Category: Turkiye

GKC Partners in association with White & Case has advised sole lead manager Commerzbank AG on Alternatif Bank’s USD 200 million 10.5% Additional Tier 1 notes issuance. Ciftci Attorney Partnership in association with Clifford Chance advised the issuer.

The notes have been admitted to trading on the regulated market of Euronext Dublin.

White & Case’s team consisted of Istanbul-based Partner Derin Altan, Associate Eren Ayanlar, and Legal Intern Zeynep Ulasan, as well as London-based Partner Richard Pogrel and Dubai-based Partner Debashis Dey and Associate Ola Sanni.

The Ciftci Attorney Partnership’s team included Partner Sait Eryilmaz and Associate Ali Can Altiparmak.

Paksoy has advised Matriks Bilgi Dagitim Hizmetleri A.S. and an unidentified underwriter on the initial public offering of Matriks’s shares on the Borsa Istanbul stock exchange.

Matriks is a Turkish provider of data on local and global capital markets to individual and institutional clients. The company is headquartered in Istanbul and currently employs around 150 people.

According to Paksoy, “this was a local IPO targeting Turkish investors, where individual shareholders sold 38.05% of Matriks’s shares along with share buy-back, lock-up, and EBITDA commitments to investors.” Furthermore, according to the firm, “this IPO set the record of the highest book-building in Borsa Istanbul’s history by attracting demand of almost 700,000 investors as of the trading date.”

Paksoy’s team consisted of Partner Omer Collak, Counsel Okkes Sahan, Senior Associate Nazli Tonuk Capan, and Associates Merve Kurdak Kurtdarcan and Bulent Ozturk.

Akol Law has assisted both transportation services company Turex Turizm Tacimacilik Anonim Sirketi and ceramic tile producer Qua Granite Haya Yapi ve Urunleri Sanayi Ticaret A.S. on their initial public offerings at Borsa Istanbul.

The IPO for Turex Turism was at 12 Turkish lira and reached a float rate of 21%. It was underwritten by Oyak Yatirim.

The price per share of Qua Granite was 16.46 Turkish lira and reached a float rate of 20%. According to Akol Law, the IPO was the largest in the Turkish market since 2018, “with a record-breaking demand of over 846,000 investors amounting to TL 2.3 billion in total, the highest demand in sales made via stock exchange so far.” The IPO was underwritten by Info Yatirim.

The Akol Law teams working on both deals were led by Partners Omer Gokhan Ozmen and Gunes Yalcin and included Counsel Handan Bacioglu, Counsel Handan Bacıoglu, and Associates Murat Ayyildiz, Gulmin Cosar, and Alp Ozturk. Associate Yagmur Aker worked on the Turex Turizm IPO as well.

Over the last five years, Turkish payment services and payment systems have gone through turbulent times, with pressure both from competition authorities (demonstrated by BKM Express’ rollercoaster ride between 2016 and 2020) and financial market regulators. Though the power of incumbent banks remains strong, the market is liberalizing and opening up for fintech players.

In 2019, the Central Bank of the Republic of Turkey (the Central Bank) assumed regulatory powers over the payment services sector. With the new regulations introduced by the Central Bank, payment initiation services providers and account information services providers are expected to become key generators of innovative services. Marketplaces that currently rely on the commercial agent exemption are the next ones to be affected by the decisions of the Central Bank. The two major projects on which the Central Bank is currently working – Digital Currency and FAST – will change the landscape of the fintech market drastically in Turkey.  

As shown below, it is a time of opportunities for fintech players, but some of the changes on the market may not be delivered in the way one would normally expect, hence horizon scanning is crucial for understanding the competitive and innovation landscape in the sector.

Initial interventions by the competition watchdog

Garanti Bonus decision

One of the critical decisions regarding payment services is the TCA’s Garanti Bonus Program preliminary examination decision numbered 17-28/462-201 and dated September 7, 2017, concerning credit card sharing programs. A private bank in Turkey, Garanti, was providing credit cards under the program name of Bonus. In its Bonus program, Garanti was inking agreements with other banks to establish a multi-branded credit card issuing platform, enabling the issuers to acquire member stores for their program. Garanti’s Bonus platform evolved into one of the largest multi-branded credit card issuing platforms. Garanti was charging high fees for non-bank payment service providers, and was inking more favorable agreements with other banks. In addition, Garanti was restricting other banks’ ability to resell their Bonus program access to non-bank payment service providers. Garanti was not in a dominant position in the market. However, Garanti concluded its agreements with most of the banks in the sector in parallel. Such parallelism curbed the non-bank service providers’ ability to join a credit card issuing platform. Since non-bank fintech companies were not able to join this multi-branded credit card issuing platform, they could not compete on equal terms in the market for payment services. This complaint of the payment service providers caught the attention of the TCA. The TCA warned Garanti to remove resale restrictions from its agreements, and ordered it to open up the Bonus program to payment service providers.

BKM Express decision

The most significant decisions concerning payment services in recent years are the series of decisions concerning the BKM Express service of BKM (Bankalararası Kart Merkezi – Interbank Card Center).

