Unfair competition is regulated by the Commercial Code, the Code of Obligations, the Paris Convention for the Protection of Industrial Property (which requires signatory states to protect the citizens of each state-party against unfair competition) and the Competition Law.
The Turkish Commercial Code aims to protect businesses against deceptive and misleading practices that violate basic rules of proper commercial behavior. The code lists examples of deceptive and misleading actions, including the dissemination of misleading announcements or advertisements evoking associations with the products or services of another company, the dissemination of deceptive information on another business’ reputation, or quality and the creation of “ambiguity” among products. “Ambiguity” arises when a consumer has difficulty differentiating between products because of the use of logos and slogans that are similar to the trademarks, brands and other descriptive advertising materials lawfully owned by another business. Even if a trademark is not registered the creation of ambiguity is considered unfair competition.
Certain restrictions apply to commercial advertisements to avoid unfair commercial practices and to protect consumers.
Pursuant to the Competition Law, which is modeled on European Union’s competition legislation, the Competition Authority oversees and regulates the following elements: decisions or acts in concert which may constrain fair competition, abuse of dominant market positions and controls on merger and acquisition transactions.
Persons engaging in business in Turkey may not enter into any agreement, take any decision or act in concert with others if such action prevents, distorts or restricts fair competition in the market. The intent is irrelevant for the purposes of this rule. Actions considered to be against fair competition include, among other things:
- price-fixing, or fixing any other conditions of a purchase or sale;
- partitioning markets, or sharing or controlling any kinds of market resources or elements;
- controlling supply or demand;
- obstructing competitor activities, or challenging competitor operations in a market through boycotts or other actions, or blocking new entries into the market;
- discriminating among equals; or
- compelling a business party to purchase goods or services in conjunction with other goods or services not related to the main transaction.
If the relevant market seems likely to benefit more from an action which normally would have a negative effect, the Competition Board may grant an exemption from these requirements. An action is deemed to bring benefit to the market if it:
- procures new economic developments or improvements;
- benefits the consumer;
- does not abolish fair competition in a significant part of the market; and
- does not limit fair competition more than necessary to achieve the goals set forth in the first two points above.
The Competition Board grants each exemption for a specific term which may be renewed. The Competition Board may grant an exemption with conditions. Failure to continue to satisfy the conditions or use of misleading information during application for the exemption may result in revocation of the exemption.
A dominant position exists when one or more market participant has the power to influence certain economic parameters such as price, production or supply volumes and distribution channels in a market. Abuse occurs when a dominant market player uses this power to manipulate the market for their own interest. The Competition Law considers the following actions, among others, as examples of abusing a dominant position:
- blocking new entries into the market, or obstructing competitors’ activities;
- discriminating among equals;
- compelling a business party to purchase goods or services in conjunction with other goods or services which are not related to the transaction;
- exploiting financial, technological or commercial advantages to distort competition in another market; or
- restricting production, marketing or technical development to the prejudice of consumers.
Transactions subject to competition review include: mergers between two or more entities, acquisitions of shares or assets, any transaction resulting in a change of “control” of an entity and the formation of a joint venture. For the purposes of competition law, “control” means the power to exercise decisive influence over a business. Change of control may occur in many ways, such as acquiring shares, ownership rights, operating rights or commercial contracts.
A transaction requires prior approval if it results in a change of control and one of the following turnover thresholds are met:
- Parties’ aggregate Turkish turnovers exceeds 100 million Turkish Lira and the Turkish turnovers of at least two of the transacting parties each exceeds 30 million Turkish Lira; or
- The Turkish turnover of the transferred assets or businesses in acquisitions exceeds 30 million Turkish Lira and at least one of the other parties’ worldwide turnover exceeds 500 million Turkish Lira; or
- The Turkish turnover of any of the parties in merger exceeds 30 million Turkish Lira and the worldwide turnover of at least one of the other parties exceeds 500 million Turkish Lira.
Turnover is calculated as total cash intake of all businesses under the control of the same ultimate beneficial owners of each party to the transaction. For the purposes of competition law, ultimate beneficial ownership means owning or holding more than 50 percent of rights to control a business.
The Competition Board may grant either unconditional approval of a transaction or, upon the satisfaction of certain terms, conditional approval. One common example of conditional approval is requiring that one of the parties spin-off a certain business or product line to avoid risks relating to the abuse of dominant market position. The Competition Board has the power to invalidate any transaction or impose monetary fines if the rules applicable to mergers and acquisitions are violated.
If the Competition Board does not respond within 30 days of an application, the transaction is deemed approved. If the Competition Board disapproves the transaction, the parties may appeal the decision before the Turkish administrative courts within 60 days.
Parties may request a clearance opinion from the Competition Board on whether a proposed transaction, action or activity is in compliance with competition law. The Competition Board may issue conditional clearances which are similar to the prior approvals for transactions or exemptions for actions. Failure to continue to satisfy the conditions or use of misleading information during application for an exemption, may result in the revocation of the clearance.
The Competition Board may start an investigation at any time based on its discretion or upon a complaint. The Competition Board notifies the relevant parties within 15 days of deciding to commence an investigation. An investigation may take place in, on, or relating to everything owned by the parties to the transaction or action. Parties under investigation must cooperate with Competition Board officials at all times and in any manner possible.
Parties have the right to respond to allegations included in a report prepared about the investigation’s findings and they may also request a hearing. The Competition Board issues a reasoned opinion at the end of these proceedings. Parties may appeal the Competition Board’s decisions before administrative courts.