September 2022 – Recently, the Turkish Competition Authority shared a Draft Amendment Bill (“Draft Bill”) on Law No. 4054 on the Protection of Competition (“Law No. 4054”) with various institutions for consultation.
If the Draft Bill comes into effect, it will be the most comprehensive amendment of Law No. 4054 since 1994, when it came into force. In particular, the Draft Bill aims to regulate digital markets in Turkey and to protect the competitive environment of such markets in view of the Digital Markets Act (“DMA”) that will soon enter into effect in the EU and Section 19a of the German Act against Restraints of Competition.
In this context, the Draft Bill emphasises the rapid changes that digitisation has brought to business models and ways of doing business and states that competition law must keep up with these technological changes.
Within this framework, the concept of “undertaking with significant market power” and the ex-ante obligations regarding such undertakings are seen as the most fundamental amendments in the Draft Bill. Additionally, the Draft Bill also covers issues such as the obligations of undertakings during on-site inspections, the definitions of core platform services and other relevant issues, and the identification of undertakings with significant market power.
a. Undertaking with significant market power
In digital markets, it is evident that a limited number of undertakings hold significant power due to market structure, high entry/investment costs, economies of scale and scope, network effects and data ownership, as well as the advantage of first-to-market status. In this respect, studies carried out around the world concentrate on the necessity for such undertakings to act within a framework of certain obligations.
In the Draft Bill, the framework outlined by the concept “undertaking with significant market power” (“SMP”) is used during the identification of such undertakings. According to the Draft Bill, the features required for an undertaking to be defined as an SMP are as follows: (i) to provide one or multiple core platform services; (ii) to have a significant impact on access to end-users or on the activities of business users; and (iii) to possess the capability to maintain this impact or demonstrate the potential for maintaining it.
Similar to the DMA, the Draft Bill determines the core platform services as follows: “online intermediation services, online search engines, online social networking services, video/voice-sharing and distributing services, number-independent interpersonal communications services, operating systems, web browsers, virtual assistants, cloud-computing services, and online advertising services delivered by the provider of any of these services.''
On the other hand, it is noted that an undertaking that is deemed an SMP will be determined as such on the basis of certain quantitative and qualitative thresholds, and it is planned to determine the framework of these thresholds in a separate communiqué. The quantitative thresholds include various criteria such as the annual gross income of the undertaking and the number of end-users or the number of business users, whereas the qualitative thresholds include criteria such as network effects, data ownership, vertically integrated and conglomerate structure, switching costs, multiple access, and user trends in the context of the structure of core platform services.
If these thresholds are exceeded, the Competition Board (i.e. the competent organ and the decision-making body of the Turkish Competition Authority) will decide whether or not the undertaking is an SMP. It should be noted that even if the quantitative thresholds are not exceeded, it is possible for an undertaking to be considered as an SMP within the framework of qualitative criteria. This clause, as well as other amendments in the Draft Bill, may become a talking point in accordance with the principle of legal certainty.
For undertakings that are found to be an SMP, certain ex-ante obligations are envisaged similar to the obligations in the EU and in Germany.
With the Draft Bill, several obligations are proposed in order to ensure the balance of competition in digital markets. Obligations to be imposed on an undertaking identified as an SMP can be summarised as follows:
- It is not possible for SMPs to favour their own goods and services. No discrimination can be made in terms such as sorting, browsing, etc., compared to the goods and services of business users (i.e., the person using the core platform services to provide goods or services). These conditions must be served in a fair and transparent manner.
- Non-public data may not be used when competing with business users.
- SMPs cannot tie the goods and services they offer to users of any other goods or services.
- A user logging in or registering on a core platform with the characteristics of an SMP cannot be tied to membership on another platform service of the same undertaking.
- It should be possible to easily change the software, application or application stores that are pre-installed on the operating system of devices of SMPs.
- An SMP cannot restrict business users from working with the SMP's competitors, from bidding to end users on its own platform or through other channels, or from advertising.
