Turkish Law Blog
Commitment Mechanism Begins in Turkish Competition Law
I. Commitment Mechanism
Commitment mechanism has been introduced to Turkish Competition Law practice pursuant to the amendments on Law on the Protection of Competition (“Law”) with the law numbered 7246. In accordance with the Article 43 of the Law regulating commitment mechanism, Competition Authority (“Authority”) is authorized to specify the rules and procedures. Competition Authority published the Draft Communiqué on the Commitments Submitted in the Preliminary Investigations and Investigations Regarding the Agreements Restricting Competition, Concerted Practice, Decisions and Abuse of the Dominant Position (“Draft Communiqué”) on 27.11.2020 for public opinion. Herein this article Draft Communiqué will be examined by comparing with its application in EU Competition Law which is the source legislation.
Commitment mechanism aims at minimizing the antitrust violations by a commitment from undertakings against whom the competition investigation has been commenced in order to cease the aforementioned violations. Commitments are divided into two whether they change the structure of the market as behavioral commitments and structural commitments.
By the mentioned amendment on the Law commitment mechanism has been introduced to Turkish Competition Law practice, the first of which is applied in Board’s Havaş decision. The second commitment decision, which is also the first structural commitment decision, is the Board’s TSB/OSEM decision.
II. Source EU Competition Law Practice
When examining the EU Competition Law which is the source legislation of commitment mechanism, Regulation numbered 1/2003 (“Regulation”) regulates the issue. However, the commitment mechanism in EU Competition Law has been applied even before the Regulation. Commission ended competition investigations upon the commitment of undertakings to cease the relevant violation by unofficial conciliation method.
Despite unofficial conciliation method plays a major role with regards to more efficient use of sources and mitigating the damages stemmed from antitrust violation it has brought some inconveniences. Because Commission could not have any recourse when an undertaking does not comply with its commitment which it has given by unofficial conciliation method. Commission can only deal with the issue by starting the procedure of the relevant competition investigation all over or activating the investigation procedure which has been suspended. That method does not fit with the purpose of the commitment mechanism which aims at efficient use of sources. Therefore, we may draw the conclusion that the commitments are not binding. On the other hand, as regulated in the Regulation, certain sanctions might be enforced against the undertaking which has undertaken a commitment but did not fulfill it.
Another inconvenience is related with the transparency. In unofficial conciliation method, the commitments, investigations of which have ended by agreement of Commission and the relevant undertakings, were not disclosed to the public. Therefore, third parties could not obtain any information regarding the existence or the content of the said commitment. However, with the Regulation, the relevant commitments of the undertakings are published to EU Official Gazette for third party opinions. Commitment mechanism which has become legislated by Regulation fulfills the element of transparency thus.
Despite the Article 9 of the Regulation does not contain any detail, Commission’s Press Releases and the Policy Brief of the Directorate General for Competition of EU Commission dated March 2014 sheds light on the issue. When evaluating the Regulation, the press release and the policy brief together,
- Article 9 of the Regulation titled Commitment states that Commission may accept the commitment offered by undertaking under the investigation if the commitment meets the concerns expressed by Commission.
- The Subparagraph 2 regulates that Commission upon request or ex officio may re-open the competition investigation against the relevant undertaking if (a) where there has been a material change in any of the facts on which the decision was based; (b) where the undertakings concerned act contrary to their commitments; or (c) where the decision was based on incomplete, incorrect or misleading information provided by the parties.
- It is stated that commitment mechanism is not applicable to the core competition violations such as cartels. Therefore, the agreements or behaviors which have as their objects as price-fixing, supply restricting or market sharing do not fall under the commitment mechanism. Besides, commitments can be behavioral or structural.
- Another issue is that Regulation remained silent on the act of undertaking regarding its antitrust character whose commitment is binding upon Commission’s approval. Thus Commission does not say its final word on the act of undertaking whose commitment becomes binding upon approval and Commission reserves a right to open investigation. In other words, the fact that Commission’s decision of commitment instead of infringement decision in accordance with the Article 7 of the Regulation may not be regarded as an implied approval by Commission. Therefore, commitment decision by Commission does not result in exemption.
- In parallel with the Commission’s does not say its final word on the undertaking’s act, customers or other competitors willing to be indemnified are required to prove before the courts the illegal nature of the aforesaid act.
- Commission allows third parties to present their opinions on the issue by publishing the commitment demand of the relevant undertaking upon receipt. Interested parties contributed to the evaluation of whether this commitment is capable of resolving the relevant antitrust violation or not by presenting their opinions. We would like to draw the readers’ attention that Commission is obliged to publish the relevant commitments in accordance with the Article 27 of the Regulation, therefore Commission does not retain a discretionary power hereof.