BKM is a partnership of public and private Turkish banks that aims to develop rules and standards within the card payment system. Turkish banks issuing credit cards are members of BKM, while BKM Express is a service that is open to these members. The main business of BKM is the settlement of receivables that arise from credit card payments between the banks. The payment system business in which BKM Express operates is strictly regulated by the Central Bank.

On the other hand, BKM Express is a payment service including a digital wallet service where customers can save their card information and use it during online shopping without having to submit the credit card information to the seller, hence speeding up the shopping and securing the card information. Any bank member of BKM can make use of BKM Express without a limitation. However, access of other fintech companies to BKM Express has been limited.

The TCA rendered a number of decisions concerning BKM Express. Since BKM Express was an association of undertakings, and competitor banks were integrating their services to form the BKM Express service, BKM applied to TCA for an individual exemption.

In its decision numbered 16-31/525-236 and dated September 23, 2016 (“Exemption Decision”), the TCA granted an individual exemption to BKM Express, with a disclaimer stating that further evaluation may result in the withdrawal of the exemption. In this Exemption Decision, the TCA considered BKM as an association of undertakings formed by the banks, and the BKM Express service as conduct restricting competition in the market. The TCA also acknowledged the benefits of BKM Express and the electronic wallet systems, as they enable customers to save time and increase card information security. The TCA considered that the BKM Express service met all of the conditions for an individual exemption:

• Ensuring efficiencies (these efficiencies may be new developments or economic or technical improvements);

• Securing consumer benefits by these efficiencies;

• Not eliminating competition in a significant part of the relevant market;

• Not restricting competition more than necessary to achieve the efficiencies and consumer benefits.

However, in 2018, BKM was requested to file a new exemption notification for the TCA to evaluate whether the exemption conditions were still met. With its detailed assessment in its decision numbered 19-20/291-126 and dated May 30, 2019, the TCA withdrew the individual exemption of BKM Express, and granted 60 days for termination of the service, until November 2019 (“Withdrawal Decision”).

In its Withdrawal Decision, the TCA raised significant competition concerns about the BKM Express service. The TCA focused on the lack of competition to BKM. There were a number of competitive concerns over BKM, which the TCA discussed in detail in its Withdrawal Decision as follows:

• The main concern is the possible restriction of competition through the unique integration between BKM and its member banks;

• BKM uses the banking infrastructure of its members to place favorable features in its digital wallet service, which provides an advantage to BKM Express compared to the other services in the market (no need for the full credit card number, automatic update of the expiration date, SMS-OTP application that is specific to BKM Express);

• The above-mentioned features can only be provided due to the integration between BKM and its member banks;

• The mentioned integration services have not been offered − at least in practice − to the other digital wallet services. 

Opening up the mentioned features to other digital wallet services through BKM cannot be a solution to address competition law concerns, since such a practice makes the non-bank fintech companies dependent on BKM. Putting such measures in place, instead of terminating BKM Express, would make non-bank fintech companies mere resellers, and this approach would limit the innovation that may provide diverse value-added services;

The entrance of BKM to new markets with the financial power generated by the BKM’s settlement business may heavily affect competition. The fact that the books of BKM are inseparable in terms of business lines contributes to these concerns.

Following these evaluations, the TCA decided to terminate the BKM Express service, and also ordered BKM to distinguish financial records on the basis of businesses. Upon a re-evaluation request, the TCA extended the termination period of BKM Express by eight months, until June 2020.

Introducing open banking rules to the Payment Services Law

At the time of the TCA’s BKM Express Withdrawal Decision and the Garanti decision, there were no rules in the Turkish payment services legislation that opened the market up to the new fintech companies. Consequently, fintech companies and payment service providers often felt excluded from the market by the banks.

By its decisions on the Garanti Bonus Program and BKM Express, the TCA aimed to open up the market for payment services to new and innovative fintech companies, by curbing the integration and parallel agreements between the incumbent banks. In the BKM Withdrawal Decision, however, the TCA pointed to the need for regulations to reflect the open banking principles of the EU’s Payment Services Directive-2 (PSD2). As per the TCA’s evaluations in its BKM Express Withdrawal Decision, amending Turkish laws and regulations to be in line with the PSD2 could open the market for payment services to the new fintech companies.

Following the TCA’s Withdrawal Decision concerning BKM Express, Turkish lawmakers amended the main legislation governing the payment services sector: Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions (Payment Services Law). The Payment Services Law was amended in a way to harmonize national legislation on payment services with the EU’s PSD2. The changes introduced open banking services such as payment initiation services and account information services with effect from the end of 2019. Fintech players that provide or were planning to provide payment services were expected to benefit from the newly adopted rules. The amendments also concerned marketplaces, due to the narrowing of the commercial agent exemption (see more below).

