Turkey: Recent Legislative Changes and Cartel Enforcement

In summary

This article outlines the key aspects of the Turkish regime in respect of cartels. It discusses recent developments and information on cartels in Turkey and presents recent cases of the Competition Board’s cartel enforcement activity.

Discussion points

• Turkish cartel regulations
• Enforcement, proceedings and sanctions
• Recent developments and statistical data on cartel cases

Referenced in this article

• Law No. 4054 on the Protection of Competition
• Law No. 4077 on the Protection of Consumers
• Law No. 6352 on the Amendment to Certain Laws for Increasing the Efficiency of Judicial Services and the Suspension of Prosecution and Penalties Regarding Crimes Committed through Press
• Regulation on Active Cooperation for Discovery of Cartels
• Regulation on Monetary Fines for Restrictive Agreements, Concerted Practices, Decisions and Abuses of Dominance
• Block Exemption Communiqué No. 2002/2 on Vertical Agreements
• Guidelines on Vertical Agreements
• Turkish Competition Authority
• Turkish Competition Board

The statutory basis for cartel prohibition is Law No. 4054 on the Protection of Competition, dated 13 December 1994 (the Competition Law). The Competition Law finds its underlying rationale in article 167 of the Turkish Constitution of 1982, which authorises the government to take appropriate measures to secure a free market economy. The Turkish cartel regime by nature applies administrative and civil (not criminal) law. The Competition Law applies to individuals and companies alike, if they act as an undertaking within the meaning of the Competition Law.

Substantive provisions for cartel prohibition

The applicable provision for cartel-specific cases is article 4 of the Competition Law, which lays down the basic principles of cartel regulation. The provision is akin to, and closely modelled on, article 101(1) of the Treaty on the Functioning of the European Union (TFEU). It prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices that have (or may have) as their object or effect the prevention, restriction or distortion of competition within a Turkish product or services market or a part thereof.

Similar to article 101(1) of the TFEU, the provision does not give a definition of ‘cartel’. Rather, it prohibits all forms of restrictive agreements, which would include any form of cartel agreement; therefore, the scope of application of the prohibition extends beyond cartel activity.

Until 2020, unlike the TFEU, article 4 excluded any possible de minimis exception. However, in 2020, Law No. 4054 was subject to amendments that entered into force on 24 June 2020 (the Amendment Law).

The amendments, with the aim of steering attention and public resources to more significant violations, introduced the de minimis rule under article 41 of the Competition Law. In accordance with the introduction, certain agreements and practices exceeding market share thresholds determined by the Competition Board (the Board) do not benefit from the de minimis principle.

In this regard, the de minimis principle is applicable to agreements falling under article 4; however, it is not applicable to hardcore violations, including resale price maintenance, price-fixing, territory or customer sharing and restriction of supply. In other words, cartels do not benefit from the de minimis principle.

The secondary legislation, which provides details on the process and procedure related to application of the de minimis principle, came into force on 16 March 2021.

Article 4 also prohibits any form of agreement that has the potential to prevent, restrict or distort competition. This is a specific feature of the Turkish cartel regulation system, recognising a broad discretionary power of the Board.

As is the case with article 101(1) of the TFEU, article 4 of the Competition Law lays down a non-exhaustive list of restrictive agreements.

The prohibition on restrictive agreements and practices does not apply to agreements that benefit from a block exemption or an individual exemption issued by the Board. To the extent not covered by the protection brought by the respective block exemption rules or individual exemptions, vertical agreements are also caught by the prohibition laid down in article 4.

The block exemption rules that are currently applicable are:

• Block Exemption Communiqué No. 2002/2 on Vertical Agreements;
• Block Exemption Communiqué No. 2008/2 on Technology Transfer Agreements;
• Block Exemption Communiqué No. 2008/3 for the Insurance Sector;
• Block Exemption Communiqué No. 2013/3 on Specialisation Agreements;
• Block Exemption Communiqué No. 2016/5 on Research and Development Agreements; and
• Block Exemption Communiqué No. 2017/3 on Vertical Agreements in the Motor Vehicle Sector.

