Part 2 : The Draft Amendment to the Law No. 4054 on the Protection of Competition in the footprints of the DMA?

The Turkish Competition Authority (the “TCA”) declared that the current competition regulations in Turkey are not sufficient to keep up with the pace of digitalization in current times. Following the big wave of platform regulations in many jurisdictions such as EU, USA, UK, Australia, Japan and India, the TCA has prepared a draft amendment (the “Draft Amendment”) to the Law No. 4054 on the Protection of Competition (the “Law No.4054”) and shared with stakeholders for receiving comments.

Having read the final report of the TCA on its sector inquiry on e-marketplaces in April 2022 and the Action Plan Calendar for Economic Reforms announced by the Ministry of Trade (the “Ministry”) in March 2021, it is not big surprise to see this Draft Amendment. It was also expected to have a draft inspired by the Digital Markets Act (the “DMA”) which was recently published at the Official Journal of the European Union in October 2022.

This overview aims to focus on the differences and similarities between the Draft Amendment and one of its sources of inspiration, the DMA in general[1].

Similar Purpose, Scope and Definitions

The Draft Amendment added the reference of refraining abuse of market power of undertakings holding significant market power within the scope of core platform services to the purpose of the Law No.4054. Similar to the DMA, the Draft Amendment mentioned that one of the aims of the Law No. 4054 is to ensure to set up and protect contestable and fair markets in core platform services.

The Draft Amendment revised the scope of the Law No. 4054 and states that newly introduced obligations of this Law shall apply to undertakings holding significant market power which provide core platform services to end users established or located in Turkey and business users established in Turkey.

The new definitions brought by the Draft Amendment are mainly drafted in parallel with the DMA (e.g online search engine, online social networking service, number-independent interpersonal communication service, operating systems, web browser, virtual assistant, cloud computing service, online advertising service, end user, business user etc.). That said, there are two important definitions which we should bear in mind to better understand the scope of the Draft Amendment. Firstly, the core platform services include the following: the online intermediation services, online search engines, online social networking services, video/sound sharing and broadcasting services, operating systems, number-independent interpersonal communication services, cloud computing services, web browsers, and virtual assistants, and online advertising services provided by the provider of any of the aforementioned services. Secondly, the TCA defines undertakings holding significant market power as undertaking that has a certain scale in terms of one or more core platform services and operates in a way that has a significant impact on access to end users or on the activities of business users and which has the power or is foreseen to be able to have the power to maintain this impact in an established and permanent manner, without calling it “gatekeeper”.

Undertakings holding significant market power v. Gatekeepers

The quantitative criteria to call an undertaking as gatekeeper already exists in the DMA (Article 3). However, the Draft Amendment does not foresee such criteria but states that the Competition Board (the “Board”) will prepare and issue a communiqué which will outline these quantitative thresholds. On the other hand, the Draft Amendment mentions that the Board has the discretion to qualify an undertaking as holding significant market power  –even if it does not meet quantitative thresholds– if some qualitative criteria such as network effects, data ownership, vertically integration and conglomerate structure, economies of scale and scope, lock-in and tipping effect, switching costs, multi-homing, user trends, mergers and acquisitions carried out by the undertaking, exist.

New obligations for undertakings holding significant market power

In parallel with the DMA, the Draft Amendment provides a list of ex-ante obligations (Article 6/A to the Law No. 4054), which should be complied with by the undertakings holding significant market power. Again, a communiqué shall be issued by the Board for the implementation of Article 6/A.  Below is a set of examples for these obligations:

