EXPERIENCES ON BILATERAL AND REGIONAL INTEGRATION:LESSONS FROM TURKEY

Lerzan KAYIHAN ÜNALCompetition ExpertInternational Relations DepartmentTurkish Competition Authority

CRPs Found in RTAs Signed between Turkey and Third Parties

Turkey-EU Customs Union Agreement Turkey’s Free Trade Agreements (EFTA states,

Bosnia Herzegovina, Bulgaria, Croatia, Israel, Macedonia, Morocco, Romania, Tunisia, and Palestinian Administration)

ATAs MOU with Romania Competition Council MOU with KFTC of South Korea

I.TURKEY- EU Customs Union

Ankara Agreement still constitutes the legal basis in relations Decision No 1/95 on the completion of the CU between Turkey

and the EU in industrial and processed agricultural goods was adopted on 31 December 1995

Same commercial policy measures with the EU Competition rules of the CU are found under the title:

“Section II Competition” via “Articles 32-43”

Overview of the Competition Provisions in the CU

Anti-competitive behaviour practices (Articles 32, 33, 34) where trade between Turkey and the EU is affected

Coordination and cooperation provisions Approximation of legislation (Article 39) Information exchange (Article 36) Positive comity (Article 43)

Implementation rules (Article 37)

II. TURKEY’s FTAs

FTA with EFTA entry into force April 1992. FTAs with Bosnia Herzegovina, Bulgaria, Croatia,

Israel, Macedonia, Morocco, Romania, Tunisia, and Palestinian Administration are in force.

FTAs with Syria and Egypt are signed but have not come into force yet.

Ongoing talks for FTAs with Albania, Fareo Islands, Jordan, Gulf Cooperation Center, and Lebanon.

Overview of CPs found in EFTA-TURKEY FTA

Regarding rules of competition concerning undertakings (Article 17), this Agreement includes provisions on co-operation and exchange of information in the Joint Committee meeting with the aim of ensuring the benefits of the Agreement are not frustrated by private anti- competitive behaviour.

Joint Committee supervises the implementation of this FTA (Article 25).

Procedures of the Joint Committee are organized in Article 26. Consultations are the fundamental dispute settlement

mechanisms between the parties. The agreement implies that the Parties are to endeavour to solve any differences between them on the interpretation and application of the agreement by direct consultations, and, if need be, through consultations in the Joint Committee (Article 23).

Overview of CPs found in

Bilateral FTAs The competition provisions of the FTAs are generally found under

the title “Rules of Competition Concerning Undertakings” and “State Aid”.

CRPs are rules designed to complement the trade provisions via giving reference to “affect trade between the parties”.

CRPs found in FTAs will only be applicable to situations where trade between Turkey and the relevant country is affected.

The competition provisions found in the relevant RTAs are declared incompatible with all:

a)restrictive agreements between undertakings,b) abuses of dominant position by one or more undertakings,c)state aids that distort, restrict or prevent competition.

These provisions are expected to be implemented by the Joint Committee or Association Committee (depending on the wording used in the agreement).

FTAs to which Turkey is a party can be divided into three categories with respect to “implementation of CPs”

1. FTAs between Turkey- Israel and Turkey-Romania:

Main provision prohibiting practices contrary to competition constitutes of anti-competitive agreements, abuse of dominant position, and state-aid.

Implementation of CPs rules should be adopted in a transition period of pre-determined length (3 years).

GATT rules would be applicable for state aid rules until the adoption of implementation rules.

FTAs to which Turkey is a party can be divided into three categories with respect to “implementation of CPs” (con’t) 2. FTAs between Turkey-Bulgaria and

Turkey- Bosnia-Herzegovina :

Main provision prohibiting practices contrary to competition constitutes of anti-competitive agreements, and abuse of dominant position. Rules on state-aid are dealt separately.

In case any anti-competitive practice causes or threatens to cause serious prejudice to the interest of any of the Parties or material injury to its domestic industry, the relevant Party may take appropriate measures under the conditions and in accordance with the procedure laid down already within the Agreement (“Procedure for the application of safeguard measures)

FTAs to which Turkey is a party can be divided into three categories with respect to “implementation of CPs” (con’t)

3. FTAs between Turkey-Croatia, Turkey-Macedonia, Turkey-Morocco, Turkey-Tunisia, and Turkey- Palestine

For the purpose of applying the CPs (anti-competitive agreements, abuse of dominant position, state-aid), the Parties will take measures in conformity with the procedures and under the conditions laid down in their respective Agreements with the European Communities.

