Away (No More)

Hello everyone!

If you are regularly checking out our blog you may have noticed that we have been away for some time. That wasn’t because we are lazy but 2 out of 3 members of our team were busy with moving abroad. Yes you heard it right. Harun now resides in Ann Arbor, Michigan and Ökmen is in New York City. While Harun taking a long vacation (about 2 years) Ökmen will be studying Public Administration at Columbia University also for 2 years.

So now the burden is mine to fill these pages with posts and news. I’ll be doing my best to keep you guys updated. Keep following :)

Back-In-Business-V2

GCR Awards 2013

GCR has announced finalists of the annual competition law awards. You can see and vote here for the nominees. Turkish Competition Authority is nominated for Agency of the Year (Asia-Pacific, Middle East & Africa) along with the India, Japan and Pakistan Authorities. I’m pretty sure that Turkish Authority will win this category cause as we know one of the many rules of internet is that if there is a Turkish nominee in an online voting he/she surely wins.

The hardest category to decide who to vote for me was the Academic Exellence Award. I was torn between Daniel Sokol and Damien Geradin but Mr. Geradin has won me over on our one day trip to Cappadocia last Saturday. So if he reads these lines I hope Mr. Sokol forgives me.

Banking Investigation: Grand Finalé

the-endOn Friday the March 8th the TCA has announced its long waited final decision on banking investigation: guilty as charged! Decision has set new all time high fining records due to the size of the sector and the undertakings (check out Harun’s post for details). Investigation on 12 banks (including 3 state-owned banks) had started in November 2011 and banks were alleged to had agreed to jointly set maximum deposit rates and credit card fees and charges as well as to increase loan rates between 2007 and 2011.

Being the Authority employees we have abstained from making comments on the ongoing investigation process as you know. Before seeing the reasoned decision we still have a little to say on the investigation but there are a few things to mention about.

First of all banking sector executives kept tacitly implying during the process that the “sector” must be exempted from the competition rules due to the “special circumstances” of the sector. Accordingly one of the first impacts of the decision was a press release by the Banks Association of Turkey (BAT) which says as follows:

 “…In addition, in order to avoid such a situation which is far from reflecting the realities of the industry and, therefore, is fundamentally unjust, the relevant legislation needs to be reviewed to take into account sector characteristics. For this purpose, under the supervision of the relevant institutions and organizations, it has been put on the agenda of the BAT to work on the legislative amendment proposals.”

According to the statement of the BAT, so the banks, are going to use their powers to create a competition law exemption for the sector. But why? I believe that the TCA’s investigation was built upon tangible evidence and the decision is just antitrust wise. I suppose such a statement can be interpreted as the Turkish Banking Sector’s standard operating procedure has been collusion and instead of complying with the law they want to amend it (a good example of how collusion worked back in 90′s, can be found here in Turkish).  Moreover reading bank executives statements following the decision, it is attracted my attention that they are confused about some basic competition law concepts such as object, effect and information exchange, even after having two different investigations within three years. Here is the statement of the Garanti Bank CEO for instance:

“..It is said that a number of conversations and e-mails have been identified. People who know each other, talk to each other in all sectors. This does not mean that a violation of the competition. It must be examined if we did give any instruction to branches thataway. Do we have a common interest rate applied through the all branches of the banks? No, not. So how competition are being violated?”

Another issue that caught my attention during the investigation was the wording of some lawyers during the oral hearings. I have observed watching the hearings that some attorneys chose to speak ill of the rapporteurs and the investigation report itself instead of pointing out to the weak points of the report sedately and picking a hole in it. It’s not a much wise strategy in so many ways.

