Hergüner Competition Monthly - May 2023

Preliminary investigation into Getir's Activities in the Online Food Service Market concluded

On 18 April 2023, the Turkish Competition Board (“Board”) published its decision[1] on the official website of the Turkish Competition Authority (“TCA”), regarding the preliminary investigation initiated on the allegation that Getir imposed "most favored customer condition" ("MFC") on member restaurants in the online food ordering market.

As per the Board’s previous decisions and the Guideline on Vertical Agreements, MFC is a commitment by a provider to its customer that it shall not offer more disadvantageous terms to it then any other customer. To put it differently, MFC enables a particular person to maintain a contractual relationship under commercial terms equivalent to the most advantageous terms offered by the provider.

As a result of the Board's on-site inspection on Getir, the TCA determined that Getir included an MFC clause in its contracts with restaurants in the first years of its entry into the market, but later on abandoned this practice.

Although later on Getir did not include the MFC clause in its contracts, TCA evaluated that Getir imposed de facto MFCs on restaurants by following the price, promotion, etc. practices applied by the restaurants on the platforms of competing undertakings.

For the reasons stated above, the Board evaluated Getir's MFC practice was within the scope of both anti-competitive agreements and abuse of dominant position, but still concluded that:

• As Getir is not in a dominant position in the market, there is no abuse of dominant position.
• As Getir’s market share does not exceed 30%, which is stipulated under the Block Exemption Communiqué on Vertical Agreements (“Communiqué”), and the applied MFC does not result in resale price maintenance, the applied MFC can benefit from the exemption provided in the Communiqué and it does not constitute a competition law violation.

The Board concluded its preliminary investigation by declining to initiate an investigation against Getir.

Another Investigation against Chain Markets has been Concluded

In the December issue of Competition Monthly, in discussing the Board's infringement decision on chain markets operating in the fast-moving consumer goods retailing ("FMCG") sector, we briefly summarized the Board's decisions on the FMCG sector from past to present.

In April, the Board concluded another investigation on chain markets.

The investigation was initiated against 23 different chain markets engaged in retail food trade to examine the allegations that they are in competition law violation by determining the resale prices of water and fresh fruits and vegetables. The investigation where the allegations were evaluated within the scope of anticompetitive agreements and abuse of dominant position was concluded in favor of the undertakings party to the investigation with the decision[2] published on 26.04.2023.

This investigation, known as the "fresh fruit and vegetable investigation" in competition law literature, was originally initiated in February 2019, just before the COVID breakout.  However the oral defense meeting was postponed for a long time within the scope of the subsequent pandemic measures, and the reasoned decision was not published despite the issuance of the reasoned decisions of the investigations initiated after such earlier investigation. The "fresh fruit and vegetable investigation", which has long aroused curiosity about the Board's approach, is particularly important in terms of the fact that the investigation committee, which took part in the investigation process, presented a different theoretical framework compared to the theoretical framework followed in subsequent investigations and included the findings that the relevant product market is a "competitive" market.

In the ex officio investigation initiated in February 2019, on-site inspections were conducted at various undertakings' premises, which revealed that the undertakings were constantly monitoring their competitors’ up-to-date grocery prices. In its review of the sector, the Board stated that chain markets are included in the organized fast-moving consumer goods retailing market and determined that street markets are competitors of the undertakings in terms of fresh fruit and vegetables. After economically examining 13 different products, the Board noted that costs had increased for all products, but this was balanced by increasing resale prices for most products and resale price increases are in line with cost increases.

During the investigation, the undertakings made defenses such as that

• resale prices reflected the cost increases arising from the fluctuations in the exchange rate,
• per unit price differentiation could not be high in terms of the products sold in the relevant product market,
• an agreement on price between competitors would not be rational due to the structure of the market, and
• the economic evidence presented during the investigation process did not reveal such an agreement.

