Turkish Competition Board Fines Digiturk
Introduction
Turkey’s leading pay television service provider, Krea İçerik Hizmetleri ve Prodüksiyon A.Ş. (“Digiturk”), is frequently the subject of complaints made to the Competition Authority (“Authority”). In fact, the Competition Board (“Board”) issues a new decision about Digiturk almost every year. In these decisions, the allegations concerning Digiturk, which holds the exclusive broadcasting rights of Turkish Süper Lig, are mostly related to abuse of dominant position via implementing excessive prices and discriminating between dealers and customers. However, in the past Board decisions where Digiturk has been investigated, there was no determination that it had violated competition rules and the company did not face any sanctions.
However, in a recent decision,[1] the Board determined that Digiturk violated Article 4 of Law No. 4054 on the Protection of Competition (“Law No. 4054”) with its contracts and implementations valid between 2018-2020, and decided to impose an administrative fine on the undertaking. This decision on Competition Law violation is the focus of this article.
Scope of the Investigation and Allegations
Digiturk is a content broadcaster that brings together content and channels from different sources, creates and prices packages according to the needs of different consumer segments, and sells memberships in these different packages.[2] Digiturk delivers its subscription packages to its subscribers via satellite broadcasting, IPTV (internet-based broadcasting) and open internet broadcasting. The packages created are offered to individual users and to commercial establishments (restaurants, cafés, hotels, lodgings, public transportation vehicles, etc.) with different prices and package strategies.
In a period when Netflix, Exxen, Disney+, Amazon Prime Video, BluTV, Turkcell TV+, Tivibu Go and similar undertakings offering paid content services over the open internet have gained importance in the media sector, one of Digiturk's most important assets is its exclusive broadcasting rights over Spor Toto Super League, as mentioned above.
This content is in considerably high demand in Turkey, and, because the exclusive rights to it were given as a result of a tender, there is no alternative way of accessing this content other than through Digiturk.
As a result of the complaints received in 2018 and 2019, the Board initiated an investigation against Digiturk and its 48 dealers. These complaints can be summarized as follows:
- For restaurants and cafés that wanted to purchase membership from Digiturk and its dealers to broadcast Süper Lig matches, Digiturk’s excessive price increases cannot be explained by the inflation rate and the course of the country’s economy, and since they have no alternative to Digiturk, these customers have to accept these price increases.
- Digiturk and its dealers offer different prices to different customers that want to broadcast the matches, and customers that have to pay excessive fees due to discrimination inevitably lose customers.
- It is only possible for a customer to sign a subscription agreement with the Digiturk dealer in the region where the customer is located, not from any dealers outside the region; therefore, Digiturk controls the market by allocating exclusive dealers to the regions.
Findings of the Authority
From the perspective of competition law, it is possible to categorize the claims of the complaints mentioned above as follows:
- Within the framework of Article 6 of Law No. 4054, Digiturk abused its dominant position by discriminating against buyers of equal status and implementing different rights and obligations to them, and applying excessive / double-monopolistic prices.
- Digiturk has violated Article 4 of Law No. 4054 by interfering with the resale price of its dealers through deterrent discounts, and by limiting active and passive sales outside the exclusive regions of its dealers.
The decision first defined the relevant market and then determined whether Digiturk has a dominant position in this market. Then, the findings related to each of the alleged violations were examined.
Relevant Market and Dominance Analysis
During the years covered by the investigation, Digiturk held the exclusive broadcasting rights to the Spor Toto Super League and Spor Toto 1st League, as well as 14 football events, including the UEFA Champions League, UEFA Europa League, one basketball event and five tennis events. Nevertheless, the Authority determined that the number of viewers going to commercial/social venues to follow broadcasts other than those of the Süper Lig and 1. Lig is marginal. Therefore, they defined the relevant product market as the “paid television broadcasting of Turkish Süper Lig and 1. Lig competitions” market. Although the relevant geographical market was defined as “Turkey,” the Authority emphasized that the 48 dealers of Digiturk that were party to the investigation operated exclusively in the region where they were active.
In this context, since the live broadcast rights of the Turkish Süper Lig and 1. Lig were purchased exclusively by Digiturk for five years as of the 2017-2018 season as a result of the tender held by the Turkish Football Federation (TFF), and Digiturk exclusively sold the broadcasting rights to its customers, the Authority concluded that Digiturk was a legal monopoly and held the dominant position in the relevant market.
Exploitative Pricing and Discrimination Allegations
After determining that Digiturk held a dominant position in the market, the Board examined whether Digiturk and its dealers were selling the broadcast service with excessive and/or double monopolistic pricing. While discussing whether Digiturk’s prices are excessive or not, the Board referred to the conditions of the broadcast rights tender between Digiturk and the Turkish Football Federation. Based on the fact that Digiturk made a loss during the investigation period, they determined that the price increases were not exorbitant. They observed that Digiturk dealers applied more than 800 different prices to different customer categories, and concluded that their profit margins were not excessive. In this context, they concluded that Digiturk and its dealers did not demonstrate exploitative pricing behavior.
