The distinction between competition law and unfair competition law as two disciplines of law is an issue that causes confusion among market actors unfamiliar with the theory as well as divergence of opinions among scholars and the legal community, given that these two disciplines have certain similarities and intersections in terms of their reflections on market actors and their historical development. Nevertheless, despite intersections in certain areas, these are often interpreted as disciplines that do not fully overlap due to the essential points where they diverge in terms of their objectives, remedies, and methods. By summarizing how the Turkish Competition Board (the “TCB”) has handled the matter through its reasoned decisions published in recent years, the question of where the difference between the two disciplines corresponds in practice based on the regulation of the issue in the Turkish legal system will be addressed in this article.
The relation between the main functions and objectives of the two disciplines
Many scholars examined the main interests sought to protect, the relationships regulated, and the acts mainly prohibited by competition law and unfair competition law to determine whether these fields of law are distinct, complementary, or integral as well as whether they have a priority relation between them. Not surprisingly, with the wide range of approaches that have been put forth, such as uniformity and independence, yet, it has not been possible to reach a consensus. However, explaining the reasons for this difference in approaches might go beyond the scope of this article which is intended to mainly address the practices of the TCB.
In terms of the objective of ensuring an undistorted competition, they complement one another and as a result, they share certain similar projections. However, because of the main objectives underlying these fields, one approaches from the economic perspective and the other from the perspective of the good faith rule. While unfair competition focuses more on ensuring a fair and honest trading environment for the benefit of the participants in the market, competition law aims to ensure and enhance economic efficiency through the protection of competition.
The legislation of the two fields and their intersection under the Turkish legal system
In Turkish law, Article 48 of the Constitution stipulates that “The State shall take measures to ensure that private enterprises operate in accordance with national economic requirements and social objectives and in security and stability.” While both disciplines may be considered as relating to this principle, the preference of the legislator has been to regulate unfair competition in the Turkish Commercial Code (the “TCC“) by means of providing legal protection through commercial litigation, while setting forth the legal context of competition law under the Law on the Protection of Competition (the “Law No. 4054“), within a stand-alone legislation.
The main forms of unfair competition are regulated in the TCC, under the title of “acts and commercial practices contrary to good faith” by way of example. In the preamble of the TCC1, it has been stated that these provisions are intended to direct all persons who may distort pure, fair (lawful) competition to ensure undistorted competition for the benefit of all participants. In line with the objective pursued, those who are given the right to file a lawsuit are regulated to include almost all participants, including chambers and consumer associations.
The scope of the Law No. 4054 involves agreements, decisions, and practices which prevent, distort, or restrict competition, abuse of dominance by dominant undertakings in the market, and mergers and acquisitions which may significantly decrease competition. This scope corresponds to Article 167 of the Constitution, which stipulates that the State shall prevent the formation of monopolies and cartels in the markets, emerged in practice or by agreement. As a result of the more economic and major focus adopted in relation to the competition law, for certain acts to fall within the scope of competition law, the requirements of being in a dominant position or exceeding certain thresholds are sought.
Meanwhile, it should be noted that some actions can be evaluated in terms of unfair competition and competition law. To provide an example, this is the case with below-cost sales and boycotts, while some of the conditions differ from each other with the existence of distinguishing prerequisites in competition law such as being in a dominant position for below-cost pricing, and the initiation by an undertaking for boycott.
Overall, concerning the Turkish legal system, it would not be erroneous to say that competition law and unfair competition are two substantially different fields of law that are distinct and independent, as confirmed by their regulation under separate laws which comprise different dispositions among which only some are complementary in certain aspects, without any relationship of precedence.
It is possible to conclude that although the debate on overlapping aims and practice areas of the rules of competition law and unfair competition law is global in nature, at the end of the day, qualifying practices as unfair or anticompetitive in practice depends on the competition policies of a country. Thus, while certain competition authorities are only in charge of safeguarding competition, certain authorities also perform duties such as protecting consumers, ensuring fair trade practices, and preventing unfair competition and unfair prices.
Where to draw the line in practice: Where does the TCB stand on the matter?
Among the applications made to the Turkish Competition Authority (the “TCA“), we encounter many complaints containing allegations related to unfair competition and this misconception stems from the confusion regarding the two fields.
In the Alcon decision, one of the decisions in which TCB decided not to initiate an investigation,2 the TCB rejected the complaint that was made based on allegations which were the subject to unfair competition regulated under the TCC, such as promoting contact lenses without prescription on the internet and thus endangering the health of the consumer, applying discounts on some brands of the same qualities while others are not applied, placing advertisements and campaigns contrary to the good faith, misleading the customer by concealing the dangers of the product or by means of additional benefits resulting from misleading campaigns and promotions, and limiting the customer’s freedom of decision-making through aggressive sales methods to the extent that some prices are set below supply price and directing the consumers to certain optical stores.
