The Turkish Law on Regulations of Electronic Commerce (the “Law No. 6563”) has been significantly amended on 01 July 2022 to provide a more secure and transparent electronic commerce environment for consumers and a fair relationship protecting the legal interests of all parties. The general preamble of the bill amending the Law No. 6563 (the “Bill”) referred to the Regulation (EU) 2019/1150 of the European Parliament and of the Council on Promoting Fairness and Transparency for Business Users of Online Intermediation Services and the Digital Services Act (the “DSA”) and the Digital Markets Act (the “DMA”) both of which have been recently adopted by the European Council in July 2022. Both European and Turkish lawmakers emphasized that the current legislation may be insufficient to solve the problems that emerged by new business models created by innovative technology and digitalization. Thus, the current circumstances caused the necessity to regulate the ecosystem to prevent unfair business practices. Setting aside the question of whether regulation was really necessary for the digital services sector, this paper aims to focus on the differences and similarities between the Law No. 6563 and one of its sources of inspiration, the DMA in general.

One step back

The European Union (the “EU”) has been working to revise its regulations for a long time to be as responsive as possible to continuous technological advancements and changes in the digital economy. The DMA was proposed in December 2020 as part of the European regulatory program known as “A Europe Fit for the Digital Age”[1]. As stated by the rapporteur from Parliament’s Internal Market and Consumer Protection Committee, Andreas Schwab, “With the DMA, Europe is setting standards for how the digital economy of the future will function. It will now be up to the European Commission to implement the new rules quickly.”[2] After a thorough impact assessment, public consultations, and lengthy discussions, the DMA and DSA were adopted this summer.

Turkey’s political and legal context

Shortly after the COVID-19 pandemic started spreading in Turkey in 2020, the Turkish Competition Authority (the “TCA”) initiated a sector inquiry on e-marketplaces. After having received many consultations from stakeholders and analyzed numerous data, the TCA published its final report in April 2022 where it announced many important notes to the sector. The final report refers to the data obtained from chambers of commerce and the Ministry of Trade (the “Ministry”), and mainly the Action Plan Calendar for Economic Reforms where it is stated that the Ministry is responsible for issuing a new law to eliminate unfair commercial practices in the retail trade and to establish a fair supply chain by taking into account EU Acquis Communautaire.  Very recently, the TCA shared its draft amendment to the Law No. 4054 on the Protection of Competition which looks like the DMA. In a nutshell, like in other EU countries during the COVID-19 pandemic, the e-commerce ecosystem has rapidly developed and changed in Turkey due to social needs and the developments in information and communication technologies. Given this political and social background and calendar, legal change was inevitable.

Different Scope

Similar to the DMA, the Law No. 6563 starts with the subject matter, scope and definitions. However, the scope of the Law No. 6563 slightly departs from the DMA because the DMA firstly defines the “gatekeeper” and lists ten core platform services that will be subject to the DMA, thus determines the scope of the Regulation as “core platform services provided or offered by gatekeepers to business users established in the Union or end users established or located in the Union, irrespective of the place of establishment or residence of the gatekeepers and irrespective of the law otherwise applicable to the provision of service”. Whereas the legislature in Turkey intends to regulate intermediaries and service providers in the e-commerce sector without defining gatekeepers or having a specific focus on certain core platform services.

New concepts introduced by the Bill

The legislature maintained the existing definitions in the Law No. 6563 and added new ones such as “electronic commerce intermediary service provider”, “electronic commerce service provider”, “electronic commerce environment”, “electronic commerce marketplace”, “Electronic Trade Information System (“ETBIS”)”, “net transaction volume” and “economic integrity”. Of note, the definitions of these following actors are important to better understand their role in the ecosystem: electronic commerce intermediary service provider refers to an intermediary service provider that enables the conclusion of contracts or placing orders for the supply of goods or services by electronic commerce service providers in an electronic commerce marketplace,[3] whereas electronic commerce service provider refers to a service provider that sells its goods or services in an electronic commerce marketplace or its own electronic commerce platform.[4] These two definitions refer to “electronic commerce marketplace” which means an electronic commerce platform in which an online intermediary service provider offers its intermediary services. The lawmaker could have benefited from the descriptions and analysis of the TCA in their report on e-marketplaces. On the other hand, as a natural consequence of adding “core platform services”, the definitions in the DMA are significantly different from the ones set forth under the Law No. 6563.

Ex-ante features of the Law No. 6563 to reach its Objectives

The DMA aims to prevent unfair practices and lack of contestability and to allow platforms to unlock their full potential by encouraging innovations. To achieve these objectives, the DMA includes, among others, ex-ante rules applicable to the gatekeepers such as the designation of gatekeepers[5] and the review of the status of the gatekeepers[6]. This approach is chosen to ensure effective monitoring and enforcement of measures against core platform services. Similarly, the main objectives outlined in the general preamble of the Law No. 6563 have been inspired by the DMA such as the prevention of unfair competition and monopolization in electronic commerce, the facilitation of new actors in the market, and ensuring the balanced and healthy growth of the market. Thus, the general preamble considers that “in addition to the ex-post competition rules, certain ex-ante rules, as stipulated in the Law for enterprises of certain sizes, are needed to protect an effectively and fairly functioning competitive environment as the current version of the Turkish Law No. 6563 may be insufficient to solve the problems created by new business models brought about by technological developments and digitalization”[7].