There is also a “safeguard clause” that allows the parties to exclude the application of the competition rules contained in the agreement to the benefit of a unilateral application of their legislation.

1. Relations with the Korea Fair Trading Commission (KFTC) The MOU on Cooperation between the KFTC and the TCA was

signed in Antalya, Turkey on November 17th 2005 during the 5th UN Conference on Competition Policy

Aims to create favorable conditions for the development of bilateral relations

Cooperation is primarily based on the exchange of legislation, information, and experience as well as joint work on the development of scientific and methodological research in the field of competition law enforcement and policy within line with the Parties relevant legislation

III. Agency to Agency

Agreements (ATAs)

2. Relations with the Romania Competition Council The MOU on Cooperation between the Romania and the Turkey

was signed on 12th December 2005 in Romania It creates a favorable framework for both institutions in reaching

their common European goals The Action Plan that foresees the exchange of information and

relevant documents initially on legislative developments taking into consideration the Romanian Competition Council’s experience during accession negotiations on antitrust to the EU, as well as in other relevant grounds was put into action immediatly

III. Agency to Agency

Agreements (ATAs)

The Turkish Experience with respect to Implementation of Competition Rules found in the Decision No 1/95 (CU) and FTAs

CASE 1 TCA initiated a preliminary inquiry in May 2004 for determining

whether it was necessary to open an investigation against undertakings operating in the production, import and sale of facilities and equipments concerning production, transmission and distribution of energy

EU had an investigation on the same matter at that time The TCA asked the European Commission to share with the TCA

any information or documents concerning the activities of cartel members in Turkey according to Article 43 (positive comity)

The Turkish Experience with respect to Implementation of Competition Rules found in the Decision No 1/95 (CU) and FTAsCASE 2 The TCA initiated an investigation in the coal market. The head

offices of the firms were in Austria and Switzerland. Both had no affiliated companies in Turkey.

Due to “effects doctrine”, they were considered under the scope of the Act on the Protection of Competition no 4054. Although an investigation was initiated against these relevant undertakings, efficient use of powers concerning request for information or on the spot inspections were not possible, as the head offices of these undertakings were situated abroad.

No implementation rules so far, but Article 43 of the CU Articles 17 (anti-competitive prohibitions) and 23 (safeguard

measures) of the EFTA-Turkey FTA

CONCLUSIONS

RTAs are considered as key tools for facilitating trade between the contracting Parties.

National competition laws to be supported by enforceable application of CRs in RTAs which aim at further liberalization of international trade.

Competition policy and its enforcement not only play a major role in advancing international trade which is obstructed by anticompetitive business practices, monopolies or state aids but also help to enhance convergence in competition policies of countries at the international arena via harmonization of the competition laws.

With respect to harmonization, the most successful and far reaching example to the regional agreements is the EU. As is known, the EU has required prospective new members to apply best endeavors to ensure their competition laws to be compatible with the EU’s competition rules.

CONCLUSIONS (con’t)

Trade is the overriding principle both in the CU Agreement and in the FTAs signed between Turkey and third parties.

Those agreements contain provisions aiming to remove obstacles to trade as well as providing protection to traders.

CU and FTAs to which Turkey is a party include CRPs. Those agreements are all EU-style agreements:

“The following [anti-competitive practices] are incompatible with the proper functioning of the Agreement, in so far as they may affect trade between the parties.

CONCLUSIONS (con’t)

In general, the effectiveness of the competition rules is limited initially to the enactment of “implementation rules”.

In the absence of such rules, the following approach can be used (in the EU legal order):“direct effect” of the CPs included in the aforementioned agreements which allows individuals to invoke them before national courts.

The existence of a direct effect can be legitimately be raised in the context of the EC-Turkey CU Agreement.

However, the Association Council are mandated to adopt the relevant rules for the implementation of competition provisions. Therefore, until such rules are adopted CPs are not deemed to be applicable.

CONCLUSIONS (con’t)

Cooperation on both substantive and procedural grounds is necessary for the further liberalization of international trade.

Info sharing, positive comity and dispute settlement mechanisms. Depends on the “common interest” of the parties. “Eager to ink but ready to act?”. Economic implications are not easy to determine at least under

the present circumstances. The discussions and attempts for further development are

expected to continue in the future.