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Turkey - What to Consider in Sharing Sectoral Reports with Sector Members?
In this regard, the Turkish Construction Equipment Distributors and Manufacturers Association[1] (“İMDER”) also submitted a negative clearance application for the reports that were envisaged to be shared with its members in the last year, and if this was not possible, to acquire an exemption.[2]
The main purpose of the application submitted by İMDER was to share information about the number of sales and leases of construction machinery with its members in a variety of ways through the platform "İmderonline." Participation in the aforementioned application was optional.
Upon the application of İMDER, in the decision dated 07 April 2022 and numbered 22-16/269-121 (“Decision”), the TCA examined three different reports:
[1] İMDER is an association of manufacturers and distributors of all kinds of construction machinery and their spare parts operating in Turkey. [2] It should be noted that İMDER's previous application dated 24 January 2020 requesting a negative clearance or an exemption for the reports shared and/or intended to be shared with its members was rejected by the TCA’s decision dated 09 November 2020 and numbered 20-50/688-302. In the said decision, it was concluded that competition had been restricted more than necessary because the reports envisaged sharing information undertaking-specific and the frequency of data sharing, the limits of the data to be shared, and the purpose for which it had been collected were not clear. Furthermore, the data to be shared could not be considered as genuinely public information, and the data would be compiled by the employees of the association and not by an independent third party.
- Monthly Report: A monthly report compiling information on the number of sales of construction machinery,
- Annual Report-I: An annual report on the number of sales of construction machinery, and
- Annual Report-II: An annual report on the number of leases of construction machinery
Reports | Shared Information | Breakdown | Geographical Scope | Undertaking- Specific/Aggregated | Monthly/Annual | Age of Information |
Monthly Report | Number of Sales | Size | Turkey | Aggregated | Monthly | At the end of the month |
Annual Report-I: | Number of Sales | Size | by Province | Aggregated | Annual | By ageing 3 months |
Annual Report-II: | Number of Leases | Short/Long Term | Turkey | Aggregated | Annual | By ageing 3 months |
1 in 3: Negative Clearance Granted for Only the Sharing Data Regarding the Leases
Within the scope of the negative clearance assessment, the TCA first stated that the aggregated data are data that do not reveal undertaking-specific information and that the exchange of historical information (aged two-three months) does not constitute strategic data sharing. On the other hand, it was emphasized that in highly concentrated markets, the restriction of competition effect may occur even in this case, and an examination was conducted regarding the concentration in the market. The TCA determined that the relevant market does not have a narrow oligopoly structure based on an assessment of the market's undertakings and their market shares. In other words, the TCA concluded that the market is not highly concentrated. In addition to the degree of market concentration, the TCA also assessed the transparency, complexity, stability, and similarity (symmetry) of the undertakings in the market. In this regard, the TCA made the following findings:- transparency is limited in the market as there are no market surveys in which data on construction machinery are shared. There is also no transparency risk arising from the common price change date in the market as the pricing strategies among undertakings differ substantially from each other.
- The market exhibits a very complex structure because (i) construction machinery can be divided into many sub-divisions such as brand, model, and area of use; (ii) there are class, type/tonnage distinctions within each sub-division; (iii) there are undertakings operating at all levels in the market, including manufacturers, distributors, spare parts distributors, and leasing and service companies.
- Considering the fact that the market shares of the undertakings do not follow a stable course, that there are fluctuations in the demand side of the market, and that five undertakings entered the market in the last three years, the market has an unstable structure.
- Since the price change dates and cost structures of the undertakings are quite different from each other, the undertakings are not similar, and the market is not symmetric.
- Since the construction machinery sector is a capital-intensive sector, the threat of entry into the market is low. However, the market is open to new entries as the Turkish construction machinery sector operates in a country with a rapid growth rate and the growth of the market encourages investors. Also, there are no legal barriers to entry in the sector, and although undertakings wishing to operate in the market have to bear certain costs, these costs do not reach the levels that would create barriers to entry.
- The previous year's data will be aged by three months.
- Unlike the Annual Report-I, the data will be aggregated across Turkey, rather than by province, and an additional sub-division will be made into long-term and short-term leases.
- There are also financial leasing companies operating in the leasing of construction machinery in the market and the data in the Annual Report-II will not include the number of leases of financial leasing companies. This will further reduce the risk of cooperative results in the market.
What to Consider in Sharing Number of Sales: The TCA Answers
In the application made by İMDER, it was stated that:- the information to be shared in the Monthly Report and Annual Report-I will enable undertakings to have information about the market and thus to make more rational decisions;
- undertakings will have information on the level of supply and demand in the market, which will enable them to improve their production, sales, and distribution planning and, thus, achieve efficiency gains;
- the information to be shared would also provide forecasts regarding the demand for spare parts and serve for product availability in after-sales services, thus benefiting the end-user;
- due to the structure of the market, the aforementioned activities can only be achieved if the changes in the market are monitored at least on a monthly basis with the Monthly Report; and
- province-specific actions could be taken to meet the demand and increase the quality of service thanks to the province-based information contained in the Annual Report-I.
Conclusion
With the Decision, the TCA concluded its evaluations regarding the application of İMDER, the outcome of which has been eagerly awaited by the members of the association, with granting a negative clearance certificate to one of the reports and five years individual exemption to other the two reports. In this regard, the TCA emphasized that:- sharing the number of sales at the end of the month without sufficiently ageing the data would theoretically not cause it to lose its strategic nature;
- as the undertakings that are members of İMDER constitute approximately 95% of the market, the sharing of a province-based number of sales could theoretically lead to province-based coordination of undertakings;
- the data, which will be aged for three months and shared across Turkey, as in Annual Report-II, would lose its strategic nature;
- consumers would benefit from the more accurate positioning of undertakings and the elimination of the lack of data in the market within the scope of the relevant information exchange to be included in the Monthly Report and Annual Report-I;
- information regarding the number of sales can be said to be competitively sensitive, but it is less likely to affect competition in the relevant market adversely compared to information such as prices, costs, and future strategies; and
- the competitive, complex, and unstable nature of the market may prevent the possible adverse effects of the information exchange in the relevant market.
Article by Mustafa Ayna, Özlem Başıböyük Coşkun, Arda Deniz Diler and Selim Turan
[1] İMDER is an association of manufacturers and distributors of all kinds of construction machinery and their spare parts operating in Turkey. [2] It should be noted that İMDER's previous application dated 24 January 2020 requesting a negative clearance or an exemption for the reports shared and/or intended to be shared with its members was rejected by the TCA’s decision dated 09 November 2020 and numbered 20-50/688-302. In the said decision, it was concluded that competition had been restricted more than necessary because the reports envisaged sharing information undertaking-specific and the frequency of data sharing, the limits of the data to be shared, and the purpose for which it had been collected were not clear. Furthermore, the data to be shared could not be considered as genuinely public information, and the data would be compiled by the employees of the association and not by an independent third party.