One of these ex-ante obligations is the obligation to obtain an e-commerce license which is also a new, notable change brought to the Law No. 6563 and not seen in the DMA. Additional Article 4 of the Law No. 6563 states that electronic commerce intermediary service providers with an annual net transaction volume of over ten billion Turkish liras and with a transaction count, excluding cancellations and returns, of over a hundred thousand must obtain a license from the Ministry, and renew it whenever necessary, to continue their activities. Licensing aims to bring certain sized enterprises in the e-commerce sector under the supervision and control of the public authorities[8] and to enable new enterprises to compete under equal conditions. However, no detailed information is provided either in the preamble or in the articles of the Bill as to how the application or the renewal of a license is going to be monitored in the process. So, this duty is again on the enforcers to ensure that this ex-ante obligation was fulfilled properly, and secondary legislation shall be awaited in this regard. To achieve the same goal, the EU does not impose gatekeepers to obtain a license. The DMA has a more structured system for designating gatekeepers and determining non-compliance of the gatekeepers with the DMA.

Unfair commercial practices

Chapter III of the DMA sets forth the practices of gatekeepers that limit contestability or are unfair,[9] in other words, the Regulation lists do’s and don’ts for gatekeepers. The lists are quite long, but some examples of do’s include:

• Allowing business users to promote their offers and conclude contracts with their customers outside the gatekeeper’s platform;
• Providing business users with access to the data generated by their activities on the gatekeeper’s platform

And some examples of don’ts include:

• Ban on using the data of business users when gatekeepers compete with them on their own platform;
• Ban on ranking the gatekeeper’s own products or services more favorably compared to those of third parties[10].

Gatekeepers are required to adjust their daily operations to the newly introduced obligations. Otherwise, they may face penalties imposed by the Commission. The DMA adopts a system of maximum fines based on a percentage of a company’s annual global turnover that is comparable to the GDPR’s structure. The Commission will have the authority to punish a gatekeeper up to 10% of its entire yearly global turnover if it were to violate the DMA’s standards. The maximum penalties might be increased to 20% in cases where there have been repeated infractions. The Commission may also impose recurring fines of up to 5% of the gatekeeper’s daily global turnover.[11]

Similarly, Article 7 of the Bill considers a commercial practice as “unfair” if and when an electronic commerce intermediary service provider significantly disrupts the commercial activities of an electronic commerce service provider to which the intermediary service provider serves, reduces its capacity to make a reasonable decision, or causes it to become a party to a commercial relationship that it would not otherwise be a party to by forcing it to take a certain decision.”

Article 7 of the Bill exemplifies unfair commercial practices with six specific cases which should be deemed as situations that constitute unfair commercial practice in any event:

• failing to make full payment to the service provider within 5 business days of the buyer’s payment to the electronic commerce intermediary service provider and the delivery of the goods or services to the buyer;
• forcing electronic commerce service providers (by the electronic commerce intermediary service provider) to make product or service promotions and discounts, including by making unilateral changes to the sale price;
• failing to determine the commercial conditions with the electronic commerce service provider in a written or electronic contract or to ensure that this contract is “clear, understandable, and easily accessible” for the electronic commerce service provider;
• making retrospective or unilateral changes to the intermediary contract in a way that is detrimental to the electronic commerce service provider, or including provisions in the contract allowing such changes.
• obtaining payment from electronic commerce service providers without a contractual basis and without providing any intermediary service; and
• de-ranking an electronic commerce service provider; restricting, suspending, or terminating a service provided to an electronic commerce service provider without an objective reason that is expressly stated in the contract.

Furthermore, Article 8 of the Bill introduces additional obligations on intermediaries. Some of these obligations apply to all intermediaries, others are triggered by three specific thresholds based on net transaction volume and/or the transaction count, namely;

• an electronic commerce intermediary service provider with an annual net transaction volume of over ten billion Turkish liras (e.g not using the data obtained from the electronic commerce service provider and the buyer for any purpose other than the provision of its intermediary services (Article 8(2)/a of the Law No. 6563) ),
• an electronic commerce intermediary service provider with an annual net transaction volume of over thirty billion Turkish liras and with a transaction count, excluding cancellations and returns, of over one hundred thousand (e.g. an electronic commerce intermediary service provider cannot restrict commercial relations of electronic commerce service provider, the fact that the service provider offers goods or services through alternative channels with same or different price, or make advertisement. The intermediary cannot force the service provider to obtain goods or service from anyone, cannot insert such a clause in the intermediation contract.),
• an electronic commerce intermediary service provider with an annual net transaction volume of over sixty billion Turkish liras and with a transaction count, excluding cancellations and returns, of over one hundred thousand (e.g. Not exceeding the limit determined in the Bill for advertisement and promotional activity spending.)

