“Economic Reforms and Competition Law and Policy

In Turkey”

Presented by :Dr. Kemal EROL

01-02 NOVEMBER 2010

MARRIOTT HOTEL ZAMALEK – CAIRO EGYPT

5TH ECONOMIC FREEDOM OF THE

ARAB WORLD CONFERENCE

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Part 2

1 -The Law on Protection of Competition

1.1 .The Purpose and The Scope of Law.

1.2 .Substantial Provisions. (=three prohibitions)

1.2.1. Cartel Prohibition. (Art 4)

1.2.2. Abuse of Dominant Position. (Art 6)

1.2.3.Merger Control (Art 7)

2 - The Competition Authority, Sanctions and Enforcement

“Economic Reforms and Competition Law and Policy In Turkey”

Part 1

1 - Historical Background

2 - Liberalisation And Opening Up Markets

3 - Cleaning Up The Obstacles For Foreign Direct Investment

4 - Privatization

5 - Regulation

6 –Enhancing A Very Effective Competition Law

7 - Competition Advocacy

8 - Maintenance Of A Sustainable Economic Growth

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24 February 1980 Decisions:

• Decreasing inflation rate by application of daily exchange rate.

• Reducing the State’s role in the economy and limiting the subsidy in agriculture sector.

• Lifting all the subsidies with the exception of fertilizer energy and transport sectors.

• Liberalization of the foreign trade and profit transfer and incentives for the foreign investments.

• Support for the constructing companies operating outside of Turkey.

• Liberalization of the imports by lifting unnecessary prohibitions and subsidy for exports by bonus system.

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•Sale:•Transfer of the ownership of companies in full or partially, •Transfer of shares of these companies through domestic or international public offerings, •Block sales to real and/or legal entities, block sales including deferred public offerings, •Sales to employees, •Sales on the stock exchanges by standard or special orders, •Sales to investment funds and/or securities investment partnerships.

•Lease: •Grant of the right of use of all or some of the assets of the companies for a defined period of time.

•Grant of Operational Rights

•Establishment of Property Rights other than Ownership

•Profit Sharing Model and other Legal Dispositions Depending on the Nature of the Business.

Privatization Methods

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Regulated Areas and Independent Regulatory Authorities

1. Financial Services: Capital Market Board (SPK)2. Banking Sector : Banking Regulation and Supervision Authority

(BDDK)3. Energy Sector: Energy Market Regulatory Authority (EPDK)

(Electricity, gas, petrolium, LPG)4. Telecommunications Sector: Information and Communication

Technologies Authority (BTK)5. Sugar Industry: Sugar Authority (ŞK)6. Tobocco&Alcholic Beverages Market Authority (TAPDK)7. Public Procurement Authority (KİK)8. Central Bank (MB)9. Revenue Administration (GİB)10. Privatization Authority (Öİ)11. Social Security Institution (SGK)12. Competition Authority (RK)

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Constitutional Order to the State (Governments)

Article 167/1 of the Constitution of the Republic of Turkey

ARTICLE: 167/1. “The State shall take measures to ensure and promote the sound, orderly functioning of the money, credit, capital, goods and services markets; and shall prevent the formation, in practice or by agreement, of monopolies and cartels in the markets.”

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ACT ON THE PROTECTION OF COMPETITION

(LAW NO:4054)

DATES :

Adoption by the Parliament : 7. December.1994

Publication at the Official Gazette and Entry into force : 13.December.1994

Entry into force for the penalty provisions : 13.December.1995

Appointment of the Competition Board : 27.February.1997

ACTUAL ENFORCEMENT :

Completion of the Establishment of the Competition Authority : 4.November.1997

CHANGING LAWS (AMENDMENTS) :

Law no:4971 dated 01.08.2003

Law no:5234 dated 17.09.2004

Law no:5388 dated 02.07.2005

Law no:5538 dated 01.07.2006

Law no:5728 dated 23.01.2008

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THE PURPOSE OF THE ACT

Within the markets for GOODS and SERVICES

-To ESTABLISH a system ENSURİNG the necessary

A- REGULATION,

B- SUPERVISION and

C- PREVENTION of

ABUSE OF DOMINANT POSITION by undertakings and which have as their :

