Competition Law PDF

Competition Law Reyhan Şentürk 27.09.2024 This lesson is in relations with Turkish Commercial Law. Customers are benefiting this competitive environment in economy. What is the legal background of competition? How it...

Competition Law Reyhan Şentürk 27.09.2024 This lesson is in relations with Turkish Commercial Law. Customers are benefiting this competitive environment in economy. What is the legal background of competition? How it developed itself? How we are implementing it? The state/government has the responsibility to protect the liberal economy and competition. (Liberal ekonomiyi ve rekabeti koruma görevi devlete aittir.) The Turkish Competition Authority is protecting the competitive environment. Is being a dominant company in a sector is prohibited or not? 04.10.2024 What is competition? (from the legal perspective) The race started by sellers in order to increase their sales of goods, products and services. Competition is a race. The actors of competition are the sellers/companies. Competition law is securing that there is a competitive environment for sellers to increase their sales. At the end their profit will increase. Competition law is serving for social justice and economic development. Social Justice: Equal opportunity to reach out to different products and services. If there is perfect competition in a state, foreign companies want to invest. State must protect the competitive environment but state is also responsible for the public good of the citizens, so they are putting some restrictions on the market. Competition law is related with constitution law and administrative law. Why competition is important? Low price, high quality. When competition increases, i must decrease the price and increase the quality to attract different customers. There is a balance here because quality is not cheap. Also because of this competition, one of the equal quality products are reducing their prices and the customers are buying it. Freedom of choice. Competitive environment is giving customers many alternatives. Consumers have a chance to choose a product of a desired price or quality among many alternatives. Technological Development. Firms have to develop their available products or produce new products in order to increase their market shares in a competitive environment. Development of Social Welfare. Competition ensures that firms produce and invest in a way that will meet the demands and expectations of the consumer, and therefore economic sources are utilized in the best way possible. 1 Competition Law Reyhan Şentürk Increasing the competition power. When i have an competitive environment, i also have a market which can be competitive enough. If a state has a good competitive environment, its competition power in foreign markets is also good. Freedom of enterprise. When i say enough freedom to invest, i will have more enterprises. Competitive markets make it easy for new firms and technologies to enter the market. Favorable Environment for SMEs (small and medium sized enterprises). In an economy dominated by monopolies and cartels, it very is difficult for small and medium-sized enterprises to carry out their activities and survive. 11.10.2024 Competition Law When i have a competitive environment which secured by competition law, how will the state, the buyer, the seller benefit from this? → State benefits from the economic development. New companies invest. There will be more money circulating in the State. State is also gaining more tax. → Buyers benefits from the cheaper prices balanced by quality. Buyers can reach to this product or service. → Seller benefits from their higher profits. At the end, there will be social justice and economic welfare. These are results of the competitive environment. Historical Aspect 1. Havana Charter: After the World War II the United Nations decided to reach to the wellbeing of the people. Aim: to coordinate international trade and creation of an International Trade Organization It is first step of regulating a legal document about safeguarding competition environment all around the world. There are some obligations for governments about certain trade disciplines. No specific competition law chapter was included. ITO is about making economical cooperation happen. Although there isn’t any specific reference of competition law, it is making an indirect reference to competition law. Presumption: Karine Unfortunately, Havana Charter does not have enough ratifications. It was not successful enough. 2 Competition Law Reyhan Şentürk 2. General Agreement on Tariffs and Trade (GATT) Although the Havana Charter was unable to elicit international acceptance, the trade policy chapter survived. Aim: to eliminate artificial barriers and discriminatory practices GATT did not directly proclaim principles of competition because first of all international trade should be satisfied. If there is no legal background, it forbids the discriminatory practices. For example i can’t say ‘’If the product is from China, i don’t want it.’’ One of the most significant changes was the creation of the World Trade Organization (WTO). This time they successfully did it. 3. EU European Union Law is also about economy. After World War II, US promoted the liberal economy in Europe. The European Coal and Steal Community (“ECSC”) Treaty prohibited: “(a) import and export duties … and quantitative restrictions on the movement of coal and steel; (b) measures or practices discriminating among producers, among buyers, or among consumers … as well as… practices which hamper the buyer in the free choice of his supplier; (c) subsidies or state assistance, or special charges imposed by the state…; (d) restrictive practices tending toward the division of markets or the exploitation of the consumer.” Also, Article 65 of said treaty prohibited agreements and concerted practices that tended to “prevent, restrict, or distort the normal operation of competition” within the Community. Economic integration is about having a Common Market. Common Market is the best interest of this competitive environment. The legal rules of competition are well-functioning in European Union. Common Market There is custom duties and quantitative restrictions between the member States. There will not be any kind of a custom taxes between the member States. Inside this common market, there is something called free movement of persons, goods, services and capital. This is also between the member States. It is beneficial but also harmful. The harmful part is if you add a poor country to EU, the economical environment might be in danger. Balance is very much important. 