The Google Alphabet Decision is also among the decisions where the TCB emphasized the distinction between the two areas by means of outlining that a specific practice may violate different legislations on different grounds, or there is no such rule that an act that cannot be held to be illegitimate under a particular legislation cannot be in breach of another legislation.3 Regarding the defence that the allegations regarding the display of text advertisements are related to consumer protection and not the subject of competition law, the TCB emphasised that the allegation that competing undertakings are brought to a disadvantageous position in competition by manipulating the clicks of users with the labelling features of Google Adwords is a case that should be examined within the scope of the Law No. 4054 since ambiguous labelling can make ad results seem more relevant than they are, leading to a further decrease in traffic to organic links.
Similarly, in the Mask Producers decision regarding the concurrent price increases, the TCB clearly stated that cases regarding unfair competition do not fall within the jurisdiction of the TCA and that unfair competition and competition infringement have different meanings. In the similar vein, an increase in the prices due to an agreement between the competing undertakings may be analysed within the context of the competition law, whereas if an undertaking increase the sales price of the goods or services offered to the consumer without a justified reason by pretending to be affected by price changes such as input cost and exchange rate increase, despite not being affected by these situations then it may constitute an unfair commercial practice. Therefore, the TCB found that the increase in the sales price of masks subject to the investigation did not violate the Law No. 4054 since it did not result from an agreement or concerted practice between the undertakings and decided only to issue an opinion to the Unfair Price Evaluation Board.4
On the other hand, in the Arçelik – Vestel Decision of the TCB where the two disciplines of law were separately addressed, the TCB held that the disclosure of confidential information by an employee of Arçelik to the research companies previously worked for by a person currently working at Vestel in exchange for various benefits may be analysed as a breach of the obligation of trade secret in the context of the TCC and that this aspect of the matter was outside the scope of the Law No. 4054. However, the TCB analysed whether other practices corresponding to exchange of competitively sensitive information between the two undertakings, constituted an infringement of competition rules.5
The decisions of the associations of undertakings and the subsequent actions accordingly taken by the undertakings which may have an impact on competition are also of importance with regards to the evaluation of this matter since the prevention of unfair competition may fall within certain associations’ objectives defined in the legislation and the objectives pursued with the practices subject to exemption applications.6
With regard to an individual exemption application made by Insurance Association of Türkiye, it is observed that the TCB rejected the individual exemption application of the association, despite the fact that the prevention of unfair competition falls within the objectives defined in the legislation of the relevant professional association and the allegation that this is also the purpose of the practice for which the exemption is applied for. 7
In another decision, the TCB decided that an individual exemption cannot be granted to the Board of Directors’ resolutions, of Air-Conditioning And Refrigeration Manufacturers’ Association, which are related to a video planned to be released as a public service advertisement promoting the use of authorised services for after-sales services over private services, despite accepting that the purpose of the practice subject to the application is essentially related to the prevention of unfair competition.8
The TCB distinguishes between the acts of unions which rely on their explicit powers arising from the legislation and acts which exceed these powers. However, from time to time by making statements to eliminate the perception that some decisions and practices of professional chambers are generally considered unproblematic in terms of competition law, sometimes included in the defence, the TCB usually decides not to initiate an investigation on various grounds such as the fact that the agreement or the decision is not implemented or grounds related to the parties and to issue opinions to the relevant associations of undertakings.9
Likewise, in the “Chambers of Pharmacists” decision, which is related to the sequential prescription distribution system, the TCB, by also expressing that such distribution systems are generally considered problematic in terms of competition law; decided not to impose a fine on the associations of undertakings party to the investigation and to issue an opinion, since the Social Security Institution, which is a party to the relevant protocol, does not have the characteristics of an undertaking and the actions of the Chamber of Pharmacists in relation to the implementation of the relevant protocol in which this distribution system is regulated, cannot be considered as an independent market behaviour of an undertaking.10
Conclusion
With respect to complaints concerning unfair competition, the TCB has been consistent in clearly stating that such practices do not fall within the scope of the Law No. 4054.11 It is observed that both in complaints and defences, the undertakings may use the allegations related to unfair competition intentionally or due to confusion; however, since the TCB’s stance on this issue is quite precise, no ambiguous situation arises in terms of the application of the two legislations. What is more interesting is that some undertakings may allege that their anti-competitive decisions or agreements are intended to protect competition, and further, they even allege that rather undertakings that do not comply with them are committing unfair competition, and needless to say, the TCB does not give credence to such allegations.