Regulator of payment services

With the 2019 amendment to the Payment Services Law, the regulatory powers, which were previously exercised by the Banking Regulation and Supervision Agency (BRSA), were transferred to the Central Bank. The Central Bank was previously regulating payment system operators, which are of systemic importance compared to payment service providers. With the amendments, the Central Bank started regulating the payment service providers along with payment systems.

The Central Bank’s supervisory authority over payment systems was widened to include system users. Previously, the Central Bank’s supervision power for payment systems only covered system operators.

In contrast to the EU’s PSD2, the Central Bank was authorized to be a shareholder in a payment system operator that it deems systemically important. At the time of the amendment, payment systems authorized by the Central Bank were the following:

• Interbank Card Center (BKM) – Domestic Clearing and Settlement System

• Istanbul Clearing, Settlement and Custody Bank Inc. (TAKASBANK)

• Equity Market Clearing System

• Debt Securities Market Clearing System

• Takasbank Cheque Clearing System

• Central Registry Agency (MKK) – Central Registry System

• Garanti Payment Systems Inc. (GÖSAŞ) – Takasnet System

• Paycore Payment Services Clearing and Settlement Systems Inc. (Paycore) – Paycore Clearing System

The new authority of Central Bank to be a shareholder of system operator played a key role later on in the TCA’s approach to BKM Express, as detailed in the next chapter.

New services relating to open banking

Payment initiation services and account information services were acknowledged as payment services within the framework of the Payment Services Law. With these amendments, payment initiation service providers (PISPs) and account information service providers (AISPs) are expected to become key players in the market for innovative services. For AISPs to exercise their functions, the Payment Services Law requires other payment service providers to open access to their customers’ account information, mainly forcing incumbent banks to open access to their data. This resembles the access to essential facility doctrine in competition law. Essential facilities doctrine requires the owner of an “essential” or “bottleneck” facility in a market to provide access to that facility on non-discriminatory terms.  Compared to access to essential facility doctrine, however, the aim and the functioning of access to account information differs in many ways. The access to account information is subject to the account owner’s prior approval. In addition, unlike the essential facilities doctrine, the services of an AISP will also be accessible to other payment service providers, creating a reciprocity between the players.

Marketplaces’ exposure to narrowing commercial agent exemption

Under the Payment Services Law, there is an exemption called commercial agent exemption, which the marketplaces are benefiting from. According to this exemption, payments between a payer and payee made through a commercial agent  ̶  with permission to negotiate or to conclude the sale or purchase of goods and services on behalf of the payer or payee  ̶  are not considered as payment services, therefore, such a commercial agent is exempt from regulation. Marketplaces are relying on this commercial agent exemption; however, their elbowroom is narrowing. The 2019 amendment enables the Central Bank to determine payment transactions reaching certain thresholds as payment services within the meaning of the Payment Services Law, even if they are benefiting from commercial agent exemption.

Shifting from competition to regulation

By the time the open banking amendments to the Payment Services Law came into effect in December 2019, the TCA had already withdrawn the exemption of BKM Express with effect from the end of June 2020.

Two months before the BKM Express service’s termination deadline, in May 2020, the Central Bank used its new power in the Payment Services Law to acquire 51% and management control of BKM. In the competition law community, this transaction was generally considered insignificant for the TCA’s approach to the BKM Express decision, since it did not affect the competitive concerns on the surface. In addition, the Central Bank aimed to become a market player by this move. However, this move of the Central Bank changed many things in the payment services market.

Shortly after its acquisition, the Central Bank filed a request to the TCA for the abolition of the withdrawal decision, as the controlling shareholder of BKM. With its request, the Central Bank expected to get the TCA’s green light for BKM Express, cancelling the termination of the service. In June 2020, 14 days before the termination deadline of BKM Express, the TCA abolished its Withdrawal Decision, enabling the Central Bank to move forward with BKM Express (“Abolition Decision”). With the abolition of the Withdrawal Decision, BKM once again benefited from the individual exemption for its BKM Express service.

Although the Withdrawal Decision was fully equipped with competition law concerns, the Abolition Decision was rather concise in terms of competitive assessments. The TCA considered a number of factors when abolishing the Withdrawal Decision, which can be summarized as follows:

• The shareholding and management structure of BKM had been changed;

• Since the reason for the administrative action is now changed, with the Central Bank being a majority shareholder of BKM, the Withdrawal Decision is legally open to amendments or abolition;

• The Central Bank is planning to steer BKM away from being a competitor in the markets at issue. Instead, BKM is expected to help the development of specific Central Bank projects in financial technology (the Central Bank Digital Currency, development of an end-to-end instant payment system);

• The Central Bank may use BKM Express to achieve goals in financial technology;

• The Central Bank promised to find ways to address the TCA’s competitive concerns, and also vowed to keep in touch with the TCA in the future;

• The Central Bank is planning to develop sector-specific regulations to address competitive concerns, which will be aligned with the PSD2, and such alignment will bring measures to address competition law concerns;

• The Central Bank established the General Directorate of the Payment Systems and Financial Technologies for sectoral oversight.