3 Competition Law Reyhan Şentürk 4. Ongoing Efforts: Governmental Initiatives United Nations Draft Convention on Restrictive Practices was sent to UN member nations for ratification. US had one of the biggest economy at that days. US did not ratify it because of strong opposition from the US business community. It is not very successful. 5. The OECD Promoting how sustainable economic growth may happen. Aim: contributing to the development of the world economy How OECD aims to protect competition: → The initiative to elaborate an International Antitrust Code Working Group, and a Draft International Antitrust Code → The OECD Competition Committee report adopted on 2001 on leniency programs to fight hard core cartels → The several conferences and recommendations of the OECD’s Joint Group on Trade and Competition Someone can be dominant, it is okay. If a dominant company’s policy damages the other companies, it is a problem. Being dominant is okay but being a cartel (tekel) is not okay. 6. UNCTAD: The main aim of the UNCTAD Set was to make sure that the liberalization of tariffs and non-tariff barriers according to GATT was not affected upon by restrictive business practices. Trade Liberalization is one of the main aims. It is about removing or reducing trade barriers and encouraging the free exchange of goods between nations. Transporting goods between countries with minimum tax. a. Tariff Barriers → Duties and taxes imposed on the imported goods. (İthal mallara uygulanan vergi ve harçlar) → Attack on the price → Indirectly restricts imports b. Non-Tariff Barriers → Various quantitative and Exchange control restrictions to restrict imports (İthalatı kısıtlamak için çeşitli niceliksel ve döviz kontrolü kısıtlamaları) → Attack on the quantity → Directly restricts imports 4 Competition Law Reyhan Şentürk High tariff barriers are damaging the international trade. UNCTAD Set takes a double approach: → On the one hand, it addresses government action (Principles and Rules for States at National, Regional and Sub-Regional Levels) → On the one hand, it addresses government action (Principles and Rules for Enterprises including Transnational Corporations) 7. The WTO (World Trade Organization) It marks the beginning of a new era of global economic co-operation. They are trying to safeguard the competitive environment around the world. 18.10.2024 Competition Law Competition law is the set of rules which are regulating the race between the sellers. The Goals and Scope of Competition Law The Scope of Competition Law Making the market more efficient and welfare. The legal rules are trying to guarantee that the competition in the market is functioning in an efficient way. When i have a perfect competitive market, if there are certain invisible hand/unseen force, they also damage competition law. There is an invisible hand there is moving in the market and affecting the market. The balance in the competitive market is damaged. Maybe we need stronger competition law rules. The perfect competition means that everything is going okay in the market. When i have a perfect competitive environment, i don’t need strict competition law rules. Some businesses may try to limit the pressure of competition to increase their profitable so at that markets we need strong rules of competition. They could do this through illegal methods such as: cartel agreements, mergers, by abusing their market power. (Cartel agreements are creating a monopoly in the market.) States use competition laws to safeguard the competition. They need strong competition law rules for that. Competition law aims to ensure fair competition dynamics. 5 Competition Law Reyhan Şentürk The Common Goals of Competition Law The main aims that i’m trying to reach out: 1. Protecting the competition law. 2. Companies should be inside of the frameworks of competition law. 3. Providing the safe dynamics of free and fair competition. 4. Protect and satisfy customer benefit. Getting the best product to a low price. (There should be price and quality balance.) 5. Protecting the seller benefit. They are trying to reducing the cost while producing the product that is efficient. When they do that their sales and at the end their profit will increase. We call it product efficiency. 6. Product efficiency. 7. Dynamic efficiency. We need to increase the investments so that we can produce more product into the market. We invest in research and innovation in the long run to improve their offerings and win the market share. If you increase the investments, there will be more offers and when you offer more, you can decrease the price. (ar-ge çalışmaları yapıp yeni şeyler üreterek etkililiği arttırmak) 8. Allocative efficiency. Resources flow to the most efficient firms. If we have a high efficient company in the market, the resources will increase. All of these goals are collapsing with each other. National Variations of Competition Law Competition law principles are similar across the world but they are customized by each jurisdiction. Each country may have different ideas as to the scope and role of competition law. The Economic Principles of Competition Law The Principle of Efficiency Competition encourages the best efficiency. I’m trying to make the sellers and customers to reach out to the best economy. The benefit of the seller is the profit that they try to reach out. The benefit of the buyer is getting the highest quality and quantity in a low price. Sellers can also attract customers by improving or differentiating their product. The Principle of Dynamic Efficiency Competition between the sellers is encouraging them to producing the products with higher quality. They try to improve their products due to competition The customers will have more choices. 