As an area where economy and law intersect, competition law has a strategic importance for the efficient and healthy functioning of the market economies. The rules of competition are expected to ensure the stability of the markets for the welfare of both companies and consumers and provide legal predictability and a favorable ground for the investments needed for strong economies. That being said, the Turkish Competition Authority’s (the “Authority”) enforcement knowledge and experience in the last 20 years, market fluctuations in domestic and international competitive markets and lastly recent technological developments set the stage for an adjustment of some provisions of the Act No. 4054 on the Protection of Competition (the “Competition Act”). In this context, the Law No. 7246 Amending the Competition Act (the “Amending Law”) was published in the Official Gazette dated 24 June 2020 and numbered 31165.
In light of recent amendments to the EU competition law, the Amending Law aims to clarify certain practices of the Competition Act such as the self-assessment principle and on-site investigation powers of the Authority as well as introducing new provisions regarding; (i) significant impediment of effective competition test; (ii) behavioral and structural remedies against competition violations; (iii) de minimis principle; and (iv) commitment and settlement mechanisms. Therefore, this Monthly Updates aims to provide a brief explanation on the Amending Law and highlight the novelties introduced therein.
Pursuant to Article 5 of the Competition Act, the Competition Board (the “Board”) may grant individual exemptions for certain agreements, concerted practices, and decisions of the associations of undertakings that may potentially affect the competition. As per the amendments in the Competition Act in 2005, undertakings were no longer under the obligation to notify the Board regarding such agreements. However, such amendments failed to clarify whether fulfillment of the conditions required for individual exemption is to be self-assessed by the undertakings. With the Amending Law, self-assessment principle is made clearer by changes to the wording of the Article 5 so that the assessment for the fulfilment of the conditions is not submitted to the Board’s discretion. However, in case of doubt, the undertakings can still apply to the Board to clarify whether the individual exemption conditions are met.
On-site Investigation Powers of the Authority
To ensure consistency between technological developments and the Competition Act, the scope of the on-site investigation powers of the Authority, which is especially important for gathering evidence regarding cartelization, is detailed, and specified under the Amending Law. In this context, the Board is authorized to inspect and make copies of the data and documents, which are kept electronically or in information systems, as well as the ones kept physically during the competition investigations.
Amendments to the Mergers and Acquisitions Control Regime
Before the Amending Law, the dominant position test was conducted while evaluating the unilateral and cooperation effects of mergers and acquisitions and whether such transactions create or strengthen the dominance of an undertaking in a related market. In parallel with the EU competition law, the Amending Law introduces the significant impediment of effective competition test which enables the Board to evaluate the effects of mergers and acquisitions by reviewing whether; (i) any dominant position is created or strengthened; or (ii) the competition is significantly impeded as a result of such transaction.
Behavioral and Structural Remedies Against Competition Violations
As per Article 9/1 of the Competition Act, the Board may impose behavioral remedies to the relevant undertakings or association of undertakings with regards to their violation of Article 4, Article 6 and Article 7 of the Competition Act. In addition to such, the Amending Law introduces exceptional structural remedies in case behavioral remedies yield no result. Within the scope of such structural remedies, the Board may suspend certain practices of the undertakings as well as order them to transfer their shares. Moreover, such structural remedies shall be proportionate and necessary to cease the violation. However, such amendment has caused discussions on how such structural remedies will be applied and thus secondary legislation is expected to be issued.
De Minimis Principle
Pursuant to Article 41 of the Competition Act, within 10 days following the submission of the preliminary investigation report to the Board regarding a suspected violation of the Competition Act, the Board decides whether to initiate an investigation. In this context, the Amending Law introduces the de minimis principle to be applied during the preliminary investigation and investigation processes. As per the de minimis principle, the Board can decide not to initiate an investigation regarding agreements, concerted practices and/or decisions of associations of undertakings between the competitors provided that the market share and turnover thresholds are not exceeded. However, hardcore violations such as price fixing, allocation of territory and/or customers and restriction of supply are excluded from the de minimis principle. Further details on the thresholds and market shares and clear explanations on the scope of de minimis principle is expected through secondary legislation.
Commitment and Settlement Mechanisms During Investigations
In order to expedite preliminary investigation and on-going investigation processes and to use public resources efficiently, two new mechanisms, commitment and settlement, are introduced by the Amending Law.
Firstly, the commitment mechanism enables undertakings or association of undertakings to commit to eliminating their competition violations arising as per Article 4 and Article 6 during the preliminary investigation or ongoing investigation. If the Board becomes convinced that the violations can be eliminated in such manner, it may decide not to initiate an investigation or terminate the ongoing investigation without completing the entire process. are excluded from the scope of the commitment procedure. Nevertheless, hardcore violations such as price fixing, allocation of territory and/or customers and restriction of supply, the undertakings are excluded from the scope of the commitment procedure. Furthermore, even after its final decision, the Board may once again initiate an investigation in the event; (i) there is a substantial change in any factor underlying the decision; (ii) the undertakings and association of undertakings violate their commitments; and (iii) the decision was made based on incomplete, incorrect or misleading information provided by the parties.
On the other hand, by considering the procedural benefits arising from the rapid completion of the investigations and the difference of opinions regarding the existence or scope of the violation between the Authority and undertakings, the Amending Law introduces the settlement mechanism. Accordingly, anytime until the official notification of the investigation report, the Board may initiate the settlement procedure ex officio or upon request of the concerned parties. In this context, the Board grants the parties a deadline to submit a settlement letter in which they accept the existence and scope of the violation. Eventually, the investigation is concluded with a final decision including the record of the violation and administrative fine. Furthermore, in such case the Board is authorized to reduce the administrative fine up to 25%.
In line with the economic and technological developments, the Amending Law aims to modernize competition rules and to make the Authority more active and dynamic to meet the needs of the markets. In this context, to sustain the proper functioning of the markets, the Amending Law clarifies certain practices under the Competition Act and introduces new mechanisms to be more efficient in terms of time and resource allocation. Although there is uncertainty on some provisions of the Amending Law, secondary legislation is soon expected to shed light on the questions of the market players.