In the evaluation conducted by the Board in terms of anti-competitive agreements, no data was found to suggest that competition was restricted. In this respect, the TCA also emphasized that the presence of multiple competitors in the market makes it difficult to conclude an anti-competitive agreement. In terms of abuse of dominant position, the Board primarily examined whether there was an undertaking in a dominant position in the relevant market, but it observed that no undertaking's market share had the potential to create a dominant position. Moreover, the Board  also noted that fresh fruits and vegetables are also sold in street markets.

Therefore, the sales in chain markets cannot represent the entire sales of the products involved, and considering the fact that the market size is actually higher due to such different sales channel, the identified market shares may be even lower. Furthermore, the Board concluded that market entry was not prevented as alleged.

The Board concluded that there was no dominant undertaking or undertakings in any relevant product market, there were no anti-competitive agreements, and the multiple actor market structure complicated anti-competitive acts, and thus, decided not to impose any administrative monetary fine regarding the fresh fruit and vegetable investigation.

Another Investigation on White Goods Sector Concluded with a Commitment

In the April edition of the Competition Monthly, we summarized the decision[3] on the conclusion of the investigation against BSH with commitment. Arçelik Pazarlama A.Ş. (“Arçelik”), one of the other undertakings[4] against which the separate investigations were initiated together with BSH, also concluded with a commitment.

Similar to the other undertakings, Arçelik was alleged to have violated Article 4 of the Act No. 4054 on Protection of Competition (“Competition Act”) by preventing its authorized dealers from making sales over the internet and by interfering with their resale prices.

Within the scope of the investigation, commitment negotiations began upon Arçelik’s application for initiation of the commitment procedure. The Board released its decision[5] on 24.04.2023 on its official website, by evaluating Arçelik's proposed commitments regarding its alleged attempt for the prohibition of dealers’ sales on online marketplaces.

In the selective distribution system created for Arçelik and Beko brands, authorized distributors of these brands work as exclusive dealers for the protection of the brand value of the products and the distribution system. For this purpose, certain quality standards have been introduced for the sales made by authorized distributors through their websites. As Arçelik explains, the necessary, uniform and proportionate criteria for authorized distributors in terms of the quality of the product serve the purposes of protecting the image of the brands, preventing free-riding, reducing distribution costs and ensuring customer satisfaction.

In this respect, the Board assessed whether such criteria constitute a violation of competition in terms of the restriction of active or passive sales to end-users by system members operating at the retail level.

According to the Board's assessment, in terms of internet sales, which are considered as passive sales in terms of competition law practice in Türkiye, the following practices constitute serious competition violation:

• restriction on the proportion of sales made through the internet to total sales,
• agreement by which the distributor pays a higher price to the supplier for products to be resold over the internet than for products to be offered at physical points of sale, and
• prohibition of sales to the distributor through online channels.

Nevertheless, quality standards and conditions introduced by the supplier for websites and marketplaces where the products are offered for sale in terms of the characteristics and quality of distribution, brand image and/or potential economic efficiency enhancing elements might be considered acceptable by the Board in certain circumstances. Such conditions should be equivalent to the conditions stipulated for physical sales channels and should not result in a de facto categorical blocking of sales made through the internet channel or specifically discourage re-sellers from using the internet channels.

Although the first commitment text submitted by Arçelik to eliminate the competition problem identified in relation to the prohibition of its authorized dealers sales from online marketplaces was found to partially eliminate the competition law concerns raised during the investigation, the following issues in the commitment text were not accepted by the Board:

a. Pricing conditions to be applied for distributors who will sell in the marketplaces

b. Limiting sales to be made in the marketplaces to 10% of the distributor's overall turnover

c. Condition regarding the collateral structure of the distributors

d. The requirement to obtain instant and cost-free data from online marketplaces

The Board considered that the rejected conditions presented a risk of creating a deterrent effect on distributors willing to sell through marketplaces and reducing the incentives of authorized distributors to sell through marketplaces, thus preventing the effective use of such channel. Similarly, as regards the cessation of physical-store-specific supports, the Board foresaw a negative impact on the marketplace sales of authorized dealers.