Turning to the discrimination allegations, the Board examined whether Digiturk dealers applied different prices to customers in equal positions, and found that prices applied to customers in the same customer category often differed by around 10-20%. However, it concluded that these differences could be explained by criteria such as the payment methods used by different customers and their commercial creditworthiness. Therefore, it determined that Digiturk and its dealers did not discriminate between equal buyers and, as a result, they did not abuse their dominant position.
Resale Price Maintenance Allegations
The allegations Digiturk faced were not only based on Article 6 of Law No. 4054. Whether Digiturk’s contracts with its dealers were restrictive to competition or not were also examined in detail in the context of Article 4 of Law No. 4054.
Firstly, the Board evaluated whether Digiturk has interfered with its dealers’ resale prices during the investigation period. In this context, it determined that a provision in the Commercial Authorized Dealership Agreement that Digiturk has concluded with its dealers for the year 2017-2018 introduced a “fair price guarantee” obligation. This required that the package prices that dealers sold to customers were to be determined unilaterally by Digiturk. On the other hand, this provision was not included in the contract for the year 2018-2019. There was also no evidence that this provision was actually enforced in the preceding period.
Although dealers had to get Digiturk’s approval for the prices they applied to their customers through a digital system, the Board emphasized that dealers could make discounts without Digiturk’s approval. It stated that there was also no communication indicating that Digiturk had forced or suggested to its dealers to adopt particular prices, and that there was no sanction imposed on the dealers such as placing quotes on those who sold cheaper than desired. In the light of this information, the Board concluded that Digiturk did not interfere with the resale prices of its dealers in a manner infringing Article 4 of Law No. 4054.
Regional Exclusivity and Sales Restrictions
Another claim that Digiturk and its dealership system faced was about regional exclusivity and sales restrictions. The Board determined that Digiturk had divided Turkey into commercial zones and had given exclusive dealership to the parties that met the commercial conditions it has determined. In other words, there is only one dealer authorized to sell in each region, customers residing in the region are obliged to purchase Digiturk broadcast packages from this dealer, and the dealer is not allowed to sell to customers residing elsewhere.
In sum, Digiturk restricted its exclusive dealers from making active or passive sales outside the regions allocated to them. Since the shares of Digiturk and its dealers in the relevant market exceeded the 40% threshold stipulated in the Block Exemption Communiqué on Vertical Agreements numbered 2002/2 and could not benefit from the block exemption due to the presence of passive sales restrictions, this implementation is not covered by the block exemption.
Whether the relevant implementation could benefit from individual exemption within the scope of Article 5 of the Law No. 4054 was also discussed in the decision. Digiturk contended that the sales restriction requirement in the dealership system provided benefits such as preventing illegal/pirated broadcasts, being able to respond to malfunctions faster, and saving on costs. Because they found these explanations to be reasonable, the Board determined that the first exemption condition, “providing significant new developments and improvements in the provision of the service,” was met. However, it concluded that consumers would not benefit proportionally from Digiturk’s dealership system, because having a single exclusive dealer in each region would result in a monopoly and eliminate the possibility of consumer choice and the opportunity to compare products and services from different vendors. In addition, it held that Digiturk’s exclusivity practice causes “competition for the market” rather than “competition within the market,” creates a significant barrier to entry and eliminates competition in a significant part of the market, and that this cannot be explained by any beneficial results or improvement in the service. Thus, it concluded that the regional exclusive dealership system did not meet three of the four exemption conditions and could not benefit from the individual exemption.
For all of these reasons, the Board decided that Digiturk violated Article 4 of Law No. 4054 by prohibiting its dealers from making active and passive sales outside the regions allocated to them. An administrative fine of 7,068,133.04 TL was imposed. The Board also ordered Digiturk to remove the passive sales ban in its contracts within one month from the notification of the reasoned decision, and to include a clear provision in its new contracts that passive sales are not prohibited.
Conclusion
Digiturk is an undertaking that is very well known in Turkey, because it holds the broadcasting rights to the Süper Lig and the results of its practices directly affect the public. Digiturk’s practices are frequently scrutinized by the Board, but no evidence of violation had been found in the past. With the decision examined in this article, Digiturk’s various behaviors and practices have been comprehensively examined from the perspective of competition law.
The decision’s conclusion that Digiturk and its dealers do not apply excessive prices has clarified that consumers do not pay exorbitant prices in the subscription fees for watching the Süper Lig matches. On the other hand, as a result of the fact that Digiturk’s regional exclusive dealers’ limitation of passive sales outside of their regions was determined to be a violation and this practice has been terminated, customers who want to receive service from Digiturk will now be able to contact dealers outside of their regions to try to obtain more affordable prices. Thus, it can be expected that intra-brand competition and consumer choices will increase as a result of the Board’s decision.
- Decision of the Competition Board dated 13.01.2022 and numbered 22-03/48-19.
- Digiturk, which has been providing its services since 2000, was taken over by Qatar-based BeIN Media Group in August 2016 and started to offer its services under the “Bein” & “Bein Connect” brand.
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