Last thing I’d touch upon is the private litigation process which probably will follow the decision. Articles 56, 57 and 58 of Turkish Competition Act allows competitors and consumers to claim damages they suffer as a result of the infringement of competition, that is to say the difference between the cost they paid and the cost they would have paid if competition had not been limited. During the investigation some NGOs had announced that they would appeal to the court for compensation against the banks once the violation is detected by the TCA. Since the private litigation way has never been implemented successfully within the Turkish Jurisdiction so far and the wording of the Act is disputable, those litigation cases will illuminate the road. I personally wonder how the Judges approach this case. The biggest challenge that they may face is the calculation of the damages while another important issue is the determination of grounds for triple damages. The Act states that if the resulting damage arises from an agreement or decision of the parties, or from cases involving gross negligence of them, the judge may, upon the request of the injured, award compensation by three-fold of the material damage incurred or of the profits gained or likely to be gained by those who caused the damage.

All in all the fat lady has sung her song and the decision has taken its place as a remarkable one within the Turkish Competition Law cases and we may expect to hear more of its impacts sooner.

TCA Hits Banks With Record Fines

In Friday evening, after the closing of stock exchange, the TCA has announced its long-awaited decision regarding major banks of Turkey. The TCA hits 12 major banks with record fines totalling 1,11 billion Turkish liras (around 480 million Euros). This amount exceeds the total fines imposed by the TCA since its establishment. Here are the percentages of the fines imposed on banks today (indicated by the red slice) compared to the total amount of the fines up to date.

banka cezalar1

This decision also broke another record in the history of the TCA which will celebrate its 16th anniversary next Friday. As can be seen in the graphics below, the fines imposed on five banks (indicated by red columns) have taken its place among the highest fines imposed on a single undertaking.

banka cezalar

The allegations investigated in the case include determination of deposit and credit interest rates, exchange of information, collusion on the increase of credit cards’ fees, and bid-rigging. Notwithstanding, the infringement was not regarded as a cartel. Hence the TCA started the calculation of fines in the range of 0.5%-3% instead of 2%-4%.

When we come to the adjustment factors, the TCA has not increased the fines because of the repeated infringement although it also imposed fines in 2011 on some of the banks that are fined today. On the other hand, the TCA applied mitigating factors in today’s decision.

All in all, the decision has already taken a significant place in the TCA’s history. It can also be asserted that the Authority has proved its maturity and sent a clear message to businesses that it will not tolerate any behaviour contrary to the Act how big or important you are for the economy as a whole.

Promotion Video of the TCA

The TCA has uploaded the long-awaited promotion video to its website, which is accessible at the right top corner of the Turkish version of the web page. The video, slightly over 4 minutes long, gives some basic information about what the benefits that competition brings to our lives and end with an assertive proposition: “if there is competition, so is happiness” (see here for more on the relation between competition and happiness).

Indeed, I noticed the video when I gave a break while reading a recent article by Nicolas Petit on “New Challenges for 21st Century Competition Authorities”. In the first part of the article, it is dealt with how competition authorities should provide guidance through negative (i.e. penalties, prohibition decisions) and positive enforcement techniques (i.e. issuing detailed clearance decisions). I would like to take this occasion to quote the part of the article on the mushrooming of these kinds of “advocacy gadgets”.

“Competition authorities like to look tough, but also like to look cool. This explains the mushrooming of advocacy “gadgets”, such as compliance movies, brochures, video games, comic strips, etc. Often, antitrust agencies present them as a source of guidance. Those instruments are, however, no surrogate for “positive enforcement”. They do not seek to clarify the substance of antitrust law. They simply try to raise awareness to the existence of competition rules. And when they do touch upon substantive issues, they stay at helicopter level. Finally, they do not originate from real life cases, they are very abstract. So whilst certainly useful, especially for new antitrust jurisdictions where market participants must be educated, advocacy instruments do not replace positive enforcement. “

After that, he gives the formula as to the optimal enforcement mix as follows:

“Optimal Compliance (OC) = deterrence through negative enforcement (D) + guidance through positive enforcement (G), with D>G; and D<1 and G>0.”

As far as I know, the Brazilian and Singapore competition agencies take the lead in this area as they have many advocacy gadgets such as brochures, videos, and animes etc. When we get back to the Turkish side, I should admit that it is a very late effort for a 15-year old authority albeit useful. It would not be a surprise if the TCA gets a similar video prepared about leniency in the near future like many other competition authorities did.