New Developments
The Regulation on the Unfair Price Assessment Board (“Regulation“) was published in the Official Gazette dated May 28, 2020 and No. 31138. The Regulation sets out the working principles, duties and powers of the Unfair Price Assessment Board (“Board“) previously set up by the Law No. 7244 on Reducing the Effects of the Novel Coronavirus (COVID-19) Outbreak on Economic and Social Life and Amendments to Certain Laws (“Law No. 7244“), which entered into force after publication in the Official Gazette dated April 17, 2020 and No. 31102.
What Does the Regulation Mean?
Law No. 7244 established the Board in an effort to combat and monitor the unfair price increases and stockpiling practices of manufacturers, suppliers and retail businesses. The Board will monitor the market; examine undertakings; impose administrative fines; and adopt further precautions when necessary.
The Regulation states that the Unfair Price Assessment Board will operate only in times of states of emergency, natural disasters, economic fluctuations or other emergencies.
Definition of unfair price increases and stockpiling practices: The Regulation provides definitions for unfair price increases and stockpiling. Accordingly, an unfair price increase is defined as manufacturers, suppliers and retail businesses increasing prices exorbitantly and inequitably (i) during a state of emergency, natural disaster or other emergencies; (ii) on goods or services necessary to satisfy the basic needs of the public such as food, medical supplies or security; and (iii) which are not justified based on increases in input or other manufacturing costs.
Stockpiling is defined as the conduct of manufacturers, suppliers and retail businesses (i) during a state of emergency, natural disaster or other emergencies and (ii) that result in a shortage in the market, disrupt the market balance and free competition, and prevent consumers from accessing the goods.
Composition of the Board: The Board consists of thirteen members. The members of the Board will have the following duties or will be assigned from the following institutions: General Manager of Domestic Trade; Deputy General Manager of Domestic Trade; General Manager of Consumer Protection and Market Surveillance; General Manager of Tradesmen, Artisans and Cooperatives; Ministry of Justice; Ministry of Treasury and Finance; Ministry of Industry and Technology; Ministry of Agriculture and Forestry; the Union of Chambers and Commodity Exchanges of Turkey; the Confederation of Tradesmen and Artisans of Turkey; the Board of Advertisement; the Council for Retail Sector; and the Council of Food Sector.
The Board requires the presence of at least seven out of thirteen members to meet quorum and requires a simple majority to adopt a decision. The Regulation states that the Board can meet electronically. The Ministry of Trade can implement the Board’s decisions and announce them to the public.
Duties and powers of the Board: The Board is empowered to take the necessary measures to protect the market balance and consumers against unfair price increases and stockpiling practices. The Board is authorized to:
- carry out or instruct others to carry out inspections and audits on unfair pricing and stockpiling practices;
- request or instruct others to request defenses from manufacturers, suppliers and retail businesses regarding inspections and audits;
- adopt and enforce administrative fine decisions against manufacturers, suppliers and retail businesses that carry out unfair pricing and stockpiling practices; and
- determine the principles and rules on unfair pricing and stockpiling practices.
Complaints to the Board: The Board may act ex officio or initiate proceedings upon complaint. The Regulation states that an electronic system will be established to enable consumers to make complaints to the Board electronically and provide documents, photographs and video images. The complaint will be removed from the Board’s docket and the applicant will be notified that its application will not be processed further if it is identified that legal proceedings have commenced in court regarding the conduct under question.
Audit and defense process: The Ministry of Trade is authorized to conduct audits and request information and documents regarding complaints from undertakings. The Regulation states that the audited undertakings will be given no less than ten days from the day of the inspection to provide their defenses. This period can be extended once for a total of ten days. The Board cannot impose an administrative fine (except when the undertaking refuses to provide its defense) without the undertaking’s defense.
Administrative fine: Law No. 7244 ordains that (i) excessive prices may be punishable by an administrative fine between TRY 10,000 to TRY 100,000; and (ii) conduct that creates scarcity, distorts competition or prevents consumers from accessing goods may be punishable by an administrative fine between TRY 50,000 and TRY 500,000.
The Regulation indicates that the determination of the administrative fine will be subject to factors such as the severity of the conduct; the substance of the inequitable conduct; the type, size and sector of the business; and the profit made by unfair pricing or stockpiling and recidivism.
Interim period: Applications made to the Ministry of Trade about unfair price increase practices before April 17, 2020, when the Law No. 7244 came into force will be reviewed and concluded by the Board of Advertisement according to the Law No. 6502 on Consumer Protection (“Law No. 6502“) and its secondary legislation. According to the Law No. 6502, the unfair commercial practice can be halted for up to three months or may be permanently halted, and the undertaking or the person performing the practice could receive an administrative fine. The administrative fine is increased if the unfair commercial practice occurred nationwide.
Conclusion
The newly established Unfair Price Assessment Board is authorized to monitor undertakings engaged in activities that prevent the consumer from accessing goods by creating scarcities in the market, disrupting market status and free competition. The Members of the Board will soon be appointed and the Board will commence its operations. All market players should ensure that their price and stock policies do not align with the unfair price increase or stockpiling definitions above and should adjust their pricing and sales policies accordingly in the future.
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