Standard of Proof in Cartel Allegations in Light of Turkish Competition Board’s Egg Producers Decision
Introduction
In its decision numbered 19-21/306-132 and dated 13.06.2019 (“Board Decision”), the Turkish Competition Board (“Board”) evaluated the complaint regarding allegations that egg producers that are active in Mardin were fixing prices by way of agreements. After its examination, the Board dismissed the complaint, and decided not to initiate a full-fledged investigation.
The Board Decision has significant importance due to the detailed evaluation of documents that were provided to support cartel allegations contained in the case file, and since it shows the Board’s recent approach in relation to the standard of proof in cartel cases.
Allegations in the Board Decision
In the complaint dated 28.11.2018 and numbered 8533, which was filed confidentially, it was alleged that (i) Dicle Tarım Gıda Pazarlama Nakliyat İnşaat Hayvancılık San. ve Tic. Ltd. Şti. (“Dicle Yumurta”), Hacıhasanoğulları Otomotiv Petrol İnşaat Tarım Hayvancılık San. ve Tic. Ltd Şti. (“Naz Yumurta”), Fırat Nakliyat Gıda Taahhüt Sanayi ve Ticaret Ltd. Şti. (“Fırat Yumurta”), which are egg producers that are active in Mardin, and Bayza Petrol Kuyumculuk Nakliyat Tarım Hayvancılık San. ve Tic. A.Ş. (“Bayza Yumurta”) active in Midyat (“Investigated Undertakings”), were the biggest egg producers and suppliers in the region, (ii) since the beginning of 2018, these four undertakings have been fixing prices above average for packaged egg prices through cartel involvement, (iii) since obtaining eggs from alternative regions entails higher costs, no one buys eggs from alternative regions, (iv) Investigated Undertakings have been applying lower prices in retail sales and, therefore, were hindering the complainant’s activities, which acts as a wholesaler.
Rapporteurs’ Opinions
Rapporteurs assigned on the case stated that there was no evidence that the Investigated Undertakings were in breach of competition law and, therefore, there was no need to initiate a full-fledged investigation. Having said that, they also stated that it would be appropriate to send opinions to the Investigated Undertakings pursuant to Articles 9/1 and 9/3 of Law on Protection of Competition numbered 4054, (“Law No. 4054”) stating that they must refrain from agreements and concerted practices between undertakings that directly or indirectly aim to prevent, distort or restrict competition, or which may cause such effect on the market in which they operate. The Board Decision is, therefore, significant in the sense that although there was no evidence of breach in relation to the Investigated Undertakings’ activities, the rapporteurs have recommended taking the measures as set forth under Article 9 of Law No. 4054, titled “Termination of Breach.”
The Board’s Evaluation
In order to evaluate the cartel allegations, the Board firstly examined domestic average egg production and consumption amounts for 2017 and 2018. Upon its evaluation, the Board stated that the increase in production per person was higher than the consumption per person and, under ordinary circumstances, the prices would drop in cases of surplus of supply. Therefore, the Board stated that in order to examine the increase in prices in the case file, egg producers’ weighted average price movements and costs must be evaluated. Within this scope, it requested information and documents from the Investigated Undertakings, including their price movements since 2018 until May of 2019. After carefully examining the submitted price movements, the Board decided that the Investigated Undertakings did not increase their prices though agreements. The Board concluded that the Investigated Undertakings’ prices were parallel to Yumurta Üreticileri Merkez Birliği (“YUM-BİR”) prices and the reason for this was that local producers followed prices of big egg producers like YUM-BİR while determining their prices and, therefore, they were affected by the same increase in costs in the same period.
The Board decided that the Investigated Undertakings’ prices did not overlap; however, the increases in exchange rates were reflected in the Investigated Undertakings’ prices during the same periods. Within this scope, the Board evaluated that the radical increase in Investigated Undertakings’ prices during similar dates were in parallel to the increase in the exchange rates, and decided that the allegations of the undertakings’ price fixing amongst themselves were not supported.
In the Board Decision, it was also decided that the unilateral intent to restrict competition was insufficient for a “meeting of the minds.” Upon request for information regarding a meeting to which all egg producers in Mardin attended, Fırat Yumurta declared that it attended such meeting with an aim to collectively fix prices; whereas, Naz Yumurta and Dicle Yumurta stated they had an aim to establish a regional association. After evaluating these statements, the Board decided that the undertakings other than Fırat Yumurta did not have any intention to restrict competition. The Board also decided that Fırat Yumurta’s unilateral intent could not be evaluated within the scope of a “meeting of the minds” sought under Article 4 of Law No. 4054.
The Board also evaluated the allegation that the Investigated Undertakings were hindering the wholesalers’ activities by applying lower prices in retail sales. Within this scope, the Board examined whether the Investigated Undertakings had retail sales and, if so, whether they made sales at a cheaper price than their sales to wholesalers. After meeting with the Investigated Undertakings’ officials, the Board decided that the said undertakings did not have any retail sales. In addition, it scrutinized the timing of the complaint and the fact that the complainant did not report all egg producers active in Mardin, and only complained about Dicle Yumurta, Naz Yumurta, Fırat Yumurta ve Bayza Yumurta. In light of these evaluations, the Board concluded that allegations that the Investigated Undertakings made wholesalers’ activities more difficult by applying lower prices in retail sales were unfounded due to the following: (i) the Investigated Undertakings did not have any retail sales, (ii) the complainant only complained about four, but not all, of the producers, and (iii) the complaint was filed two years after the meeting in which the alleged breach had occurred.
In light of the above, it was decided that there was no document, information or finding that showed Bayza Yumurta, Fırat Yumurta, Naz Yumurta and Dicle Yumurta were fixing prices together and were restricting competition through making retail sales for prices cheaper than they provide to wholesalers. The Board, therefore, decided to dismiss the complaint, and not to initiate a full-fledged investigation.
Conclusion
The Board Decision is significant since it shows that price increases on similar dates and at similar rates do not create an automatic presumption that the undertakings agreed to fix prices. As explained in detail, above, the Board did not decide that the undertakings were in breach, and evaluated the relevant undertakings’ price movements and costs by way of making economic analysis in relation to the relevant price increases.
Another important point regarding the Board Decision is the approach taken towards the “meeting of the minds” notion. Even though Fırat Yumurta admitted that it attended a meeting with competitors with an aim to fix prices, the Board did not find a single undertaking’s statements sufficient to determine an aim to restrict competition. Seeking additional evidence regarding Fırat Yumurta’s statement, as a result of its examination, the Board decided that other undertakings did not have a will to restrict competition in attending the meeting, and that there was no meeting of the minds between the relevant undertakings within this scope.
It is, therefore, evident that the Board decision, which frames the competitive analysis and application of “meeting of the minds” notion in cartel cases, shall be a precedent for future case files.
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