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16 May 2019
On 1 April 2019 the Competition Board published its reasoned decision (10 January 2019, 19-03/13-5) following a preliminary investigation of allegations that çiğ köfte producers in Gaziantep province had violated Article 4 of Law 4054 on the Protection of Competition by restricting competition through anti-competitive behaviour and agreements.(1) The complainant had claimed that:
The preliminary investigation focused on a number of documents obtained during on-site inspections in Gaziantep and additional interviews with the vice president of the Gaziantep Chamber of Commerce.
The Competition Board began its assessment of the relevant market by explaining that çiğ köfte has become an important alternative for fast-food consumers. The board noted that çiğ köfte is a sub-category of the fast-food sector and that çiğ köfte stores have become increasingly popular over the past 20 years. Çiğ köfte is distributed by corporate brands via their branches or through more localised stores where production and sales are conducted together.
The board noted that the complainant's application concerned çiğ köfte production and sales in Gaziantep province; however, it refrained from conclusively determining a relevant product or geographic market, as this would not substantially affect its assessment.
The Competition Board acknowledged the signatures of six çiğ köfte store owners active in Gaziantep province on a document entitled Çiğköfte Producers Discussion Meeting (Document 1). As can be seen from the board's decision, Document 1 shows that from a specific redacted date, the price of çiğ köfte was determined for a specific redacted amount. Document 1 also shows that the agreed price would apply in Gaziantep province and a different minimum price would be applied in the rest of Turkey.
Document 1 also stipulated that a WhatsApp group would be set up to report non-compliance and that a fine of TL13,000 would be imposed on parties that failed to comply with the abovementioned rules and other rules stipulated in the agreement. It also stated that half-kilo çiğ köfte packs sold to stores would be priced at a specific redacted amount. Further, Document 1 included an additional clause that producers would not conduct sales under different brands or undercut the market value.
Document 2 comprises notes from an interview conducted with Cevizli Köfteci, one of the undertakings being investigated. During the interview, Cevizli Köfteci's owner stated that:
Cevizli Köfteci's owner also stated that the WhatsApp group was used to maintain the agreement, but that the penalty clause had not been put into practice.
Document 3 comprises notes from an interview with the complainant in which it stated that a different redacted price had been executed prior to the agreement.
Document 4 comprises notes from an interview with the Gaziantep Chamber of Commerce's vice president stated that the price of ingredients had doubled prior to the agreement. Further, the vice president stated that no follow-up request had been made by the undertakings with respect to prices.
The board started its assessment by citing Article 4 of Law 4054, which states that "fixing the purchase or sale price of goods or services, elements such as cost and profit which form the price, and any condition of purchase or sale" is prohibited and the behaviour of the çiğ köfte producers could be examined in this context.
The board further explained that the market prices for çiğ köfte had dropped following Padişah Köfte's market entry, which was reciprocated by İsot Köfte also dropping its prices. Further, the board noted that costs increased markedly, which had caused these lower prices to be unprofitable. According to the board, through the abovementioned agreement, prices were increased and determined per kilo of çiğ köfte by the relevant undertakings.
Drawing on the interviews conducted, the board also found that:
In this respect, the board found that the existence of a signed agreement and proof that it had been executed constituted a violation of competition law.
The board also noted that:
In this context, the board referenced Article 9 of Law 4054, which stipulates as follows:
The Board, prior to taking a decision pursuant to the first paragraph, shall inform in writing the undertaking or associations of undertakings concerned of its opinions concerning how to terminate the infringement.
The board further referenced the Council of State's decision in Burdur Consumer Protection Association, which found that it can apply Article 9 of Law 4054 where it is possible to:
The board found that the information gathered for the case had fulfilled the abovementioned requirements and sent a letter of opinion to the Gaziantep Chamber of Commerce under the terms of Article 9 of Law 4054.
For further information on this topic please contact Gönenç Gürkaynak at ELIG Gürkaynak Attorneys-at-Law by telephone (+90 212 327 17 24) or email (email@example.com). The ELIG Gürkaynak Attorneys-at-Law website can be accessed at www.elig.com.
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