A Brief Sector-Specific Assessment in the light of the Latest Siemens Investigation of Turkish Competition Board from the Competition Law Perspective
The medical diagnostic and monitoring equipment market has been one of the priority markets for…
The Board has announced on 11.05.2017 that it decided to initiate an investigation against OMV Petrol Ofisi A.Ş., Milan Petrol San. Tic. A.Ş., and TP Petrol Dağıtım A.Ş. upon an annulment decision of the Council of State. The court has annulled the decision of the Board dated 2009, and therefore triggered opening of an investigation.
What happened in 2009?
In 2009, the Board received claims against the petroleum distributors, which triggered opening of a preliminary inquiry. The main claims were that the petroleum distributors restricted the LPG dealers’ ability to work with other competitors based on their usufruct rights.
As is known, after the Petroleum Sector Report issued in 2008, the usufructs in the sector has come to the spotlight. The main claim on the issue was that, like the famous Repsol Case of the EU Commission, such long-term agreements (i.e. usufructs, registered lease and sub-lease agreements etc.) entered into force in parallel with the distributorship agreements, and mainly within the scope of which the parties are generally the same (i.e. the dealers and distributors), are to by-pass the competition rules, especially the non-compete obligations, which cannot exceed 5 years as per the block exemption regarding vertical agreements. The Council of State supported this stance in its famous Total-Akdağ case in 2009 and held that such long-term agreements, which are directly or indirectly prolonging the maximum 5-year term non-compete period, are null and void, and that the Competition Board should take necessary steps to act in such cases. The Competition Authority therefore announced in its web page that it was to consider the Council of State’s approach and declare such agreements null and void on a case-by-case basis. However, even though the Board was eager to apply this approach relating to the petroleum sector, it was reluctant to apply this for the LPG sector. Therefore, the Board held in 2009 that it is a rare fact that a petroleum dealer distributes LPG from a different distributor brand for the same station, and that it is also understandable from the distributor’s perspective that the same dealer only distributes a single distributor’s brand, which is also appropriate both for corporate identity and security. Therefore, the Board held that the agreements are in line with the competition rules without examining the usufructs and their effect in LPG dealership contracts on a case-by-case basis.
The Council of State Decision
The Council of State held that the Board held a decision without providing sufficient information and proof, and therefore it had to initiate an investigation. Therefore, the Board has initiated an investigation against three undertakings.
It is important to note that there is no decision of the Board on fining the distributors due to usufructs or similar agreements that are used for prolonging non-compete obligations to this day. The Board generally orders the relevant distributors to remove the relevant registered lease or usufructs from the registry, and not to prolong the non-compete obligations by any direct or indirect means, and warns that an investigation is to be opened otherwise. Therefore, it appears likely that the Board would inform the undertakings in the case that it determines case-specific practices and order them to stop similar practices, as it did so to this day. We will be following up the process.
We consider that the Council of State decision clearly puts forward that the Board should not hesitate to intervene in the LPG dealership contracts and usufructs or similar agreements in line with the petroleum sector contracts.
In an additional note, we should also criticize the fact that a single decision of the Council of State (as a first instance court) on the lawsuit has lasted more than 5 years, which is not acceptable for a state of law considering the right to fair trial, especially considering the dropping petroleum prices and therefore LPG stations’ popularity within this period.
Att. İsmail Ünal Doğan