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A New Age for Digital Markets in Turkey? The Draft Amendment to the Law No. 4054 on the Protection of Competition
This blogpost will give an overview on the draft amendment (the “Draft Amendment”) to the Law No. 4054 on the Protection of Competition (the “Law No. 4054”). The key points of the Draft Amendment concern:
This blogpost will provide overview on (i) the main definitions, (ii) the obligations to be imposed on the undertakings, (iii) the processes envisaged for compliance with these obligations, and finally (iv) amendments regarding the article about on-site inspections that are included in the Draft Amendment.
What are the Key Definitions Brought by the Draft Amendment?
The Draft Amendment primarily amends Articles 1 and 2 of the Law No. 4054, which regulate the purpose and scope of the Law, and extends the scope of the Law No. 4054 to cover the prohibited conducts and obligations to be imposed on the undertakings holding significant market power in core platform services to prevent them from abusing their market power.
Accordingly, the Draft Amendment provides additional definitions in Article 3 of the Law No. 4054. These definitions include detailed descriptions of the undertakings operating in digital markets and the services they offer.
Therefore, the relevant article of the Draft Amendment includes the definitions of the following terms, most of which are self-explanatory: (i) data that is not publicly available, (ii) undertaking holding significant market power, (iii) end-user, (iv) core platform services, (v) online intermediation services, (vi) online search engine services, (vii) online social networking services, (viii) video sharing platform services, (ix) number-independent interpersonal communications services, (x) operating systems, (xi) web browsers, (xii) virtual assistants, (xiii) cloud computing services, (xiv) online advertising services, (xv) business users and (xvi) ancillary services. The definitions of the main concepts of “undertaking holding significant market power” and “core platform service”, which are at the centre of the amendments, are provided as follows:
Core platform services are regulated in a way to cover a range of services in digital markets. As seen above, the Draft Amendment adopts the same approach for the core platform services with the recently published Digital Markets Act (“DMA”) of the European Union and exhaustively lists the activities that will be subject to the obligations, in other words, core platform services. The Draft Amendment, however, foresees the issuing of an additional communiqué by the Competition Board (the “Board”) to determine the thresholds that will be relevant to make an assessment for the concept of undertakings holding significant market power.
How to Determine the Undertakings Holding Significant Market Power?
According to Article 3 of the Draft Amendment, for a core platform service provider to be considered as an undertaking holding significant market power, it is understood from the definition that the following conditions are required to be satisfied cumulatively:
These concepts are in line with the criteria for the designation of “gatekeepers” in the DMA. However, unlike the DMA, the Draft Amendment does not set out the limits of the criteria to be taken into account for an undertaking to be designated as an undertaking holding significant market power. These requirements will be introduced in detail by the communiqué (the “Communiqué on the Implementation of Article 8/A of the Law No. 4054”) to be issued by the Board within six months following the entry into force of the new amendments.
The Draft Amendment stipulates that the Board shall take into account two types of criteria while designating the undertakings holding significant market power. On one side, quantitative thresholds such as annual gross revenue, the number of end-users or the number of business users will be considered. On the other side, 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 will also be analysed.
Therefore, an undertaking may be designated as an undertaking holding significant market power by the Board either ex officio or upon complaint to be made by the third parties, based on qualitative requirements, even if the limits to be specified by the quantitative thresholds in the communiqué are not exceeded.
The process of designation of holding significant market power
First, the undertakings providing core platform services shall apply to the Competition Authority (the “Authority”) within 30 days in case they exceed the thresholds that will be determined by the Communiqué on the Implementation of Article 8/A of the Law No. 4054. Along with the application, undertakings may also submit their objections to the Authority, if any, about why they think they do not hold significant market power.
As a result of the evaluation to be carried out within 60 days following the completion of the application, the Board shall 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. As stated in the previous section, the Board may also make the same determination ex officio or upon complaint. In addition, the Board may, even if quantitative thresholds are not exceeded, reach a conclusion based on the assessment of qualitative requirements.
If the undertaking is designated to be holding significant market power, the Board shall determine a reasonable period of time, not exceeding 6 months, for the undertaking to comply with the provisions of Article 6/A.
The undertaking that is designated to hold significant market power may submit its objective justification defence regarding its inability to fulfil its obligations stipulated to the Authority, together with sufficiently substantiated and concrete information and documents, if any, within 6 months starting from the service of the decision. The Board shall evaluate and decide on whether it considers this defence within 60 days; if the Board does not accept objective justification, it shall decide that the relevant obligation shall be fulfilled.