The above are all modelled on their respective equivalents in EU legislation. The newest of those block exemptions, Block Exemption Communiqué No. 2017/3, sets out revised rules for the motor vehicles sector in Turkey, overhauling Block Exemption Communiqué No. 2005/4 for Vertical Agreements and Concerted Practices in the Motor Vehicle Sector. Restrictive agreements that do not benefit from either block exemptions under the relevant communiqué or individual exemptions issued by the Board are covered by the prohibition in article 4.

The Board’s general practice shows that horizontal restrictive agreements, such as price-fixing, market allocation, collective refusals to deal (group boycotts) and bid rigging, have consistently been deemed to be per se illegal.

The Turkish competition regime also condemns concerted practices. The Competition Authority (the Authority) easily shifts the burden of proof in connection with concerted practice allegations through a mechanism called ‘the presumption of concerted practice’. The definition of concerted practice in Turkey does not fall far from the definition used in EU competition law.

A concerted practice is defined as a form of coordination between undertakings that, without having reached the stage where an agreement has been properly concluded, knowingly substitutes practical cooperation between them for the risks of competition. This is, therefore, a form of coordination, without a formal agreement or decision, by which two or more companies come to an understanding to avoid competing with each other. The coordination does not need to be in writing; it is sufficient if the parties have expressed their joint intention to behave in a particular way, for example, in a meeting, via a telephone call or through an exchange of letters.

Enforcement

The national competition authority for enforcing cartel prohibition and other provisions of the Competition Law in Turkey is the Authority, which has administrative and financial autonomy. It comprises the Board, the presidency and service departments.

Six divisions with sector-specific work distribution handle Competition Law enforcement work through approximately 160 case handlers. The other service units comprise the department of decisions; the economic analysis and research department; the information management department; the external relations, training and competition advocacy department; the strategy development, regulation and budget department; and the cartel and on-site inspections support division.

As the competent body of the Authority, the Board is responsible for, among other things, investigating and condemning cartel activity. It comprises six independent members. The presidency handles the administrative work of the Authority.

The Authority’s administrative enforcement is also supplemented with private lawsuits. Accordingly, in case of private suits, cartel members are adjudicated before the courts. Owing to a treble damages clause allowing litigants to obtain three times their loss as compensation, private antitrust litigations have increasingly made their presence felt in the cartel enforcement arena. Most courts wait for the decision of the Authority and build their own decision on the Board’s decision.

Proceedings

As the competent body of the Authority, the Board is responsible for, among other things, investigating and condemning cartel activity. A cartel matter is primarily adjudicated by the Board.

The Turkish cartel regime does not recognise de minimis exceptions, and there is currently no threshold for opening an investigation into cartel conduct. The Board is entitled to launch an investigation into alleged cartel activity ex officio or in response to a notice or complaint, which may be submitted verbally or through a petition. The Authority has an online system through which complaints may be submitted on its official website.

In the case of a notice or complaint, the Board rejects the notice or complaint if it deems it not to be serious. Any notice or complaint is deemed rejected should the Board remain silent on the matter for 60 days.

The Board will decide to conduct a pre-investigation if it finds the notice or complaint to be serious. It may then decide not to initiate an investigation. At this preliminary stage, the undertakings concerned are not notified that they are under investigation, unless the Authority decides to conduct a dawn raid or use other investigatory tools (ie, formal information request letters).

The Authority experts submit a preliminary report to the Board within 30 days of their assignment. The Board then decides within 10 days whether to launch a fully fledged formal investigation. If it decides to initiate an investigation, it sends a notice to the undertakings concerned within 15 days. The investigation is to be completed within six months. If deemed necessary, this period may be extended by the Board only once, for an additional period of up to six months.

Once the notice has been formally served, the investigated undertakings have 30 days to prepare and submit their first written defences. Subsequently, the main investigation report is issued by the Authority.