- As it may prevent market entry or effective competition: (i) personal data obtained from core platform services or from other services or third parties cannot be combined, processed in combination and used in the context of other services, especially targeted advertising; (ii) competitively sensitive data obtained from business users cannot be processed for purposes other than the delivery of the relevant service, unless an explicit, clear and sufficient option is provided to the business user.
- Access to data shared by business users themselves or by end users, or generated within the scope of their activities on the relevant platform, should be provided to business users.
- It should be possible to move such data on request, free of charge and effectively, and tools to facilitate data portability should be provided free of charge.
- Interoperability of core platform services or ancillary services with other related products or services should be enabled effectively and free of charge.
- For other undertakings to be able to provide core platform services or ancillary services, it is necessary to provide free access to the necessary operating system, hardware or software features, limited to the relevant core platform service.
- If requested by business users, sufficient information should be provided about the scope, quality, performance, pricing principles and conditions of access to these services.
- A separate obligation is imposed with regard to advertisers, publishers, advertising intermediaries or third parties authorised by them, for whom online advertising services are provided. Accordingly, access to information on pricing conditions, auction processes and pricing principles, as well as free, continuous and real-time information on the visibility and usability of the ad portfolio, including the fee paid to the publisher for relevant advertising services and advertising verification and performance measuring tools and the data necessary for their use, will need to be established.
- Business users cannot be discriminated against by asserting unfair or unreasonable conditions.
Therefore, it may be said that the relevant obligations are in line with those set forth for undertakings in a dominant position, but these draft clauses, which were also prepared considering the DMA and German legislation, will bring more stringent conditions in terms of digital platforms.
Although the Draft Bill essentially contains provisions on regulating the behaviour of undertakings that are found to be SMPs, an exception has been made within the scope of on-site inspections. An additional obligation is set forth for all undertakings providing core platform services to fulfil the technical and administrative requirements that will enable the Turkish Competition Authority to conduct on-site inspections efficiently.
One of the most eye-catching aspects of the Draft Bill is related to sanctions. It is seen that progress has been made in the same direction as the DMA, which was recently published in the Official Journal of the European Union. Accordingly, in case of repeated infringements within the last five years, an administrative fine of up to 20% of the gross annual income of the relevant undertaking is under consideration. It should be underlined that the current Regulation on Fines allows the Competition Board to impose a maximum fine of up to 10% of the annual turnover of undertakings concerned.
The Draft Bill also states that if it is determined that the article regarding an SMP’s obligations has been infringed at least twice within five years, mergers and acquisitions by the undertaking in question may be prohibited for up to five years.
In addition, similar to the clauses concerning merger control, it is also envisaged that an administrative monetary fine may be imposed in case (i) incomplete, incorrect or misleading information/document is provided in the applications made, or the information/document is not provided within the specified time or at all; (ii) the obligation of notification stipulated in the Draft Bill is not complied with in case the turnover thresholds are exceeded; and (iii) the necessary technical and administrative obligations are not met in order to carry out the on-site inspection.
Another important change is related to structural remedies. Under the current Law No. 4054, it is possible to impose structural remedies only when behavioural remedies are ineffective. However, according to the amendment specified in the Draft Bill, in order to decide on a structural remedy for SMPs, it is not necessary for the Competition Board to render a final decision on a behavioural remedy. If the Draft Bill is adopted in its current wording, the Board will be able to directly decide on structural remedies upon understanding that the intended result cannot be achieved with behavioural remedies.
In terms of digital markets, it is known that Turkey’s Competition Authority, like other competition authorities throughout the world, had certain concerns and followed these markets closely. In this direction, we see that obligations that may have a serious impact on digital markets are on the way, within the framework of the DMA and German legislation and numerous studies worldwide, even if these have not yet reached their final form.
At this stage, we consider that the scope of certain obligations in Turkey regarding digital markets and their regulation may become more specific with the revisions to the Draft Bill to be made in context with the opinions of the relevant institutions. Of course, the scope and effects of the foreseen obligations when the amendments are finalized will remain a matter of interest.