In other words, without defining and designating gatekeepers, the Turkish legislature imposes significant obligations to economically important actors of the sector.

In terms of compliance with these obligations, the Ministry shall apply an administrative fine as per Article 12 of the Law No. 6563 by considering the principles of aggravation of the act, proportionality, and deterrence. The length and complicated nature of Article 12 makes it impossible to categorize the sanction types. There are different ranges of monetary sanction, however, the wording of the article and reasoning of the Bill do not help to analyze the lawmaker’s logic behind these measures.

Two-headed enforcement problems

The EU Commission (the “Commission”) made it clear that the Commission will enforce the DMA[12] and be the first to determine whether businesses engaged in essential platform services qualify as gatekeepers under the DMA.[13] In a nutshell, the DMA will impose obligations on a small number of very large online platforms using quantitative thresholds to determine gatekeeper status.[14] The Commission will also work closely with competition authorities and judges in the EU Member States as part of the DMA’s supervisory framework. In cases where such competence is granted by national law, the appropriate national authorities may take investigative measures to determine if the gatekeeper violates the DMA and may inform the Commission of their findings.

On the other hand, the President of the Turkish Republic is the lead enforcer of the Bill. In addition, as per Article 11(1) of the Law No. 6563, as also amended by the Bill, the Ministry is authorized to ensure the implementation of the Law and the development of e-commerce, to protect an effective and fair competition environment, to make arrangements for the activities of service providers and intermediary service providers and to determine mandatory elements to be included in the brokerage contracts. The Ministry is empowered to impose administrative fines and issue secondary legislation. However, unlike the DMA, no detailed investigation process has been foreseen under the Law No. 6563.

At the same time, the TCA had issued its report on e-marketplaces, declared that it would work on secondary legislations in this regard, and continues to carry out investigations on companies that are active in the field of e-commerce. Therefore, an online service provider might be subject to several administrative investigations initiated by the Ministry and the TCA for the same incident. Therefore, this dual hatting might cause confusion between authorities. The draft amendment to the Law No. 4054 on the Protection of Competition addresses this problem by stating that if an undertaking holding significant market power is subject to administrative fine as per Additional Article 2 of the Law No. 6563, the TCA shall not impose further administrative fine as per the Law No. 4054 on the Protection of Competition. The reasoning of the draft amendment refers to the principle of “ne bis in idem” in that respect.

Conclusion

Since the COVID-19 pandemic, many countries have started taking legal initiatives to establish new regulations to keep up with the recent developments and the growth of the digital sector. In this respect, the EU has been an important source of inspiration for Turkish legislation. Despite its similarities, the Law No. 6563 is not as well discussed or defined as the DMA because the latter has gone through many consultations and impact assessments whereas the Law No. 6563 has entered into force with rocket speed and due to the lack of consultation, it still lacks clarity as to how the system will be monitored and the measures will be enforced. Consequently, secondary legislation is awaited to cover many open points. Cooperation between the Ministry and the TCA is essential. Nevertheless, when making their risk mapping, executives must bear in mind that companies might be exposed to investigations by the Ministry and the TCA simultaneously.

[1] “A Europe Fit for Digital Age”, European Commission, https://ec.europa.eu/info/strategy/priorities-2019-2024/europe-fit-digital-age_en#:~:text=Related%20links-,Introduction,this%20Europe’s%20%E2%80%9CDigital%20Decade%E2%80%9D.

[2] “Deal on Digital Markets Act: ensuring fair competition and more choice for users”, ://www.europarl.europa.eu/news/en/press-room/20220315IPR25504/deal-on-digital-markets-act-ensuring-fair-competition-and-more-choice-for-users

[3] Article 2(1)-f) of the Bill.

[4] Article 2(1)-g) of the Bill.

[5] DMA, Article 3, businesses with an annual turnover in the EU of €7.5 billion or with a global market value of €75 billion will be covered by the DMA. Additionally, the gatekeepers must have 100,000 business users and at least 45 million individual end users per month.

[6] DMA, Article 4.

[7] The General Preamble of the Bill.

[8] Additional Articles 4(1) and 4(4) of the Bill.

[9] https://ec.europa.eu/info/strategy/priorities-2019-2024/europe-fit-digital-age/digital-markets-act-ensuring-fair-and-open-digital-markets_en

[10] Further examples may be seen at https://ec.europa.eu/commission/presscorner/detail/en/QANDA_20_2349

[11]“Digital Markets Act: Ensuring fair and open digital markets”  https://ec.europa.eu/commission/presscorner/detail/en/QANDA_20_2349

[12] “Digital Markets Act: Ensuring fair and open digital markets” https://ec.europa.eu/commission/presscorner/detail/en/QANDA_20_2349

[13] Council of the EU, Press Release, 25 March 2022, https://www.consilium.europa.eu/en/press/press-releases/2022/03/25/council-and-european-parliament-reach-agreement-on-the-digital-markets-act/

[14] “Digital Markets Act: Ensuring fair and open digital markets” https://ec.europa.eu/commission/presscorner/detail/en/QANDA_20_2349