The TCA seems to think that the answer to the problems in the payment systems sector is not competition law enforcement, but regulations with the backbone of open banking and the sectoral oversight of the Central Bank. However, with the Central Bank becoming a majority shareholder of BKM and no detailed regulations adopted yet, it is not clear how the open banking rules will be implemented in the Turkish payment services market.

What’s next for the Turkish payment services market?

As per the Regulation on the Operations of Payment and Settlement Systems, additional services to be provided by the system operators must be approved by the regulator, the Central Bank. Therefore, the Central Bank approves or declines the additional service requests of the system operators. From the sectoral regulation standpoint, the Central Bank is the regulator that will decide which system operator can do what, and to what extent. Following the Central Bank becoming the majority shareholder of BKM, in September 2020, the Central Bank approved BKM’s application and allowed it to perform “innovative infrastructure/platform services” along with its system operations. However, one might question whether the Central Bank should be regulating BKM, which is controlled by the Central Bank. Defining the role of the Central Bank plays a key role here. Should the Central Bank fail to steer BKM away from the market as an economic actor, there is an even more thorny path ahead of the payment services sector. Because this time the Central Bank will be a market player that will not only be regulating itself but also its competitors. However, as the Central Bank promised to the TCA for the Abolition Decision, BKM may exit from the market for payment services, and focus on its payment system duties.

FAST

The Central Bank is currently working on two major projects that may change the landscape of payment systems drastically in Turkey. These are the Central Bank Digital Currency, and more importantly the immediate and continuous transfer of funds (FAST – fonların anlık ve sürekli transferi). The FAST system is the embodiment of integration between banks through BKM Express, with the participation of fintech companies through newly introduced payment initiation services and account information services. With FAST, individuals will be able to transfer money to any bank account within seconds.

In addition, FAST is using the easy addressing system (KOLAS – kolay adresleme sistemi), which enables individuals to transfer money to others without knowing their account or IBAN numbers. With the introduction of account information services under the Payment Services Law, service providers will be opening up the account information connected to easy addresses (e.g. phone number, ID number, e-mail) to other service providers for them to initiate the transfer of funds. BKM operates both FAST and KOLAS systems. Who is BKM getting the account information from to transfer, since the Central Bank issued no licenses for account information services yet? The answer to this question is showing the immediate need for the detailed regulations. Although the Central Bank was expected to publish the detailed regulations and commence the licensing of fintech companies for payment initiation services and account information services, no regulation has been enacted yet. Currently, only the bank members of BKM are connected to the FAST and KOLAS systems. Therefore, the incumbent banks are also given a head start for these new services.

New regulations

Market players were recently provided with drafts of the detailed regulations to govern payment services: the Draft Regulation on Payment Services, Electronic Money and Payment Service Providers, and the Draft Communiqué on Information Systems of Payment and E-Money Institutions and Data Sharing Services of Payment Service Providers in the Field of Payment Services. Although the consultation period is underway and no official regulation came into force yet, it can be seen from these draft regulations that BKM is expected to have new responsibilities and powers concerning the payment services market.

In general, BKM will be responsible for the supervision of the technical adequacy of the service providers wishing to provide payment initiation services and account information services. Providers of these services will be required to connect their systems to BKM within six months of the authorization; therefore, BKM will be acting as an intermediary platform that all information goes through. On the other hand, the proposed rules introduce a data localization rule by requiring service providers to keep their primary and secondary systems in Turkey.

By Sahin Ardiyok, Partner, 
Emin Koksal, Consultant, and 
Ramiz Arslan, Associate, Balcioglu Selcuk Ardiyok Keki Attorney Partnership

On February 23, 2021, the Turkish Competition Authority (“Authority”) has published seminal judgments of the 13^th Chamber of the Council of State (“Council of State”). These are landmark decisions that upheld the Turkish Competition Board’s (“Board”) analysis within the scope of its decision regarding the allegations that Mey İçki San. ve Tic. A.Ş. (“Diageo Turkey”) violated Article 6 of Law No. 4054 on the Protection of Competition (“Law No. 4054”) through exclusionary practices in the vodka and gin markets (“Vodka and Gin Decision”). The decisions of the Council of State are of particular significance since they affirmed a very rare usage of the “ne bis in idem” principle (i.e., a legal concept that restricts the possibility of a defendant being penalized repeatedly on the basis of the same offence, act or facts with the same time period) in terms of competition law.

Background

The Authority initiated two separate full-fledged investigations against Diageo Turkey in 2015 and 2016, which concerned Diageo Turkey’s practices in the raki market (“Raki Investigation”), and its practices in the vodka and gin markets (“Vodka and Gin Investigation”). Both investigations were focused on Diageo Turkey’s similar practices in the respective relevant markets, which allegedly aimed to exclude its competitors by way of utilizing certain rebate schemes and investment supports to impose exclusivity upon significant sales points.

