Turkey: The Turkish Competition Board Imposed an Administrative Fine on Çekok Gıda for Hindering an On-Site Inspection

The Authority has recently published the Board's reasoned decision in the Çekok Gıda case (dated 03.07.2017, and numbered 17-20/318-140) regarding its ex-officio preliminary investigation based on the allegations that eight undertakings^[1] had violated Articles 4 and 6 of the Law No. 4054 by (i) concluding agreements between the relevant undertakings and abusing their dominant positions by imposing prices to consumers that were above the market prices, and (ii) sharing retailers and geographic areas among major suppliers (i.e., market allocation) in the wholesale market for fresh fruits and vegetables.

For the purposes of its evaluation of the case, the Board made use of the Turkish Central Bank's report of May 2017, which analyzed the competitive conditions in view of the market structure in the processed food supply market. The Board also carefully examined the wholesale market for fresh fruits and vegetables in terms of its structure and its operation throughout Turkey and the European Union. The Board determined that the distribution of fresh fruits and vegetables were carried out through three channels, namely the wholesale market halls, large distribution places, and associations of producers in the EU. On the other hand, customers reach the products through several intermediary actors, including collectors, brokers, commissioners, and merchants in the Turkish market for fresh fruits and vegetables, which has various upstream and downstream levels, from production to retail sale/producers to consumers in Turkey.

In light of the foregoing considerations, the Board preferred to base its examination on the wholesale market for fresh fruits and vegetables. However, the Board proceeded with its investigation without defining any relevant product market pursuant to paragraph 20 of the Guidelines on the Definition of Relevant Market, which provides that the market definition can be left open/undetermined in cases that do not give rise to competition law concerns regardless of how the market is defined.

The Board pointed out that fierce competition takes place in the wholesale market for fresh fruits and vegetables in which the final price is determined through vigorous bargaining, and that wastages in fruits and vegetables cause losses in profit, based on the information collected through its on-site inspections and meetings. The Board further found that transportation costs, wastages and climate conditions could be considered as the most substantial factors in determining the prices of fresh fruits and vegetables.

The Board then proceeded with its analysis under Article 6 of the Law No. 4054. To that end, the Board first demonstrated that there are various players in the upstream and downstream markets, including wholesalers, commissioners and retailers, who each take part and play a distinct role in the process of providing the products to the end consumers. The Board further determined that the relevant undertakings active in these markets are not able to influence the market conditions, and therefore, not able to achieve a dominant position in the market. Thus, the Board concluded that the probability of a violation under Article 6 of the Law No. 4054 could be deemed as low.

Subsequently, the Board conducted an assessment under Article 4 of the Law No. 4054, and observed that (i) anti-competitive coordination is unlikely to occur in the relevant market since there are a lot of undertakings operating at different levels of the market, (ii) the undertakings would be unable to increase the price by reducing supply since weather conditions are a crucial/unpredictable factor for the supply of fresh fruits and vegetables, (iii) the risk of rotting for the products lead the undertakings active in the market to sell out their products on a daily basis regardless of the market conditions, and finally (iv) the investigated undertakings have no ability to increase the price in the overall market by adjusting their supply amount, since more than half of the products are sold through channels other than the wholesale market halls. Accordingly, for the relevant market, the Board concluded that there were no grounds or factors that would facilitate a violation of Article 4 of the Law No. 4054.

The Board also evaluated the allegations regarding market allocation and indicated that there was no need to take an enforcement action due to the lack of evidence supporting the claim at hand and due to the ability of retailers to purchase their products from different sources.

In light of the foregoing analysis, the Board concluded that there was no legal ground to initiate a full-fledged investigation against the relevant undertakings operating in the wholesale market for fresh fruits and vegetables based on the Law No. 4054.

Finally, the Board decided to impose an administrative fine on one of the investigated undertakings, namely Çekok, amounting to 3,120,136.61 Turkish Liras (which corresponded to 0.5% of its gross income for the 2016 financial year) under Article 16 of the Law No. 4054. The Board took this enforcement action on the grounds that Çekok had hindered the Authority's on-site inspection by delaying it for one-and-a-half hours.

The Board's decision in this case is important, as it provides instructive explanations and analyses regarding the wholesale market for fresh fruits and vegetables from a competition law perspective by also taking into account the market structure in the EU. The Board's decision is also interesting and noteworthy from another perspective, as it provides a rare illustration of the imposition of an administrative monetary fine for delaying, and thus impeding, the Authority's on-site inspection.