COMPETITION LAW FOR SMES

Entrance

Small and Medium-sized Enterprises (SMEs) , one of the most important actors in Turkey's economic life, constitute 99% of all businesses and approximately 70% of employment. For SMEs, which have such significant economic weight , competition law is not only a means of protection against the monopolistic behavior of large companies, but also indispensable for ensuring fair competition in the market and supporting growth and sustainability.

The cornerstone of Turkish competition law Law No. 4054 on the Protection of Competition. This law prohibits anti-competitive agreements, abuse of dominant position, and mergers and acquisitions that restrict competition.

This article will examine in detail the importance of Law No. 4054 for SMEs, the problems encountered in its implementation, the obligations of SMEs in light of the decisions of the Competition Board, and the opportunities that competition law offers to SMEs.

1. The Relationship Between SMEs and Competition Law

1.1. Definition of SME

In Turkish legislation SMEsare defined according to criteria such as the number of employees, annual net sales revenue, and balance sheet size. According to the regulations:

Micro-enterprise: < 10 employees, ≤ 5 million TL turnover,
Small business: < 50 employees, ≤ 50 million TL turnover,
Medium-sized enterprise: < 250 employees, ≤ 250 million TL turnover.

This classification is also important in the application of competition law, as the amount of penalties, exemption assessments, and responsibilities for competition violations can vary depending on the size of the business.

1.2. The Importance of Competition Law for SMEs

SMEs are often the parties affected by anti-competitive practices, rather than the parties committing them . For example, SME dealers or distributors who have a vertical relationship with a large manufacturer may be parties to contracts that restrict competition. In such cases, SMEs' knowledge of competition law enables them to both avoid penalties and protect their rights.

2. The Effects of Law No. 4054 on SMEs

2.1. Agreements Restricting Competition (Article 4)

Article 4 of the law prohibits agreements that restrict competition . Examples:

Costing,
Market or customer sharing,
Bid rigging,
Dictating the resale price.

SMEs frequently face the imposition of resale prices by large suppliers . According to the established jurisprudence of the Competition Board (e.g., Supreme Court 11th Civil Chamber, 2017/4358 E., 2019/2211 K.), setting resale prices constitutes a clear violation.

2.2. Abuse of Dominant Position (Article 6)

Large companies, when they hold a dominant position in the market, may resort to anti-competitive practices against SMEs:

Extremely low pricing (predatory pricing),
Imposing arbitrary contract terms on a dependent supplier,
Preventing rival SMEs from entering the market.

SMEs a complaint with the Competition Board .

2.3. Mergers and Acquisitions (Article 7)

While SMEs are less likely to directly undertake large mergers and acquisitions, market monopolization directly impacts their operations. For example, a large chain supermarket merger could limit market access for smaller suppliers.

3. SMEs in Light of Competition Board Decisions

3.1. Vertical Agreements and Franchise Systems

The Competition Board strictly monitors the setting of resale prices, particularly in vertical agreements . For example, significant administrative fines have been imposed in cases of price imposition on dealers in the white goods, automotive, and electronics sectors.

3.2. Group Exemptions

One of the important regulations for SMEs the group exemption circulars. The Vertical Agreements Group Exemption Circular (2002/2) grants automatic exemption to vertical agreements under certain conditions. This exemption provides flexibility, especially for SMEs in dealership agreements.

3.3. Bidding Collusion

SMEs may sometimes face pressure to submit collusive bids when participating in public tenders. However, this behavior is one of the most serious competition violations under Law No. 4054 and results in high fines.

4. Risks in Competition Law Enforcement for SMEs

Unintentional involvement in a breach: SMEs that sign contracts imposed by large companies may be considered parties to a breach.
Lack of education: Low awareness of competition law leads to penalties.
Bidding processes: Small businesses may be drawn into behaviors that violate competition rules in bidding processes.

5. Penalties for Competition Law Violations and SMEs

According to Law No. 4054 administrative finesare calculated based on the annual turnover of the relevant business.

Basic penalty: 2% to 4%,
Depending on aggravating/reducing factors, it can increase up to 10%.

Although SMEs pay relatively lower penalties due to their smaller turnover, these amounts can still seriously disrupt their operations.

6. Opportunities and Strategies for SMEs

6.1. Advantages Arising from Competition Protection

SMEs should view competition law not as a "prohibitory burden," but as a protective shield . For example:

A complaint mechanism against pressure from large suppliers,
Ensuring fair pricing,
An opportunity to increase market share.

6.2. Integration Programs

While SMEs are not expected to undertake comprehensive compliance programs like large companies, it is recommended that they take the following steps:

Providing competition law training to employees,
The examination of contracts by legal professionals,
Obtaining consultancy services for tender participations.

6.3. Application for Repentance

If an SME has been involved in a competition violation, it can avoid all or part of the penalties by filing a leniency application

7. A Comparison of European Union and Turkish Competition Law

Turkish competition law has been largely harmonized with EU competition law . For SMEs:

De Minimis Circular (exemption for small-scale agreements in the EU),
Group exemptions,
Market share thresholds.

Although Türkiye does not yet have a "de minimis" regulation as detailed as in the EU, it is seen that small businesses are evaluated differently in violations according to the decisions of the Competition Board.

8. Examples of Supreme Court and Competition Board Decisions

The 11th Civil Chamber of the Supreme Court of Appeals, Case No. 2017/4358, Decision No. 2019/2211, ruled that the violation of determining the resale price was a clear violation.
Competition Board Decision No. 2021/13-15: Significant fines have been imposed on companies with SME status for collusion in tender processes.
The Competition Board, in its decision numbered 2020/55-67,imposed sanctions on SME dealers on the grounds that the group exemption conditions were not met in vertical agreements.

Conclusion and Evaluation

For SMEs, competition law is both an obligation and an opportunity. Under Law No. 4054:

SMEs are protected against anti-competitive behavior by large companies.
However, they can also face serious sanctions if they inadvertently become a party to the violation.
Therefore, it is vital for SMEs to carefully review their contracts, increase their awareness of competition law, and apply to the Competition Authority when necessary.

With the right strategy, SMEs can use competition law not as a threat, but as an advantage for growth and sustainability .

Law No. 4054, legal services, legal consultancy, SMEs, competition law, competition board.

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