Banks Engaging In Anti-Competitive Practices
T.C. COUNCIL OF STATE 13TH CHAMBER, 2015/2624 E., 2015/4608 K. Decision Date: 16.12.2015
INTEREST RATES AND FEES APPLIED TO BANKING SERVICES (Actions of 12 Banks jointly setting rates/anti-competitive actions in the context of a settlement concerning deposit, credit card, and credit services – Violation of the Competition Protection Law – Decision of the Competition Authority to impose an administrative monetary fine of approximately 1% of the annual gross revenue)
ANTI-COMPETITIVE ACTIONS (Banks operating in the banking sector reaching a settlement; the common basis of the settlement being the joint determination of pricing strategies; execution and monitoring of this settlement were carried out through a series of communications, information exchanges, and mutual agreements between the parties – The imposition of an administrative monetary fine by the Competition Authority is legally valid)
VIOLATION OF THE COMPETITION PROTECTION LAW (12 Banks jointly setting interest rates and fees for various banking services within the scope of a settlement, leading to actions that restrict competition in deposit, credit card, and credit services – No violation found in the decision of the Competition Authority imposing an administrative fine amounting to 1% of the annual gross revenue)
BANKS’ ANTI-COMPETITIVE BEHAVIOR (No legal violation in the decision of the Competition Authority to impose an administrative fine of 1% of the annual gross revenue of the 12 banks involved in actions related to interest rates and fees applied to deposit, credit card, and credit services)
SETTLEMENT AMONG BANKS IN CREDIT CARD SERVICES (The common basis of the settlement is the joint determination of pricing strategies, which were executed and monitored through a series of communications, information exchanges, and mutual agreements between the parties – The imposition of an administrative monetary fine by the Competition Authority is legally valid under the Competition Protection Law)
CREDIT INTEREST / DEPOSIT INTEREST (The 12 Banks jointly determining interest rates and fees applied to services such as deposits, credit cards, and loans – Anti-competitive actions carried out within a settlement concerning these services, where the common purpose was to jointly determine pricing strategies, and this was executed through a series of communications, information sharing, and mutual agreements)
SUMMARY: Businesses operating in the banking sector have engaged in anti-competitive practices by jointly determining interest rates and fees for various banking services, including deposits (including public deposits in the case of public banks), loans, and credit card services. These actions took place within the framework of a settlement regarding these services, with the common purpose being the joint determination of pricing strategies. The implementation and monitoring of this settlement occurred through a series of communications, information sharing, and mutual agreements among the parties involved. Documents obtained during on-site inspections revealed that competition-sensitive information was shared between the banks involved in the investigation. Some documents indicated that senior executives of competing banks met at breakfast meetings, during which they shared information that led to a mutual understanding, indicating an agreement.
As a result, it was determined that the plaintiff violated Article 4 of the Competition Protection Law by engaging in anti-competitive behavior. Therefore, the decision by the Competition Authority to impose an administrative fine amounting to 148,231,490 TL, calculated at 1% of the annual gross revenue at the end of the 2011 financial year, is legally sound.
Summary of the Request: The plaintiff seeks to annul the decision of the Ankara 2nd Administrative Court, dated 25.12.2014, E: 2014/232, K: 2014/1581. The plaintiff argues that the fine imposed ranged between 0.3% and 1.5%, but the reasoning for this difference was not explained in the decision. The lack of product market definition was cited as grounds for annulment, and it was claimed that the investigation was incomplete, particularly regarding the alleged settlement between the banks. The plaintiff also argues that there was insufficient evidence to prove a single ongoing settlement and that the investigation relied on incorrect documents. Additionally, the plaintiff contends that the decision violated the principle of proportionality and equality, and that public sector banks should be considered as a single economic entity.
Summary of the Defense: The defense argues for the rejection of the appeal and the affirmation of the legally sound decision of the Administrative Court.
Opinion of the Council of State Rapporteur: The appeal is rejected, and the decision of the Administrative Court should be upheld.
IN THE NAME OF THE TURKISH NATION
After listening to the remarks of the Council of State Rapporteur and reviewing the documents in the case file, the request for a hearing was deemed unnecessary as the file was complete. Consequently, no further decision was made regarding the request for a stay of execution.
DECISION: The case concerns whether the banks operating in Turkey engaged in anti-competitive behavior by agreeing to jointly set interest rates, fees, and commissions for deposit, credit, and credit card services, violating Article 4 of the Competition Protection Law. The administrative monetary fine of 148,231,490 TL, imposed based on 1% of the annual gross revenue at the end of the 2011 financial year, is legally valid. The claim that public banks (Ziraat Bank, VakıfBank, HalkBank) should be considered a single economic entity, thus exempting them from competition rules, was not accepted. The legal review concluded that these banks, while publicly owned, are independent legal entities and must avoid anti-competitive actions under the law.
According to Article 4 of the Competition Protection Law No. 4054, “Agreements, coordinated actions, or decisions made by businesses that directly or indirectly aim to restrict, distort, or prevent competition, or have the potential to do so, are prohibited and illegal.”
