State Council of Turkey, 13th Chamber, 2015/2624 E., 2015/4608 K. Date: 16.12.2015
INTEREST RATES AND FEES APPLIED IN BANKING SERVICES (Joint Actions Taken by 12 Banks / Actions Restricting Competition within the Scope of an Agreement Covering Deposit, Credit Card, and Credit Services) – Violation of the Competition Protection Law / The Competition Board’s Decision to Impose an Administrative Fine Equivalent to 1% of Annual Gross Revenue is in Compliance with the Law)
ACTIONS RESTRICTING COMPETITION (Agreement between Businesses Operating in the Banking Sector / Implementation and Monitoring of the Common Ground of the Agreement Established through a Series of Communications, Information Sharing, and Agreement between the Parties to Jointly Determine Pricing Strategies – Administrative Monetary Penalty Imposed by the Competition Board in Compliance with the Law)
VIOLATION OF THE COMPETITION PROTECTION LAW (12 Banks Jointly Determining Interest Rates and Fees Applied in Various Banking Services / Restrictive Practices) Emergence of competition within the scope of a settlement covering deposit loans and credit card services – There is no violation of the law in the Competition Board’s decision to impose an administrative fine at a rate of 1% of annual gross revenues. BANKS’ COMPETITION
RESTRICTIVE BEHAVIOR (The Competition Board’s decision to impose an administrative fine of approximately 1% of annual gross revenues is not contrary to the law – 12 banks jointly determined interest rates and fees applied for various banking services / Actions restricting competition occurred as part of a settlement involving deposit credit cards and credit services)
The bank’s credit card services agreement (the agreement strategy for determining the common denominator of communication between the parties is established through a series of applications and monitoring, information sharing, and understanding through performance – the board’s application of administrative fines for preventing competition in accordance with the law/violation of the law regarding the protection of competition) (Competition)
Lending/deposits (interest rates and fees applied for banks’ services, the restrictive nature of competition, and your credit card credit, the application of the settlement strategy arising when transactions within the scope of services are subject to settlement, and the monitoring of the common ground established between the parties through a series of communication, information sharing, and performance)
4054/m. 4, 16/3
SUMMARY:
Businesses in the banking sector are concerned with interest rates and fees applied for various banking services, restrictive actions used to determine their position in competition (including public banks, public deposits, credit and credit card services), and settlement and conciliation within the scope of common ground; pricing strategies have been developed to determine the elements of the settlement; a series of implementation and monitoring, communication, information sharing, and performance between the parties has been carried out through the understanding gained from the analysis of the documents as part of the settlement;
the competition between the banks involved in the investigation of the content of this document is shared under an agreement on sensitive information; in some documents, it is understood that senior executives of banks competing in the market met for breakfast, and as a result of these meetings and negotiations, information indicating the existence of an agreement was shared, as evidenced by the documents in the file.
As of now, the plaintiff’s actions violate the competition rules set forth in Article 4 of the Law. Since it is understood that this article has been violated, there is no inconsistency with the Board’s decision on the subject of the case; according to this decision, the plaintiff was fined an administrative penalty of TL 148,231,490, which is 1% of the estimated annual gross revenue determined by the Board at the end of the 2011 fiscal year.
Summary of the Request: Ankara 2nd Administrative Court’s decision dated 25.12.2014 and numbered E:2014/232, K:2014/1581; the Board’s decision provided for a fine of between 0.3% and 1.5%, but the reasons for these different fines were not explained in the decision, the relevant product was not defined, and in the process requiring cancellation on Sunday,
the failure to prove a settlement based on an incomplete investigation based on interbank agreement, the incorrect assessment of the document-based investigation, the disregard of the distinction between parallel actions consistent with the conduct, the administrative penalties being contrary to the principles of equality and proportionality, the fact that publicly owned banks are the sole source of economic unity and that it is desirable for this situation to be disrupted,
Summary of the Defense: It is argued that the Administrative Court’s decision, which is in accordance with procedure and law, should be upheld by rejecting the appeal.
Opinion of the State Council Investigating Judge: It is believed that the Court’s decision should be upheld by rejecting the appeal.
IN THE NAME OF THE TURKISH NATION
Following the decision of the Thirteenth Chamber of the State Council, the statements of the Investigating Judge were heard and the documents in the file were examined. Pursuant to Article 2577, paragraph 2, of the Administrative Procedure Law, it was discussed that the plaintiff should continue working without any further decision being taken on the request for suspension of enforcement due to the company’s request for a hearing not being deemed appropriate and the file being taken.
