Turkish Law Blog
New Era on Turkish Competition Law Enforcement / Amendment to Act No. 4054 on Protection of Competition Came Into Force
The Amendment to Act No. 4054 on Protection of Competition (“Act no. 4054”) (“Amendment”) entered into force as of the date 24.06.2020 after being published in the Official Gazette of Turkey dated 24.06.2020, numbered 31165.
Turkish Competition ACT - Act No. 4054 on Protection of Competition- entered into force in Turkey on 13 December 1994 with the published Official Gazette numbered 22140. In 1998 Turkish Competition Authority (hereafter TCA) had started to fully operational. Turkish Competition Law is in line with the EU and member states legal system. Mainly four substantial mechanisms; article-4 “prohibition of anti-competitive agreements” and article-5 “exemption mechanisms for anti-competitive agreements”, article-6 “prohibition of the abuse of dominant position” and article-7 “merger control” are in line with the EU mechanism. Turkish competition law practices and TCA decisions are using heavily EU case-law and new mechanisms are also adopted with some period of time and with some country-based needs into Turkish law.
The New Amendment involves important innovations such as “de minimis” analysis, “structural remedies”, “commitment” and “settlement” mechanisms which are implemented already in the EU Competition Law. Clarifying individual exemption system is a new amendment but the self-assessment of individual exemption was into force since 2005 amendments. With the amendments made, a more harmonious structure with the EU law has been provided in terms of the basic functioning of the Competition Law and the attitude of the Competition Board against the competition violations.
We would briefly explain and highlight the essential amendments and new institutions introduced to the Turkish Competition Law enforcement system with the amending act below.
2. Self Assessment on Exemption Conditions
Article 5 of the TCA states that if the agreements, concerted practices or decisions of associations of undertakings are in line with the two positive and two negative conditions demonstrated in the paragraphs, they could be exempted from the prohibition. If they have new efficiency on the market and consumer benefits from this new efficiency as positive conditions, and if they do not remove the competition in the relevant market and do not much restrict the competition conditions for having efficiency and consumer benefits, they could be exempted from the prohibition. At the beginning of Turkish Competition law practices, there was a mandatory notification system that was so strict for the market and 2005 amendments changed it as a voluntary notification system.
With the Amendment made in the 5th article of the Act no. 4054, the “self-assessment” mechanism which envisages a more flexible examination system regarding "exemption" regime is made clear. In this regard, undertakings will self-assess the criteria needed for granting the exemption from the prohibition of anti-competitive agreements. However, they also reserve the right to notify to the Competition Board (“Board”) in case of having hesitant. Moreover, this provision regulated as mandatory for undertakings who meet the conditions. This means is the Board's discretionary power has been lifted in terms of undertakings that fulfill the conditions for the exemption. We may argue for the competition law investigations and all commercial activities, Decision-makers must evaluate first as they have or not exemption conditions which is in line with the “rule of reason” analysis in the US anti-trust law enforcement system.
3. More Strict Merger Control
With the Amendment made in Article 7 of Act no.4054; the test so-called SIEC (significant impediment of effective competition) is adopted by the Turkish competition law system instead of the “dominant position test” regarding the merger or acquisition to provide parallelism with the EU legislation. Thus, in addition to the prohibition of creation or strengthening of a dominant position, the transactions that can significantly reduce competition are also prohibited.
New wording of the article states dominant position test is still available as an example of reducing competition, but also merger or acquisitions which will significant impediment of effective competition may be prohibited. Some mega-mergers may use some commitments for having approval from TCA, but for clarification of the procedure and demonstration of the SIEC test and commitments, TCA will prepare new communique and guidelines as secondary legislation about the merger clarification process.
4. Structural Remedies Power to the TCA
Before the new amendment, the wording of article 9 which entitled “Termination of Infringement” was the most discussable provision in theory and in practice as it was written in so general and giving more power to the Turkish Competition Authority. Although that was a much and uncertain power, TCA used EU practices as a tool and there were some behavioural remedies for some cases.
With the new amendment made on article 9/1 of Act no.4054; an explicit provision has been added that "structural remedies" such as to cease certain activities of the enterprises, transfer its partnership shares or assets can be introduced in the final decisions of the Board as an exceptional way to be applied in cases where behavioural remedies do not yield results.
For using “structural remedies” TCA has to imply behavioral remedies first, then must calculate and evaluate that these remedies are not sufficient with a final decision and then TCA may take some decision regarding “structural remedies”. When there will be a “structural remedies” TCA have to give at least 6 months to undertakings for obeying them.
Hereby, we may say the instruments of the Board against violations are increased and a more effective method is provided against the hard and structural based competition violations.
