innovation and a way of settlement in competition law where undertakings under investigation, propose a set of behaviors (or structural remedies) addressing the competition concerns raised by antitrust authority. In return, the authority terminates the ongoing investigation in early stages and makes the proposed commitments binding on the undertaking, provided that the commitments are satisfactory in resolving the competition concerns in that specific case. Undertakings are not forced to acknowledge the violation and the undergoing probe is closed with no fine within this mechanism. Both parties, the Authority and the undertakings gain significant procedural efficiency in total.

European Commission have been applying commitment decisions successfully since 2004, pursuant to the Article 9 of “Council Regulation (EC) No 1/2003 of 16 December 2002 on the Implementation of the Rules on Competition Laid down in Articles 81 and 82 of the Treaty”. More than half of the Commission investigations during 2004-2019 period have been finalized by use of commitment mechanism.

Turkish competition law jurisdiction does not still have a clear legal basis for commitment decisions as the current act (Act Numbered 4054 on the Protection of Competition) does not include an explicit provision for this procedure. The draft legislative amendment dating back to 23.01.2014 contains a provision pertained to commitment procedure identical to Article 9 of Council Regulation (EC) No 1/2003. While awaiting this amendment to pass into law, Turkish Competition Authority (TCA) has been making use of Article 9 of the current Act, as legal basis for quasi-commitment practices for a long time, by legal interpretation. TCA has been closing cases at early stages without entering into in-depth investigation, pursuant to mentioned provision. Looking back to respective cases, it can be deduced that the Turkish Authority has been choosing this implementation in the situations demonstrating following characteristics;

  • The anti-competitive behavior is not implemented or lasted for a short period of time,
  • The effect or impact of the anti-competitive behavior is limited,
  • The undertakings provide a proposal addressing the competition concerns and settlement brings procedural efficiencies,
  • The anti-competitive behavior stems from a structural problem of the market or from market regulations,
  • An investigation is not effective to resolve the competition concerns.

The Authority takes into account on or more of these conditions to resolve relevant investigations. This practice is a quite similar with European Commission commitment mechanism.

The most recent TCA practice of Article 9, is the ESGAZ case, where TCA closed the case at the end of the preliminary investigation, having received from the undertaking, a proposal of commitments addressing the competition concerns.

ESGAZ has a dominant position in the local gas supply market as the incumbent gas supplier of the city of Eskişehir and was claimed to be favoring one of its sister companies, KA Insurance Company, for natural gas installation insurance activities and excluding rival insurance firms from this market. Upon the initial findings of the Authority during the preliminary investigation, ESGAZ proposed and put into practice a set of behaviors to terminate the possible violations and repair the potential harm to some extent. Specifically ESGAZ;

  • modified the software that was directing consumers to KA Insurance as the default insurance company,
  • added a clear warning to the software screen informing users that physical copies of insurance policies are also welcome and consumers are not forced to make online insurance,
  • committed to send official letters and to inform all consumers that any insurance company is always acceptable for natural gas connection
  • declared that it is ready for further actions imposed by the Authority.

Based on these steps taken, TCA implemented Article 9 of the Act and terminated the case at the end of the preliminary investigation without an infringement decision. The Authority considered, “commitments of the undertaking, limited effect of the investigated conduct and small market size” as the ground for this decision.

As a result, compared to previous implementations, ESGAZ case is remarkable for getting closer to the European Commission’s commitment decisions.  

By Metin Pektas, Antitrust and Compliance Partner, Nazali Tax & Legal

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