Coca Cola’s Commitments in the Recent Competition Investigation
Introduction
A commitment procedure has only recently been introduced to Turkish competition law practice. The procedure was instituted on 16.06.2020 with the amendment to Law No.4054 on the Protection of Competition, and has been utilized for over a year now. In this brief time frame, although the recent Coca Cola Satış ve Dağıtım A.Ş. (“CCSD”) commitment case was not the first of its kind, it was one of the most discussed among competition law practitioners due to the extensive commitments.
The Turkish Competition Authority (“TCA”) investigated CCSD, the distributor of Coca Cola products in Turkey, pursuant to Turkish Competition Board’s (“Board”) decision of 02.04.2020. This decision was based on the claim that CCSD has abused its dominance in the Turkish cola market. The investigation especially concerned the allegations that CCSD complicated the activities of its competitors and prevented entry to the market through restrictions on access to merchandising refrigerators, utilization of exclusivity clauses in their agreements, loyalty discounts, and similar practices that led to exclusivity.
During the investigation process, CCSD made an application in accordance with Communiqué No. 2021/2 on the Anti-Competitive Agreement, Concerted Actions and Decisions, and Communiqué on Commitments to be Submitted in Preliminary Investigations and Investigations on Abuse of Dominant Position published in the Official Gazette dated 16.03.2021.
The Board announced on 06.09.2021 that they had accepted the commitment package submitted by CCSD on 02.09.2021 within the scope of the negotiations held during the commitment process. Later on, TCA provided further details on the nature and contents of the relevant commitments. Based on these details, the Board decided to end the investigation without any determination of infringement or sanctions.
The commitments submitted by CCSD and accepted by the Board, as well as the Board’s assessments regarding the commitments, will be examined below.
The Commitment Package Accepted by the Board
The summary of the commitment package submitted by CCSD as disclosed by TCA is as follows:
1. Three separate contracts instead of a single contract: With sales points such as grocery stores or markets, instead of the general comprehensive contracts which are created by CCSD to include their entire product portfolio; separate contracts will be signed for each of (1) “Cola Drinks,” (2) “Other Carbonated Products,” and (3) “Non-Carbonated Products.” The other carbonated products category will consist of “flavored soda” and “plain soda” sub-categories, while the non-carbonated products category will consist of the sub-categories of “water and mineral water,” “fruit juice and iced tea,” “energy drinks” and “sports drinks.” Product transitivity between these contracts and sub-categories will be terminated.
For example, previously, each product from any category purchased by a sales point that made an agreement with CCSD based on a total sales amount of 100 units could be deducted from that total sales amount of 100 units specified in the contract. With the acceptance of the relevant commitment clause, the sales amount of each category will be determined separately, so the purchase of products from the cola category will not cause any change in the water and mineral water category quota of the sales point.
2. Discounts, promotions and discounts will only be valid for the same type of beverages: Discounts-rebates-promotions defined by the CCSD for the sales points will be determined separately for “Cola Drinks,” “Other Carbonated Products,” and “Non-Carbonated Products” contracts, and separately for the flavored soda, plain soda, water-mineral water, fruit juice-ice tea, energy drinks, and sports drinks sub-categories. In other words, when a sales point purchases a product in the cola category from CCSD, the free product to be gifted by CCSD for this purchase cannot be from a different category, but can only be from the cola category. For example, flavored soda products cannot be given to the sales point as a promotion for purchase of cola products.
3. There will be no exclusivity in non-carbonated products: CCSD’s single brand agreements in non-carbonated products will be terminated except in some exceptional cases. Therefore, CCSD will not be able to conclude an exclusive dealership agreement with the sales points (in other words, an agreement that would result in the availability of only CCSD products at the sales points) in terms of non-carbonated products.
4. Contract periods will not exceed 2 years: Except for some exceptional cases, CCSD’s term contracts will be limited to two years, and if the term of a quantity-based contract exceeds two years, the sales point will be granted the right to terminate the contract without any penalty.
5. Products of CCSD’s competitors that do not have merchandising refrigerators will be put in CCSD’s refrigerators: The scope of the 20% refrigerator access rule applied until today pursuant to the decision of the Competition Board of 10.09.2007 will be expanded. Accordingly, in sales points in the traditional channel and in the on-site consumption channel which are below 100 m2, 25% of CCSD’s refrigerators will be accessible to competitors’ products. In this framework, regardless of whether another competitor (other than CCSD) has a refrigerator in the sales point, 25% of other products of competitors without a refrigerator will be allowed to take place in CCSD refrigerators.
6. Obligation to inform: CCSD will inform consumers and sales points within the scope of the accepted commitment clause (5) above regarding the refrigerator access rule. CCSD will also inform the sales points that currently have ongoing contracts within the scope of the accepted commitment clauses (1), (2) and (3) above.
