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Unfair Competition

April 2015 - EU & Competition. Legal Developments by Baspinar & Partners Law Firm.

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Unfair competition is regulated in the Turkish Commercial Code ("TCC") Law No: 6102 and the Competition Law On the Protection of Competition ("The Competition Law"), Law No: 4054.

 

1. HOW DOES TCC DEFINE UNFAIR COMPETITON?

Unfair competition is defined as any misleading act or commercial practice that has an impact on competitors or relations between customers and suppliers and any act or commercial movement that violates the good faith principles stipulated under the TCC. Unfair competition regulations aim to provide a fair and uncorrupted competition environment for the interest of competitors and customers. Article 55 of the TCC provides a list of actions, which shall be considered as unfair competition. The actions on this list are not exhaustive.

1. Advertisements and sales methods against good faith and other unlawful acts. Such as;

  • Discrediting others or their goods, activities, products, business, etc.
  • Providing untruthful or misleading information regarding one's own status, his commercial undertaking, products, activities, prices, campaigns, etc.
  • Creating or trying to create an image as to having an exceptional talent by acting as if one had obtained a distinction, degree or reward without actually having obtained such,
  • To take measures which create confusion with the goods, business products, activities or affairs of others
  • Comparing one's own status, goods, business products, activities, prices with others, their goods, business products or prices in an untruthful, misleading and offensive manner,
  • Offering certain elected goods, business products or activities to sale below their purchase price for more than once, specifically emphasizing these offers in its advertisements and thus misleading its customers about his and his competitors capabilities provided that in case the sales price is below the purchase price of similar goods, business products or activities in similar quantities presence of a deceit is accepted as a presumption,
  • Deceiving the customer in connection with the actual price of the good by providing additional services,
  • Limiting the freedom of the customer to make a decision by means of especially aggressive sales methods,
  • Concealing the special features of goods, business products or activities, their amounts, purpose of use, benefits or perils and thus deceiving the customer,
  • Not indicating one's own title explicitly at sales agreements with installments or in announcements to public for similar legal transactions, not indicating the sales price in cash or in total or the additional payments resulting from sales with installments in Turkish Liras and over annual rates,
  • Offering or executing sales with installments or consumer loan agreements within the frame of activities relating to one's own commercial undertaking and in this context using agreement methods containing insufficient or wrong information regarding the subject of the agreement, price, payment conditions, term of the agreement, customers' right to renounce and termination or the right to pay the outstanding debt before the maturity date,

2. To direct to infringe or to terminate an agreement. Such as;

  • To direct one's own customers to infringe the agreements they have entered into with others for the purpose of having them enter into an agreement with himself in person,
  • Assuring or promising to the employees, agents or other assistants of third persons advantages to which they are not entitled to and which would incite them to act against their responsibilities when fulfilling their duties and thus securing advantages for one's self or for others,
  • Inciting the employees, agents or other assistants to divulge or obtain the business or manufacturing secrets of their employers or their clients,
  • Inciting the buyer or the person getting a credit who has entered into sales with installments agreement, cash sales agreement or consumer loan agreement with himself to withdraw from the agreement or to incite the buyer who has signed a cash sale agreement to terminate such agreement.

3. To benefit from others' business products without authorization. Such as;

  • To benefit from a business product such as an offer, account or plan which have been deposited with him, 
  • To benefit from third parties' business products such as an offer, account or plan when one should know that these have been entrusted or provided to him without authorization,
  • Taking over and benefiting from work products of others ready for advertising by technical augmentation methods without one's own proper contribution.

4. To divulge manufacturing and business secrets illegally, in particular one who utilizes and makes known to others information and business secrets of a manufacturer which he has acquired secretly and without permission or in any other illegal manner shall be acting against goodwill.

5. Not to abide by the rules of business; in particular persons who do not abide by the business rules which have been set as a responsibility of his competitors as well through a law or an agreement or who do not abide by the business rules common in a profession branch or a business environment shall be acting against goodwill.

6. To use transactional conditions that are against goodwill; in particular persons who use previously written transactional conditions against the other party in a deceiving manner. Such as;

  • Transactional conditions that differ materially from the legal regulations applicable directly or through interpretation or
  • Transactional conditions, which foresee a distribution of rights and obligations materially in contradiction of the characteristics of an agreement, shall be acting against goodwill.

2. HOW DOES THE COMPETITION LAW DEFINE UNFAIR COMPETITON?

Unfair competition is not explicitly defined in the Competition Law but it aims to ensure the protection of competition in the goods and services markets and prevent anticompetitive, disruptive or restrictive agreements, decisions and concerted practices and dominant undertakings. The Competition Code gives some examples to the distortion or restriction of competition in the Article 4. Examples are included but not limited. Such as;

  • Fixing the purchase or sale price of goods or services,
  • Partitioning, sharing and or controlling markets for goods or services,
  • Controlling the amount of supply or demand,
  • Complicating and restricting the activities of competing undertakings,
  • Except exclusive distributorship agreement, applying different terms to persons with equal status for equal rights, obligations and acts,
  • Contrary to the nature of the agreement or commercial usages, obliging to purchase other goods or services together with a good or service.

3. WHAT ARE THE CONSEQUENCES OF VIOLATION OF THE TCC?

In case of violation of TCC provisions, the person who suffers from unfair competition acts may demand:

  • The establishment of the of the unfairness of the act,
  • The prevention of unfair competition,
  • The suppression of the material conditions resulting from unfair competition and if unfair competition rests on untrue or deceitful statements, the rectification of these statements,
  • Compensation of loss and damages,
  • Payment of moral damages,
  • Imprisonment for a term up to 2 (two) years,
  • Judicial fine.

The parties are entitled to file a criminal complaint in case of suffer to loss of reputation, business, customers or any financial benefit as a result of unfair competition.

4. WHAT ARE THE CONSEQUENCES OF VIOLATION OF THE COMPETITION CODE?

Unlike TCC provisions, in case of violation of The Competition Code, upon informing, complaint or the request of The Ministry of Customs and Trade or on the Competition Authority's own initiative imposes fine on the circumstances below:

  • False or misleading information or document is provided in exemption and negative clearance applications and in authorization applications for mergers and acquisitions,
  • Mergers and acquisitions that are subject to authorization are realized without the authorization of The Competition Board ("Board"),
  • In implementation of articles 14 and 15 of The Competition Code, incomplete, false or misleading information or document is provided, or information or document is not provided within the determined duration,
  • On-the-spot inspection is hindered or complicated,
  • On prohibited actionsdefined in articles 4, 6 and 7 of The Competition Code.
  • Obligations introduced or commitments made by a final decision or interim measure decision is not complied with.

In case the Board deems that the claims are serious and sufficient, informers or complainants are notified in writing that the claims put forward have been deemed serious and an inquiry has been initiated. The investigation shall be concluded within 6 (six) months at the latest. The report prepared at the end of the investigation stage is notified to all members of the Board and the parties concerned. Those determined to have infringed this Act are notified to submit their written pleas to the Board within 30 (thirty) days. The decision is made on the same day after the hearing, or if not possible, within 15 (fifteen) days, together with its grounds. Against administrative sanctions suits shall be filed before the competent administrative courts.

As it is seen, competition is useful for the market activities on one level. When competition became harmful and had pernicious impacts on the commercial conducts and transactions the law prohibits and punishes this kind of misleading acts.

We hope that this Q&A would be satisfactory, however please let us know if you have further inquiries.