Turkish Competition Board’s Sunny Decision on Resale Price Maintenance and Indirect Information
Introduction
The Competition Board ("Board") made an addition to its line of decisions on resale price maintenance with its decision on Sunny Elektronik Sanayi ve Ticaret A.Ş. ("Sunny")[1]. In its decision, the Board thoroughly examined the allegations regarding Sunny's involvement in maintaining resale prices and restricting the internet sales of its resellers for consumer electronics and small household appliances. The Board also scrutinized allegations against Sunny on suspicion of facilitating an indirect exchange of information among retailers, namely Vatan Bilgisayar San. ve Tic. A.Ş. (“Vatan”), Teknosa İç ve Dış Tic. A.Ş. (“Teknosa”), and Media Markt Turkey Ticaret Limited Şirketi (“MediaMarkt”). Additionally, a significant aspect highlighted in the decision was the dissenting opinion, arguing that the revenues generated from the company's export activities should be included in the calculation of the administrative fine.
Legal Background
The legal basis for the prohibition of resale price maintenance is provided under Article 4 of Law No. 4054 on the Protection of Competition ("Law No. 4054"), which prohibits agreements and concerted practices between undertakings, which have as their object or effect or likely effect of prevention, distortion or restriction of competition directly or indirectly in a particular market for goods or services. Pursuant to Article 4/1(a) of Law No. 4054, fixing the purchase or sale price of goods or services, or any elements which form the price such as cost and profit, or any condition of purchase or sale, is considered among the prohibited conducts between undertakings. In this respect, resale price maintenance practices are considered agreements restricting competition within the scope of Article 4 of Law No. 4054.
According to Article 4/1(a) of the Block Exemption Communiqué on Vertical Agreements numbered 2002/2 and Article 17 of the Guidelines on Vertical Agreements, the buyer has the freedom to determine its selling price, which cannot be prevented, either directly or indirectly. However, the supplier may determine maximum sales prices for the buyer or offer recommended sales prices to the buyer, provided these do not transform into fixed or minimum sales prices. Practices concerning resale price maintenance are considered among infringements within the scope of Article 4 of Law No. 4054, even if they do not have a restrictive effect on competition given the fact that these agreements restrict competition in terms of object.
Resale Price Maintenance
The documents obtained during the on-site inspections conducted by the Board on the premises of Sunny revealed several communications among dealers, electro-marketers, and Sunny employees indicating that Sunny intervened in the resale prices of its retailers. In this context, the correspondence between Sunny employees revealed that prices on e-commerce platforms and price comparison websites were monitored, the screenshots of re-sellers “distorting” prices were shared, and employees were instructed to identify such sellers and ensure that they adjusted their prices to the desired level. The seized documents also included correspondences indicating that certain sanctions would be imposed on resellers having low internet prices, which were considered to be detrimental to Sunny’s price stabilization policy, such as preventing them from conducting online sales and refusing to sell goods to resellers distorting prices.
Based on the findings obtained in the course of the investigation, the Board determined that Sunny had intervened in the selling prices of its dealers, electro-markets, and other resellers and assessed that this action constitutes a restriction of competition by object under Article 4 of Law No. 4054. Furthermore, the Board concluded that Sunny’s conduct fails to provide any improvements or efficiency gains, as maintaining elevated prices by suppliers directly impedes intra-brand price competition among resellers and diminishes the incentives for these resellers to invest and lower their costs, hence does not meet any exemption criteria under Article 5 of Law No. 4054.
In addition to the infringement related to fixing resale prices, the findings related to Sunny were also scrutinized for potential violations of the prohibition on passive sales, which prohibits buyers from conducting online sales as specified in paragraph 25 of the Guidelines on Vertical Agreements. However, the Board considered the restrictions imposed on the internet sales of the resellers to be a part of the resale price maintenance as a single infringement, as they were intended to maintain the product’s price at a certain level.
Indirect Information Exchange
Within the documents acquired from Sunny, numerous communications were revealed, that arouse suspicions regarding Sunny’s involvement in facilitating the exchange of competitively sensitive information among electro markets acting as resellers. The Board's examination concentrated on communications involving indirect information exchange, specifically about whether Sunny monitored the electro-markets’ conduct for implementation of its prices and whether Sunny addressed complaints raised by electro-markets (acting as buyers) concerning the prices of their competitors.