Within the scope of its decision with respect to Diageo Turkey’s practices in the raki market (“Raki Decision”), the Board has resolved that Diageo Turkey abused its dominant position through exclusionary practices and imposed an administrative monetary fine in the amount of TRY 155,782,969.05. Later on, in its Vodka and Gin Decision, the Board concluded that Diageo Turkey engaged in similar exclusionary practices in the vodka and gin markets, including the rebate scheme and investment support, and therefore violated Article 6 of Law No. 4054.

One of the critical arguments that Diageo Turkey put forth within the scope of the Vodka and Gin Investigation was that the Authority’s investigation contradicts the ne bis in idem principle. To that end, Diageo Turkey asserted that the respective principle should preclude the Board from conducting a second investigation against Diageo Turkey for the same conduct, given that the acts/behaviours that were already scrutinized under the Raki Investigation were basically the same as the ones that were scrutinized and penalized within the scope of the Vodka and Gin Investigation.

The Board put a caveat in terms of Diageo Turkey’s defences based on ne bis in idem principle by highlighting that the determination on whether an undertaking had abused its dominant position is made based on the “relevant market” wherein the alleged violation takes place. To that end, the Board resolved that Diageo Turkey’s conducts aiming to exclude its competitors from the relevant markets took place within separate product markets (i.e., the raki market, vodka market and the gin market), and thereby there is no justification that would preclude the Board from scrutinizing the relevant conduct by Diageo Turkey, within separate investigations.

That being said, the Board took into account Diageo Turkey’s defenses regarding the application of the ne bis in idem principle in its determination of the administrative monetary fine. In that context, the Board determined that Diageo Turkey`s anti-competitive conducts (i.e., the rebate scheme) in the vodka and gin markets on one hand, and the raki market on the other, overlapped in terms of structure and implementation. The Board further remarked that the rebate schemes applied by Diageo Turkey in the respective markets were characterized by the same elements and covered the same period. To that end, the Board resolved that the rebate schemes applied by Diageo Turkey in the raki, gin and vodka markets were the outcomes of the same business strategy and were simply identical.

Further to its assessment as to the similarities between the conducts scrutinized within the scope of the Raki Investigation and the Vodka and Gin Investigation, the Board highlighted that if multiple misdemeanours were committed by means of a single act/behaviour, only the most severe administrative fine envisaged for the respective misdemeanours should be applied, instead of implementing separate administrative fines for each and every one of the misdemeanours committed, as per Article 15(1) of Law on Misdemeanours No. 5326 (“Law No. 5326”). In light of the foregoing, the Board concluded by a majority vote that there were no grounds to impose a separate administrative monetary fine against Diageo Turkey for its practices in the vodka and gin markets, considering the following: (i) Diageo Turkey’s conducts in the raki market were similar to the ones that transpired in the vodka and gin markets, (ii) these practices were conducted within the same timeframe, (iii) they are integral parts of Diageo Turkey’s general strategy as a whole, and (iv) the administrative monetary fine in the Raki Decision was determined based on the overall annual turnover of Diageo Turkey (i.e., without distinguishing between the turnover generated in the relevant market).

Further to the Vodka and Gin Decision, two of Diageo Turkey’s competitors, Efe Alkollü İçecekler Ticaret A.Ş. (“Efe”) and Antalya Alkollü İçecek San. ve Tic. A.Ş. (“Antalya”), appealed against the relevant decision by filing two separate lawsuits for annulment before the Ankara administrative courts. Upon their review, Ankara 12^th Administrative Court and Ankara 2^nd Administrative Court (“Administrative Courts”) upheld the Vodka and Gin Decision.

The Administrative Courts put the case into further context by characterizing the rebate scheme implemented by Diageo Turkey in raki, vodka and gin markets as a single act/behaviour, due to the fact that it was conducted in the same period. Furthermore, the Administrative Courts held that Diageo Turkey’s conduct cannot be separated into two different acts/behaviours, merely on the basis that the Authority had conducted separate investigations in terms of “raki” market and “vodka and gin” markets. Within that context, it appears that the Administrative Courts also took into account that the Authority was compelled to assess the alleged anti-competitive conducts relating to the raki market, and the vodka and gin markets, under two different investigations because of certain procedural technicalities (i.e., the Authority was not able to merge two separate investigations due to the fact that the Vodka and Gin Investigation was initiated approximately nine months after the Raki Investigation.) From this viewpoint, the Administrative Courts concluded that if the contrary were to be accepted, (meaning, if conducting two investigations indicated there were two separate offences) this would have resulted in duplicative fines being applied to the same act/behaviour.

Lastly, by referring to Article 4(1)(a) of the Regulation on Fines to Apply In Cases of Agreements, Concerted Practices and Decisions Limiting Competition, and Abuse of Dominant Position (“Regulation on Fines”), which requires calculation of separate administrative monetary fines for each behaviour violating the Articles 4 or 6 of the Law No. 4054 that are independent from each other in terms of market, quality and chronologic course, the Administrative Courts resolved that, in the particular case at hand, there were no separate behaviours in terms of market, quality and chronologic course, due to the fact that the behaviour/act was committed once, regardless of the relevant market.

