The Competition Authority's Sector Investigation Reports on FMCG Retailing and Online Advertising Sectors and the Reflections of Digital Transformation on Competition Law were Published
The Competition Authority presented its important studies on various sectors to the public. The reports, which address the competition law implications of the transformation in digital markets, and include findings and assessments on the fast-moving consumer goods retailing and online advertising sectors, reveal the Competition Authority’s approach to the relevant sectors separately. We present our alert below, which briefly compiles these studies, to your attention.
Final Sector Inquiry Report Regarding Fast-Moving Consumer Goods Retailing
The Final Sector Inquiry Report Regarding Fast-Moving Consumer Goods (“FMCG”) Retailing (“Final Report”) prepared by the Turkish Competition Authority (“Authority”) was published on the Authority’s website on 30.03.2023. The Authority had shared its Preliminary Sector Inquiry Report Regarding the FMCG Retailing prepared in this scope with the public on 05.02.2021.
Due to its structure and key role in the economy, the FMCG retailing sector constitutes one of the areas of the Authority’s focus. The related sector is regularly and carefully followed by the Authority and developments in the sector are closely monitored. In this context, the findings and assessments addressed in the Final Report are presented below:
- In Türkiye, where the traditional retail channel preserves its importance, organized FMCG retailing continues to develop with the contribution of regional/local retail chains.
- It is stated that the reason for the concentration in the sector is new store openings, rather than the slow pace of acquisitions, but new store openings. Therefore, it is concluded that there is no need to lower the merger filing turnover thresholds specific to the retail market.
- It has been suggested that a buyer market share threshold could be added to the legislation in addition to the supplier market share threshold in order to examine whether a vertical agreement benefits from the group exemption. Additionally, it is noted that regulations in the Directive on Unfair Trading Practices adopted by the European Commission should also be implemented in Türkiye.
- On the other hand, it has been assessed that provisions on the prohibition of “supplementary invoice” practices imposed by retailers with a unilateral decision may be considered within the scope of unfair commercial practices.
- It has been expressed that requiring new store opening permits of chain supermarkets to be based on the population criterion may have some anti-competitive effects, and therefore, such a regulation should not be implemented. However, it has been also stated that retailers within the same economic integrity may be prohibited from opening a second branch within a specified distance and they may also be prevented from acquiring within the same distance.
- It is assessed that regulations regarding the discount arrangements, including the availability of the product in the store during the period when the discount is announced and sold it at the discount price and preventing agreements for suppliers to produce products with special weights for a single chain market.
- As the share of private label products in FMCG retailing has been increasing, it is considered that a possible exchange of competitively sensitive information regarding private label products may have significant consequences for the market. Therefore, it has been stated that “Chinese Wall” practices may be applied in order to limit the possible exchange of competitively sensitive information between private label product manufacturers and retailers.
- Finally, it is assessed that the FMCG retail market, with the impact of Covid-19 has started to digitalize rapidly, and this change will affect both the size and shape of competition in the sector.
You may access the full Turkish text of the Final Report here.
Preliminary Report on The Online Advertising Sector Inquiry
As part of the online advertising sector inquiry initiated on 21.01.2021, the Preliminary Report on the Online Advertising Sector Inquiry (“Preliminary Report”) prepared by the Competition Authority (“Authority”) was published on the Authority’s website on 07.04.2023. The findings and assessments discussed in the Preliminary Report are presented below:
- Emphasizing the importance of the online advertising sector, it is determined that online advertising has surpassed all traditional advertising channels with the growth rate it has achieved in recent years.
- Regulations on advertising in Türkiye are mentioned, but it is revealed that there is currently no regulation that meets the competition problems which arise/may arise in this market.
- The types of online advertising are explained as search-based advertising, visual advertising and listing advertising, the relationships between these types are examined and it is stated that visual advertising, especially on social media platforms, is positioned differently in the eyes of advertisers.
- In terms of market definition in the advertising sector, the interchange relationship between online and offline advertising is analyzed and it is concluded that the two types constitute different markets.
- In the concentration analysis of online advertising services in Turkey, it is observed that the visual advertising market is concentrated in Meta and the search-based advertising market is concentrated in Google economic entities.
- It is noted that the transformation of user data collected by undertakings into services through targeted advertising provides significant benefits for each stakeholder, namely publishers, advertisers and consumers, but data collection raises privacy concerns for consumers, and therefore an optimal balance between the benefits and harms of targeted advertising must be established.
