As concern regarding the recent outbreak of the novel coronavirus (COVID-19) grows across the world, businesses in Turkey should beware of potential antitrust risks that may arise during this unprecedented global crisis. This alert covers the possible competition law risks that businesses may face in this time of uncertainty.
- Bona fide collaboration with competitors to tackle the pandemic may still pose competition law risks.
- Following the instructions of government agencies and serving public interest do not necessarily provide immunity against the consequences of potential competition law violations.
- The abusive behavior of the dominant players in the markets could receive harsher punishments.
- Businesses may experience delays in their ongoing dealings with competition authorities.
This alert provides an overview in relation to antitrust compliance and aims to raise awareness that competition laws still apply to your business, so does the Turkish Competition Authority (“TCA“) monitor your activities.
1.Collective actions and compliance with competition laws
Humanity’s current priority is to find a vaccine, medicine or any other measures or treatments for the COVID-19, and thus end the exponentially growing number of infections and deaths. Finding a treatment for COVID-19 will allow us to return our daily lives and eradicate severe business disruptions. To that end, companies may be required or may want to work with their competitors to achieve this goal.
These collective efforts may include joint (i) R&D studies by biotech, biochemistry or pharmaceutical companies; (ii) mitigating measures on supply chains by food, medicine, medical equipment suppliers; (iii) reimbursements from travel and accommodation service providers; or (iv) expansion of insurance coverages by the insurance companies.
Although these efforts are essential to improve public health and order, businesses should be careful due to the possible antitrust risks that come along with collective activities. For instance, businesses in amicable collaborations should still not share competitively sensitive information, nor should such joint activities evolve into an opportunity to set prices. A global crisis such as the COVID-19 pandemic does not suffice to justify collaborations violating competition laws. As a prime example, in 2017, the European Commission imposed € 776.5 million in fines on eleven airlines for applying fixed fuel and security charges. Even though the airlines justified their unlawful activities by citing the uncertainty sparked by the 9/11 attacks, their claims were rejected.
2.Following government instructions does not necessarily mean you are in line with competition laws
The government may call for businesses to heed its measures to solve the pandemic and crisis, which may involve compensations to customers or forming public-private partnerships. Although it is generally legal to convene or correspond with government officials and competitors, joint lobbying efforts or coordination on competitively sensitive commercial activities could breach antitrust rules as they go beyond the government’s goal to effectively respond to the COVID-19 outbreak.
3.Abusing market power could result in heavy fines
Due to the COVID-19 outbreak, there is an increasing demand for products such as face masks, hand sanitizer, soap, toilet paper, pasta, etc. Therefore, these products have become scarce in supermarkets and warehouses, and the high demand for non-perishable products could lead to a shortage. In response, businesses selling these products may increase their prices or bundle those products with other non-essential goods, thereby taking advantage of the tight supply-demand balance.
According to the TCA’s regulation, competition law offences categorized as cartel offences shall be subject to a base fine calculated at a rate of 2% to 4% of the businesses’ local turnover generated in the year preceding the Turkish Competition Board’s (“TCB“) fining decision. Even if a potential offence is categorized as a “non-cartel offence” (such as a dominant firm’s abusive conduct), the base fine would be calculated at a rate of 0.5% to 3% of the business’ local turnover generated in the year preceding the TCB’s fining decision.
4.Deferment of competition files before the authorities
Preventive measures to reduce the spread of the coronavirus include working remotely and limiting face-to-face meetings, and authorities (including the TCA) may become unavailable for business at any time in case the level of the measures taken rises. For example, the European Commission’s Directorate General for Competition announced that due to COVID-19, the oral procedure for leniency applications is unavailable until further notice. In addition, it encourages companies to postpone their merger notifications originally planned until further notice, if possible. However, as of the date of this alert, the TCA continues to carry out its operations and it appears they have not implemented remote working, unless otherwise ordered by the government.