In addition, the Board may, upon request or ex officio, change, review or withdraw its decision, in any of the following cases where:
If the Board determines, ex officio or upon complaint, that the obligations stipulated are not complied with, the preliminary investigation or fully-fledged investigation will be launched as per Articles 40 and 59 of the Law No. 4054.
If the undertaking is designated to hold significant market power, this decision will be valid for 3 years. In case the undertaking does not apply to the Authority 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, as well.
What are the Obligations that the Undertakings Holding Significant Market Power Should Comply with?
The Draft Amendment provides a list of conducts to be added as Article 6/A to the Law No. 4054, which should be complied with by the undertakings holding significant market power. These are ex-ante obligations that undertakings should comply with in order to prevent anti-competitive conduct in the core platform markets for goods and services by undertakings holding significant market power, and to ensure the maintenance of a fair and competitive market structure in the core platform services provided by such undertakings. The communiqué (the “Communiqué on the Implementation of Article 6/A of the Law No. 4054”), which is envisaged to be issued by the Board within six months following the entry into force of the new amendments, will provide further information on the implementation of these obligations.
In parallel with the DMA, the obligations set out below will be applied, to the extent appropriate to all core platform services for undertakings that have been designated to hold significant market power.
Under the Draft Amendment, undertakings holding significant market power should;
What are the Fines in Case of Non-Compliance with the Obligations?
The Draft Amendment also includes provisions on administrative fines and remedies to be applied in case of a failure to comply with the above-mentioned obligations.
Accordingly, similar to a case of violation of core competition law articles of the Law No. 4054, the Board may decide to apply structural remedies in the form of requiring undertakings to transfer certain businesses, partnership shares or assets in the event of a failure to comply with the obligations stipulated under Article 6/A of the Law No. 4054. Unlike a violation of Articles 4, 6 and 7, a violation of Article 6/A can directly motivate a decision ordering a structural remedy, without the need to issue a prior behavioural remedy in a previous decision.
In such a case, it will be sufficient to demonstrate that the behavioural remedy will not yield any result.
One of the most relevant amendments envisaged by the Draft Amendment is the administrative fine to be imposed on the undertakings holding significant market power in case of a failure to comply with the obligations to which they are subject.
In case of a violation of Articles 4, 6 and 7 of Law No. 4054, the relevant undertaking may be imposed an administrative fine up to ten percent of its annual gross revenues. With the Draft Amendment, this rate has been increased twice, i.e., up to twenty percent of their annual gross revenues, in case that undertaking holding significant market power violates the obligations stipulated under Article 6/A. If the relevant provision enters into force, it can be expected to be very effective in practice and to result in very high administrative fines.
Moreover, in case the Board determines that undertakings holding significant market power violated Article 6/A at least two times within five years, it may prohibit the mergers or acquisitions by these undertakings for up to five years, in order to eliminate the damages arising from repeated violations or to prevent serious or irreparable damages that may arise.
The envisaged provisions under the Draft Amendment of the Law No. 4054 provide that the undertakings holding significant market power may be obliged to comply fully and actively with the obligations to which they are subject. Accordingly, they shall take all the necessary measures and report the relevant processes upon request of the Authority. The undertakings holding significant market power are deemed unconditionally responsible for complying with the obligations.
Proposed Amendment Regarding the Board’s On-Site Inspection Authority
Article 7 of the Draft Amendment is envisaged to add the expression “and, in cases where resolving requires special expertise or technical knowledge for the implementation of Article 6A, experts with special knowledge, skills or experience to be appointed by the Board if deemed necessary” to follow the expression of “experts employed at the disposal of the Board” in Article 15 of the Law No. 4054 titled on-site inspection.
In addition, it is regulated that undertakings offering at least one core platform service in Turkey, regardless of them being residing in Turkey or not, will be obliged to fulfil technical and administrative requirements that would enable to perform the powers set forth in this article.
One of the most important tools used by the Board in revealing competition violations is on-site inspection. However, the online nature of digital services allows platforms to offer services outside the country in which they are established. Therefore, if the platforms do not have an office in Turkey where the employees to be addressed during on-site inspection are employed and remote access to the servers abroad is provided, it will not be possible to conduct an on-site inspection.
With the Draft Amendment, undertakings offering at least one core platform service in Turkey are held responsible for fulfilling the technical and administrative requirements that will enable the use of this authority in order not to render the Board’s on-site inspection authority ineffective for undertakings that do not have headquarters in Turkey or do not have centralized technical and administrative equipment.
Another issue envisaged by the Draft Amendment is that similar to the DMA, if deemed necessary when implementing Article 6/A independent third parties with technical knowledge could be assigned by the Board to participate in the examination, in addition to the experts already working under the Board’s authority.