Once this is served on the defendants, they have 30 calendar days to respond, extendable for a further 30 days (the second written defence). The investigation committee will then have 15 days to prepare an additional opinion concerning the second written defence, which, in accordance with the recent amendments, is extendable for a further 15 days.

The defending parties will have another 30 days to reply to the additional opinion (the third written defence), which is also extendable for a further 30 days. When this reply is served on the Authority, the investigation process will be completed (ie, the written phase of investigation involving the claim or defence exchange will close with the submission of the third written defence).

An oral hearing may be held upon request by the parties. The Board may also decide ex officio to hold an oral hearing. Oral hearings are held within between 30 and 60 days of the completion of the investigation process under the provisions of Communiqué No. 2010/2 on Oral Hearings before the Competition Board. The Board renders its final decision within 15 days of the hearing, if an oral hearing is held; otherwise, the decision is rendered 30 days after completion of the investigation process. It usually takes around three to six months (from the announcement of the final decision) for the Board to serve a reasoned decision on the counterpart.

Effect theory

Turkey is an ‘effect theory’ jurisdiction where what matters is the effect that a cartel activity has produced on Turkish markets, regardless of the nationality of the cartel members, where the cartel activity took place or whether the members have a subsidiary in Turkey.

In the past, the Board has refrained from declining jurisdiction over non-Turkish cartels or cartel members, so long as there was an effect in the Turkish markets.^[1] However, the Board is yet to enforce monetary or other sanctions against firms located outside Turkey without any presence in Turkey, mostly owing to enforcement handicaps (eg, difficulties of formal service to foreign entities).

Powers of investigation

The Competition Law provides vast investigative powers to the Authority, such as the power to conduct dawn raids and to apply other investigatory tools (eg, formal information request letters). A judicial authorisation is obtained by the Board only if the subject undertaking refuses to allow the dawn raid. The prevention or hindering of a dawn raid could result in the imposition of an administrative monetary fine.

Although the mere wording of the Competition Law obliges employees to provide verbal testimony, case handlers usually allow for an answer to be provided after the occurrence of the dawn raid; therefore, in practice, employees can avoid providing answers on issues about which they are uncertain, provided that a written response is submitted within a mutually agreed time limit. Case handlers of the Authority may fully examine computer records and mobile phones used for work purposes, including, but not limited to, deleted items.

Officials conducting an on-site investigation must be in possession of a deed of authorisation issued by the Board, which must specify the subject matter and the purpose of the investigation. The inspectors are not entitled to exceed their authorisation; they must not exercise their investigative powers (copying records, recording statements by company staff, etc) in relation to matters that do not fall within the scope of the investigation (specified on the deed of authorisation). Thus, the Authority officials may not copy documents or record verbal testimonies that are not related to or covered by the scope of the investigation.

The sole category of people participating in on-site inspections is members of staff of the Authority. The members of staff have no duty to wait for a lawyer to arrive. That said, they may sometimes agree to wait for a short while for a lawyer to come but may impose certain conditions (eg, to seal filing cabinets or disrupt email communications).

The Authority may also request all information it deems necessary from all public institutions and organisations, undertakings and trade associations. Officials of those bodies, undertakings and trade associations are obliged to provide the necessary information within a fixed period.

Failure to comply with a decision ordering the production of information may lead to the imposition of a turnover-based fine of 0.1 per cent of the turnover generated in the financial year preceding the date of the fining decision. The Board may impose the same amount of fines if an undertaking provides incorrect or incomplete information in response to the Authority’s request for information.

Sanctions

In the event of a proven cartel activity, the companies concerned will be separately subject to fines of up to 10 per cent of their Turkish turnover generated in the financial year preceding the date of the fining decision. If this is not calculable, the turnover generated in the financial year nearest to the date of the fining decision will be taken into account.

Employees and managers of the undertakings or association of undertakings that had a determinative effect on the creation of the violation are also fined up to 5 per cent of the fine imposed on the undertaking or association of undertakings. The current minimum fine is set as 34,809 lira for 2021.

