Excessive Price Increase within the Scope of Unfair Commercial Practices

Recent events such as pandemics, wars, natural disasters, social uprisings, civil wars and mass migration have led to the emergence of uncertainties about the future and an environment of mistrust in free markets. This environment of uncertainty and mistrust in markets generally has a negative impact on the price policies implemented in goods/services markets. However, enterprises that are in a dominant position in the relevant goods/services market may abuse their dominant position and increase the prices of goods/services without a proper justification in order to avoid being affected by uncertainty and even to increase their profits. This approach of enterprises and the existing environment of uncertainty and mistrust lead to exorbitant price formations in the markets. All units that operate in the market (intermediate wholesalers, retailers, consumers, etc.) are adversely affected by this exorbitant price environment.

Although enterprises may resort to various means to increase their profits, they should not deprive consumers of their right to purchase at affordable prices. Exorbitant price practices that occur in the markets without justification damage commercial relations, and especially disrupt the supply-demand balance. The deterioration of the supply-demand balance leads to product shortages in various fields, and product shortages cause prices to increase again. These unavoidable and cyclical price increases undoubtedly affect consumers the most and cause them to suffer losses.

Consumers are in a weaker position in terms of knowledge and experience than businesses engaged in commercial activities. This position of consumers against businesses requires the protection of consumers’ rights against businesses. Undoubtedly, it would be unthinkable for commercial enterprises to set prices in a completely free manner regarding market conditions that consumers are not fully informed about. In this context, it is necessary to protect the economic interests of consumers and to guarantee their right to demand compensation for the damages they may suffer due to unfair commercial practices they may encounter. In this way, consumers will be able to meet their needs in a reliable market environment.

As a matter of fact, the Turkish legal system has introduced various regulations in order to control and, if necessary, impose sanctions against excessive price practices. Accordingly, Article 62 of the Law on Consumer Protection ("CPL") stipulates that an "unfair commercial practice" occurs when a commercial practice significantly impairs or is likely to significantly impair the consumer's economic behavior regarding a good or service. In parallel with the CPL, detailed regulations on unfair commercial practices are included in the Regulation on Commercial Advertising and Unfair Commercial Practices (Regulation).

Pursuant to the CPL and Regulation, a commercial practice is deemed to be unfair if it does not comply with the requirements of professional care and if it significantly impairs or is likely to significantly impair the economic behavior of the average consumer or the average member of the group to which it is directed. Particularly, practices that are deceptive or offensive and practices that are included in the annex of the Regulation as examples are considered unfair commercial practices and all kinds of unfair commercial practices towards consumers are prohibited.

Deceptive acts in Art. 29, deceptive omissions in Art. 30, offensive commercial practices in Art. 31 and the sample practices in the annex of the Regulation are considered unfair commercial practices in any case. At this point, it is necessary to mention the unfair commercial practices in the relevant article provisions. According to Article 29 of the Regulation, the act of deceiving consumers regarding the price of a good or service, the method of calculation of the price, payment terms or a certain price advantage are deemed to be deceptive acts. Similarly, the act of inviting the consumer to obtain the goods or services at a particular price where the person engaged in the commercial practice in the annex of the Regulation has sufficient information that he cannot offer the goods or services in question or their equivalents at the specified price or cannot supply them from elsewhere for a reasonable period and amount of time, and does not warn the consumer, is also considered a deceptive act.

In the examples of unfair commercial practices specified in the annex of the Regulation, it was stated that creating the false impression that the price increases in the goods or services offered to the consumer were based on variables such as input costs and exchange rate increases would cause a violation. However, the aforementioned provision was repealed on 01.02.2022 and no new regulation was made on the subject. The reason for the abrogation of the said provision, although not explained, may be based on the fact that the issue was already regulated in Article 18 of the Law on the Regulation of Retail Trade with the principles regarding the exorbitant price. On the other hand, it is also possible to mention the concern that a regulation on this issue would create uncertainty in the legal system.

Even if the said provision is removed from the sample practices section of the Regulation, based on the wording of Article 62 of the CPL and the purpose of the regulation, the exorbitant price practices made by using input prices as a pretext should be qualified as unfair commercial practices. In relation to this issue, the Law on the Regulation of Retail Trade stipulates that producers, suppliers and retail businesses cannot make exorbitant increases in the sales price of a good or service. Pursuant to Article 18 of the Law on the Regulation of Retail Trade, an administrative fine of ten thousand Turkish Liras to one hundred thousand Turkish Liras shall be imposed on the undertakings that make exorbitant price increases[1]. The Unfair Price Evaluation Board was established with the Unfair Price Evaluation Board Regulation published in the Official Gazette dated 28 May 2020, and numbered 31138 to examine the complaints to be made under this law and to impose the administrative fines stipulated in the relevant provision where necessary. Complaints to the Board can be made to the Ministry of Trade or Provincial Directorates of the Ministry of Trade by petition, through the complaint system or by using other electronic application methods.

The administrative sanction for unfair commercial practices is regulated under Article 77 of the CPL. Pursuant to this provision, the unfair commercial practice falling within the scope of Article 62 of the CPL may be suspended for up to three months, the practice may be suspended completely or an administrative fine of five thousand Turkish Liras[2] may be imposed on the undertakings engaging in unfair commercial practices. As a result of the investigation to be conducted by the Advertisement Board, these fines may be imposed together or separately depending on the nature of the violation. Furthermore, if the unfair commercial practice is carried out throughout the country, an administrative fine of fifty thousand Turkish Liras[3] will be imposed instead of five thousand.

As a result, various administrative fines are envisaged to be imposed for the exorbitant price practices that are incompatible with the market realities, which have been at the top of the public agenda recently and which are of significant concern especially to consumers. The implementation of these administrative sanctions stipulated in the legislation, which are extremely important for the protection of consumers, will undoubtedly be possible through the awareness of consumers, the audits of the relevant institutions and the functioning of the legal system.

Bibliography

1. Fahiş Fiyata İlişkin Sınırlamalar ve Aykırılığın Ticaret Hukuku Açısından Sonuçları, Rauf Karasu Semih Sırrı Özdemir, Ankara Hacı Bayram Veli Üniversitesi Hukuk Fakültesi Dergisi, Cilt: 26 - Sayı: 3 (www.dergipark.org.tr)

2. Tüketici Hukukunda Haksız Ticari Uygulamalar ve Uygulama Örnekleri (Unfair Commercial Practices and Examples of Practice in Consumer Law), Prof. Dr. Ebru Ceylan, Uyuşmazlık Mahkemesi Dergisi - Yıl 8, Sayı 15 (www.dergipark.org.tr)

3. Tüketicilere Yönelik Etik Dışı Fiyatlama Uygulamaları (Unethical Pricing Practices Towards Consumers), Murat Selim Selvi, Neslihan Cavlak, Doğuş Üniversitesi Dergisi, Cilt: 23 - Sayı: 2 (www.dergipark.org.tr)

[1] According to this provision, the amounts of administrative fines to be imposed in 2023 have been updated to be between TL 33,126.105 and TL 330,126.105 after the increase applied by the revaluation rate according to Article 17/7 of the Law on Misdemeanors.

[2] According to this provision, the amount of the administrative fine to be imposed in 2023 has been updated as 34,701 TL after the increase applied by the revaluation rate according to Article 17/7 of the Law on Misdemeanors.

[3] Pursuant to this provision, the amount of the administrative fine to be imposed in 2023 has been updated as 147,128 TL after the increase applied by the revaluation rate according to Article 17/7 of the Law on Misdemeanors.

Tagged with: Gökçe, Aslıhan Kayhan, Başak Taş, Commercial & Corporate