III. What Does Draft Communiqué Introduce?
Commitment mechanism has been introduced to Turkish Competition Law with the amendments on the Subparagraph 3 of the Article 43 of the Law on the Protection of Competition by the law numbered 7246. The law states that the communiqué regarding the rules and procedures is to be issued by Competition Authority. Draft Communiqué states that,
- The communiqué does not cover the clear and severe violations as the commitment mechanism is not applicable to the agreements between competitors which have as their object of price fixing, supply restricting or market sharing.
- Commitment procedure commences upon the receipt of the commitment demand of undertaking in writing by Authority. In accordance with the Article 5 of the Draft Communiqué, undertakings are required to send their commitment demand in writing to Authority within 3 months upon the receipt of the investigation notification. Otherwise, commitment demands of undertakings exceeding this period will not be considered.
- In Article 7 which regulates the submission of commitment, commitment text is to be submitted with a summarized form free from trade secrets and confidential information. Following Subparagraph 2 states that time periods in which the commitments can be submitted is to be determined by Board. Each time period will be determined by Board case by case regarding the phases of investigation and scope of the commitment.
- Article 8 of the Draft Communiqué states that alternative commitments may not be submitted. Because Board requires that submitted commitment be specified in clear manner. Following Subparagraph 2 states how a clear commitment be formed. In this context, commitment must be specified clearly as to its characteristics, from when it will apply, the time period and the way of its application and its effects on the market.
- Another important issue is that the documents regarding the agreements with complainant and third parties must be submitted to Authority when the relevant commitment requires so.
- Article 9 regulating the quality of the commitment states that behavioral or structural commitments can be submitted within the same commitment text or separately. Therefore, structural commitments which affect market structure such as divestiture or license transfer and behavioral commitments which do not affect market structure such as capacity restriction can be submitted collectively.
- Moreover, Article 9 subparagraph 2 regulates the criteria regarding the commitments to be submitted upon which Authority will look. Board requires that commitments be proportional, be capable of resolving the issues, be fulfilled within short period of time and be applicable effectively. Further, Authority states that commitments not requiring supervision are preferable for an effective commitment mechanism. Because in this way it is esteemed that commitment mechanism which aims at minimum use of public resources has been realized more effectively.
- Another issue is to be regarded is that any commitment regarding the acts of third parties may not be submitted.
- In parallel with the market test in the EU Competition Law practice, in accordance with the Article 11 of the Draft Communiqué, Board may decide to resort to opinions of the third parties and complainants. We would like to draw the reader’s attention that appealing the opinions of the third parties and complainants by Board is not mandatory as in the EU Competition Law practice. Therefore having recourse to opinions of the third parties and complaints by Board is not an obligation rather a discretion.
- Board evaluates the commitment independent from any time limit, afterwards if Board finds it suitable then the commitment becomes binding with regards to the relevant persons. Should the Board does not deem the commitment suitable, the parties may be granted to right to change in the commitment according to the time period and procedures to be specified by Board for once. Otherwise, the decision of ending the commitment procedure shall be given.
- Article 14 regulating the binding of commitment, Board is entitled to end the investigation which has been opened or to not open an investigation at all if Board deems that the submitted commitment be capable of meeting the competition concerns. However, it is emphasized in the second sentence that the decision of Board does not contain any evaluation whether the relevant agreement or application violates the antitrust laws or not.
- Article 15 regulates the supervision and fulfillment of the commitment which has become binding. Submission of reports on a regular basis from the party which submitted a commitment, appointment of 3rd party auditors or cooperation with the association of undertakings or public institutions are listed as Board’s instruments for supervision of commitment. We are of the opinion that aforesaid instruments are not listed in an exhaustive manner and Board may resort to another methods.
- Another significant point in Draft Communiqué is that the Communiqué will be applicable for the ongoing investigations. Only exception is that the condition to submission of commitment demand to the Authority within the 3 months of the receipt of notification is not required for the investigations which elapsed 3 months time period.
Draft Communiqué which specifies the rules and the procedures of the commitment mechanism differentiates from EU Competition Law practice in certain points. To overview, regarding implementation Competition Board is entitled with broad powers and discretions. Draft Communiqué differentiates from its source legislation EU Competition Law practice regarding the time period for submission of commitment. Article 5 of the Draft Communiqué regulates that undertakings under investigations must submit their demand of commitment within 3 months of the receipt of notification. Otherwise, commitment demands of undertakings exceeding this period will not be considered. Within that direction by amendment of law is entered into force before the Communiqué, this issue comes up regarding the commitments about the ongoing investigations. Competition Board, in its Aslan Logistics decision numbered 20-36/485-212 and dated 20.07.2020, rejected the commitments on the grounds that they are given following the completion of investigation phase regardless of whether the violation is clear or not.
