Ercüment Erdem Att. Mert Karamustafaoglu

Evaluation of COVID 19 Outbreak in Terms of Turkish Competition Law

May 2020
“Everything was so much that it would come as little to be surprised.”
Edip Cansever

Introduction

COVID 19 was previously a mysterious disease that appeared in a remote Chinese city. Over time, frightening images of this epidemic disease began to appear in the news. At first, many countries in the world were safe; the disease was not everywhere. In time, however, COVID 19 spread throughout the world, as it was inevitable to do so.

Epidemics seen in various periods throughout world history affected thousands, even millions of people. For example, in the book, "Rebellion and Plague in Istanbul," by Eastern Roman historian, Prokopios, a disastrous plague epidemic is described. Due to the aforesaid epidemic, the economic and social life in the Roman Empire changed drastically, and strict new laws were introduced. Despite this, however, the fall of the Roman Empire could not be prevented. Hence, after the raging of great epidemics, empires collapsed, or new empires began to emerge throughout history.

The COVID 19 outbreak, like all other major outbreaks, has become a problem threatening all humanity throughout time; therefore, it was declared as a "Pandemic" by the World Health Organization on 12 March. It caused millions of people to fall sick and to date, we have seen over 400,000 related deaths. The shelves of supermarkets were emptied within a few hours by people panicking in fear. Cleaning and food products supply became a serious problem. Billions of people remained in quarantine in their homes for months. Economies have halted in all countries, millions of people have become unemployed, and the capitalist system has encountered one of the most severe crises known to mankind. Although the epidemic has been brought to heel in many countries, it is said that new waves may occur, and this makes the future more uncertain in terms of economic activities.

The excessive demand for certain goods unpredictably increased demand, especially for e-commerce items, during the epidemic period. It looks certain that the intense demand upon online sales channels will change market definitions and will lead to a different interpretation of the markets in terms of competition law. In addition, many undertakings, especially supermarkets, will need to make intense efforts and take additional measures in order to ensure supply adequacy and security. If a new wave of the outbreak occurs, it seems that supply shortages will be a serious problem, especially in terms of food and cleaning materials.

Thus, cooperation between the said undertakings seems inevitable. In terms of competition law, this situation brings with it important risks, especially in the realm of information exchange.

However, excessive price increases for some basic foods and cleaning products are even more important within the scope of COVID 19. Despite increasing prices, consumers still cannot access certain products. This situation brings along shocking claims. As is found in the entire in world, public opinion in Turkey has placed pressure on the governments to control price increases. It is seen that the Competition Authority is also playing an important role in investigations initiated, as well as forming new regulations for control of the excessive price increases and the fight against stockpiling during the COVID 19 process in Turkey.

It seems that the effects of COVID 19 will appear more clearly in the upcoming period. In terms of competition law, this will also require the adoption of a new sanction policy. Therefore, after the epidemic, it will be inevitable that issues, such as abuse of dominant positions, excessive prices and refusal of giving goods, will come under intense scrutiny on the agenda. Likewise, the Competition Authority in many parts of the world opened investigations, especially as to food and cleaning / hygiene products as soon as the epidemic started.

In addition, due to the fact that hundreds of thousands of public employees stayed in their homes during the epidemic, both in the European Union ("EU") Member States and the EU Commission, the principle to conduct meetings through video conferencing or over the phone became more widely used. In addition, many Member State Competition Authorities were requested to postpone merger and acquisition applications as much as possible, and it was announced that they would be treated flexibly in terms of time. As the employees of the Competition Authorities return to their jobs, long-awaited decisions will begin to be issued.

COVID-19 in Terms of Turkish Competition Law

Claims of excessive increases in the prices of health and cleaning materials and, especially, food, has come to the forefront since mid-March when the COVID 19 outbreak started to gain momentum in Turkey.[1] In addition to the difficulty in the supply of some products due to the increase in demand, prices started to increase significantly with the start of Ramadan. Production difficulties caused by the COVID 19 outbreak created serious uncertainties for all players in the market. While consumers had difficulty in finding some products in the market, they had accessed many products at very high prices as compared to the past. The increase in the demand for products used for protection against epidemics, such as gloves, cologne and masks, made it difficult to find the said products.

