Past and Present Difficulties in Turkish Competition Policy
By Ann-Kathrin Ziegler
ADMD Law Office, www.admdlaw.com, Istanbul TURKEY
Overview
At the Helsinki European Council in December 1999, the Republic of Turkey was officially recognized as an accession candidate country to join the European Union. Negotiations pertaining to accession talks include Turkey’s competition policy. The 2005 accession talks in Brussels required Turkey to align itself with the European Union Legislation.
Past Difficulties
For this purpose the mentioned legislation was split into 35 chapters with chapter 8 referring to competition policy. Since competition policy is one of the chapters used by the EU to assess Turkey’s ability to assume obligations for membership, it seems appropriate to scrutinize its progress in more detail.
An enlightening source for this purpose is the presentation shown at a screening meeting in December 2005 by the Turkish Competition Authority (TCA) before the European Commission. ‘Alignment’, to begin with, is required in terms of substance as opposed to procedure. While impressive evidence relating to Turkey’s general compliance with EC procedures was presented in the first part, legislation seemed to be lacking behind. An OECD Turkey-Peer Review of Competition Law and Policy established the following:
Article 81 (1) of the 1999 Treaty of Amsterdam prohibits (and Article 81(2) renders legally void) all agreements and concerted practices “which have as their object or effect the prevention, restriction, or distortion of competition.” Article 4 of the Turkish competition act in essence mirrors this: Agreements, practices and decisions between all kinds of undertakings operating in or effecting markets for goods and services within the borders of the Republic of Turkey which can prevent, distort or restrict competition.
Exemptions from Article 81 (1) are listed in Article 81 (3); the Turkish equivalent, article 5, according to OECD, follow the same criteria for granting exemptions as those in Article 81 (3) of EU law and ‘require that the agreement at issue lead to improvements in production, distribution, or technology, and confer benefits on consumers; yet not eliminate competition in a significant part of the market or be more restrictive than necessary to achieve its beneficial objective’.
Present Difficulties
Notable legislative differences befalling Article 81 (3) EU law and Article 5 of Turkish competition law nonetheless prevail. For example, as of May 2004 case-specific exemption applications as well as the negative clearance system (enabling parties to obtain a declaration granting them quasi immunity from prosecution under Article 81 (1)) were eliminated. Under Turkish competition law these exemptions, however, remained in force and constitute a difference to EU competition to the present.
Dissimilarity could also be found in Research and Development agreements (R&D). In August 2003 TCA published a communiqué that granted block exemptions for R&D agreements. It demonstrates minor differences to EU legislation regarding the length of the exemption applicability and market share percentages exist. The TCA exemption scheme further prohibits all price fixing contracts unconditionally.
In addition, the OECD report expressed concerns over the lack of a technology transfer block exemption comparable to the existing EU one. This matter appeared to have been resolved in January 2008 with the publishing of communiqué 2008/2 on block exemption for technology transfer. Indeed, this constitutes a major improvement on Turkey’s part because it introduced market share ‘ceilings’ required for the issuing of intellectual property rights, a concept therefore, that had been problematic only two years ago. On the other hand, on August 6, 2008 the General Block Exemption Agreement was published in the Official Journal of the European Union. The agreement now grants state aid exempt from Article 81 (1) to a number of institutions including newly created small enterprises, female entrepreneurship, and environmental protection, energy saving measures, environmental studies, and promotion of energy from renewable energy resources. The agreement, therefore, expands and limits the terms under which exemptions may be granted to technology transfers alien to those in the Turkish communiqué.
Conclusion
The above selection of dissimilarities in the terms of substance pertaining to Turkish alignment with EU competition law was meant to underline some of the remaining difficulties. All the while Turkey has made rapid improvements in the alignment process issuing communiqués (in force) concerning for example block exemptions relating to the insurance sector, vertical agreements and concerted action in the motor vehicle sector. Further communiqués on mergers and acquisitions throughout the last two years have regulated and facilitated foreign investment.
It should nonetheless be forgotten that with the adoption of the European Union legislation, Turkey has agreed to take into account the constantly evolving and changing legislation. In this sense Turkey’s improvements on competition policy alignment is not only praiseworthy or lamentable at times but also a necessary measure to join the European Union.