Further to the Administrative Courts’ decisions, Efe and Antalya appealed the relevant decisions before the Ankara Regional Administrative Court. Within the scope of its review, 8^th Administrative Chamber of Ankara Regional Administrative Court (“Regional Administrative Court”) reflected that although Diageo Turkey’s practices which constituted a competition law violation in the vodka and gin markets were (i) conducted within the same timeframe as Diageo Turkey’s practices in the raki market, (ii) these practices were part of the same strategy and (iii) both violations were the result of identical practices, it could only be plausible to argue that Diageo Turkey could not be penalized more than once for its practices with regards to each type of alcoholic beverage in the relevant market, unless the relevant market was defined separately as the raki market, or the vodka and gin markets.

To that end, the Regional Administrative Court concluded that given that vodka and gin markets are indeed separate from the raki market, Diageo Turkey’s practices which were found to be in violation of Article 6 of Law No. 4054 should have also been subject to a separate administrative monetary fine. Based on these grounds, the Regional Administrative Court decided to overturn the Ankara Administrative Courts’ decisions.

Assessment of the Council of State

Upon the decisions of the Regional Administrative Court, the Authority (and Diageo Turkey as the intervening party) appealed the case before the Council of State, which is Turkey`s highest court in the administrative branch. In these landmark decisions, the Council of State’s analysis of case is heavily grounded in the discussion and interpretation of various criminal law concepts.

The Council of State explained that both Law No. 5326 as well as Turkish Criminal Code No. 5237 (“Law No. 5237”) found it sufficient that a person who commits multiple offenses (or misdemeanours) with a single act shall only be sentenced to the most severe penalty among those that are stipulated for the relevant offenses, instead of facing multiple penalties for each offense (i.e., the ideal concurrence of offences). Based on this, the Council of State put forward the conditions for ideal concurrence as the following: (i) there should be a single conduct, (ii) multiple offenses should arise through a single conduct and (iii) the application of rules regarding ideal concurrence should not be expressly prohibited by the relevant legislation.

The Council of State continued by construing the term “single conduct” under Article 15 of Law No. 5326 and Article 44 of Law No. 5237. In this regard, the Council of State concluded that the “conduct” should be construed as the “act,” regardless of whether there are several outcomes/results of such an act. Accordingly, the Council of State further clarified that the outcome/result is not a sub-element of the conduct and the fact that there are several outcomes/results of a conduct should not preclude the application of the rules of ideal concurrence. In other words, the Council of State highlighted that even if a conduct brings forth several outcomes/results, this does not justify implementing multiple administrative sanctions for this conduct, which actually comprises a single act.

To that end, the Council of State deemed that the manifestations of Diageo Turkey’s commercial strategy, including its rebate scheme and other exclusionary conducts in the raki market on one hand and the vodka and gin markets on the other, were separate outcomes/results arising from a single conduct/act. Accordingly, the Council of State also considered that the two separate misdemeanours (which were the mere outcomes/results of the single conduct of Diageo Turkey) identified under the Raki Decision and the Vodka and Gin Decision should be regarded as a single conduct, which does not differ in terms of market, quality/element and chronologic course. To that end, the Council of State did not consider the case at hand, where two misdemeanours are committed by means of a single conduct/act, to fall within Article 4(1)(a) of the Regulation on Fines, which requires the application of separate administrative monetary fines for each behaviour violating the Articles 4 or 6 of the Law No. 4054 that stand independent from each other in terms of market, quality and chronological course. In light of this analysis, the Council of State overturned the decision of the Regional Administrative Court.

It is worth mentioning that although both the dissenting opinion in the Vodka and Gin Decision, as well as the decision of the Council of State refer to Article 4(1)(a) of Regulation on Fines, they employ it to support opposing arguments. In the dissenting opinion, the President and the Vice President of the Board argued that pursuant to the relevant provision, separate administrative monetary fines should have been imposed for each independent conduct which was realized in different markets and therefore the administrative monetary fine in the Raki Decision could not be deemed as a justification for not imposing an administrative monetary fines against Diageo Turkey’s conducts in vodka and gin markets. On the other hand, as also discussed above, the Council of State interpreted the relevant provision in a way to deduce that the relevant practices were conducted regardless of the markets, and also, they were not independent in terms of their characteristics and chronological processes.

Conclusion

The Council of State’s decision might pave the way for a more frequent implementation of the ne bis in idem principle in competition law cases. It is a seminal decision not just for affirming an assessment rarely brought by the Board, but also for providing a framework for implementation of the relevant criminal law principles within the context of competition law cases and interpretation of the rules regarding independent conducts under Regulation on Fines.

Additionally, one of the reasons as to why the Board did not impose a separate administrative monetary fine against Diageo Turkey in its Vodka and Gin Decision was that the administrative monetary fine in the Raki Decision had already been determined based on the overall annual turnover of Diageo Turkey, instead of just the turnover it generated in the raki market. It may be the case that going forward, the decision of the Council of State could steer the Board to impose administrative monetary fines based on an undertaking’s turnover generated in the relevant market, in similar cases.