7. New implementation regarding purchase conditions: The phrase “(…) by way of purchasing regularly and continuously” in the contracts of CCSD will be preserved only in contracts containing cash investment (cash support given to the sales point), and will be removed from contracts in terms of provisions containing discounts-rebates-promotions other than cash investments. In addition, in terms of contracts that contain cash investments and include this phrase, the non-compliance of the sales point with the aforementioned phrase will not create any penal consequences for the sales point.
8. Amendments and arrangements regarding the contracts that are currently in-force will be completed within 1 year from the notification of the reasoned decision, and compliance efforts in terms of other commitment clauses will be completed by 31 December 2021.
9. In case of any subject not covered by the text of commitment submitted by CCSD, the text of the reasoned decision of the Competition Board dated 10.09.2007 will be taken as the basis.
The Board’s Evaluations on the Commitments
Upon examining the commitment package submitted by CCSD, the Board concluded that as a result of the commitment package:
- With the amendment to the merchandising refrigerator access rule, CCSD’s competitors will have increased opportunity to have products available at the sales points,
- Consumers will be provided with the opportunity to access more product options at the sales points,
- Competitive concerns arising from the strength of CCSD’s product portfolio will be eliminated by separating the carbonated and non-carbonated products from cola products by also introducing sub-categories,
- Competitive parameters in the relevant markets will become comparable in terms of competitors and sales points,
- Awareness regarding the commitments to be implemented will increase via the notifications to be made by CCSD,
- The shortening of contract periods (with some exceptions), will make the market more competitive,
- With some exceptions, ending exclusivity in non-carbonated drinks will increase the level of competition in the relevant market.
Accordingly, indicating that the commitment package is proportional, is suitable for eliminating competitive concerns, and can be implemented within a short time and effectively, the Board decided to conclude the investigation by accepting the relevant commitment package and deeming the commitments binding.
Conclusion
The most significant of the commitments in the package is arguably the separation of the single contract for all products into three separate contracts for cola drinks, other carbonated products, and non-carbonated products. Coca Cola’s dominance is evident in the market for cola drinks, but not so clear in other carbonated drinks and even less so in non-carbonated drinks. As a result of this commitment, CCSD will not be able to tie/bundle all of its products in a single contract, and thus, will not be able to leverage its high market power and bargaining ability in cola products to gain advantage in the other two. In addition, the 5% increase in CCSD’s obligation to allow its competitors’ products in its merchandising refrigerators will also affect the availability of competitors’ products, likely resulting in a marginal market share loss. These commitments will likely hurt Coca Cola’s business in markets other than cola products, where it is the strongest.
Once the reasoned decision of the Board is published by TCA in the upcoming months, more details of CCSD’s practices, their effects, the scope of the commitments, and the Board’s determinations on how the commitments will address competitive concerns will become available.
At any rate, this is one of the most interesting and elaborative commitment cases in Turkish competition law practice yet, and it will be utilized as a milestone precedent for the cases to come.
All rights of this article are reserved. This article may not be used, reproduced, copied, published, distributed, or otherwise disseminated without quotation or Erdem & Erdem Law Firm's written consent. Any content created without citing the resource or Erdem & Erdem Law Firm’s written consent is regularly tracked, and legal action will be taken in case of violation.
Other Contents
At the meeting of the Fédération Internationale de Football Association (“FIFA”) held on 16 December 2022, the FIFA Council approved the FIFA Football Agents Regulations (“FFAR”). In the FFAR, various amendments have been made, such as the introduction of a maximum service fee limit that football agents are...
Resale Price Maintenance (RPM) is still considered a hardcore restriction under the recently revised Vertical Block Exemption Regulation (VBER), which means that it cannot benefit from a statutory exemption under Article 101(1) TFEU, unlike certain other types of vertical agreements. However, it has been debated...
In competition law, it is important to accurately determine the concept of undertaking, especially in terms of mergers and acquisitions. Therefore, the concept of economic entity aims to reveal the economic units covered by the undertakings. The relationship between the concept of economic entity and family ties comes...
In these days when the Competition Board (“Board”) frequently imposes administrative fines for preventing on-site inspections and both the Competition Authority (“Authority”) and undertakings take legal and technical measures regarding on-site inspections, a striking development has occurred. In its decision...
Online advertising has become an important source for businesses for promoting products and services and meeting consumers, as a result of the rapid development of information technologies and increase in the use of internet. Delivering targeted messages to consumers at the right time through the digital...
Selective distribution systems refer to a type of distribution system in which suppliers commit to selling the contracted goods or services directly or indirectly to distributors selected based on specified criteria, while the distributors commit not to sell the said goods or services to unauthorized...
