Competition Board's Investigations in Cosmetics Industry

Colastin Sağlık Ürünleri A.Ş. (“Colastin”)

According to the Board's decision dated 03.11.2022 and numbered 22-50/739-M, on-site inspections were conducted in undertakings operating in the cosmetics and personal care industry, namely MOT Grup Bilişim Ltd. Şti. (“Saçhane”), Ucuzavar Bilgi Teknoloji Turizm Gıda Pazarlama Ltd. Şti. (“Ucuzavar”), Likya Farma Emlak Gıda Kozmetik İthalat İhracat Turizm ve Ticaret Ltd. Şti. (“Farma Ucuz”), Gratis İç ve Dış Ticaret AŞ’de (“Gratis”), A.S. Watson Güzellik ve Bakım Ürünleri Ticaret AŞ (“Watsons”), Dirk Rossmann Mağazacılık Ticaret Ltd.Şti. (“Rossmann”), Eve Mağazacılık AŞ (“Eve”) and Günerler Kozmetik ve Tekstil Tic. Ltd. Şti.de (“Günerler”), and an investigation was initiated against various undertakings to determine whether they have violated Law No 4054 on the Protection of Competition (“Law No. 4054”).

Colastin purchases, sells, imports and exports all kinds of food supplements and protein products, wholesales, imports and exports ready-made homogenized food and dietetic food products, sports foods and immunity-boosting foods, and produces, sells and distributes Colastin branded Collagen, Elastin and Lozenge products. Therefore, the Board stated that the relevant product market could be defined as the “food supplement products” market, but refrained from making a definitive definition of the relevant product market, stating that the market definition would not change the results of the examination.

In the analysis carried out by the Board, it was determined that Colastin Sales Manager sent a WhatsApp correspondence to Farmaucuz’s General Manager, stating that Colastin followed up on the prices of the reseller Farmaucuz's marketplace and website sales and that if Farmaucuz sold products at a price lower than the determined price, it contacted the seller and revised its prices.

In addition, it was understood from the message sent via WhatsApp by the Turkey Sales Manager of Colastin that prices in case other resellers were also monitored and Colastin could intervene if the resellers would sell products at a price lower than the determined price. Colastin would also send out warning messages to the resellers and threaten them that if the resale prices are found to be different from the price lists conveyed by Colastin their lawyers would terminate the commercial relationship by utilizing the trademark right. In this context, it was concluded that Colastin’s behavior constituted a violation in accordance with Article 4 of Law No. 4054. In this context, Colastin requested settlement and the Board decided to conclude the investigation for Colastin by imposing an administrative fine on the undertaking with a 25% settlement discount.

Kozmoklinik Kozmetik A.Ş. (“Kozmoklinik”)

Since Kozmoklinik, which was scrutinized within the scope of the same investigation, operates in the field of marketing, sales, and distribution of cosmetics and personal care products, the relevant product market was determined as “cosmetics and personal care products” for the specific case.

A single finding was included in the reasoned decision; however, the relevant document was an e-mail sent by Kozmoklinik to resellers with whom Kozmoklinik has already established or is likely to establish a working relationship, in which it stated that if resellers set their sales prices at a within a certain frame along the lines of the recommended prices determined by Kozmoklinik, due to the profitability resulting from the sale the reseller would be entitled to the entire year-end premium, and if the recommended prices are not followed, a deduction will be made from the year-end premium earned due to the lack of profitability expected from the sale. In accordance with the relevant correspondence, the Board determined that certain price deviations from the resale price could be ignored, but in case of further deviations, a pressure and incentive system was established by deducting the year-end premium, which would further reinforce the resale price maintenance behavior of Kozmoklinik. In this context, Kozmoklinik requested settlement and similarly, it was decided to conclude the investigation for Kozmoklinik by imposing an administrative fine with a 25% settlement discount for Kozmoklinik.

