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Turkish Competition Authority’s approach against SMEs: the case of the egg producers

November 2020 – Turkish Law No. 4054 on the Protection of Competition (“Law No. 4054”) does not include a de minimis exception, and therefore any action, no matter its impact, that violates competition under Law No. 4054 is punishable. However, there are several precedents where the Turkish Competition Authority (“TCA”) has adopted a less stringent approach for small and medium-sized enterprises (SMEs), even for conduct that could be interpreted as infringing serious restrictions. This can be illustrated by the recent case of egg producers in Mardin in south-eastern Turkey[1].

Background

The TCA initiated a preliminary investigation against four egg producers (BAYZA, DICLE, FIRAT and NAZ) in order to assess whether they violated Article 4 of Law No. 4054 by fixing the price of goods.

The preliminary investigation was triggered by an anonymous whistleblower, who alleged that the four egg producers colluded to create a cartel and increase the sale price of packaged eggs by TRY 1 above the average price. The whistleblower also alleged that the egg producers had initially planned to establish an industry association but that this had eventually been converted into a cartel.

In its assessment, the TCA considered certain market facts such as the increase in the amount of production over the years and in the costs of egg production. The TCA stated that the “radical increase in prices in 2018 was due to an increase in foreign exchange rates” as many of the costs were associated with imported goods (such as chicken feed and additives).

The TCA also conducted on-site inspections and interviewed the four companies subject to the preliminary investigation. During these interviews, it was understood that representatives of the four companies met at a hotel in late 2016. All of the companies except one stated that the scope of the meeting was legitimate and the purpose was to establish an industry association. However, FIRAT explicitly stated during the interview with the case handlers that the aim of the meeting was to fix prices and that this scheme only lasted for two months, as egg producers from outside the city started to offer competitive prices. FIRAT went on to say that it would like to cooperate with the other producers and complained about the lack of trust among the companies, which makes it impossible to set a collective price. After the preliminary investigation, the Board decided not to launch an in-depth investigation as no evidence was found that the egg producers fixed egg prices or collectively tried to exclude their distributors from the market.

Analysis of the TCA’s Conclusions

This conclusion was surprising as the TCA reached it decision even though one of the companies acknowledged that it had participated in a meeting with its competitors with anticompetitive intentions.

The TCA, relying upon the testimonies of the other three egg producers, stated that “even though it is understood that FIRAT participated in the meeting with the intention to restrict competition, the other participants of the meeting do not show intention in this regard.” It went on to say that the market behaviour and the of the relevant undertakings also supports this assumption. It concluded that as there was no agreement among the participants of the meeting, which is a prerequisite for anti-competitive activity, the relevant communication cannot be considered as an agreement under Turkish competition law.

The decision is interesting, as the TCA voted unanimously not to initiate an in-depth investigation even though one of the companies stated clearly, most likely due to a lack of competition law knowledge, that it participated in a meeting to make an anticompetitive agreement with its competitors.

The TCA also took a similar and rather lenient approach in a recent case related to çiğköfte[2] (raw meatball) producers in the southern Turkish city of Gaziantep[3]. In that case the TCA decided to confine itself with an opinion letter (which was not published) pursuant to Article 9(3) of Law No. 4054, even though there was solid and undeniable cartel evidence where the relevant undertakings took a formal price-fixing decision with a penalty and supervisory mechanisms to ensure compliance.

Conclusion

Although, unlike the case of the Gaziantep raw meatball producers, there was no direct evidence in the case of Mardin egg producers, it can be deducted from the decision not to initiate an investigation that the TCA took a rather tolerant stance. One can argue that the TCA may not have taken such a decision if the parties had not been local SMEs. There are several decisions where the Board has initiated full-fledged investigations where there is less compelling evidence, let alone direct testimony of anticompetitive intent from a participant.

According to the Council of State, which is the highest court for judicial review of the TCA’s decisions in Turkey, in order not to initiate an investigation the TCA must show that there are no doubts that an action, decision or agreement restricts competition[4] and this is without reference to any threshold level. Thus, the TCA must have been certain that the other companies did not act in any anti-competitive way. This decision does not mean that the Board is reluctant to initiate investigations regarding anti-competitive practices, but this is likely an example of its lenient approach that is confined to small local businesses. In our experience, investigations usually do not find witness testimony as open as in the case of the egg producers of clear anti-competitive intent. It is worth bearing in mind that there were 41 on-going detailed investigations as of mid-2019 and the Board imposed a total of TRY 264 million[5] in administrative monetary fines in the first half of 2019[6]. Most investigations do not receive such lenient treatment from the TCA as in the case of the Mardin egg producers.

For more information please contact Bulut Girgin, Counsel, at bgirgin@gentemizerozer.com.


[1]Decision dated 13.06.2019 and numbered 19-21/306-132.

[2] A traditional Turkish dish, mainly sold as street food.

[3] Decision dated 10.01.2019 and numbered 19-03/13-5.

[4] The Council of State, 13th Chamber, decision dated 30.05.2014 and numbered 2010/4818 E., 2014/2197 K.

[5] Approx. USD 45 million at the time of this article.

[6] Source. Turkish Competition Authority decision statistics.