These situations, particularly, are as follows:
- Determining the purchase or sale price of goods or services, including the costs, profits, and all conditions related to the purchase or sale;
- Dividing the market for goods or services, sharing or controlling any kind of market resources or elements;
- Controlling the supply or demand quantity of goods or services, or determining them outside the market;
- Making it more difficult for competing businesses to operate, restricting them, or removing them from the market through boycotts or other actions, or preventing new entrants to the market;
- Applying different conditions to equally situated individuals with the same rights, obligations, and actions, except in the case of exclusive dealerships;
- Forcing the purchase of a good or service together with another good or service, or linking the purchase of one product or service with the exhibition of another product or service required by an intermediary buyer, or imposing conditions for the re-offering of a good or service;
- In cases where the existence of an agreement cannot be proven, if the changes in market prices, the balance of supply and demand, or the operational areas of the businesses show similarities to markets where competition is restricted, disturbed, or limited, it constitutes evidence that the businesses are acting in concert.
It has been stated that “each of the parties can be exempted from responsibility by proving that they did not act in concert, based on economic and rational facts.”
Furthermore, in Article 16, paragraph 3 of the Law titled “Administrative Fines,” it is specified that businesses and associations that violate the prohibitions in Articles 4, 6, and 7 of the Law will be subject to an administrative fine of up to 10% of their gross annual revenue from the previous financial year, or the most recent financial year before the final decision date, which will be determined by the Board.
Upon examining the case file, it was found that the interest rates applied by banks were determined at the highest rate, no bank lowered its interest rates, and all banks used the same interest rate. As a result of the investigation into these claims, the Board decided to conduct a preliminary investigation. Following the preliminary investigation report, a decision was made to open an investigation to determine whether Article 4 of the Law No. 4054 had been violated. The investigation was conducted against AKBANK, GARANTİ, İŞ BANKASI, YKB, TEB, VAKIFBANK, HALKBANK, ZİRAAT, DENİZBANK, FİNANSBANK, HSBC, and ING Banks. After completing the investigation, a report was prepared and, after considering the written and oral defense statements from the banks, it was concluded that the mentioned businesses had violated Article 4 of Law No. 4054, and administrative fines were imposed on the relevant businesses.
Article 4 of Law No. 4054 prohibits agreements, concerted practices, and decisions made by business associations that directly or indirectly aim to prevent, distort, or restrict competition in a particular market for goods and services, or those that can cause or lead to such effects. Therefore, in order for an administrative fine to be imposed based on Article 16 of Law No. 4054, a violation of competition, in the form of an agreement or concerted practice, must be established, and it must also be demonstrated that illegal conduct occurred.
In the justification of Article 4 of the aforementioned Law, it is stated that the term “agreement” is used in the sense of any kind of settlement or understanding to which the parties feel bound, whether or not it complies with the conditions of validity under Civil Law, and whether it is written or verbal is not important.
The general justification of Law No. 4054 notes that, in a competitive market economy, prices and profit indicators should be determined without interference; competition is a process that ensures the functioning of the market economy. If the conditions for competition are not present, the market economy cannot function properly, and businesses must refrain from acts and behaviors that violate competition in order to ensure the healthy functioning of this process.
When the aim of violating competition can be identified, it is important to determine the nature of the acts and behaviors that are claimed to violate competition. In short, the provisions and justifications of Law No. 4054 emphasize that acts and behaviors that aim to violate competition are prohibited. When important information regarding future prices and costs is shared with a competing business, it is clear that there is a suspicion of an intention to violate competition. If sharing sensitive competitive information is repeated over a certain period, this suspicion is reinforced and can indicate the existence of an agreement. Additionally, the fact that the sharing of sensitive information is not repeated does not eliminate the potential for anti-competitive behavior, and this situation will be evaluated by the relevant authorities based on the specific circumstances of each case.
Businesses operating in the banking sector were found to have engaged in activities that restrict competition by jointly setting interest rates and fees for various banking services. These actions were part of an agreement involving deposit services (including public deposits in the case of public banks), credit, and credit card services. The common denominator of this agreement was determining pricing strategies together. The identification, implementation, and monitoring of the agreement were carried out through a series of communications, information sharing, and agreements between the parties. Documents obtained during on-site inspections showed that sensitive competitive information was shared between the banks involved in the investigation, and some documents indicated meetings between senior managers of the competing banks during breakfasts, where information was shared that confirmed the existence of an agreement.
The plaintiff business was found to be a party to the gentlemen’s agreement clearly established through the economic analysis based on Document-2 obtained in the investigation. The plaintiff was also found to have participated in the agreement related to deposit interest rates, as shown in Documents-3 and 4, and the public banks’ anti-competitive agreement, as evidenced by Documents-14, 16, 20, and 21.
Therefore, it was concluded that the plaintiff had violated Article 4 of the Law with the mentioned anti-competitive behavior, and an administrative fine of 148,231,490 TL was imposed, which corresponds to 1% of the plaintiff’s gross annual income for the year 2011, as determined by the Board.
Conclusion: The appeal to the Ankara 2nd Administrative Court, dated 25.12.2014, E:2014/232, K:2014/1581, was rejected. Since none of the reasons for annulment listed in Article 49, paragraph 1 of the Law on Administrative Procedure (Law No. 2577) were found, the Court’s decision was upheld based on the reasons stated above. The case file was sent back to the relevant Court, and the unused administrative stay of 45.60 TL will be refunded to the plaintiff upon request. This decision was unanimously made on 16.12.2015, with the option for correction within 15 days following the delivery date.