Turkey: The Turkish Competition Board Closed The Pre-Investigation Against Raw Meatballs Producers For Price Fixing With A 9(3) Letter

The Board published its reasoned decision[1] on the preliminary investigation conducted against raw meatballs (çiğ köfte)[2] producers, in Gaziantep regarding allegations that the relevant undertakings have violated Article 4 of the Law No. 4054.

The decision carries importance given that the Board decided to issue an opinion letter pursuant to Article 9(3) of the Law No. 4054 although there was concrete evidence showing a price fixing agreement, a mechanism for monitoring of that agreement, a punishment mechanism for cheating and the effects of this agreement on the market.

In its evaluation on the relevant product market definition, the Board took into consideration developments in the raw meatballs sector in Turkey and based its competitive assessments on the "raw meatballs production" market. That said the Board decided not to proceed into an exact relevant product market definition. The Board also did not define a relevant geographical market, however took into account that raw meatballs production subject to the complaint takes place in the Gaziantep province.

The Board conducted its analysis mainly based on the document titled "Raw Meatballs Producers Discussion Meeting" which took place at the Gaziantep Chamber of Commerce, and which was signed by the representatives of six raw meatballs stores active in the Gaziantep province. The relevant evidence indicates that: (i) starting from a specific date (that is redacted in the reasoned decision), the price of raw meatballs was determined to be fixed at a specific amount (also redacted in the reasoned decision), (ii) 0.5 kg pack of raw meatballs packs sold to stores would be priced at a specific amount (redacted), (iii) the determined price included in the agreement would be applicable in Gaziantep whereas a different minimum price would be applied throughout Turkey, (iv) the producers would not conduct sales under different brands and under the market value, (v) a WhatsApp group would be created in order to report any failure to comply and final, and (vi) a fine of TRY 13,000 would be imposed on those who do not comply with the rules as agreed upon.

Emphasizing the importance of the difference between the prices applied before and after the execution of the agreement, the Board found that the market prices for raw meatballs had decreased following new entries into the market. However, the Board concluded that the prices were increased through the agreement executed by the relevant undertakings due to cost increases. The Board then observed that the pricing decisions taken during the meeting have been applied by all of the producers whose names are mentioned in the agreement and follow-ups were made via the WhatsApp group; and that the penalty clause was inserted in order to demonstrate that the undertakings were taking the agreement seriously.

Based on these findings, the Board explicitly stated that the relevant agreement establishes the existence of a violation of competition law. That said, the Board referred to Article 9 of the Law No. 4054 pursuant to which the Board may issue an opinion letter to undertakings to terminate the infringement. The Board also referred to the judgment of the Council of State in Burdur Consumer Protection Association[3] which states that the Board must initiate a full-fledged investigation if the information and findings necessary to clarify the case subject to the preliminary investigation could not be obtained during the preliminary investigation phase; however it might also decide not to initiate a full- fledged investigation and apply the different measures provided within the Law No. 4054, in cases where (i) no finding of violation could be established, (ii) it is possible to fully shed light on the case during the preliminary investigation phase, (iii) the violation is so minor that initiating an investigation is not needed, (iv) it is also possible to eliminate entirely the effects of the violation and compensate the anti-competitive effects of the violation or (v) the violation is made in markets which are not completely open to competition due to structural and legal barriers.

In this regard, contrary to the opinion of the Investigation Team which indicated that an investigation should be initiated, the Board ultimately decided (i) not to initiate an investigation, (ii) to issue an opinion letter to each of the undertakings subject to the preliminary investigation to refrain from the behaviours that could restrict the competition, and (iii) to inform Gaziantep Chamber of Commerce about the legal consequences of the relevant behaviours.

This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in June 2019. A link to the full Legal Insight Quarterly may be found here

[1] The Board's decision dated January 10,2019, and numbered 19-03/13-5.

[2] A traditional Turkish meatball that is deemed as a sub-category of fast-food sector, which is being served in chain stores around Turkey.

[3] The 13th Chamber of Council of State's decision dated May 30,2014, and numbered 2010/4818 E., 2014/2197 K.

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