• Ban on discriminating their own goods and services in ranking, scanning, indexing or in other conditions, compared to the goods or services of business users,
• Ban on using the data that are not publicly available while competing with other business users.
• Ban on requiring business users or end users to subscribe or register with any core platform services of this undertaking holding significant market power as a condition for accessing, logging in or registering any core platform services.
• In a way to prevent competitor undertakings from entering the market and to prevent those already in the market from competing effectively; (i) unless it is necessary for the performance of a contract to which the end user is a party, the undertakings holding significant market power cannot combine personal data that they obtain from the core platform services with personal data obtained from any other services they offer or with personal data obtained from third parties; cannot process these data by combining or use these for / in the context of other services, especially in targeted advertising, (ii) cannot process the competitively sensitive data obtained from business users for purposes other than the provision of the relevant service, unless it provides clear, precise, and sufficient options to the business user. (Although this obligation is mainly adopted from the DMA, “the competitively sensitive data” is used only in the Draft Amendment and we think that the meaning of this wording needs further clarifications.)

Application of the new obligations

The timeline set forth under Article 8/A of the Law No. 4054 shall be as follows:

1. The undertakings providing core platform services and exceeding the thresholds shall apply to the TCA within 30 days. (Along with the application, undertakings may also submit their objections to the Authority, if any.)
2. The Board shall have 60 days to determine whether the undertaking holds significant market power and which of the obligations listed under Article 6/A of the Law No. 4054 the undertaking will be subject for each platform service it offers. This approach is very different from the DMA because in EU gatekeepers are obliged to comply with Articles 5, 6, and 7 of the DMA in general whereas the TCA states that the Board shall have the discretion to determine the obligations that the undertakings will be subject to.
3. If the undertaking is qualified as holding significant market power, the Board shall determine a reasonable period of time (up to 6 months), for the undertaking to comply with the obligations of Article 6/A.
4. The undertaking may submit its objective justification defense regarding its inability to fulfil its obligations within the time granted by the TCA, together with sufficiently substantiated and concrete information and documents, if any. The Board shall evaluate and decide on this objection within 60 days.

As additional procedural points:

• The Board may make its determination ex officio or upon complaint.
• The Board may, upon request or ex officio, change, review or withdraw its decision.
• If the undertaking is qualified as holding significant market power, this decision will be valid for 3 years. In case the undertaking does not apply to the TCA within 90 days before the end of the 3-year period, the relevant undertaking is deemed to hold significant market power for the next 3 years.

Penalties and avoiding ne bis in idem

The EU Commission is the enforcer of the DMA and be the first to determine whether businesses engaged in essential platform services qualify as gatekeepers under the DMA. 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.

In Turkey, The Ministry is empowered to impose administrative fines on electronic commerce intermediary service provider as per the Law No. 6563. On the other hand, in case of a violation of Articles 6/A of Law No. 4054, the relevant undertaking (which can be an electronic commerce intermediary service provider and undertaking holding significant market power at the same time) may be imposed to an administrative fine up to twenty percent of its annual gross revenue. The most important point is that, in principle the TCA might issue an administrative fine against an undertaking holding significant market power for the same incident as the Ministry. Therefore, this dual hatting might cause confusion between authorities. The Draft Amendment tries to solve 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. The reasoning of the draft amendment refers to the principle of “ne bis in idem” in that respect.

Conclusion

Despite its similarities with the DMA, the Draft Amendment still lacks clarity as to how the system will function because several communiqués are awaited to cover many open points. It is noteworthy that having on one hand ex-ante obligations in a law and waiting for upcoming communiqués to clarify these obligations on the other hand seems to be contradictory and creating concerns for the predictability and clarity of the Law. Cooperation between the Ministry and the TCA is essential to avoid duplicated administrative fines. Nevertheless, it is difficult to predict the application of EU-scale obligations in Turkey. Therefore, it would be better if the TCA waits for the EU to test the effectiveness of the DMA in 2023[2] before implementing the Draft Amendment.

[1] Please see our article LINK Part 1: . How Does Turkish E-Commerce Law Blink to the DMA?

[2] DMA rules enter into force 01.11.2022, DMA rules start to apply in 02.05.2023 whereas the obligations set forth under the DMA shall apply in March 2024.