* AGREEMENTS

* DECISIONS

* CONCERTED PRACTICES

a) OBJECT or

b) EFFECT

- PREVENTION or- RESTRICTION or

- DISTORTION

Of COMPETITION

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The SCOPE of the ACT

This Act applies to : operations as regards :

which have as their OBJECT or EFFECT

amongst ANY undertakings which

PREVENTION

DISTORTION or of

RESTRICTION COMPETITION

* AGREEMENTS,* DECISIONS and* CONCERTED PRACTICES

II. The ABUSE OF DOMINANT POSITION IN THE MARKET and

III. ALL KINDS OF OPERATIONS and CONDUCTS which are deemed to create a MERGER or ACQUISITION by which COMPETITION in the market would SIGNIFICANTLY be IMPEDED

I. The

EFFECTS DOCTRINE

* measures* decisions* regulations

* supervisions

FOR PROTECTION OF COMPETITION

concerning

* OPERATE in or

* MAY AFFECT

The markets for GOODS and SERVICES within the TERRITORY of TURKISH REPUBLIC

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PROHIBITION IAGREEMENTS, DECISIONS AND CONCERTED PRACTICES IN

RESTRAINT OF COMPETITION

Art.4 = (ART. 85/I; 81/I of the EEC TREATY.)

* The AGREEMENTS and CONCERTED PRACTICES of the UNDERTAKINGS and the ASSOCIATION of UNDERTAKINGS and

* HAVE AS THEIR OBJECT or* CAUSE or* MAY CAUSE

Which: The

- PREVENTION

- DISTORTION

- RESTRICTION

of COMPETITION

In a market for GOODS and SERVICES

ARE UNLAWFUL and PROHIBITED

* The DECISIONS of the ASSOCIATION of UNDERTAKINGS.

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EXAMPLES TO PROHIBITIONS MENTIONED AT ARTICLE 4

* Fixing the purchase or selling price or the factors such as cost or profit.* Sharing the markets for goods and services or the sources and elements of the market. * Controlling the quantities of supply or demand or determining these figures outside the market conditions. * Eliminating or preventing the new competitors or impeding their activities.* Applying dissimilar conditions to equivalent transactions with the other trading parties.

* Making a conclusion of contracts subject to the acceptance of [unreasonable] condition.

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EXEMPTION Art.5. (= Art.85(3) of the EEC Treaty)The COMPETITION BOARD (and only the BOARD)

POSITIVE CONDITIONS

* Contributes to the improvement of PRODUCTION or DISTRIBUTION of goods and providing services or PROMOTING TECHNICAL or ECONOMIC progress.

* Allows Consumers A FAIR SHARE of the resulting benefit.

* ELIMINATE competition in a substantial part of the relevant market;* INDUCE a restraint on Competition that is MORE THAN NECESSARY for the attaintment of the objectives set out in paragraphs (a) and (b)

NEGATIVE

CONDITIONS

Publish group Exemption Notifications for certain categories of agreements.

The BOARD may give exemption either upon a request on an individual basis.- For a maximum 5 years period- and if necessary on certain conditions and/or undertakings or,

EXCLUSIVE POWER

may declare the provision of Art.4 in applicable to

* any decision by association of undertakings or

* any agreement by the undertakings

* any concerted practices

If it :

and If it does not :

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PROHIBITION IIThe ABUSE OF DOMINANT POSITION.Art.6 = (Art. 86 of the EEC TREATY)

ANY ABUSE by one or more undertakings, acting ALONE or

by means of

- an agreement or

- concerted practices.

OF A DOMINANT POSITION :

in a market for GOODS and SERVICES

* within the WHOLE TERRITORY of the STATE or * IN A SUBSTANTIAL PART OF IT. IS UNLAWFUL AND PROHIBITED.

