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Legal Alerts

18/03/2021

Communiqué on De Minimis Exception Enters Into Force

Legal Alerts
Competition
General

New Developments

The Competition Authority’s (“Authority“) Communiqué No. 2021/3 on Agreements, Concerted Practices, Acts and Conducts of Association of Undertakings that Do Not Considerably Restrict Competition (“Communiqué“) was published in the Official Gazette dated March 16, 2021 and No. 31425 and entered into force on the same day. The Communiqué aims to establish the de minimis mechanism, which allows public funds to be directed towards investigating more important violations instead of violations that do not significantly restrict competition. Previously, the draft communiqué (“Draft Communiqué“) was published on the Authority’s website on October 23, 2020. You may find our legal alert on the Draft Communiqué here. Compared to the Draft Communiqué, the Communiqué brings both critical and cosmetic changes.

What Do the Developments Mean?

The Communiqué regulates the conditions under which the Authority may decide not to pursue investigations on the agreements, concerted practices, decisions and actions of associations of undertakings that do not significantly restrict competition in the market. The procedures and principles specified in the Communiqué include:

  • Clear and hardcore violations cannot benefit from the de minimis exception provided by the Communiqué: Article 1 of the Communiqué states that clear and hardcore violations would fall outside the scope of the Communiqué, and these violations cannot benefit from the de minimis exception. Article 4 of the Communiqué conclusively answers the question about the definition of “clear and hardcore violations”. According to the Communiqué, all clear and hardcore violations have one common characteristic: having the object or effect of directly or indirectly preventing, distorting or restricting competition in a market for goods and services. The Communiqué further exemplifies these violations by categorizing them in terms of the nature of the relationship between the undertakings.
    • Horizontal clear and hardcore violations: Price fixing; customer/supplier/territory/trade channel allocation; restrictions or quotas on supply; bid-rigging; or sharing competitively sensitive information such as future prices, production or sale volumes, between competitors.
    • Vertical clear and hardcore violations: Determination of the buyer’s fixed or minimum sales prices between undertakings operating at different levels in production or distribution chains.

The Communiqué expands the scope of the clear and hardcore violations, which is one of the significant deviations from the Draft Communiqué where clear and hardcore violations were defined as price fixing, region or customer allocation and restrictions on supply, without  further categorization.

  • De Minimis mechanism is based on market shares: Similar to the European Union competition law legislation and enforcement, Article 5 of the Communiqué ordains that the following agreements do not appreciably restrict competition:

(i) if the aggregate market share held by the parties to the agreement does not exceed 10% on any of the relevant markets affected by the agreement where the agreement is made between competing undertakings; and

(ii) if the market share held by each of the parties to the agreement does not exceed 15% on any of the relevant markets affected by the agreement, if the agreement is made between non-competing undertakings.

The Communiqué also provides that if it is not possible to classify the agreement as an agreement between competing undertakings or between non-competing parties, or if the relevant decision belongs to an association of undertakings, the aggregate market share of the parties/members of the association of undertakings should not exceed 10% in any of the relevant markets affected by the agreement.

The Communiqué has a specific provision for vertical restrictions. Accordingly, the aggregate market share of competing or non-competing undertakings should be below 5% to benefit from the de minimis mechanism if the parallel networks formed by vertical restrictions cover more than 50% of the relevant market.

Last but not least, the Communiqué indicates that it will not be deemed to be an appreciable restriction on competition if the market shares of the contracting parties or members of the association of undertakings are above the specified thresholds by a maximum of 2% during the agreement or the decision period for two consecutive calendar years.

  • The Competition Board may not launch an investigation regarding agreements and decisions that do not have an appreciable effect on competition, or may terminate an investigation if it turns out during the investigation that the aggregate market shares do not exceed the relevant thresholds: Although the Draft Communiqué clearly set forth that the Competition Board can launch an investigation even if the designated thresholds are not exceeded, the Communiqué does not include the relevant provision and contents solely referring to the Competition Board’s discretion not to launch an investigation regarding the agreements and decisions that fall within the scope of de minimis exception. Additionally, the Competition Board may terminate an investigation if it is later calculated that the market shares of the undertakings or associations of undertakings do not exceed the abovementioned thresholds where an investigation is initially commenced due to the inability to determine the aggregate market shares of the relevant undertaking or association members.
  • Relevant market data and year for the market share calculation: The Communiqué also differs from the Draft Communiqué in terms of the market share calculation for the implementation of the de minimis exception. The Draft Communiqué provided that the market share would be calculated based on the sales value, and if unavailable, based on the estimations of other reliable market data including sales volume. However, although the Communiqué refers to the market share based on the sales value, it also indicates that purchase price-based market shares could be taken into consideration, where appropriate. If neither the value-based nor purchase price-based market shares are available, the Authority will calculate the market share based on other reliable market data. Finally, despite the Draft Communiqué indicating that the Authority will consider the market shares for each year during the period of the agreement or decision, the Communiqué states that the market shares will be calculated based on the data of the previous year.
  • De minimis exception will also be applied to the ongoing preliminary and full-fledged investigations: The Communiqué states that de minimis exception will also be applied to the ongoing preliminary and full-fledged investigations as of its enforcement.

Conclusion

The Communiqué, which recently entered into force, regulates the procedures and principles regarding the implementation of the de minimis mechanism. This mechanism was added to the Law No. 4054 on the Protection of Competition through the newly enacted Law No. 7246, which entered into force on June 24, 2020. The Communiqué bears significant similarities to the European Union’s Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the Treaty on the Functioning of the European Union (De Minimis Notice), particularly on the framework and threshold market shares. This marks yet another effort to align Turkish competition law with the EU law. It is expected that the Communiqué will enable the Authority to allocate public resources more effectively for competition law enforcement.

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