The Competition Law makes reference to article 17 of the Law on Minor Offences to require the Board to take into consideration factors such as:

• the level of fault and the amount of possible damage in the relevant market;
• the market power of the undertaking within the relevant market;
• the duration and recurrence of the infringement;
• cooperation or driving role of the undertaking in the infringement;
• the financial power of the undertaking; and
• compliance with the commitments in determining the magnitude of the fine.

In line with this, the Regulation on Monetary Fines for Restrictive Agreements, Concerted Practices, Decisions and Abuses of Dominance (the Regulation on Fines) was enacted by the Authority. The Regulation on Fines sets out detailed guidelines on the calculation of monetary fines applicable in the case of an antitrust violation. It provides detailed guidelines regarding the calculation of fines applicable for antitrust violations and applies to both cartel activity (article 4) and abuse of dominance (article 6). Illegal concentrations (article 7) are not covered by the Regulation.

Fines are calculated by first determining the basic level, which in the case of cartels is between 2 per cent and 4 per cent of the company’s turnover in the financial year preceding the date of the fining decision (if this is not calculable, the turnover for the financial year nearest the date of the decision). Aggravating and mitigating factors are then factored in.

The Regulation on Fines also applies to managers or employees that had a determinative effect on the violation (eg, by participating in cartel meetings and making decisions that would involve the company in cartel activity) and provides for certain reductions in their favour.

In addition to the monetary sanction, restrictive agreements may be deemed legally invalid and unenforceable with all its legal consequences. Under article 9, besides an article 7 violation, in the determination of article 4 and 6 infringements, the Board may order behavioural as well as structural remedies to re-establish the competition and end the infringement. It may order to end practices, adopt remedies to restore the status quo without imposing an administrative fine .Additionally, the Competition Law authorises the Board to take interim measures until the final resolution on the matter, if there is a possibility for serious and irreparable damages.

The sanctions that could be imposed under the Competition Law are administrative in nature; therefore, the Competition Law leads to administrative fines (and civil liability) but no criminal sanctions. However, there have been cases when the matter had to be referred to a public prosecutor after the Competition Law investigation had been completed.

On that note, bid-rigging activity may be criminally prosecutable under section 235 et seq of the Criminal Code. Illegal price manipulation (ie, manipulation through misinformation or other fraudulent means) may also be punished by up to two years’ imprisonment and a civil fine under section 237 of the Criminal Code.

The above-mentioned sanctions may apply to individuals if they engage in business activities as an undertaking. Similarly, sanctions for cartel activity may also apply to individuals acting as the employees or board members or executive committee members of the infringing entities, if those individuals had a determinative effect on the creation of the violation. There are no sanctions specific to individuals other than those mentioned above.

Administrative settlement of cases

The amendments introduced a commitment and settlement mechanism under article 43 of the Competition Law to end investigation processes in a timely manner.

The commitment mechanism allows parties to voluntarily offer commitments during a preliminary or full-fledged investigation to eliminate the Authority’s competitive concerns concerning articles 4 and 6. Depending on the sufficiency and the timing of the commitments, the Board can decide not to launch a full-fledged investigation following the preliminary investigation or to end an ongoing investigation without completing the entire investigation procedure.

The commitment mechanism is not applicable to hardcore violations, including resale price maintenance, price-fixing, territory or customer sharing and restriction of supply; in other words, the commitment mechanism is not applicable to cartels. The secondary legislation, which provides details on the process and procedure related to the application of the commitment mechanism, came into force on 16 March 2021.

On the other hand, the settlement mechanism is applicable to hardcore violations (ie, cartels). Under the settlement mechanism, the Board may, ex officio or upon parties’ request, initiate a settlement procedure. Parties that admit to competition infringements until the official notification of the investigation report may benefit from a reduction of up to up to 25 per cent of the administrative fine. The parties may not bring a dispute on the settled matters or the administrative fine once an investigation finalises with a settlement. The secondary legislation is yet to be enacted.