The assessment of whether the communication between Sunny and the electro-markets meets the criteria of a hub-and-spoke cartel was evaluated based on the standard of proof laid out in the Tesco decision.[2] In this context it is primarily examined whether the competitively sensitive information shared by the buyer to the supplier was passed on to another buyer and whether such information is exercised in the pricing strategy of the recipient buyer. An essential consideration was that the recipient must be capable of discerning both the source and the purpose of the information conveyed by the supplier.
When analyzing the results in this context, it was noted that during the discussions between Sunny and the representatives of Vatan, Teknosa, and Bimeks, certain complaints were expressed to Sunny with respect to low pricing of rival electro markets, leading Sunny to request intervention in the matter. As a response to this communication, Sunny expressed that it has implemented requisite measures and intervened in the pricing practices of the electro markets.
On the other hand, the investigation revealed that the correspondences were solely comprised of complaints of rival competitors’ prices, with no evidence indicating the transfer of such information to rival electro markets through Sunny or no evidence that electro markets have updated their prices based on the information provided. In this context, it is observed that the correspondences reveal Sunny's efforts to enforce compliance, of which are inadequate to imply the existence of a hub-and-spoke cartel.
After the Board’s assessments based on the mentioned factors, the investigation was terminated through a settlement procedure under Article 43/7 of Law No. 4054 and Article 4/4 of the Regulation on the Settlement Procedure in Investigations on Agreements, Concerted Practices, and Decisions Restricting Competition and Abuse of Dominant Position which resulted with a 25% reduction on the administrative fine imposed on Sunny.
Dissenting Opinion
In the decision, two Board members objected to the exclusion of export figures from the calculation of the administrative fine imposed on Sunny. According to the dissenting opinion, Law No. 4054 and secondary legislation do not provide for any provision for the exclusion of export figures when calculating the administrative fine. On the contrary, when determining the administrative fine, the total economic power of the undertaking is taken into consideration and the fine is determined based on the annual turnover of the undertakings.
Another objection raised in the dissenting opinion regarding the exclusion of export figures from the calculation is that the figure constituting the basis for the penalty is obtained by subtracting the foreign sales under the gross sales item from the net sales, which in this case would result with the subtraction of a gross figure from a net figure. It is stated that this situation contradicts the approach adopted in competition law, which is based on the market power of the undertaking.
Conclusion
The Board frequently focuses on investigating violations related to resale price maintenance, rendering it the most commonly addressed type of competition infringement. With respect to the Board’s investigations concerning resale price maintenance, this conduct is often closely examined alongside indirect information exchange and restrictions on retailers’ online sales. The mentioned decision holds significance for treating internet restrictions and indirect information exchange as integral components of resale price maintenance conduct, subjecting them to thorough scrutiny. The dissenting opinion suggesting the inclusion of Sunny’s export figures in calculating the total turnover which serves as the basis for the administrative fine in the decision, is also notable considering the ongoing debates surrounding this matter.
- Board's Sunny Decision dated 05.01.2023 and numbered 23-01/12-7
- Tesco decision of the Competition Appeal Tribunal (CAT) of the United Kingdom dated 20.12.2012 and numbered 1188/1/1/11 (Access date:10.12.2023)
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
The startup ecosystem in Turkey has experienced notable growth in recent years. In the last quarter of 2023, 81 startups secured a combined investment of around 60 million dollars. While the number of investments remained consistent when comparing the third quarter periods of 2022-2023, there was a decrease...
Hub and Spoke cartel is a type of violation that is not clearly defined and regulated under Law No. 4054 on the Protection of Competition (“Law No. 4054”). Decisional practices of foreign competition authorities, particularly the UK Competition and Markets Authority’s decisions (“CMA”), are instructive concerning...
It is observed that the Competition Authority (“Authority”) has recently scrutinized various industries such as fast-moving consumer goods, labor market, pharmaceuticals, and cement. When the reasoned decisions of the Competition Board (“Board”) published in October are examined, it can be seen that the...
Jules Verne says, “Everything on earth has a limited lifespan, nothing that will exist forever can be created by human hands”. Perhaps change is the only constant concept in all our lives. Despite two major world wars and countless periods of crisis, humanity has been undergoing a great change and...
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...