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EXAMPLES OF ART.6. PROHIBITIONS

• PREVENTING (Directly or Indirectly) the new competitors or IMPEDING the activities of already existing competitors.• APPLYING dissimilar conditions to equivalent transactions (thereby creating a direct or indirect discrimination)• MAKING the conclusion of contracts subject to the acceptance of some (unjust) conditions• USING the FINANCIAL, TECHNOLOGICAL and COMMERCIAL advantages of a dominant position in a market for goods and services to detriment of a competition in another market.• RESTRICTING production, marketing or technical development which would cause a disadvantageous position for consumers.

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PROHIBITION III(SOME) MERGERS & ACQUISITIONS(Art. 7/1 of the ACT)1) MERGER of two or more undertakings or

as a result of which:

COMPETITION WOULD SIGNIFICANTLY BE IMPEDED

in a market for goods and services in the WHOLE territory of the STATE or in a SUBSTANTIAL PART of it.

- by an undertaking or,- by a person

of another undertaking

2) ACQUISITION

by acquisition of all or part of its assets or securities, or

by other means

by which that person or undertaking

ACQUIRES A CONTROLLING POWER in that undertaking concerned. which would :

IS UNLAWFUL and PROHIBITED

- CREATE or the DOMINANT POSITION of- STRENGTHEN one or more undertakings

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COMPETITION AUTHORITY

COMPETITION BOARD

(7 Members including Chairman)ASSISTANT CHAIRMANS

COMPETITION BOARD

MINISTRY OF TRADE INDUSTRY

HIGH COURT OF APPEAL

HIGH ADMINISTRATIVE COURT

(COUNCIL OF STATE)

TURKISH UNION OF CHAMBERS AND EXCHANGES

SERVICE DEPARTMENTS

-MAIN SERVICE DEPARTMENTS (Carrier Services

-CONSULTATIVE SERVICES

-AUXILARY (SUPPORTING) SERVICES

MINISTRY RESPONSIBLE FOR THE STATE PLANNING ORGANIZATION

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SANCTIONS I- NULLITY AND VOIDITY OF THE PRACTICES CONCERNED

(INCLUDING THE CONTRACTS) (Art`s 4,6,7,56) II- IMMEDIATE TERMINATION OF INFRINGEMENT (Art.9)

III-RESTORATION OF ALL FACTUAL SITUATIONS BEFORE THE MERGER (in the case of UNLAWFUL MERGERS & ACQUISITIONS.) (Art.11) IV-FINES ( Art 16 - and PERIODIC PENALTY PAYMENTS :

a) FIXED FINES : (Art 16) Up to 0,1% of the turnover (min. 10.000 TL) a)false or misleading information or document is provided in exemption and negative clearance applications and in authorization applications for mergers and acquisitions,b)mergers and acquisitions that are subject to authorization are realized without the authorization of the Board,c)in implementation of articles 14 and 15 of the Act, incomplete, false or misleading information or document is provided, or information or document is not provided within the determined duration or at all,d)on-the-spot inspection is hindered or complicated,   

a)false or misleading information or document is provided in exemption and negative clearance applications and in authorization applications for mergers and acquisitions,b)mergers and acquisitions that are subject to authorization are realized without the authorization of the Board,c)in implementation of articles 14 and 15 of the Act, incomplete, false or misleading information or document is provided, or information or document is not provided within the determined duration or at all,d)on-the-spot inspection is hindered or complicated,   

b) PRO-RATA FINES (Art.16/3) Up to 10 % of the turnover infringing article 4, 6, or 7.

c) FINES FOR THE MANAGERS AND EMPLOYEES OF THE COMPANY (Art. 16/4) Up to 5% of the fines given to the company.

d) PROPORTIONAL ADMINISTRATIVE FINES: (Art.17)

For each day of the failure of the enforcement of a decision of the BOARD 0,05% of the turnover

V- COMPENSATION OF ALL DAMAGES and if there is an intention or heavy neglicence, THREE TIMES of the substantial damage. (Art 57-58) 17