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 çig 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:
- at a meeting in the Gaziantep Chamber of Commerce, çig köfte producers had determined market prices; and
- undertakings that chose not to comply with the determined prices would be penalised.
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.
Sector and relevant product market information
The Competition Board began its assessment of the relevant market by explaining that çig köfte has become an important alternative for fast-food consumers. The board noted that çig köfte is a sub-category of the fast-food sector and that çig köfte stores have become increasingly popular over the past 20 years. Çig 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 çig 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.
Document 1
The Competition Board acknowledged the signatures of six çig köfte store owners active in Gaziantep province on a document entitled Çigköfte 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 çig 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 çig 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
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:
- an undertaking was offering prices lower than the market average; and
- the agreement had been drawn up to create a middle ground with other competitors.
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
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
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.
Behaviour of cig köfte producers
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 çig köfte producers could be examined in this context.
The board further explained that the market prices for çig köfte had dropped following Padisah Köfte's market entry, which was reciprocated by Isot 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 çig köfte by the relevant undertakings.
Drawing on the interviews conducted, the board also found that:
- pricing decisions taken during the meeting in the Gaziantep Chamber of Commerce had been applied by all of the producers mentioned in the agreement;
- follow-ups had been communicated via the WhatsApp group; and
- a penalty clause had been inserted to demonstrate that the undertakings were taking the agreement seriously.
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:
- the vice president of the Gaziantep Chamber of Commerce had stated that the producers had joined together with similar aims;
- a similar pricing agreement had also been concluded at the same meeting, but there had been problems with its application and the producers had asked for a new meeting to be organised;
- in a submission made to the Competition Authority by a number of undertakings, it was stated that their decisions had been taken in good faith, but had not been acted on any further; and
- during the interviews, it had been stated that the undertakings had had to act due to the cost increases.
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:
- shed light on a complaint during the preliminary investigation phase;
- eliminate the effects of a violation of competition law; and
- compensate for the violation's anti-competitive effects.(2)
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.
Endnotes
(1) A traditional Turkish meatball that constitutes an alternative to fast food and is served in chain stores in Turkey.
(2) Decision 2010/4818 E 2014/2197 K.
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