5. More Investigative Power for On-site Inspections
With the Amendment made on article 15/1-a of the Act no.4054, it is aimed to extend the authority of on-site investigation, which is very important for cartel detecting and, to clarify the powers regarding the examination / copying / printing of data / documents. The new wording of “any data kept within physical and electronic environment and information systems” on the power of TCA investigation power is clarified digital search power of the TCA’s expert investigators. Before this amendment TCA was using broad on-site investigation power and also took all related documents in hard or soft copy. But there were some hesitation for collecting electronic data’s as these were not mentioned on the act directly. TCA had the power of search and if there will be a problem for entering to undertakings premises, having court warrant for the searches, takings electronic copies of documents were also in practice but with ongoing disputes about the power of TCA. Broadening competition authorities on-site investigation power is also a trend around the world, with this new amendment TCA may have more investigative power especially on much increased digital economical activities. But in our view, the discussion about what is the private communication and/or what are the undertakings responsibilities about the workers communication is going to be hard topic on this issue.
6. “De Minimis” for Non-Efficient Prohibitions
With the Amendment made on Article 41 of Law no.4054; an arrangement compatible with the “De Minimis” analysis in the EU legislation is introduced to the Turkish Competition system. In this context; in cases where thresholds such as market share and turnover to be determined by the Board are not exceeded; agreements, concerted practices, and practices of associations of undertakings may not be the subject of an investigation except for hard-core restrictions such as price determination, region/customer sharing, restriction of supply amount. TCA has to makes some secondary regulation such as communique and guidelines for implementation of these rules objectively. TCA will determine the thresholds and turnovers limits and may give examples for types of conduct for being evaluated as a “de minimis” argument. As an administrative body, TCA has to respond all types of complaint and this is time and effort consuming and effectiveness decreasing point for them. Thus, it is aimed to make efficient use of public resources with this new amendment.
7. “Commitment” and “Settlement” Mechanism Entered in Turkish Competition Law Enforcement
With the amendment made in Article 43 of the Law no.4054; the mechanism of "commitment" and "settlement" are adopted. Thus, undertakings are given the opportunity to make commitments to eliminate competitive concerns and, in the event that the relevant commitments are deemed to meet the concerns by the TCA, it is aimed to use public resources effectively by not initiating / terminating the investigation. But for implementing “commitment” mechanism, the violations must not be on price fixing, market sharing and similar hard core restrictions. For having accepting “commitments” TCA will have full authority, but TCA will make some secondary legislation for the process and practices and will shows objective conditions of the “commitments”. With the commitments, undertakings will benefits to end not hard-core violations without fine and the public will benefits to end of some light restrictions, although this has some question marks. But by the commitments procedure if where (i) there has been a change in any of the facts, (ii) the concerned entity act contrary to their commitments or (iii) the decision was based on incorrect information, the Competition Board may reopen the investigation proceedings with the new legal changes.
By newly adopted “settlement” mechanism, with the undertakings that acknowledge the existence of the violation during the investigation, an opportunity is reached to settle until the notification date of the investigation report, thereby both the investigation period and public costs can be reduced. In this respect, up to 25% reduction (and additional %25 reduction of early payment by administrative procedure of the payment) can be made on the administrative fines to be imposed as a result of the investigation and both the administrative fines agreed on and the matters contained in the text of the settlement cannot be the subject of the lawsuits. There is no hard-core, soft restrictions difference for the “settlement” mechanism and TCA will publish some secondary legislation for the “settlement” process.
8. New Administrative Changes
Finally, we would like to state that the Amendment involves some administrative changes regarding the personal of the institution such as Vice-President number to be increased, rules regarding to staff titles / staff degrees / numbers etc. to be arranged explicitly, the provision stipulated in the Civil Servants Law to be applied to assistant experts, the Article 104 of Banking Law to be applied in terms of criminal and legal responsibility etc. Additionally, investigation team also have to opportunities to use extension period of 15 days additional opinion period to 30 days in the investigation period. TCA board members and staff will have additional protection mechanism for the administrative and criminal immunities for their works.
With these new 2020 amendments, the Turkish Competition Law enforcement system has approached more to the EU system. By cutting some “light” competition infringements procedures and with the aim of more concentrating on hard-core restrictions, we may say the Turkish competition law enforcement system will be more powerful in the legal base. We will see the impact of the changes with the secondary legislations entering into force and full operation in practice. In sum, big undertakings must be much more careful for the competition law as they will be always at the center of the scene of competition law enforcement.
Turkish Competition Act with the all amendments, The Act on Protection of Competition