Conclusion
Currently, there is no draft regulation on the quantitative criteria to be taken into account for the determination of undertakings holding significant market power. The Draft Amendment sets out in detail the conducts that undertakings holding significant market power should refrain from while operating in the market and sets the fines to be imposed in case of non-compliance with these obligations considerably high. This confirms that the relevant undertakings operating in digital markets, which have been under the scrutiny of competition authorities for a long time, will be given a substantial responsibility.
Considering that many secondary legislations will be required, and the application processes of undertakings will start once the legislations entered into force, digital markets and the undertakings operating in these markets may be expected to be under the scrutiny of the Authority for a long period. In this context, the relevant undertakings should initiate their compliance processes with the new regulations as soon as possible by taking into consideration the framework outlined by the DMA.
Comparison with DMA
DMA | Draft Amendment | Notes |
Article 3(1): An undertaking shall be designated as a gatekeeper if:
|
(b) | it provides a core platform service which is an important gateway for business users to reach end users; and |
(c) | it enjoys an entrenched and durable position, in its operations, or it is foreseeable that it will enjoy such a position in the near future. |
(a) | as regards paragraph 1, point (a), where it achieves an annual Union turnover equal to or above EUR 7,5 billion in each of the last three financial years, or where its average market capitalisation or its equivalent fair market value amounted to at least EUR 75 billion in the last financial year, and it provides the same core platform service in at least three Member States; |
(b) | as regards paragraph 1, point (b), where it provides a core platform service that in the last financial year has at least 45 million monthly active end users established or located in the Union and at least 10 000 yearly active business users established in the Union, identified and calculated in accordance with the methodology and indicators set out in the Annex; |
(c) | as regards paragraph 1, point (c), where the thresholds in point (b) of this paragraph were met in each of the last three financial years. |
Will be determined by the Communique on the Implementation of Article 8/A of the Law No. 4054
(a) | process, for the purpose of providing online advertising services, personal data of end users using services of third parties that make use of core platform services of the gatekeeper; |
(b) | combine personal data from the relevant core platform service with personal data from any further core platform services or from any other services provided by the gatekeeper or with personal data from third-party services; |
(c) | cross-use personal data from the relevant core platform service in other services provided separately by the gatekeeper, including other core platform services, and vice versa; and |
(d) | sign in end users to other services of the gatekeeper in order to combine personal data, |
unless the end user has been presented with the specific choice and has given consent within the meaning of Article 4, point (11), and Article 7 of Regulation (EU) 2016/679.
Where the consent given for the purposes of the first subparagraph has been refused or withdrawn by the end user, the gatekeeper shall not repeat its request for consent for the same purpose more than once within a period of one year.
This paragraph is without prejudice to the possibility for the gatekeeper to rely on Article 6(1), points (c), (d) and (e) of Regulation (EU) 2016/679, where applicable.
1) not combine the personal data they obtain from the core platform services with the personal data obtained from any other services they offer or with personal data obtained from third parties, shall not process these data by combining and shall not use them for / in the context of other services, especially in targeted advertising; unless it is necessary for the performance of a contract to which the end user is a party,
2) not process the competitively sensitive data obtained from business users for purposes other than the fulfilment of the relevant service, unless it provides clear, precise, and sufficient options to the business user.
- The DMA only includes personal data however the Draft Amendment covers personal data as well as competitively sensitive data obtained from business users.
- Regarding data processing prohibition, the Draft Amendment stipulates a limitation (i.e., if necessary for the performance of a contract to which the end user is a party) on the other hand, the DMA presents consent as a general exception to all obligations under this paragraph.
- In addition, the Draft Amendment prohibits processing the competitively sensitive data unless it provides clear, precise, and sufficient options to the business user.
- In Article 5(2) para. (c) and (d) cross-use and sign-in end-users to combine data are regulated specifically unlike the Draft Amendment.
Article 5(4): The gatekeeper shall allow business users, free of charge, to communicate and promote offers, including under different conditions, to end users acquired via its core platform service or through other channels, and to conclude contracts with those end users, regardless of whether, for that purpose, they use the core platform services of the gatekeeper.
(a) | the price and fees paid by that advertiser, including any deductions and surcharges, for each of the relevant online advertising services provided by the gatekeeper, |
(b) | the remuneration received by the publisher, including any deductions and surcharges, subject to the publisher’s consent; and |
(c) | the metrics on which each of the prices, fees and remunerations are calculated. |
In the event that a publisher does not consent to the sharing of information regarding the remuneration received, as referred to in point (b) of the first subparagraph, the gatekeeper shall provide each advertiser free of charge with information concerning the daily average remuneration received by that publisher, including any deductions and surcharges, for the relevant advertisements.
