Competition Section Under the Reguler Progress Report of EU Commision

Chapter 6: Competition policy

The competition acquis covers both anti-trust and State aid control policies. It includes rules and procedures to combat anti-competitive behaviour by companies ( restrictive agreements betweeen undertakings and abuse of dominant position), and to prevent governments from granting state aid which distorts competition in the Internal Market. Generally, the competition rules are directly applicable in the whole Union, and Member States must cooperate fully with the Commission in enforcing these rules.

Progress since the last Regular Report

Since the last Regular Report, some progress has been achieved in the field of competition.

Conceming anti-trust, only limited legislative alignment can be recorded. The Competition Board adopted a communiqué, effective from 31 December 2004, increasing the administrative fines provided for in the law on the Protection of Competition.

Some progress has been achieved in the enforcement of anti-trust rules. In 2003, the Competition Authority imposed fines in 13 cases out of 303 cases concluded. The Competition Board imposed conditions on 9 mergers and acquisitions out of a total of 69 merger cases approved in 2003.

In 2004, in the judicial review process, only 21 cases out of 196 were concluded by the Supreme Court which acts as a first instance court. A large number of cases are still pending after appeals.

Concerning administrative capacity, the Turkish competition authority is quite well staffed and puts efforts on the training of its staff.

No progress has been made on the adoption of state aid legislation, or on the establishment of a state aid monitoring authority.

Regarding steel, Turkey requested the prolongation of the period in which restructuring aid may be granted to the steel industry under specific conditions defined in the 1996 ECSC Turkey Trade Agreement. The Turkish authorities have to submit an acceptable national restructuring programme for the steel sector providing appropriately detailed information and individual business plans for all companies involved in the restructuring process.

Overall assessment

Generally, Turkey's anti-trust legislation appears to be largely modelled on the main principles of Community anti-trust rules. As regards secondary legislation, Turkey has introduced many of the block exemption regulations. Further alignment is necessary, in particular in view of the Community's evolving policies on vertical restraints and horizontal cooperation agreements.

The Turkish Competition Authority started operating in 1997. It consists of an eleven¬member board and has a total staff of 316, of whom 84 have university degrees, responsible for competition investigations, assessment of mergers and acquisitions, exemptions and negative clearance. Apart from these, there are six examination experts mainly responsible for decisions of the Turkish Competition Board who assist with their reasoning, four lawyers mainly responsible for dealing with cases before the Council of State and four assistant experts on research. The Competition Authority is an independent authority, but recent governmental efforts to establish a uniform organisational structure for all independent regulatory authorities by adopting framework legislation raise concerns about potential political intervention in the operations of the Competition Authority.

The delays encountered in the handling of appealed cases in the Supreme Administrative Court are a matter for concern. The amendments made in the Competition Act last year are expected to increase the enforcement effectiveness of the competition rules. However, only 500,000 Euro out of 60 million Euro which the Competition Authority imposed as fine has been collected since 1998. This reveals the urgent need to strengthen the administrative capacity of the Supreme Administrative Court in order to improve the quality and speed of the appeal process.

The Competition Authority is the sole body responsible for the enforcement of anti-trust rules. However, all public authorities, including Parliament, should ensure that competition is not distorted through the adoption of legislation or administrative decisions. The existing legal barriers stemming from both primary and secondary legislation cause serious distortions of competition. Remarks by the Competition Authority should be taken into consideration in the drafting of all types of legislation that may have an impact on competition.

As a matter of urgency, public authorities should prepare amendments to sectoral legislation, which currently includes anti-competitive provisions, and should associate the Competition Authority fully in this process.

During the privatisation process, competition aspects should play an important role, in particular where dominant positions exist. Privatisation models that ensure a high level of competition in the respective sector in the post-privatisation period should be designed.

Effective coordination between the Competition Authority and sectoral regulatory authorities such as the Energy Markets Regulatory Authority, and the Banking Regulatory and Supervisory Agency, should be ensured.

No progress has been made on the adoption of state aid legislation or on the establishment of an operationally independent state aid monitoring authority. The lack of progress on this key question is hindering the implementation of a state aid control regime, resulting in potential distortions of competition in markets via the allocation of public aid. It is also a major factor delaying the adoption of an Association Council decision on the implementation of competition rules, despite the fact that Turkey is committed under the Customs Union and the ECSC Turkey Trade Agreement to align with the EU acquis in the state aid sector.

Competition conditions in the alcoholic beverages sector are stilI not satisfactory. Problems stem from the primary legislation of 2001, which contains a number of provisions in contradiction with the Customs Union and WTO obligations of Turkey. This legislation should be amended urgently in order to ensure a level playing field for all market actors.

Major efforts conceming alignment in the adjustment of state monopolies and companies having exclusive and special rights are needed.

Conclusion

In the field of anti-trust rules, harmonisation with the acquis appears reasonably well advanced. However, the state aid framework Law has not been adopted, and therefore, there is no alignment with the EC Treaty rules on state aid control.

Major efforts conceming alignment in the adjustment of state monopolies and companies having exclusive and special rights are needed. An efficient enforcement of all competition rules must be ensured and the role of the Competition Authority in the economic policy-making process needs to be strengthened considerably. Turkey should urgently adopt legislation conceming state aid monitoring, which is in compliance with EC state aid rules, and establish an operationally independent state aid monitoring authority