DECISION:
As a result of the investigation into whether banks operating in Turkey acted in violation of Article 4 of Competition Protection Law No. 4054 regarding interest rates, fees, and commissions, the Competition Board’s decision dated 08.03.2013 and numbered 13-13/ 198-100 dated 08.03.2013;
when all information, documents, and evidence in the investigation report and its annexes were evaluated together; the banks under investigation were found to have violated Article 4 of Law No. 4054 on the Protection of Competition regarding deposit, credit, and credit card services, competition in the market, the determination, prevention, distortion, or possible restrictions on interest rates and various fees, the sharing of trade secrets identified within the scope of agreements and joint actions, the negotiation of market-oriented decisions, acting in accordance with the agreement of will and compliance, and the implementation of fixed issues agreed upon within the scope of this agreement through graphical and economic analyses, it was concluded that the plaintiff Bank was involved in the agreements and joint practices specified in Article 4 of Law No. 4054.
Therefore, it has been concluded that the plaintiff violated approximately 1% of its annual gross income at the end of the 2011 fiscal year, i.e., TL 148,231,490, in return for these actions. The board of directors’ decision regarding the imposition of the administrative fines in question was accepted as a violation of the law that should be considered as a single economic entity by all public banks (Agricultural Bank, Foundation Bank, and Halkbank). It is alleged that the basic structure and organizational purpose of all three banks were ultimately regulated in accordance with the provisions of the Turkish Commercial Code and the banking law provisions governing joint-stock companies with independent legal personality;
therefore, they can all operate in the field of banking services, engage in private banking activities with other banks, must compete with commercial strategies that contribute to the data of other state banks, and also share this data with all their organs; the management bodies of the three public banks are responsible for the management of strategic decisions taken by the said bodies, including any enforcement decision; however, the management bodies of the bank, as well as the presence of a manager in other public authorities, are not subject to any legal obligation to follow the instructions of any public official in the executive branch in practical situations, such as in the absence of a manager working simultaneously with the banks.
The three state banks have no authority to intervene in decisions made outside the bank by any official or individual in the decision-making process; the decisions of the banks’ governing bodies are subject to the approval of any public authority, either legally or in practice; or such an authority also has the power to make strategic decisions regarding the suitability of the bank’s governing bodies; the fact that all operational and strategic decisions of the banks are made without the decisive influence of an independent public authority,
and that there is no regular flow of data between the banks, public authorities not owning the majority or all of the banks’ capital, the authority to appoint board members only applying to publicly owned banks, and the state not interfering in the strategic decisions of publicly owned banks through the general supervision and control of public authorities’ activities, together prevent them from interfering in the matters under consideration.
Since it was concluded that ZIRAAT BANK, VAKIFBANK, and HALK BANK are independent legal entities and therefore have an obligation to avoid actions that prevent, distort, or restrict competition or that could have such an effect, the lawsuit was dismissed on the grounds that the plaintiff’s claims were not considered otherwise, and the plaintiff appealed this decision.
Article 4 of Law No. 4054 on the Protection of Competition states that “Decisions and actions of agreements, joint actions, and associations of undertakings that aim to directly or indirectly prevent, distort, or restrict competition in a particular goods or services market, or that have or may have this effect, are unlawful and prohibited.”
These states are specifically:
The determination of the purchase or sale price of goods or services, the elements that constitute the price, such as cost and profit, and any conditions of purchase or sale;
The division of markets for goods or services and the sharing or control of any market resources or elements;
controlling the supply or demand of goods or services or determining them outside the market;
making it difficult or restricting the activities of competing businesses through boycotts or other behaviors, excluding businesses operating in the market from the market, or preventing new entries into the market;
applying different conditions for equal rights, obligations, and actions to persons in equal circumstances, except for exclusive dealerships;
the alleged breach of a contract or other goods or services, or the claim that the conditions have been breached based on the buyer’s attempt to purchase goods or services in the event of a mandatory demand for goods or services, the seller’s offering of goods or services for other goods or services, or the supply of goods or services or the resupply of goods or services;
Where the existence of a contract cannot be proven, if market price changes or supply and demand balance or regional business activities are similar to those in markets where competition is prevented, distorted, or restricted, this creates a presumption that the businesses are acting together.
“Provided that it is based on economic and rational facts, each party may be exempted from liability by proving that they did not act together.” The rule is given below.
On the other hand, those who engage in prohibited conduct as specified in paragraphs 4, 6, and 7 of Article 16(3) of the Law, titled “Administrative Monetary Penalties,” an administrative fine of up to ten percent of the declared income may be imposed on the basis of the annual gross income determined by the board of directors, as of the date of the final decision of the members of these units or at the end of the previous fiscal year or, if this calculation is not possible, at the end of the following fiscal year.
