Paying Too Much To Hajj And Umrah Trips? : The TCA Investigates Competitive Environment In Relation Travel Packages Arranged By ATTA In Turkey

Thursday, April 4, 2019

The Turkish Competition Authority (TCA) recently published its reasoned decision on the investigation conducted regarding the Association of Turkish Travel Agencies (shortly ATTA), Gulf Insurance Turkey and Turser – Tursav Insurance, which is an agency of Gulf Insurance Turkey. The investigation which initiated subsequent the complaint of 83 – YES EIGHTY THREE - undertakings offering the hajj and umrah trips dealt with the following claims:

ATTA obliged travel agencies to buy mandatory hajj and umrah insurance from its subsidiary - Turser – Tursav Insurance and restricted travel agencies from opting to other insurance companies,

ATTA discriminated between travel agencies by not collecting service fee from certain travel agencies,

ATTA obliged travel agencies to purchase transportation and catering services in Saudi Arabia from certain undertakings it determined.

The TCA's analysis concentrated on whether such arrangements gave rise to a competition concern within the meaning of Article 4 the Competition Act - which regulates competition restricting agreements, concerted practices and decisions, rather than Article 6 of the Competition Act - which prohibits abuse of dominant position.

Overall, the TCA assessed the claims within the scope of "mandatory insurance services for package tours" and "travel agency services regarding hajj and umrah" markets. As a result, the TCA concluded that ATTA restricted competition in the "mandatory insurance services for package tours" market and fined ATTA.

Understanding the role of the ATTA

ATTA, a legally established association, is responsible for organization of hajj and umrah trips and has certain important has obligations in relation to such. For example; ATTA is required by law and the decisions of Interministerial Hajj and Umrah Board (shortly IHUB) to supervise transportation and catering services during hajj and umrah trips. Beyond its obligations, ATTA also arranges transportation and catering services to be utilized by travel agencies through Saudi Arabian enterprises - in order to eventually provide cheaper service to visitors. Additionally, ATTA conducts discretionary operations to support travel agencies. Such discretionary operations include providing the mandatory insurance services for the relevant trips.

Generally speaking, service fees collected from travel agencies are the main source for ATTA's operations. As explained in the decision at some instances ATTA includes the amounts paid for insurance services to the service fees it charges in relation to hajj and umrah trips.

Against this background, the TCA analyzes the role of ATTA in the markets for mandatory insurance services for package tours" and "travel agency services regarding hajj and umrah".

So what did the TCA conclude?

In relation to complaints related to obligation to purchase mandatory insurance from ATTA's subsidiary, the TCA based its evaluation on an announcement made by ATTA – which read that if undertakings purchase insurance from Turins, its subsidiary, the amount would be accounted for regular service fee. Accordingly, the TCA noted that with the relevant announcement ATTA boosted strength of/provided an advantage to its subsidiary since the travel agencies were directed - somewhat forcedly - to purchase insurance from it in order to obtain fee – free benefit.

Overall, the TCA acknowledged need for alternative insurance companies in the relevant market since the 17 of the top 18 insurance companies with the ability to provide insurance services did not have interest to issue any insurance policies concerning hajj and umrah trips. Some of the underlying reasons for such loss in appetite consisted of following; difficulties to find a reinsurance company, the higher risks carried with the elder age of the costumers and low insurance premiums. Against this background, ATTA's attitude and strength did not improve the situation. Indeed, the TCA remarked that the annual increase in Turins' market share as of the announcement was a reflection of its anti – competitive effect.

Overall, the TCA assessed whether ATTA's operations fulfilled a certain need in the market under an individual exemption analysis. In this sense, the TCA concluded that the announcement ATTA's behaviors in the mandatory insurance services for package tours market had an anti-competitive effect – restricting competition more than necessary- and that such practices violated Article 4 of the Competition Act.

Moving on to discrimination related complaints, the TCA confirmed that the service fees were charged to all travel agencies; however, ATTA was not able to collect the fees from certain agencies. It was discovered that the main reason behind ATTA not restricting operations of non-paying agencies was to protect the hajj and umrah visitors. Accordingly, the TCA concluded that ATTA did not engage in any discriminative activities.

In its assessment, the TCA also emphasized that travel agencies were able to opt for other catering or transportation services other than those arranged by ATTA in Saudi Arabia. Accordingly, the TCA concluded no violation on this matter.

Some differing opinions

One note to emphasize is that the president of the Competition Board disagreed with the decision. The president noted that ATTA satisfied a certain need in the market since the other players in the market had no interest to provide insurance related to hajj and umrah trips. The president supported his arguments with the decreasing prices in the relevant time.. It also stated that there was no evidence existed in relation to ATTA's enforcement to purchase insurance policies form its subsidiary.

Moving on, another Board member disagreed with the reasoning of the decision and stated that the relevant acts should be evaluated under Article 6 of the Competition Act concerning abuse of dominant position and would only come into existence if it was determined that ATTA abused of its dominant position via (i) distorting certain undertakings' operations in the market through behaviuors such as discrimination, excessive pricing or (ii) foreclosing of market to other undertakings by favoring its subsidiaries.

Food for thought

ATTA's practices in the mandatory insurance market appear to have resulted to application of cheaper fees for travel agencies. However perhaps hajj and umrah visitors have been paying a little too much to hajj and umrah trips because ATTA stood alone as the only insurance provider for hajj and umrah trips and there was no competitive pressure to decrease the insurance prices reflected to travel agencies and the overall prices to applied to the visitors. We will see how the cookie crumbles in the upcoming days...

BONUS: The TCA also assessed ex officio the exclusive distribution/agency agreements and agency agreements entered between Gulf Insurance and Turser and the acquisition of Turins Insurance, a subsidiary of ATTA, by Gulf Insurance Turkey within scope of Article 4 and 7 of the Competition Act respectively. However no competition problems were found as per the relevant evaluations -the exclusive distribution/agency agreements benefitted from the block exemption and the acquisition was not subject to the merger control regime.