On the other hand, in EU practice there is not any foreseen time limit. In our opinion, the communiqué to be issued in parallel with its source EU legislation shall not contain any time limit. Because, the purpose of the commitment mechanism is to minimize damages stemmed from the antitrust violations by using resources efficiently. We are of the opinion that in aforesaid Board decision there is a time limit brought by communique which has not been introduced by law. To clarify, the Article 44/3 of the Law in which commitment mechanism has been introduced states that commitment is to be submitted “within the process of preliminary investigation or investigation”, the Law does not state that it must be within the investigation phase. Until final decision is given all the procedure must be deemed as investigation phase even the phase of oral defense. Therefore we are of the opinion that enabling undertakings to submit their commitment demands until the violation decision is given (until the investigation is ended) must be regulated in the communiqué to be issued
Another issue to be explained is that a regulation stating Board will not consider the commitment texts which contain alternative commitments. We are of the opinion that this regulation is deemed inappropriate which does not have any correspondence in the EU Competition Law practice. Because, commitment mechanism by its nature enables Board and undertakings to implement a wide range of solutions for ending antitrust violations rather than providing classical solutions. Although however the necessity for clarity and unambiguity with the purpose of supervision may seem understandable due to the binding nature of commitment upon approval by Board, the rejection of commitment text which contains more than one commitment does not have any legal grounds. Because, Board may render one of the commitments binding by choosing among them which are presented by the relevant undertaking. Therefore we are of the opinion that undertakings must be enabled to submit commitment text which contain alternative commitments in the communiqué to be issued.
Another different point of Draft Communiqué from EU Competition Law practice is that Board is not obliged to publish the commitment texts which are presented to it. Because, publication of the relevant commitment by Board is conditioned upon the decision of recourse to opinions of third parties or complainant. Therefore, if the Board does not deem necessary to obtain the opinions of the third parties or complainants there is not any obligation upon Board to publish the relevant commitment. On the other hand, in EU Competition Law practice in accordance with the Article 27 of the Regulation numbered 1/2003, Commission is under an obligation to publish the relevant commitments on the EU Official Gazette. By this application which is called market test Commission enables third parties to present their opinions on the relevant commitment when each commitment is submitted. On the other hand, the third parties are only able to present their opinions if the Board esteems hereof. Therefore, we are of the opinion that for the purposes of uniformity with the EU law and transparency, publication of the relevant commitments must not be left to the Board’s discretion and they must be published in all cases in the communique to be issued.
Draft Communiqué differentiates from its source EU Competition Law practice in certain points. First of all, in EU Competition Law practice it is possible to submit to commitment demand until the end of the investigation process, whereas in Draft Communiqué it is limited to 3 months upon the receipt of the investigation notification. We are of the opinion that in the communiqué to be issued demand to commitment must be submitted until the end of the investigation process for the purposes of uniformity with the EU law and commitment mechanism. Secondly, we esteem that the regulation in the Draft Communiqué stating alternative commitments are not taken into consideration has no legal grounds. By this provision which does not have any correspondence in the EU practice, commitment mechanism will be restricted which provides alternative solutions to parties. Therefore in our opinion the communiqué to be issued must contain a provision stating that alternative commitments are to be taken into consideration. Lastly, publication of the relevant commitments by Board is only realized when recourse to the opinions of the complainant and to the relevant parties. In parallel with the EU practice publication of the commitments in all cases plays significant roles with regard to transparency.
Our final belief, for the purposes of uniformity with the EU legislation and transparency the communiqué to be issued will be amended accordingly on the grounds explained above.
- Law amending the Law on the Protection of the Competition (2020, 24 June). Official Gazette (Number:31165). Link address: https://www.resmigazete.gov.tr/eskiler/2020/06/20200624-1.htm
- Draft Communiqué on the Commitments Submitted in the Preliminary Investigations and Investigations Regarding the Agreements Restricting Competition, Concerted Practice, Decisions and Abuse of the Dominant Position (2020, 27 November). Link address: https://www.rekabet.gov.tr/Dosya/geneldosya/1-taahhut-tebligi-pdf
- EU Council Regulation numbered 1/2003 (2003, 4 January). Link address: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32003R0001&from=EN
- EU Commission Competition Policy Brief (2014, March). Link address: https://ec.europa.eu/competition/publications/cpb/2014/003_en.pdf
- Board Decision numbered 20-36/485-212 and dated 28.07.2020 Link address: https://www.rekabet.gov.tr/Karar?kararId=c0048bf5-d616-497a-8bf1-e36ee1670a86
- Board Decision dated 11.2020 Link address: https://www.rekabet.gov.tr/tr/Guncel/rekabet-hukukunda-yeni-bir-donem-taahhut-5ca6e0b74220eb11812200505694b4c6
- Board Decision dated 01.2021 Link address: https://www.rekabet.gov.tr/tr/Guncel/turkiye-sigorta-reasurans-ve-emeklilik-s-30868ee30d54eb11812700505694b4c6