Turkey: Does The Turkish Competition Authority Look For A Higher Standard For Granting Individual Exemption?

The Turkish Competition Authority (TCA) recently published an interesting decision, which indicates higher standards for granting individual exemption at first glance. In its Trakya Cam Sanayi A.Ş. (TRAKYA CAM) decision,¹ the TCA denied granting exemption to a dealership agreement, which contains a non-compete clause. Yet it had done with an earlier decision in 2017 for the same agreement². In this short article, after providing some background information and summarizing the assessments of the TCA, we address possible implications of this new perspective in the business environment.

Some background information

TARAKYA CAM is one of the two flat glass manufacturers in Turkey³. It is the fifth-biggest producer in the world, and it has the highest production capacity in Europe. In the Turkish market – considering the TCA's earlier decisions – it has a dominant position in the flat glass market with a significant market share.

The notified agreement for exemption is a distribution agreement with TRAKYA CAM and its 19 authorized dealers. As mentioned in the decision, the agreement contains a non-compete clause that prevents the dealers from selling competing products. However, it does not include any clause that may indicate any territorial exclusivity or a passive sale restriction.

As in the EU competition law, while evaluating an agreement, the TCA follows a usual assessment process. More specifically, restrictive agreements qualify for exemption if their benefits to general welfare outweigh their restrictive effects on competition. The primary considerations are based on product improvement, technical or economic progress, and consumer benefits.

In fact, in 2017, upon the notification of TRAKYA CAM, the TCA granted an exemption to the same agreement for two years. In that decision, referring to the high market share (>40 percent) of TRAKYA CAM, the TCA identified that TRAKYA CAM couldn't benefit from the block exemption. However, after a detailed individual exemption assessment, the TCA decided that the notified agreement creates sufficient efficiency gains and consumer benefits that may offset the restrictive clause.

What has changed in 2020?

For the same agreement, in 2020, the TCA adopts a divergent view. The individual exemption assessment section of the decision consists of direct quotations from the Guidelines on the General Principles of Exemption⁴. Through these quotations, the TCA emphasizes the clarity and the objectivity of the efficiency gains and economic benefits, which may offset the restrictive clauses.

Only in a single paragraph (para. 30), the TCA provides a specific comment about TARAKYA CAM and the notified agreement. Referring to the granted exemption in 2017, the TCA claims that TRAKYA CAM might bring more objective information and more concrete data about the efficiency gains and the consumer benefits based on its experience through applying the agreement since 2017.

What is the message that we should take?

The objectivity and the clarity in the presentation of efficiency gains and consumer benefits are not the new standards considered in individual exemption assessments. Moreover, it has been taken as a common standard in every competition analysis beyond the exemption assessments. However, the new thing in this decision is the divergence from the precedents without putting a concrete reason. For instance, an analysis that shows a change in market conditions or consumer behavior may be legitimized reasons for this attitude change. But as is, the decision exhibits a clear divergence from the precedents.

Therefore, it is hard to get a clear message from the latest TRAKYA CAM decision of the TCA. Returning to our question at the title, one cannot argue that the TCA looks for a higher standard for granting individual exemption to an agreement.

Footnotes

1. TCA's decision dated 25.06.2020 and numbered 20-32/382-171, available at https://www.rekabet.gov.tr/Karar?kararId=9f0fe326-0c9e-4ba5-b2d9-601eaeb256d2.

2. TCA's decision dated 21.12.2017 and numbered 17-42/670298, available at https://www.rekabet.gov.tr/Karar?kararId=224ae8b0-b98f-4d96-8bbb-d9c66e2044ea.

3. The other is Düzce Cam ve Sanayi Ticaret A.Ş.

4. Guidelines on the General Principles of Exemption dated 28.11.2013 and numbered 13-66/923-RM(10), available at https://www.rekabet.gov.tr/Dosya/guidelines/11-pdf.

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