News and developments
The Commitment Mechanism is not Open to Negative Matching Agreements
Further to the initiation of the investigation, VAVA CARS and Arabam.com submitted their requests to initiate commitment negotiations but TCA rejected their requests. Then, both undertakings requested a re-evaluation of their commitment requests as per Article 11 of the Administrative Procedure Law No. 2577 (“Administrative Procedure Law”) prior to challenging the relevant decisions before the administrative judiciary.
In this regard, the TCA recently published two reasoned decisions that evaluate the applications of Arabam.com[1] and VAVA CARS[2] under Administrative Procedure Law requesting a re-evaluation of their requests to offer commitments. Subsequent to the publication of these reasoned decisions, it is seen that the behaviours of the relevant undertakings subject to the Investigation are related to the "negative matching obligation," which is a prominent topic within the scope of Turkish competition law practice via the TCA’s Modanisa Decision[3].
[1] TCA Arabam.com Decision dated 08 December 2022 and numbered 22-54/836-346. [2] TCA VAVA CARS Decision dated 27 October 2022 and numbered 22-49/725-304. [3] TCA Modanisa Decision dated 25 November 2021 and numbered 21-57/789-389.
- The TCA Did Not Recognize the Defence on Trademark Rights
- The Investigated Practices are Considered Naked and Hard-Core Infringement
- The investigated practices did not constitute a naked and hard-core infringement, which are listed numerus clausus within the scope of Communiqué No. 2021/2. However, the TCA discretionarily expanded the scope of naked and hard-core restrictions in its evaluation of commitment request.
- In its Modanisa Decision, the TCA evaluated whether the agreement that contained a negative matching obligation could benefit from the individual exemption and concluded that the agreement did not constitute naked and hard-core infringement, but only led to potential anticompetitive effects.
- The EU competition law legislation and precedents do not regulate negative matching agreements as naked and hard-core infringements, while the U.S. Federal Trade Commission acknowledged that the agreements on negative matching obligation do not constitute per se
- the non-targeting obligation imposed only on registered trademarks is in the nature of narrow non-brand bidding agreements and falls within the scope of the trademark protection granted by IP Law to right holders,
- the non-targeting obligation imposed on phrases that are not registered as trademarks (such as phrases derived from the partial spelling of trademarks) exceeds the limits of trademark protection in any case, and
- the negative matching obligation has the potential to cause similar effects to customer/market sharing since it exceeds the limits of the trademark protection provided by IP Law as it results in the competitors blocking the impression of each other's ads even when they do not specifically bid on each other's brands.
- the implementation of the agreement would not eliminate competition in a significant part of the relevant market and its impact on competition in the relevant markets may be limited considering that the agreement is limited only between Sefamerve and Modanisa, whose market shares are considerably lower compared to the rest of the market,
- negative matching agreements are unlikely to prevent the problem of free-riding, and likely to have market/customer sharing-like effects and limit consumers' choices since they limit the ads that could be displayed for queries with a very broad set of keywords and prevent consumers from being notified of competitors of the relevant brand, and
- implementing wide negative matching obligations could not be considered necessary and proportional compared to less restrictive alternatives, such as narrow non-brand bidding agreements.
CONCLUSION
These decisions have prominent nature in terms of Turkish competition law practices. Indeed, although the relevant decisions do not include a comprehensive evaluation of online advertising practices, they strengthen the TCA’s approach to negative matching agreements whose foundations were laid with the Modanisa Decision in 2021. It is observed that the TCA does not pay regard to the arguments that narrowly explain negative matching agreements only in terms of IP Law. On the contrary, the TCA reiterates its evaluation that negative matching agreements have similar impacts on relevant markets such as customer/market sharing agreements, which are considered naked and hard-core restrictions. Similarly, although the commitment mechanism was introduced in 2020 (with details regulated through a communiqué in 2021), these two reasoned decisions enrich the TCA precedents on applications made within the scope of Article 11 of Administrative Procedure Law with regard to the TCA’s rejection of commitment requests.[1] TCA Arabam.com Decision dated 08 December 2022 and numbered 22-54/836-346. [2] TCA VAVA CARS Decision dated 27 October 2022 and numbered 22-49/725-304. [3] TCA Modanisa Decision dated 25 November 2021 and numbered 21-57/789-389.