(First published by Mondaq on March 19, 2021) 

By Gonenc Gurkaynak, Partner, O. Onur Ozgumus, Counsel, Firat Egrilmez, Associate, and Efe Oker, Associate, ELIG Gürkaynak Attorneys-at-Law

Gozde Kuscuoglu has joined BTS & Partners to lead the firm’s FMCG and Retail department.

BTS & Partners describes Kuscuoglu, who joins as Partner, as having “extensive knowledge and experience in the retail industry in general,” and reports that, “with her leadership in this area BTS & Partners will continue to serve its growing local and foreign clients successfully.”

Kuscuoglu has a BA in Law from Istanbul University and an LL.M. from the Istanbul Bilgi University. Before joining BTS & Partners, she spent six years with Yarsuvat and over 14 years with Alshaya Turkey & Azerbaijan & Georgia.

Turkish lawyers Candemir Baltali and Begum Yorukoglu have been promoted to Partner at CCAO in Istanbul.

Both Baltali and Yorukoglu have been with CCAO since July 2011, and stayed with it through its 2018 separation from Kinstellar, with which it had been affiliated (as reported by CEE Legal Matters on September 4, 2019).

Baltali focuses on banking law, restructuring, regulatory and M&A matters, and Yorukoglu specializes in M&A, banking and finance, and energy.

Former Counsels Selahattin Kaya and Bora Ikiler have been promoted to Partner at the Balcioglu Selcuk Ardiyok Keki Attorney Partnership.

Selahattin Kaya, who practices in the firm’s Corporate group, focuses on cross-border mergers and acquisitions for private equity funds, venture capital funds, and international strategic buyers. According to BASEAK, he specializes in corporate law, corporate mergers and acquisitions, private equity, and financial restructuring. 

Kaya holds an LL.B. from the Istanbul University and an MBA from Wharton. Before joining BASEAK in 2015, he spent almost three years with White & Case, over three years with BNP Paribas, a year and a half with Barclays Capital, and almost two years with BGC Partners.

According to BASEAK, Bora Ikiler, who practices in the firm’s Competition and Antitrust group, “has wide experience in all aspects of competition law [and] also focuses on data protection and privacy law compliance.” According to the firm, “finally, Bora specializes in supporting his clients’ management in internal investigations and in setting up compliance management systems.”

Ikiler holds an LL.B. from Bilkent University, an LL.M. from the Istanbul Bilgi University, and an LL.M. from the University of Michigan School of Law. Before joining BASEAK in 2018, he spent almost six years with ELIG and four years with Moroglu Arseven.

We were introduced with right to be forgotten (“RTBF”) in 2014 with Court of Justice of the European Union’s (“CJEU”) Google Spain SL and Google Inc. v Agencia Española de Protección de Datos (AEPD) and Mario Costeja González decision (“González decision”). Since then, it has become an essential part of privacy rights and had seen many applications all around the world.

We have seen its applications in Turkey in litigation, mostly through high court decisions. However, recently, specifically in the year 2020, we have seen RTBF reference taking its part in the legislation, as well as being officially recognized as a data protection right by the Turkish Data Protection Authority (“DPA”) through Turkish Data Protection Board’s (“Board”) relevant decision explained below.

Right to Be Forgotten in Turkey

The first recognition of RTBF in Turkey was through a Supreme Court General Assembly of Civil Chamber and a Constitutional Court decision.

The Supreme Court General Assembly of Civil Chambers with its decision of June 17, 2015 with no. 2014/4-56, 2015/1679, defined the RTBF as the right to ask for the negative events in the digital memory (i) to be forgotten after a while, (ii) erasure of personal data which the individual does not want others to know, and (iii) the prevention of its dissemination. 

The Constitutional Court, through its decision of March 3, 2016 with application no. 2013/5653, which was on the online archive records of a newspaper’s website, has considered the individual request asking access ban to personal data in the Internet news archive in order to ensure that the person’s past actions are forgotten, within the scope of RTBF. The Constitutional Court referred to the foregoing Supreme Court General Assembly of Civil Chambers decision as well as CJEU’s decision. Constitutional Court stated that RTBF is in question when certain news are available on the internet for a long period of time and for that reason, damages a person’s honor and reputation. Constitutional Court also recognized RTBF as a part of the right to protection of personal data and emphasized that a balance between RTBF and freedom of expression and freedom of press shall be maintained.

After being evaluated within the scope of the foregoing precedents for several years, in the year 2020, the Data Protection Board’s (“Board”) decision of June 23, 2020 with no. 2020/481 and Article 9/10 which was added to the Law with No. 5651 (“Internet Law”) and entered into force on July 31, 2020 explicitly introduced two different legal grounds to pursue the RTBF in Turkey:

1. The RTBF Provision Added To the Internet Law

The Constitutional Court’s and Supreme Court General Assembly of Civil Chambers decisions were already in place for application of the RTBF cases within the scope of Internet Law before the Article 9/10 was added to the law on July 31, 2020, so the hosting providers could already be subject to requests based on RTBF.