6 Competition Law Reyhan Şentürk Types and Power of Competition There are national variations about competition law issues, because of this there are different competition law structures. 25.10.2024 Types and Power of Competitions Perfect competition is something more theoretical. The idea of competition was about bringing the society in a welfare level. There is a highly competitive environment. Perfect Competition Basic components of perfect competition: It aims the maximum level of customer welfare. It is about reaching out the higher quality with lower price. One of the aims is strong market. You can enter or withdrawal with the market as you want. Perfect competition is a theoretical structure. A theoretical market structure in which there are no monopolies. The most competitive market is perfect competition. In reality, reaching out to perfect competition is impossible. In this market, only those who provide the best quality product at the lowest price can survive. 7 Competition Law Reyhan Şentürk Sellers invest in improving production and distribution. If they become more efficient, they can lower their price. Sellers gain here is selling more products. They have a high profit at the end of the day. Welfare of the society is reached out in this perfect competition. There are a large number of firms supplying the product, which implies that the behaviour of each individual firm does not have any influence on the market price – firms are assumed to be price takers. The idea of perfect competition must certainly be something that the State is try to reach out. Monopolistic Competition We have many companies which is offering the similar products and services. They must attract the customers from different perspectives. (You must do some sales, you must improve your product.) The barriers to entry in a monopolistically competitive industry are low and the decisions of any one firm do not directly affect its competitors. Producers control the price with customers. Oligopoly There is a competitive environment but here we have a few competitors. The number of competitors are less. A market structure with a small number of firms, none of which can keep the others from having significant influence. Because of the structure of this product that you’re trying to give, you have some limitations. (Örneğin herkes benzin markası ya da havayolu markası açamaz çünkü yeterli yatırımı yoktur.) Selling the gas is monopolistic competition, if you want to produce the oil it is oligopoly. 8 Competition Law Reyhan Şentürk Monopoly This is the least competitive market. We don’t have any other competitors. I’m the only seller in the market. This is like a locked in structure. The power is collected in that one person or that one market. Natural Monopoly: Sometimes because of the nature of the product or service, we may have this natural monopoly. The benefit is going to giving to the society. (drinking water in a State, railways, natural gas) Cartels and Other Horizontal Restraints 1. Cartels This it worst scenario that we have. The most dangerous violations of competition law are cartels. Cartels are witnessed even in international market. Export Cartels Export cartels are formed frequently under the excuse of cost-savings resulting from allowing that a common sales organization handle the transactions multiple domestic products in regards to selling,... Export cartels are effective in violating the competition law rules. 2. Restrains Vertical Restraints and Horizontal Restraints They are agreements that aim to damage the competitive environment. Vertical (Dikey Anlaşmalar): Üretici ürünü üretti. Birden fazla bayi var. Bir bayi ile bir anlaşma yapıyorum: Ben ürünü sadece sana vereceğim, diğer bayiler ürünü satamayacak. Üretici firma işin içerisinde. Horizontal (Yatay Anlaşmalar): Üretici ürünü üretti. Birçok bayi var. Bayiler kendi arasında anlaşıyor. Fiyatı fixliyorlar. Üst fiyattan ya da alt fiyattan satıyorlar. Üretici firma işin içerisinde değil. İkisi de rekabete zarar veriyor. 9 Competition Law Reyhan Şentürk Anti-Competitive Practices: They may remain in different markets. It may be in multinational market, it may be in one country affecting markets in other countries and it may be in one country affecting market access. a. Predatory Pricing It is an illegal practice. We are setting the price for a product unrealistically low in order to eliminate the competition. The goal is to create a monopoly. One company take risks to lose money to become monopoly at the end of it. A, B ve C malı 80 liraya mal ediyor. Normalde hepsi 100 liradan satarsa hepsi ürün başına 20 lira kar edecek. Bunun yerine şirketlerden biri malı 50 liraya satarak ürün başı 30 lira zarar etme riskini alarak monopoly olmaya çalışıyor. Monopoly olduktan sonra isterse malı 110 liraya satıp ürün başına 30 lira da kar edebilir. The Effects of Predatory Pricing Customer’s perspective: Once the initial competitors have been eliminated, the predatory company will raise prices back to normal or above normal. Seller’s perspective: When the sector is empty, someone else may come and invest and you can back to your beginning position. Dumping As Predatory Pricing The company sells their products in a foreign market for cheaper than they can at home. The companies in the foreign market are damaging by this. Aim must be to damage foreign market. Price Discrimination What is price discrimination? Price discrimination is a selling strategy which a seller prices the same