This situation started to affect many sectors. For example, since ethyl alcohol required for the production of cologne and disinfectants is difficult to find in the market, the necessity of mixing ethanol into gasoline has been suspended for 3 months.[2] Likewise, electricity consumption fell unexpectedly to the lowest level of the year due to declining economic activities.[3] This led to a serious drop in wholesale electricity prices, reducing the profitability of power generation companies. The Ministry of Industry and Technology held a meeting concerning cologne, which came to the fore during the epidemic, and announced that the producers are committed to not increasing their prices.[4]

Various precautions have been taken due to the price increases experienced due to the epidemic. In this context, apart from the Ministry of Commerce, it was also observed that the Ministry of Treasury and Finance also took action, and some companies were punished for excessive prices.[5]

One of the most important measures taken has been the amendments introduced to Law No. 6585 on the Regulation of Retail Trade.[6] The notions, such as "excessive prices," "stockpiling," and "unfair price assessment board," added to the said Law, the principle of investigating the high price increases and, upon complaints, actions were taken concerning matters such as stocking, by the “unfair price assessment board.” With the “Unfair Price Assessment Board Regulation,”[7] issued following this amendment, the aforementioned Board, the operating principles of which were arranged in detail, began to function.

Thus, as in many parts of the world, in Turkey, the government has responded sensitively to price increases, and has taken emergency precautions to ensure the security and adequacy of supply for the public’s food and cleaning products.

The Turkish Competition Authority, like other Competition Authorities in the EU and the United States, did not make any announcement regarding any changes concerning the functioning of competition rules, applications, and meeting procedures. However, it gave very limited certain flexibility in terms of defense period. The Authority announced that applications regarding the extension of the second and third written defense periods will be accepted; even so, any matter that could not be submitted to the Authority together with the defenses shall be submitted within the investigation period (approximately 15 months).[8] This has, in fact, allowed many defense arguments to be presented within an investigation period of almost 15 months.

The Competition Authority has been much more sensitive about food prices. The Competition Authority issued two very closely dated announcements about excessive prices, especially in the food sector. The Competition Authority previously published announcements about fresh fruit and vegetable products, which were claimed to have had excessive price increases imposed upon them.[9] Following these announcements by the Competition Authority, investigations were launched in markets, such as supermarket chains, and fruit and vegetable markets.

The first announcement by the Competition Authority, after the effects of the COVID 19 outbreak began to appear, was on 23.03.2020.[10] In this announcement, the Competition Authority emphasized COVID 19, which is a global epidemic, and stated that excessive price increases had been observed in the food markets, especially in the fresh fruit and vegetable market. Emphasizing that this situation affects consumer welfare, the Authority stated that actions that would disrupt competition would be punished with the most severe administrative fines.

Two days after this announcement, a statement was issued by the President of the Competition Authority.[11] In that statement, it was stated that the fresh fruit and vegetable market is being closely monitored and, although there has been no increase in costs, “excessive price increases” have been made, and these practices cannot be tolerated. The most important message of the said announcement was that the administrative fines will be handed down from the upper limit, and that the Competition Board will use its discretion to impose heavy penalties. Therefore, the Authority explicitly stated that despite the struggle against the COVID 19 outbreak, the heaviest fines would be imposed on those who made excessive price increases by being “opportunistic.”

Soon thereafter, the Competition Authority launched an investigation of cleaning and food products.[12] This was followed by an investigation of mask manufacturers.[13] Thus, an active competition law practice began in Turkey.

Conclusion and Implications for the Future

In previous years, due to the increase in the foreign exchange and seasonal conditions experienced in Turkey, increases in the prices of some fruit and vegetable products were experienced. Thereupon, statements and investigations were made via the Competition Authority's website.[14] In the same period, investigations were commenced on paper, fertilizer, and supermarket markets that came to the agenda with the claims of high price increases but, mostly, no violation was determined.

Past practices clearly reveal that the Competition Authority is closely examining markets with high price increases due to both foreign exchange increases and seasonal conditions. It tries to protect the interests of consumers by examining the effects and causes of price increases. It also takes into account all economic arguments throughout the crisis period, which has been put forward as a defense in this matter.

However, in previous decisions, the Authority did not take into account only the crisis defense. For example, the economic crisis defense proposed in the Seramik[15] decision was not accepted. The Authority indicated that a crisis cartel must be formed in order to reduce excess capacity, should not involve price determination or quota agreement, and public authorities should be notified. In the Otomotiv ÖTV[16],Tüpraş[17] and 12 Banks[18] decisions, crisis defenses were made by undertakings, but these defenses were not accepted, as well.