Farmasi Enternasyonel A.Ş. (“Farmasi”)

In the relevant decision, as a result of telephone conversations with the complainant and examination of the prices of sellers in online marketplaces; Avon Kozmetik Ürünleri Sanayi ve Ticaret AŞ (“Avon”), L’Oreal Türkiye Kozmetik San. and Tic. AŞ (“Loreal”), NAOS İstanbul Kozmetik San. and Tic. Ltd. Ltd. (“Naos”), Pierre Fabre Dermo Kozmetik Ltd. Ltd. (“Pierre Fabre”), Kosan Kozmetik Pazarlama ve Tic. AŞ (“Flormar”), Yöntem Profesyonel Kozmetik Ürün. San. ve Tic. Ltd. Şti. (“Yöntem”) and Farmasi were suspected of having violated Law No. 4054 by restricting their resellers’ internet sales and/or interfering with the resale price. These six enterprises were included in the review and it was decided to conduct a preliminary investigation against them, and an investigation was eventually initiated on Farmasi.

Within the scope of the investigation regarding Farmasi, which imports, exports, domestically purchases and sells all kinds of personal care and cosmetic products on a retail and/or wholesale level, and markets them directly or door-to-door, the relevant product market has been determined as “cosmetic and personal care products”.

Within the scope of the investigation, Farmasi was requested to provide information about the effective dates and samples of the Farmasi Entrepreneur Agreement, Entrepreneur Booklet and similar annexes, amendments made to the provisions and their dates. In the submitted response letter, it was stated that the Farmasi Entrepreneur Agreement and Entrepreneur Booklet came into force in 2011, some amendments were made to its articles over time, and the versions of the relevant contract and booklet used so far were presented. However, although the undertaking stated that the Entrepreneur Booklet was up-to-date, it was determined by the case handlers assigned to the file that a provision referred to in the documents obtained during the on-site examination and considered to be contrary to competition law was not included in the said Entrepreneur Booklet. It has been determined that the provision in question regulates that resellers can only sell at catalog prices on websites and applications permitted by Farmasi and that if resellers violate this provision, various sanctions such as termination of their page within Farmasi and termination of their membership may be imposed on the seller.

In addition, from the evidence obtained, it was observed that Farmasi warned a reseller who sold products at prices lower than the catalog prices and requested that the prices be increased to the same level as the catalog prices and that if the prices were not increased within the specified period, the relevant seller’s Farmasi entrepreneur page would be terminated. Similarly, in other documents, it is stated that Farmasi’s authorized sellers do not allow the sale of products on the online platform called Trendyol, and if it is determined that they sell products below a certain price on the relevant platform, criminal sanctions will be imposed on the sellers in question, the relevant sellers will be prevented from entering the entrepreneur page in Farmasi and their premiums will not be paid. In addition, in such cases, Farmasi required product prices to be corrected and reported to Farmasi, and clarification on the issue is requested from authorized sellers. In this context, it has been determined that some entrepreneurs corrected their prices following Farmasi’s warning.

Accordingly, Farmasi’s actions were determined to be resale price determination, and the case was concluded for Farmasi with a reduced administrative fine by 25% within the framework of the settlement text submitted upon Farmasi’s request for settlement.

In addition, during the investigation process, it was determined that the article referred to in the Entrepreneur Booklet was not included in the contract declared to be up-to-date by Farmasi, that another provision which was claimed to have been added by the undertaking in 2018 was actually included in 2017 and that the amounts of back sales for export purposes carried out by Farmasi in 2021 were declared differently in each document. Accordingly, it was unanimously decided to impose an administrative fine in the amount of one-thousandth of the annual gross income generated at the end of the 2021 fiscal year and determined by the Board, separately for each action.

Conclusion

Recently, it has been observed that the Authority has carried out in-depth examinations in various sectors. In this regard, it is evident that detailed examinations and investigations are carried out regarding the determination of the resale price in the cosmetics industry, and the relevant companies prefer to conclude the investigation through the settlement process. The relevant decisions also shed light on the depth and detail of the analysis of the case handlers, since it is clear that the basis of the fine regarding the false and misleading information given to Farmasi is the differences found out by the experts by comparing the information in the response letters with the documents examined on-site and Google search results.