Turkey Considering New Digital Competition Legislation

Commentary by Meredith BroadbentandJohn Strezewski

Published May 7, 2024

Following the European Union's lead with its Digital Markets Act (DMA), Turkey has embraced a formidable regulatory initiative aimed at comprehensively reshaping the activities of U.S. tech firms in its market. In early 2020, Turkey's antitrust regulator, the Turkish Competition Authority (TCA), opened a sectoral investigation into e-commerce platforms that morphed into an even larger initiative. The TCA released a final report in 2022 identifying issues and recommending policy solutions that widened the scope to cover virtually all digital markets. The Turkish government was then swift to propose regulations, which have yet to be finalized. The draft amendment to Law No. 4054 on the Protection of Competition was issued to the public for feedback in October 2022. If adopted, these rules would constitute a separate structure for regulating digital firms, adjacent to traditional competition and consumer rules that apply to all companies operating in Turkey.

The draft amendments "largely mirror the operation of and substantive provisions in the EU Digital Markets Act," observes international law firm Cleary-Gottlieb, and go "further in certain respects." The DMA, as noted in previous Scholl Chair commentaries, is an ex ante framework that applies almost exclusively to U.S. firms, substantially tightens the EU digital regulatory environment, and imposes punitive penalties on non-conforming firms if they exceed a certain size.

While the draft regulation pends, the TCA has been active. It completed a Digital Markets Study in mid-2023 that stressed numerous competition issues-such as first-mover advantage, high entry costs, data ownership, and economies of scale-characterizing these as prime obstacles to fair digital market competition.

Competition Law Draft Amendment

Clearly inspired by the DMA, the draft amendment practically copies several key provisions and definitions and, in some cases, calls for even more onerous regulation than Brussels. One of the most important features of the DMA is its "gatekeeper" classification system, by which it distinguishes who is covered by the law and who is not. In virtual lockstep with the DMA, the proposed Turkish statute applies quantitative thresholds to tech firms based on two primary factors: annual gross revenues and the number of Turkish users (either consumers or business users). Though the specific revenue or user minimums have not yet been determined, the draft Turkish amendment will in all likelihood cover the same core U.S. businesses targeted by Europe-Amazon, Apple, Microsoft, Google's parent company Alphabet, and Facebook's parent company Meta.

The proposed amendment also lists numerous qualitative criteria, such as "network effects, data ownership, vertically [sic] integration and conglomerate structure, economies of scale and scope, lock-in and tipping effects, switching costs, multi-homing, user trends, [and] mergers and acquisitions," in its assessment of whether a business should be covered under the law. This addition to the amendment opens the door for the Turkish government to designate firms as gatekeepers even if they fall below the quantitative thresholds. Firms will have, as in the European Union, the right to appeal the government's designation decisions. If an appeal is turned down, these firms will have "a reasonable period of time not exceeding six months" to fulfill the obligations outlined in the draft regulation.

Under the draft amendment, designated firms would have to abide by a laundry list of blanket regulations, again resembling those found in the DMA. These include prohibitions on using non-public data when competing with other business users, self-preferencing products, and requiring users to register with one core service offering to access another. Firms would also have the obligation to ensure interoperability between their service offerings and those of competitors, give users continuous access to their personal data, and allow users to uninstall preinstalled applications.

While many individual provisions of the draft amendment largely mirror the DMA, several go above and beyond the EU regulation in their scope. For instance, the draft amendment would prohibit self-preferencing in "ranking, crawling, indexing, or 'other conditions,'" with the inclusion of "other conditions" widening the ban potentially far beyond that of the more clearly defined DMA. Similarly, proposed requirements that all core service offerings become interoperable with all related products or services is far broader than the equivalent DMA requirement, which only applies to operating systems and virtual assistants-a small subset of the digital market. In yet another example, the draft amendment's blanket prohibition on the merging of user data across service offerings goes beyond the analogous DMA requirements, which permit the combination of personal data if given user consent.

While the draft amendment is quite like its European counterpart, it appears the fine print of the final regulation will have an even larger impact on current business practices of U.S. firms. Whether this early iteration simply lacks the precision of the DMA or genuinely seeks to exceed the European Union in its ambition to grow the role of the state in regulating Big Tech, the text as it stands should raise significant alarm bells for U.S. tech firms serving Turkish consumers.

Turkey's unique political situation, moreover, may provide some insight into how this law will be implemented. While the draft amendment may, at face value, be an attempt to harmonize regulations across Turkey and the European Union, President Recep Tayyip Erdoğan's tenure and the past actions of the ruling Justice and Development Party (AKP) demonstrate how Turkey can adapt legislation enacted in jurisdictions with healthy democratic and legal institutions to instead shore up the ruling party's control over Turkish society. In October 2022, Turkey passed a law that "mirrored" the European Union's Digital Services Act (DSA). Considered the DMA's sister legislation, the DSA sought to curb the uptick of disinformation found on social media. While the Turkish alternative copied the DSA's language word-for-word in many circumstances, it also went "significantly further in restricting online speech" in ways that observers saw as favoring "Erdoğan's effort to hold onto the Turkish presidency." Using the DSA as a base text, the Turkish law added language that created far harsher penalties than its EU counterpart, legalizing prison sentences of up to three years for those spreading "disinformation." This measure and others put journalists critical of the AKP at risk. The law passed just in time for Turkey's 2023 presidential election, which saw Erdoğan narrowly eke out a victory to extend his rule to a third consecutive decade.

With the Turkish government having already modified the EU regulatory model to include new avenues to censor free speech, the draft Turkish regulation could very well be employed to expand on the DMA in notable ways-to stifle U.S. tech firms, for which Erdoğan has already shown much disdain.

Conclusion

Turkey stands out as one of the many advanced developing countries that aspire to imitate Brussels in using a comprehensive regulatory approach to target new technology and services being developed by U.S. digital champions. Signs show, however, that Turkey-if there is no pushback from the United States and other trading partners-intends to go even further than the comprehensive regulatory template of the DMA.

Meredith Broadbent is a senior adviser (non-resident) with the Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. John Strezewski is an intern with the Scholl Chair in International Business at CSIS.

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