Several competition concerns are identified in the online advertising sector:
- In the supply of online advertising technology services, competition concerns arising from vertically integrated advertising technology providers being caught between the interests of their own services and the interests of their customers, or serving both advertisers and publishers, are assessed.
- Concerns are raised that Google would use its power in the sector anticompetitively through tying, self-preferencing and data aggregation practices.
- Transparency issues in the advertising technology supply chain are addressed and it is stated that the Draft Bill on Amendments to Law No. 4054 is envisaged to solve these issues.
- It is determined that copyright regulations for the protection of the monetary rights of news publishers against the use of their content by digital platforms are an important step, but insufficient. It is also emphasized that in Turkish law, the intellectual property violations that occur specifically in the digital environment and the liability regime for these violations remain limited.
- Finally, Google’s Privacy Sandbox practice, Apple and Google’s practices in mobile online advertising and other issues that may raise competition concerns are evaluated.
Public comments on the findings, assessments, evaluations and policy recommendations of the Preliminary Report can be submitted until July 7, 2023.
You may access the full Turkish text of the Preliminary Report here
The Study Titled “The Reflections of Digital Transformation on Competition Law” was Published
The Competition Authority ("Authority"), published the study titled "Reflections of Digital Transformation on Competition Law" ("Study") on the Authority's website on 18.04.2023.
With this Study, the Authority aims to foresee its perspective on digital markets, its existing legal instruments under the Law No. 4054 on the Protection of Competition, its concrete practices in this field and to shape its goals and vision for the near future. In addition, since digital markets are of interest to a wide range of audiences, from consumers to technology companies, the Study was shared to gather public opinion, considering that the feedback to be provided will contribute to the development in this area.
The study consists of 7 (seven) main and sub-headings. These are: (i) The current state of digitalization in Türkiye, (ii) Competition issues arising from digitalization, (iii) The Competition Board's ("Board") investigations and decisions on digital markets, (iv) Actions taken by competition authorities around the world, (v) Possible violations of competition, observed in digital markets, (vi) Market insights on basic platform services, and (vii) Conclusion.
The Study underlines that competition law tools are insufficient to intervene in digital markets, that it is very difficult for competition authorities to supervise the activities of digital platforms, that ex post regulations do not eliminate the effects of the infringement in the market, and that ex ante intervention should be made in this area, and evaluates that it would be appropriate to prepare a draft regulation that will include the basic procedures and principles regarding digital markets and a secondary legislation for this purpose. In the Study, the types of competition law violations that may be committed by digital platforms are addressed in order and recommendations are listed down for all types of violations. These competition violations and recommendations are given below.
- It is stated that even if there is consumer consent, data merging may limit competition in the market and create an entry barrier, and it is also considered that it would be appropriate to make a regulation to prevent processing for purposes other than the provision of the relevant service.
- It is stated that Turkish regulations regarding the excessive data are sufficient, the principle of data minimization should be followed and ex post control is sufficient.
- Data portability has positive effects on competition law
- In general, it would be appropriate to regulate data access, data portability and interoperability practices of platforms that have significant market power in data.
- Similar to the DMA, it follows that when competing with commercial users, undertakings with significant market power should be prevented from using non-public data.
- In addition, similar to the amendment to the German Competition Act, it would be appropriate to include a clause prohibiting undertakings with significant market power from granting preferential treatment to their products or services when accessing supply and sales markets, in terms of ranking or other conditions.
Binding and Package Sales Practices
- It is stated that undertakings with significant market power in digital markets even if they are not in a dominant position, may damage consumers by causing market closure in the tied product market, and it is considered that it would be appropriate to make a regulation to ensure that undertakings with significant market power refrain from tying practices.
Exclusivity and MFN Practices and Unfair Contract Terms
- Since consumers will be able to access the goods or services offered through different channels, they will be more likely to choose the platform that offers them favorable prices and conditions.
- It is stated that a belated intervention cannot solve market problems in digital markets where network externalities are the most fundamental market failures, and therefore, broad MFN terms should be banned for gatekeepers up front, and even narrow MFN terms should be included in this ban.
Lack of Transparency
The Authority indicates that three regulations to address the lack of transparency may be made with regard to the 3 subjects given below:
- Consumers should be informed about the terms and conditions and ranking parameters of the service they receive, and about the advertisements they encounter when receiving that service,
- If the ranking of an undertaking with a significant market power is based on self-preferencing,
- Considering that regulations can be put in place to address transparency concerns and increase transparency for advertisers, publishers and intermediary undertakings in the supply chain for the online advertising market regarding the price or performance measurement criteria arising from the platforms from which they receive services.
You may access the full Turkish text of the Study here.
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