Article 5(10): The gatekeeper shall provide each publisher to which it supplies online advertising services, or third parties authorised by publishers, upon the publisher’s request, with free of charge information on a daily basis, concerning each advertisement displayed on the publisher’s inventory, regarding:
(a) | the remuneration received and the fees paid by that publisher, including any deductions and surcharges, for each of the relevant online advertising services provided by the gatekeeper; |
(b) | the price paid by the advertiser, including any deductions and surcharges, subject to the advertiser’s consent; and |
(c) | the metrics on which each of the prices and remunerations are calculated. |
In the event an advertiser does not consent to the sharing of information, the gatekeeper shall provide each publisher free of charge with information concerning the daily average price paid by that advertiser, including any deductions and surcharges, for the relevant advertisements.
Article 6(8): The gatekeeper shall provide advertisers and publishers, as well as third parties authorised by advertisers and publishers, upon their request and free of charge, with access to the performance measuring tools of the gatekeeper and the data necessary for advertisers and publishers to carry out their own independent verification of the advertisements inventory, including aggregated and non-aggregated data. Such data shall be provided in a manner that enables advertisers and publishers to run their own verification and measurement tools to assess the performance of the core platform services provided for by the gatekeepers.
- The Draft Amendment includes information about bidding process unlike the DMA.
For the purposes of the first subparagraph, the data that is not publicly available shall include any aggregated and non-aggregated data generated by business users that can be inferred from, or collected through, the commercial activities of business users or their customers, including click, search, view and voice data, on the relevant core platform services or on services provided together with, or in support of, the relevant core platform services of the gatekeeper.
- The DMA in the second paragraph includes several examples of how the data can be collected while the definition of the Draft Amendment does not refer something similar.
The gatekeeper shall allow and technically enable end users to easily change default settings on the operating system, virtual assistant and web browser of the gatekeeper that direct or steer end users to products or services provided by the gatekeeper. That includes prompting end users, at the moment of the end users’ first use of an online search engine, virtual assistant or web browser of the gatekeeper listed in the designation decision pursuant to Article 3(9), to choose, from a list of the main available service providers, the online search engine, virtual assistant or web browser to which the operating system of the gatekeeper directs or steers users by default, and the online search engine to which the virtual assistant and the web browser of the gatekeeper directs or steers users by default.
Article 6(4): The gatekeeper shall allow and technically enable the installation and effective use of third-party software applications or software application stores using, or interoperating with, its operating system and allow those software applications or software application stores to be accessed by means other than the relevant core platform services of that gatekeeper. The gatekeeper shall, where applicable, not prevent the downloaded third-party software applications or software application stores from prompting end users to decide whether they want to set that downloaded software application or software application store as their default. The gatekeeper shall technically enable end users who decide to set that downloaded software application or software application store as their default to carry out that change easily.
The gatekeeper shall not be prevented from taking, to the extent that they are strictly necessary and proportionate, measures to ensure that third-party software applications or software application stores do not endanger the integrity of the hardware or operating system provided by the gatekeeper, provided that such measures are duly justified by the gatekeeper.
Furthermore, the gatekeeper shall not be prevented from applying, to the extent that they are strictly necessary and proportionate, measures and settings other than default settings, enabling end users to effectively protect security in relation to third-party software applications or software application stores, provided that such measures and settings other than default settings are duly justified by the gatekeeper.
- The DMA leaves out the possibility to uninstall any software application that is essential for the functioning of the operating system.
- The DMA explicitly envisages the rights of providers to take strictly necessary and proportionate measures, to ensure that integrity and security of services provided by those are not endangered, unlike the Draft Amendment.
- With regard to changing default settings on operating system, the DMA requires that end-user should be provided with a list of the main available service providers.
The gatekeeper shall not be prevented from taking strictly necessary and proportionate measures to ensure that interoperability does not compromise the integrity of the operating system, virtual assistant, hardware or software features provided by the gatekeeper, provided that such measures are duly justified by the gatekeeper.
6/A (k): In order to maintain provision of core platform services or ancillary services by other undertakings, provide free of charge access to the necessary operating system, hardware or software features, limited to the relevant core platform service, and shall fulfil the technical requirements for this,
For that purpose, the gatekeeper shall publish general conditions of access, including an alternative dispute settlement mechanism.
The Commission shall assess whether the published general conditions of access comply with this paragraph.