Leniency programme

The Competition Law underwent significant amendments in February 2008, bringing a stricter and more deterrent fining regime, coupled with a leniency programme for the undertakings.

The secondary legislation specifying the details of the leniency mechanism – the Regulation on Active Cooperation for Discovery of Cartels (the Regulation on Leniency) – came into force on 15 February 2009. The Guidelines on Explanation of the Regulation on Active Cooperation for Discovery of Cartels were published in April 2013.

With the enactment of the Regulation on Leniency, the main principles of immunity and leniency mechanisms have been set. According to the Regulation on Leniency, the leniency programme is only available for cartelists; it does not apply to other forms of antitrust infringements. A definition of cartel is provided in the Regulation on Leniency for this purpose.

A cartelist may apply for leniency until the investigation report is officially served. The application is independent from applications by the cartelist itself, if there are any.

Depending on the order of application, there may be total immunity from or a reduction of a fine for the manager or employee. The immunity or reduction includes both the undertakings and its employees and managers, with the exception of the ‘ringleader’, which can only benefit from a second degree reduction of the fine. The conditions for benefiting from immunity or reduction are also stipulated in the Regulation on Leniency. Both the undertaking and its employees and managers can apply for leniency.

A manager or employee of a cartelist may also apply for leniency until the investigation report is officially served. The application is independent from any application by the cartelist itself. Depending on the order of application, there may be total immunity from or a reduction of a fine for the manager or employee. The requirements for an individual application are the same as those stipulated above.

Appeal process

In accordance with Law No. 6352 on the Amendment to Certain Laws for Increasing the Efficiency of Judicial Services and the Suspension of Prosecution and Penalties Regarding Crimes Committed through Press, which took effect on 5 July 2012, the administrative sanction decisions of the Board can be submitted for judicial review before the administrative courts in Ankara by filing an appeal case within 60 days, upon receipt of the justified (reasoned) decision of the Board by the parties.

In accordance with article 27 of the Administrative Procedural Law, filing an administrative action does not automatically stay the execution of the decision of the Board; however, upon request of the plaintiff, the court, by providing its justifications, may decide the stay of the execution if the execution of the decision is likely to cause serious and irreparable damage and if it is highly likely to be against the law (ie, showing of a prima facie case).

The judicial review period before the Administrative Court usually takes between 12 and 24 months. If the challenged decision is annulled in full or in part, the Administrative Court remands it to the Board for review and reconsideration.

Decisions of courts in private suits are appealable before the Supreme Court of Appeals. The appeal process in private suits is governed by the general procedural laws and usually lasts between 24 and 30 months.

A significant development in competition law enforcement was the change in the competent body for appeals against the Competition Board’s decisions. The new legislation has created a three-level appellate court system comprising administrative courts, regional courts (appellate courts) and the High State Court. The regional courts will go through the case file both on procedural and substantive grounds and investigate the case file, making their decision considering the merits of the case.

The decision of the regional court will be subject to the High State Court’s review in exceptional circumstances, which are set forth in article 46 of the Administrative Procedure Law. In those cases, the decision of the regional court will not be considered as a final decision, and the Council of State may decide to uphold or reverse the regional court’s decision. If the decision is reversed by the Council of State, it will be returned to the deciding regional court, which will issue a new decision that takes into account the Council of State’s decision.

Damages actions

Similar to US antitrust enforcement, the most distinctive feature of the Turkish competition law regime is that it provides for lawsuits for treble damages; thus, administrative enforcement is supplemented with private lawsuits. Article 57 et seq of the Competition Law entitles any person who shall be injured in their business or property by reason of anything forbidden in the antitrust laws to sue the violators for three times their damages plus litigation costs and attorney fees. The case must be brought before the competent general civil court.

In practice, the courts usually do not engage in an analysis on whether there is actually a condemnable agreement or concerted practice; they wait for the board to render its opinion on the matter, therefore treating the issue as a prejudicial question. Since the courts usually wait for the Board to render its decision, the court decision can be obtained in a shorter period in follow-on actions.