The revised commitment text of Arçelik removed or amended various conditions required for authorized distributors to sell in the marketplaces in the first commitment text. For instance, the criterion stipulating that sales in the marketplaces should not exceed 10% of the authorized reseller's annual turnover in the first commitment text has been amended to state that the authorized reseller's turnover from sales in physical channels should correspond to at least 85% of its total annual turnover. In this regard, the Board examined the sales made by the dealers of undertakings operating in the white goods and small household appliances sectors on online marketplaces. As a result of the examination, the Board concluded that the ratio of the sales made through online marketplaces to the total sales of the dealers, although different for each undertaking, did not significantly exceed 15% and therefore, accepted the revised commitment condition. However, three members in two dissenting opinions disagreed with the Board’s decision on this revised condition on the grounds that it was not clear how increasing the 10% limit to 15% would eliminate the competition problems and that the 15% limit had the risk of preventing the active use of the online marketplace channel.

These revised conditions, in general terms, appeared to be proportionate to the competition concerns and to be effective in eliminating them. The Board assessed that the conditions were objectively concrete, reasonable and acceptable in terms of the factors that increase the quality and quality of distribution, brand image and potential efficiency.

Regarding the condition to be imposed on authorized distributors regarding the minimum sales ratio in physical channels, the Board determined that such commitment is of great importance. Accordingly, the Board concluded that the condition could be fulfilled in a short time was acceptable.

This decision of the Board serves as a guideline for those suppliers operating selective distribution systems and intending to introduce criteria for the sales of their authorized distributors in Turkey in online marketplaces. In fact, the BSH and Arçelik decisions are pioneering decisions in this regard. Our note on the BSH decision, included in our April edition can be accessed here.

The Competition Authority published its study named "Reflections of Digital Transformation on Competition Law"

In its study named "Reflections of Digital Transformation on Competition Law"(“Study”) published on 18 April 2023, the TCA discussed how the digital transformation, which has a deep influence worldwide, affects competition between undertakings and consumers, and what types of policies can be developed in terms of the structure of digital markets and their possible negative effects.

The Study discussed the following topics are discussed in terms of possible infringements observed in digital markets:

• Collection, processing, and use of data,
• Data portability and interoperability
• Self-preferencing,
• Tying and bundling,
• Exclusivity and MFC practices and unfair contract terms
• Lack of transparency
• Concerns on mergers and acquisitions

Within the scope of the Study, brokerage services, search engine services, social media services, video sharing services, number-independent peer-to-peer services, operating system services, cloud computing services and online advertising services were assessed individually and concerns were identified. In these sectors, problems that may significantly affect competition, such as the abuse of power by dominant undertakings and the existence of barriers to market entry were found to be the main and most common concerns of all.

In the light of the Study, the TCA concluded that it is difficult to identify anti-competitive acts in the digital market and to plan interventions in terms of time. Therefore, the Study suggested as a measure to prevent problems that may arise due to the endangerment of the market’s competition, it would be necessary to draft legislations addressing the fundamental procedures and principles regarding the regulation of the digital market.

[1] Board’s decision dated 15.09.2022 and numbered 22-42/606-254

[2] Board’s decision dated 24.03.2022 and numbered 22-14/245-105

[3] Board’s decision dated 08.09.2022 and numbered 22-41/579-239

[4] Arçelik Pazarlama A.Ş., Gürses Kurumsal Tedarik ve Elektronik Tic. Paz. A.Ş., LG Electronics Tic. A.Ş., Samsung Electronics İstanbul Paz. ve Tic. Ltd. Şti. ve SVS Dayanıklı Tük. Mall. Paz. ve Tic. Ltd. Şti.

[5] Board’s decision dated 08.09.2022 and numbered 22-41/579-240

First published by Hergüner Bilgen Üçer Attorney Partnership, June 2023