Fast-moving consumer goods is undoubtedly one of the sectors that the Competition Authority has been working most intensively since the COVID 19 pandemic. Among the most important developments of this period was the Sector Inquiry initiated on Fast Moving Consumer Goods (“FMCG”) Retailing...
In the decision of the Constitutional Court ("Constitutional Court" or "Court") dated 09.11.2022, numbered 2020/67 E. 2022/139 K. (the "Decision"), the annulment of certain articles of the Law Amending the Law on the Protection of Competition No. 4054 ("Law No. 7246") was requested...
In Turkish competition law, certain types of mergers and acquisitions are subject to Turkish Competition Board’s (“Board”) approval in order to gain legal validity. Pursuant to Article 7 of the Law No. 4054 on the Protection of Competition (“Law No. 4054”), the Board is competent to define mergers and acquisitions...
Recently, the Competition Board (the Board) had imposed administrative fines on banks and financial institutions for failing to respond to the request for information within the scope of a preliminary investigation.[i] The request for information that lays the groundwork for the administrative fine imposed by...
Amazon, a world-famous company, is an e-commerce company that operates the world’s largest online shopping platform. In the backstage, Amazon is a data-driven company whose retail decisions are mostly driven by automated systems, fueled by the relevant market data. That being said, Amazon has a dual...
The right to make on-site inspections is one of the Competition Board’s (“Board”) most important tools for revealing whether Law No. 4054 on the Protection of Competition (“Law No. 4054”) has been violated. The effective use of this authority is quite important in terms of obtaining fruitful results from...
“Harese” is an interesting Arabic word. There is a thorn that camels love very much in the desert. The camel eats the thorn with great greed. So much so that, its mouth bleeds as it eats, but it doesn't stop eating. The taste of the thorn is mixed with the salty taste of its own blood. This mixed taste drives the camel...
Turkey’s leading pay television service provider, Krea İçerik Hizmetleri ve Prodüksiyon A.Ş. (“Digiturk”), is frequently the subject of complaints made to the Competition Authority (“Authority”). In fact, the Competition Board (“Board”) issues a new decision about Digiturk almost every year. In these decisions...
The French Competition Authority (Autorité de la Concurrence), within the scope of the competition law proceeding initiated upon the complaint of Criteo SA (“Criteo”), accepted the commitments proposed by Meta Platforms Inc., Meta Platforms Ireland Ltd., and Facebook France...
While the scope of Competition Board’s (“Board”) power to conduct on-site inspections has increased with the introduction of Guidelines on Examination of Digital Data during On-site Inspections (“Guidelines”), nowadays the amount of monetary fines imposed on undertakings continue to...
The hub and spoke cartel, which is a relatively new type of violation in terms of Turkish competition law, is defined as the indirect exchange of information between two independent undertakings which are horizontal competitors on the supplier or retailer level, through another undertaking...
The settlement mechanism has only recently been introduced to Turkish competition law practice. It entered into force with the amendment made to the Law on the Protection of Competition (“Law”) numbered 4054 on 16.06.2020, and has been in effect for less than two years. In this relatively...
Due to their increasing share in the economy and rapid growth rate, e-marketplace platforms have come under the increasing scrutiny of the Turkish Competition Authority (“Authority”) as well as many competition authorities around the world...
Pursuant to the Amendment Communiqué Concerning the Mergers and Acquisitions Requiring the Competition Board’s Approval (“Amending Communiqué”) published in the Official Gazette dated March 4th, 2022 and numbered 31768, certain amendments have been introduced...
The Competition Board (“Board”) has recently published a reasoned decision in which it evaluated BSH Ev Aletleri Sanayi ve Ticaret A.Ş.’s (“BSH”) request for negative clearance or exemption with regard to its practice of prohibiting authorized dealers from making sales through online marketplaces...
Shahmaran, a Mesopotamian myth, is believed to take place in Tarsus. According to the myth, the shah of snakes is the immortal and omniscient "Shahmaran." Shahmaran is described as a beautiful woman living in her cave with her snakes...
During the COVID-19 pandemic, competitive concerns about the pricing behavior of chain markets, manufacturers, and wholesalers engaged in the retail trade of food and cleaning supplies led to an investigation by...
When the past decisions and the recent decisions of the Competition Board (“Board”) are examined, a significant increase can be observed in the number of decisions where the Board found hindrance or obstruction of on-site inspections. This situation shows that...
The European Commission began investigating the collusive behavior of Credit Suisse, UBS, Barclays, RBS, and HSBC in the Foreign Exchange (forex) spot trading market in 2019. With the recent press release dated 02.12.2021, the Commission announced that the case is now closed...
Digitalization, in particular, necessitates the rewriting of competition law rules. Competition law is at the center all questions regarding e-commerce and digital platforms. The aforementioned platforms, which have become prominent due to innovations in...