Turkish Competition Authority (“TCA”) decided to revoke the individual exemption which was given in 2016 to BKM Express, the digital wallet application of Bankalar Arası Kart Merkezi A.Ş. (“BKM”) and to terminate mentioned services in 60 days after declaration of justified decision. BKM is a joint venture established by leading banks in Turkey.
In the same decision, the Board decided that BKM should reapply for two other individual exemptions granted before. One of them is the 3 years exemption for the determination of credit card’s interchange commission rate. (TCA Decision - 08.06.2017 17-19/294-130). The other one is the 5 years exemption for the determination of joint interchange commission for five-years. (TCA Decision - 26.02.2015 15-09/129-58).
TCA evaluated BKM Express in detail with respect to requirements of individual exemption These assessments can be summarized as below:
a. Ensuring new developments and improvements, or economic or technical development: Although BKM Express provide various technical improvements, these comes true as a result of integration provided by member banks that cannot be achieved by any single payment institutions. TCA focus on three improvements:
TCA determined that these 3 improvements arise from cooperation among banks and when other payment institutions use SMS verification that cannot be accepted equivalent with 3D Secure that’s why in any malfunction, refund comes from related institutions not from bank. Within this framework, it was concluded that there is no economic or technological development that is specific to BKM Express so it was decided that first condition of exemption was not fulfilled.
b. Benefitting the consumer: BKM listed several consumer benefits such as; free service, transactions without card, transactions with QR Code, choosing easily between system-defined cards and transferring money to other cards. TCA determined that they are not specific to BKM Express, since all other digital wallets could provide these services. Another accentuated point in the case is the consumer perception that the service provided by BKM Express is safer. It is inferred that there is no gauge for safety and this perception arises from structure of BKM.
c. Not eliminating competition in a significant part of the relevant market: BKM and BKM members are competing undertakings in the market for digital services. TCA determined that member banks’ motivation to compete will not be strong and member banks will passively depend on consumer choices without any active competitive behavior. Besides banks provide infrastructure services special to BKM that makes market entry difficult. The Board evaluated in 4 separate titles that the different qualifications between BKM Express and other digital wallet services:
TCA evaluates that other payment institutions are deprived of efficient integration among banks and this causes market entry barriers and also makes it difficult to compete in the market. Despite its losses, BKM could continue providing this service since BKM is a non-profit institution. BKM has the ability to cross-subsidize this activity by the profits from markets where it has a market power. BKM is able to reach strategic information of member banks within the scope of DEA. Based on these evaluations, TCA comes to conclusion that competition had disappeared in the large part of the market.
d. Not limiting competition more than what is compulsory for achieving the goals: Although it is necessary not limiting competition more than what is compulsory for achieving requirements which is listed in Article 5 [sub-paragraphs (a) and (b)) of the Act, BKM Express did not fulfill this requirement due to relation between BKM and banks, it was evaluated competition was limited in multiple areas the reason of providing BKM Express service.
As a result, the Board decided to revoke the individual exemption which was given to BKM Express in 2016 and mandate the termination of this activity in 60 days.
(TCA Decision - 30.05.2019, 19-20/291-126)