Footnotes
1. Preamble of the Turkish Commercial Code No. 6102, Article 55 https://www.lexpera.com.tr/mevzuat/gerekceler/turk-ticaret-kanunu-madde-gerekceleri/1 (last access on 04.08.2023).
2. TCB’s decision no. 21-34/476-238 of 08.07.2021: Following the annulment of the TCB’s Alcon Decision no. 18-20/355-M of 21.06.2018 by the administrative court, the TCB this time carried out a preliminary investigation and decided not to investigate by rejecting the complaint again. https://www.rekabet.gov.tr/Karar?kararId=86b00546-c24a-48de-b43d-c0be86db0998
3. TCB’s decision no. 20-49/675-295 of 12.11.2020: In the Google Alphabet Decision, it is stated by the TCB that the effects of Google advertisements in terms of unfair competition are not analysed within the scope of the file and that whether they harm effective competition in the market is analysed instead. https://www.rekabet.gov.tr/Karar?kararId=9bbb9ad4-24d1-4d5d-b2c2-e710a35496ab
4. TCB’s decision no. 20-57/798-355 of 30.12.2020: In the Mask Producers Decision, the TCB summarized the legislative amendments and the measures implemented against unfair price increases during the pandemic period in Turkey and in other countries, such as the establishment of the Unfair Price Evaluation Board within the Ministry of Trade. https://www.rekabet.gov.tr/Karar?kararId=5d512066-dfae-4306-8db8-f109b6446b89
5. TCB’s decision no. 20-01/13-5 of 02.01.2020: In the Arçelik – Vestel investigation, Arçelik applied for leniency and the parties alleged that the extent of the incident was the leakage of information within the scope of unfair competition, rather than the exchange of information within the scope of the Law No. 4054. The TCB concluded that Arçelik, from which the information was leaked, was not aware of the information transfer, and that between the two undertakings there was no agreement or concerted practice limiting competition also having analysed whether there was parallelism in the market figures. https://www.rekabet.gov.tr/Karar?kararId=8c7e3596-b946-49b9-9a97-9f546349a798
6. Under Article 3 of the Law No. 4054, “association of undertakings” are defined as “any kind of associations with or without a legal personality, which are formed by undertakings to accomplish particular goals”. For example, professional chambers and sector associations can be considered within this context.
7. TCB’s decision no. 18-48/751-364 of 20.12.2018 (https://www.rekabet.gov.tr/Karar?kararId=7a167127-763a-48ee-a081-b1ba7bc233c6)
8. TCB’s decision no. 19-14/186-84 of 04.04.2019 (https://www.rekabet.gov.tr/Karar?kararId=424c927b-d522-4d64-afb3-666cdf5cd1e7)
9. TCB’s decision no. 18-02/10-6 of 11.01.2018: In the İstanbul Chamber of Commerce Decision, the TCB decided that “In this respect, it has been concluded that the occupational decision subject to the present investigation, which aims to determine the conditions of competition in the relevant market, has a quality that exceeds the scope and limits of the authority of the İTO in terms of taking compulsory occupational decisions, that the Compulsory Occupational Decision taken by the İTO constitutes a violation of the Law No. 4054, however, since it has not been implemented so far, it is not necessary to initiate an investigation, and it is concluded that an opinion should be issued to the İTO within the framework for the İTO to withdraw the decision in question and notify its members.” https://www.rekabet.gov.tr/Karar?kararId=6f7ccbae-b501-44d4-8534-e40c5c001644 (last access on 04.08.2023)
10. TCB’s decision no. 17-22/362-158 of 13.07.2017: With regards to the Chambers of Pharmacists Decision, it is alleged by the chambers of pharmacists that the aspect of the sequential prescription distribution system which makes it difficult for patients to access medication, that was found problematic by court decisions, has been eliminated by introducing a quota system which facilitates patients’ access to medication, that unfair competition conditions have been eliminated by introducing an upper limit for each prescription group, and that the application even has the effect of increasing competition among pharmacies. https://www.rekabet.gov.tr/Karar?kararId=813d64cf-c682-4db9-9d8b-ea582ddb595f
11. TCB’s decision no. 18-19/330-164 of 12.06.2018: In the IQVIA Decision, the TCB decided that the allegations regarding the meeting of Eczacıbaşı with doctors in order to promote its product and obtaining market share from Aymed by conducting competitive activities in the relevant market cannot be evaluated within the scope of the Law No. 4054 and that the allegations that Eczacıbaşı officials advised doctors who prescribed Urocit K not to prescribe this medication can be analysed within the scope of the provisions of Article 55 of the TCC regarding unfair competition. https://www.rekabet.gov.tr/Karar?kararId=2c917543-e274-45f9-88f4-063a5299039a
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