product differently across markets based on what each market’s buyers are willing to pay. This is also something violating the competition law. 10 Competition Law Reyhan Şentürk 01.11.2024 Competition Law in Turkey & Competition Authority The Turkish Competition Law has a economic concern about having a free competitive economy. (Free competition + market economy) Competition law is defined as the race between the sellers in market. The concept of competition constitutes the basis for an efficiently operating market system. (Social justice + welfare) Competitive market structure has dynamic functions. Competition facilitates technological development. In our country we have freedom of enterprise. I am opening the market to everyone, if you have the ability to be a part of it, you are welcomed. Turkish Competition Code/Law’s main goal is: → the prohibition of cartels and other restrictions on competition → prevention of abuse of dominant position by a firm which has dominance in a certain market → prevention of the creation of new monopolies. (being the dominant is okay but if you abuse this, it is not okay) Merger and acquisition are not illegal things. They are okay. The dangerous point is doing them to distort the competitive environment in market. (ÖNEMLİ!) Competition Authority in Turkey is a administrative institution. It is about administering the competition act. But not just administering the act, for example, it is also responsible for checking out if there is restraints in the market. How constitution law is protecting the competition: Article 167: The State shall take measures to ensure and improve the healthy and orderly functioning of money, credit, capital, goods and services markets and shall prevent monopolization and cartelization in the markets, whether actual or by agreement. → It shows how the state is also the part of the competition environment. The state must take some measures with it’s law to ensure and improve the functioning money, credit, capital, goods and services. The Turkish State is responsible for two main duties: → preventing monopolization and cartelization → the state should take measures to ensure and improve the healthy functioning of money, credit, capital, goods and services markets. 11 Competition Law Reyhan Şentürk With the entry into the 1990s within the framework of the harmonization process with the European Union, the development process of Competition Law started to accelerate. Purpose of Establishment of the Competition Authority Competition Authority (Rekabet Kurumu) is an independent administrative authority. It is a public legal independent administrative authority. By saying that, i mean there is a administrative and financial autonomy. The Competition Authority is a public legal entity with administrative and financial autonomy. (Rekabet Kurumu idari ve mali özerkliğe sahip kamu tüzel kişiliğini haizdir.) Aim: → provide a legal basis for the protection of competition in the markets for goods and services → ensure a healthy environment of free competition In order to achieve this aims, the Competition Authority: → If there are any violations that damages competitive environment, the authority may decide on some penalties. → Competition authority may grant some exemptions. → Competition authority prevents monopolization within the market by examining mergers, acquisitions and joint-ventures over a certain threshold. → Competition authority is also responsible for privatization process. → Competition authority is responsible to ensure the dominance of competitive conditions within the market. Mission As The Competition Authority The Authority’s mission is: → to prevent cartelization and monopolization, → increase consumer welfare, → contribute to the well-functioning of market mechanism, → contribute to the improvement of international competition power → and to ensure that investment environment functions in a healthy way by decreasing entry barriers. By having brands/brading, you can become internationally competitive in the market. (Markalaşma) By doing this, i must also be careful that not become a monopoly. (Örneğin Güney Kore, Samsung ile pazarda uluslararası düzeyde rekabetçi olmuştur.) 12 Competition Law Reyhan Şentürk Working Principles of the Authority 1. Impartiality: The Authority keeps an equal distance with all its shareholders without distinction and decisions based on the circumstances of the concrete case and the evidence. 2. Foreseeability: The Authority performs its duties within the framework of the legislation in effect, taking care to be consistent in terms of the procedures and principles. 3. Accountability: Competition Authority systematically shares its decisions with the public. 4. Rapid Decision-Making: The Authority takes care to make decisions quickly and accurately. 5. Participation: The Authority conducts its activities in active cooperation with the relevant persons and institutions and by taking the opinions of these circles into account in its decision-making processes. 6. Expertise: The Authority conducts the activities within the area of its powers and responsibilities with competent human resources, based on the principle of expertise and qualification. 7. Efficiency: The Authority pays particular attention to carry out its activities by using its resources efficiently and productively. 08.11.2024 State is the part of the competition for protective the competitiveness in the market. Distorting the competition environment means cartel agreements. One of the roles of Competition Authority is controlling and ending the cartel agreements. Competition Authority is independent. This independency means Competition Authority is excluding itself from the executive organ in the State. It is independent inside itself. Being independent does not mean that it is not connected with State. No body, office, authority or person may give orders or instructions to influence the final decision of the Authority. 13