Competition regulations that arouse interest in Turkish Law upon the enforcement Law No. 4054 on the Protection of Competition (“Law No. 4054”) aim to ensure the proper functioning of the competitive market environment. In other words, Competition Law regulations arising from Law No. 4054 focus on the competitive market environment and aim to protect the competitive order itself by controlling the market structure. Unfair Competition regulations arising from Turkish Commercial Code No. 6102 (“Code No. 6102”), on the other hand, lay down rules for a much wider range of commercial practices such as misleading advertisements, copying of commercial products and trademarks, disclosure of trade secrets, defamation of competitors, predatory pricing and discrimination. However, while having different extents, both regulations aim to protect competition in essence. They differ only in the way they address this purpose. As such, these two fields of law support each other in many respects and even overlap in practice.
As mentioned above, although the Competition Law regulations under Law No. 4054 and the Unfair Competition rules in Code No. 6102 basically aim to protect competition, there are some methodological differences between these two branches of law. While the Competition Law regulations under Law No. 4054 provide protection at the macro level, the Unfair Competition provisions in Code No. 6102 protect competition at the micro level. Moreover, Law No. 4054 controls the market order whereas the Unfair Competition regulations under Code No. 6102 seek to prevent commercial abuses by focusing on commercial practices. Therefore, it is not possible to completely differentiate between these two branches of law.
The unfair competition provisions of Law No. 4054 and Code No. 6102 overlap in some cases, and the regulations arising from both may be applied together. The key issues on which they overlap are discussed in detail below:
1. Predatory Pricing
Predatory Pricing is an excessively low pricing strategy employed by an undertaking to force competitors out of the market or to prevent potential competitors from entering the market. Such pricing is considered an abuse of dominance under Law No. 4054 if the undertaking is in a dominant position. The reason is that a dominant undertaking can financially overcome this below-cost pricing, whereas a non-dominant undertaking will not be able to overcome it and will disappear from the market. This is contrary to the purpose of ensuring the continuity of the competitive market environment and constitutes an abuse of dominance.
This dishonest practice is also subject to Unfair Competition Law arising from the provisions of Code No. 6102. In fact, this is a commercial practice contrary to the rule of good faith and is prohibited pursuant to Article 55 of Code No. 6102.
2. Boycott
Boycott is explicitly listed among anticompetitive practices in subparagraph d of Article 4 in Law No. 4054 as “…excluding undertakings operating in the market by boycotts or other behavior, or foreclosing the market to potential new entrants.” If such an action is performed upon an agreement between multiple companies, it will also be considered as an anticompetitive agreement (cartel) under Law No. 4054. Even unilateral boycott attempts may lead to a violation in terms of the antitrust concept depending on their market effects. Regulated under Law No. 4054, boycotts are also subject to the Unfair Competition regulations under Code No. 6102. Accordingly, boycotts, which may decrease the number of goods and services or the number of undertakings offering goods and services to the market, also reduce the social benefit, constituting a commercial practice contrary to good faith. Therefore, boycotts may lead to unfair competition. Likewise, in the doctrine, boycotts are considered among the typical areas where the unfair competition rules under Code No. 6102 and the regulations of Law No. 4054 overlap.
3. Disparagement and Misrepresentation of Competitors
The acts of disparaging a competitor and spreading unfounded and misleading information about its products/services are explicitly listed among anticompetitive practices pursuant to subparagraph (a) of Art. 55/1 in Code No. 6102. For example, if an undertaking spreads negative and false rumors about its competitor’s financial situation or the nature of its products, it will have violated the principle of good faith. While such defamatory activities are normally not within the scope of Law No. 4054, the situation takes on a different dimension if the defamatory undertaking is in a dominant position. Indeed, in this case, the defamed undertaking may be forced out of the market.
4. Prevention of Market Entry and Other Methods
Some undertakings may exert pressure on their suppliers and/or dealers to force them to work only with them. This is referred to as exclusivity under Law No. 4054. Exclusivity may be dealt with under Article 6 if the undertaking is in a dominant position and Article 4 if it is not as per Law No. 4054. In fact, this issue is clearly mentioned in the Guidelines on Exclusionary Conduct of Dominant Undertakings. In this context, the imposition of exclusivity by an undertaking in breach of the good faith principle may be evaluated as per both fields of law.
The points where the unfair competition regulations under Law No. 4054 and Code No. 6102 overlap are not limited to those indicated here. Indeed, the rules of both will come into play in a market behavior involving two practices, namely (i) preventing entry to the market, forcing out of the market, and (ii) spreading false claims about the competitor.
In conclusion, although these two fields of law may sometimes be confusing for market players in terms of how they relate to each other, they essentially support each other and overlap in various respects while addressing their main objective of protecting competition from different perspectives.
Nedim Korhan Şengün, Founder and Partner
Dila Yıldırım, Associate