It is clear from these decisions that the Competition Authority accepts the defenses made during the crisis periods only as a reason for the reduction if it reveals drastic changes in the market conditions. The existence of only one crisis is not considered as a defense that eliminates the violation of competition. However, it should be noted that the effects of an epidemic, such as COVID 19, have not yet been examined by the Competition Authority. Such a pandemic can change the jurisprudence of the Competition Authority, as in the rest of the world.

[1] https://www.sabah.com.tr/ekonomi/2020/03/13/corona-firsatcilari (Access date: 9.06.2020); https://www.hurriyet.com.tr/ekonomi/son-dakika-bakan-pekcandan-corona-virus-aciklamasi-fiyat-artislarina-gerekeni-yapacagiz-41466705 (Access date: 9.06.2020).

[2] https://www.enerjigunlugu.net/kolonya-uretimi-icin-3-ay-benzine-etanol-karistirilmayacak-36518h.htm (Access date: 9.06.2020).

[3] https://www.dunya.com/gundem/gunluk-elektrik-tuketiminde-yilin-en-dusuk-seviyesi-goruldu-haberi-465662 (Access date: 9.06.2020).

[4] https://www.sanayi.gov.tr/medya/duyurular/60d200320t1 (Access date: 9.06. 2020).

[5] https://www.tv100.com/maliye-bakanligindan-fahis-fiyatli-satislar-icin-ihbar-hatti-haber-487881 (Access date: 9.06.2020); https://www.ekonomist.com.tr/haberler/bakanliktan-virus-firsatcilarina-karsi-onlem.html (Access date: 9.06.2020); https://www.gib.gov.tr/koronavirus-nedeniyle-piyasalardaki-haksiz-fiyat-artisina-iliskin-sikayet-hatti (Access date: 9.06. 2020).

[6] For Law No. 7224, which includes the said amendments, see Official Gazette dated 17.04.2020 and numbered 31102.

[7] For detailed information, see Official Gazette dated 28.05.2020 and numbered 31138.

[8] https://www.rekabet.gov.tr/tr/Guncel/duyuru-91e4ba53dc80ea11811800505694b4c6 (Access date: 9.06.2020).

[9] https://www.sozcu.com.tr/2018/ekonomi/tarlada-da-yok-depoda-da-yok-2768372/ (Access date: 9.06.2020).

[10] https://www.rekabet.gov.tr/tr/Guncel/kamuoyuna-duyuru-3b18d865266dea11811700505694b4c6 (Access date: 9.06.2020).

[11] https://www.rekabet.gov.tr/tr/Guncel/rekabet-kurumu-baskani-birol-kule-nin-ya-19def560896eea11811700505694b4c6 (Access date: 9.06.2020)

[12] https://www.rekabet.gov.tr/tr/Guncel/aralarinda-zincir-marketlerin-de-bulundu-8828c79f5f90ea11811a00505694b4c6 (Access date: 9.06.2020)

[13] https://www.ntv.com.tr/turkiye/rekabet-kurumu-maske-uretim-ve-satisi-yapan-10-tesebbuse-sorusturma-acti,126IRYcLVkGmrPAmH99FdQ (Access date: 9.06.2020)

[14] https://www.sozcu.com.tr/2018/ekonomi/tarlada-da-yok-depoda-da-yok-2768372/ (Access date: 27.03.2020); https://www.aa.com.tr/tr/ekonomi/rekabet-kurumundan-patates-ve-sogan-fiyatlarina-takip/1182051 (Access date: 9.06.2020); http://ekonomi.haber7.com/ekonomi/haber/2775326-rekabet-kurumundan-kritik-sogan-aciklamasi (Access date: 9.06.2020).

[15] https://www.rekabet.gov.tr/Karar?kararId=794eb352-4c6e-40df-8d73-7867772827e3 (Access date: 9.06.2020).

[16] https://www.rekabet.gov.tr/Karar?kararId=b2bac617-7340-433a-99b8-b9ff8d3e1934 (Access date: 9.06.2020).

[17] https://www.rekabet.gov.tr/Karar?kararId=3b186e10-8a4d-4897-a49a-d8e5e2f1b21f (Access date: 9.06.2020).

[18] https://www.rekabet.gov.tr/Karar?kararId=30851aa5-2cf3-4c54-b284-e192ed6ed71b (Access date: 9.06.2020).