The case review determined that the highest interest rate applied by banks was determined without discounting all banks using the same interest rate; the board of directors decided that the result of the preliminary investigation was prepared in accordance with Article 4 of Law No. 4054 and that the preliminary investigation report was prepared. Investigations are conducted into Akbank, Garanti Bank, İş Bank, YKB, TEB, VAKIFBANK, HALKBANK, TARIM, Denizbank, Finansbank, HSBC, and ING Bank,
which are subject to the board of directors’ decision of the relevant companies and for which it was decided to open an investigation to determine whether they violated the relevant article in Article 4 of Law No. 4054. Following the completion of the investigation, the banks’ written and oral defenses dated February 25, 2013, and the evaluations made at the meeting were taken into consideration, and it was concluded that the relevant companies had violated the relevant article according to the decision of their board of directors, and administrative fines were imposed.
Pursuant to Article 4 of Law No. 4054, agreements between businesses, decisions of business associations, and collective practices and actions that could directly or indirectly prevent, distort, or restrict competition in the market for certain goods and services, or that could lead to such effects, are prohibited. From this date onwards, pursuant to Article 16 of Law No. 4054, in order for an administrative fine to be imposed for a competition violation based on Article 4 of the Law, a competition-restricting agreement as specified in the article must have been made or collective action must have been taken, and the existence of these unlawful actions must be established.
The rationale for the aforementioned article of the Law states that the agreement referred to is any kind of settlement or agreement to which the parties feel bound, and that whether the agreement is written or verbal is irrelevant for the purposes of the article, even if it does not comply with the conditions of validity of the Civil Code.
The general justification of Law No. 4054 states that in a market economy where competition is ensured and kept free from external interference, prices and profits are determined as indicators of the market economy; the process is the tool that enables the conditions for competition to operate; in the absence of a market economy, this process cannot function properly; it is therefore stated that businesses must refrain from actions contrary to competition.
In cases where the intent to violate competition can be determined, establishing the nature of the acts and behaviors alleged to be anti-competitive is of minimal importance. Indeed, the relevant provisions and justifications of Law No. 4054 are summarized in the abstract; it is stated that acts and behaviors intended to violate competition are prohibited. It is clear that sharing information such as prices and costs, which are important in terms of competition,
with another business in the market would raise suspicions of an anti-competitive purpose. Repeated sharing of sensitive information in terms of competition during a specific process also supports this suspicion and reveals the existence of an agreement. The non-repetition of information sharing does not prevent the sharing of competition-sensitive information from constituting an anti-competitive agreement, and this will be assessed by the relevant authorities according to the nature of each specific case.
Businesses in the banking sector, with regard to interest rates and fees applied for various banking services, restrictive practices used to determine their position in competition, such actions (including public banks, public deposits, credit and credit card services) led to reconciliation and settlement within the common denominator, price determination strategies were developed to determine the elements of the settlement, communication between the parties was implemented and monitored, a series of transactions were carried out through information sharing and understanding of the settlement,
the competition between banks included in the analysis of the documents was shared between the banks involved in the investigation of the content of this document within the scope of an agreement on sensitive information, in some documents, senior executives of banks competing in the market met for breakfast and the existence of an agreement emerged as a result of the discussions, as understood from the information sharing in the documents.
The plaintiff’s commitment; the economic analysis conducted on the investigation document-2 and obtained from this document clearly shows that the gentleman agreement in documents 3-4 is one of the parties, and the deposit interest rate obtained from the analysis based on these documents indicates that the agreement in documents-14, document-16, and document-20-21 , constitutes an agreement made with the aim of distorting competition among state banks, and that the plaintiff is also a party to this agreement.
As of now, the plaintiff’s actions violate the competition rules set out in Article 4 of the Law. Since it is understood that this article has been violated, there is no inconsistency with the Board’s decision on the subject matter of the case; according to this decision, the plaintiff was fined an administrative penalty of TL 148,231,490, which is 1% of the estimated annual gross income determined by the Board at the end of the 2011 fiscal year.
CONCLUSION:
Based on the above reasons, the appeal against the dismissal of the case was rejected in the Ankara Administrative Court’s decision dated 25.12.2014, numbered E:2014/232, K:2014/1581, Since none of the grounds for violation specified in the first paragraph of Article 49 of the Administrative Procedure Law No. 2577 were found, the appeal request was not examined on its merits, and the Court’s decision was APPROVED based on the above-mentioned GROUNDS; the file was sent to the aforementioned Court. On 16.12.2015, by unanimous vote, it was decided to refund the enforcement suspension fee to the plaintiff upon his request and to provide a clear path for the correction of the decision within 15 (fifteen) days from the notification of this decision.