However, the Article 9/10 now allows judges to decide on not associating the applicant’s (whose personal rights are violated due to the content broadcasted on the Internet) name with the websites subject to the decision, and stipulates that the decision should point the search engine to be notified to the Access Providers Union (may be referred to as a “delisting” decision).

Although this decision does not specifically address RTBF, it now makes it possible for the criminal judgeships of peace to include search engines to a removal decision by deciding on delisting.

2. The Board’s RTBF Decision

On the other hand, the Board’s RTBF decision of June 23, 2020 with number 2020/481 specifically addresses RTBF but it is based on the protection of personal data. The Board, with its decision, evaluates the search engines as data controllers and their indexing activities -in terms of the data they collect from third party websites- as data processing activities. Accordingly, the Board enables delisting of contents from search engines based on the RTBF. As the Board’s decision refers to a precise list of criteria, the search engines are guided with a list consisting of thirteen criteria to evaluate upon RTBF complaints directed to the search engines. These criteria are based on Article 29 Working Party’s Guidelines on the Implementation of the Court of Justice of the European Union Judgment on “Google Spain And Inc v. Agencia Española de Protección de Datos (AEPD) and Mario Costeja González” C-131/12 with minor differences, which shows us that the DPA adopts a similar approach to Europe.

The Relationship Between the Board’s RTBF Decision and Article 9/10 of Internet Law and Their Practical Applications 

The Board’s RTBF decision refers to the access ban procedure under the Internet Law as an example for tools for the application of RTBF. The Board also refers to data subject’s right to erasure under the Law No. 6698 on Personal Data Protection (“DPL”). 

Internet Law does not offer any criteria for decision on delisting. As we see international application of delisting in RTBF situations, a similar approach may be expected from the courts. However, as it has not even been a year since this clause was introduced, it is still early to expect a consistent approach.

The Board provides particular criteria to be followed by the search engines for evaluation of the RTBF requests, the Board expects each individual request to be evaluated by making a balance test between the data subject’s fundamental rights and freedoms and public’s interest for obtaining the information. Such balancing is also emphasized in the Constitutional Court’s RTBF decision.

As example of this test, the Board recently published its decision on an investigation upon a complaint wherein the complainant claimed that they requested removal of the relevant news from the relevant search engine, and search engine decided not to take any action and that the news articles were affecting their lives and profession, requested the relevant contents to be de-listed. The Board in its decision, evaluated the case within the scope of each criteria and concluded that the search engine’s decision of not removing the contents was in accordance with the relevant criteria published by the Board’s decision with no. 2020/481 and that there were no additional steps to be undertaken regarding the issue in terms of DPL.

Criminal judgeships of peace already started granting decisions referring to delisting. Such decisions do not specifically refer to the Board’s criteria. This may be due to DPL being a specialized law. DPL regulates specific sets of procedures for protection of a specific right. On the other hand, Internet Law is expansive in scope and includes remedies for many situations from violation of personal rights to privacy and specific sets of crimes committed through internet. Article 9/10 is introduced as a remedy for violation of personal rights, which may not be through a violation within the scope of DPL in every case. However, RTBF is an application for protection of right to privacy and such criteria is actually to provide the balance between freedom of expression and freedom of press and the fundamental rights of the person in question. Therefore, even though not explicitly, the courts may take those criteria into consideration or in any case they would at least be expected to make a balancing test before deciding on delisting.

RTBF applications and acknowledgements through precedents, decisions and legislation are based on the well-known González decision; hence, they are in a close relationship albeit not always visible. Therefore, the interested parties would at least be expected to consistently conduct a balancing test between protection of fundamental rights of the person and freedom of expression and freedom of press before deciding on any deindexing or delisting decision based on RTBF.

By Gonenc Gurkaynak, Partner, Ceren Yildiz, Partner, Batuhan Aytac, Associate, and Derya Basaran, Associate, ELIG Gürkaynak Attorneys-at-Law

Andersen Global has tied up with MGC Legal in Istanbul, giving it a new base of operations in the Turkish capital.

MGC Legal has eight partners — including Managing Partner Mustafa Gunes — and 60 fee earners. “We are committed to client service and stewardship, which ensures we provide best-in-class services to our clients,” Mustafa said. “Our quality solutions are reinforced by our professionals’ expertise in all areas of law as well as the working relationships and resources we’ve built over the years. Collaborating with Andersen Global supports our goal of being a benchmark organization that sets the standard for client service regionally and globally.”

Andersen Global Chairman and Andersen CEO Mark Vorsatz added, “MGC Legal’s professionals are outstanding. We were very impressed with their operational knowledge, and their culture and values mirror those of our organization. This collaboration is an important addition in the region, and the chemistry we’ve already developed with this group is a springboard for our collaboration going forward.”

Andersen had previously been cooperating with Nazali Tax & Legal in Istanbul — a relationship which began in the summer of 2017 (as reported by CEE Legal Matters on July 17, 2017) and concluded in January 2020.