Owing to a treble damages clause allowing litigants to obtain three times their loss as compensation, private antitrust litigations have increasingly made their presence felt in the cartel enforcement arena. Most courts wait for the decision of the Authority and build their own decision on that decision.

Turkish procedural law denies any class action or procedure. Class certification requests would not be granted by Turkish courts. Although article 25 of Law No. 4077 on the Protection of Consumers allows class actions by consumer organisations, the actions are limited to violations of Law No. 4077 and do not extend to antitrust infringements. Similarly, article 58 of the Commercial Code enables trade associations to take class actions against unfair competitive behaviour; however, this has no reasonable relevance to private suits under article 57 et seq of the Competition Law.

Legislative developments

The most recent change in respect of the Turkish cartel regime was the publication of the amended Guidelines on Vertical Agreements, which concluded two years’ work by the Authority. The amended version of the Guidelines includes internet sales, which are acknowledged to provide a wider data set that allows price comparison to consumers. Revisions were also made concerning most favoured customer clauses, a contemporary topic deemed significant by competition authorities around the globe.

Besides the above, the most significant development regarding Turkish competition law is the Amendment Law, which passed through the Grand National Assembly of Turkey on 16 June 2020 and entered into force on 24 June 2020 – on the day of its publication in Official Gazette No. 31165.

Recent cases

During the past year, there have not been any significant cartel decisions in which the Board imposed significant administrative fines. There has been a decline in the number of cartel cases, and of investigations, with monetary fines.

According to the Competition Authority’s 2020 annual report, 65 of the 319 cases the Board decided on related to competition law violations: 43 of those cases related to article 4 of the Competition Law and 33 of those 43 cases related to horizontal agreements. Overall, the Authority recorded increased cartel enforcement under horizontal agreements assessments.

In respect of cartel enforcement activity, the Board recently issued a short decision imposing an administrative fine against Novartis Sağlık Gıda ve Tarım Ürünleri San ve Tic AŞ and Roche Müstahzarları San AŞ for their cartel arrangement.^[2]

Another significant decision made by the Board in 2020 is the Gaziantep auto-expert opinion decision on price-fixing arrangements.^[3] The decision concerns an investigation initiated against auto-expert opinion providers operating in Gaziantep province. The Board found concrete evidence of a price-fixing arrangement and imposed a monetary fine on the relevant undertakings, except one who got reduction owing to its application to benefit from the Active Cooperation Guidelines.

In another decision, the Board concluded that gas stations located in Burdur province violated article 4 of the Competition Law by fixing prices.^[4] It found that the cartel arrangement was essentially formed via WhatsApp groups and messages created between employees of those gas stations. Despite an explicit finding of a cartel violation, the Board took into consideration the lowest base fine rate stipulated under the Regulation on Fines applicable for violations other than cartel violations, since the profit margins of the investigated undertakings were significantly low, and the imposition of a high fine would restrict the sustainability of their businesses.

On the other hand, the Board found that certain ready mixed concrete producers operating in Yozgat province infringed article 4 by establishing two legal entities (Güven Beton and Sorgun Emek Beton) to coordinate sales, collectively determine prices and allocate customers. Accordingly, it imposed an administrative fine of 1.2 per cent of the annual gross income of the investigated parties.^[5]

In an investigation concerning traffic signalling market, the Board concluded that nine of the 10 investigated parties had violated article 4 of the Competition Law by bid-rigging.^[6] Among other practices, it essentially found that undertakings prepared offers and entered into bids based on a mutually reached consensus. As a result, all but one of the investigated undertakings were imposed with an administrative fine of either 2 per cent or 3 per cent of their annual gross income. During the investigation process, one of the investigated undertakings – Mosaş Akıllı Ulaşım Sistemleri AŞ – was fined separately for hindering the Authority’s on-site inspection^[7] and refusing to grant access to the Authority for 17 days.^[8]

Notes