Draft Regulation by Turkey's Competition Authority: A Step Forward in Cartel Transparency

Article 4 of Code No. 4054 on the Protection of Competition ("Code") prohibits agreements, concerted practices, and decisions that restrict competition. The Regulation on Active Cooperation for Detecting Cartels ("Existing Regulation") published in the Official Gazette dated 15.02.2009 and numbered 21142 has been in force for more than 14 years to reveal cartels, which are considered the most serious competition violations in competition law, involving agreements and/or concerted practices that indicate price-fixing among competitors, market allocation, limiting the supply quantity, and collusive behavior in tenders, and to specify the principles and procedures regarding the non-imposition or reducing of fines specified in the Code for undertakings, undertaking executives, and employees actively cooperating with the Competition Authority ("Authority"). As a result of the need to update the regulations related to active cooperation in light of the changes in the relevant legislation, the results achieved in practice, and the practices of competition authorities in other countries during the intervening period, a new draft regulation has been prepared and made available for public opinion.

In the Draft Regulation on Active Cooperation for Detecting Cartels ("Draft Regulation"), while many of the provisions from the Existing Regulation are retained, several significant and debated new regulations have been introduced concerning undertakings that seek active cooperation, as well as their executives and employees.

The key points addressed in the decision can be summarized as follows:

   1. New Definitions

  • The Draft Regulation introduces the term "applicant" and defines those who can apply for active cooperation as individuals, undertakings, and economic unions, as well as executives and employees who may independently apply for active cooperation. Such change in terminology can be considered in point since it aligns with a provision in the Regulation on Monetary Fines for Restrictive Agreements, Concerted Practices, Decisions and Abuse of Dominance stating that executives and employees of an undertaking may be solely responsible. Draft Regulation suggests that the executives and employees of an undertaking or an economic union can play a significant role in initiating the investigation process by independently applying for active cooperation. While such a regulation may aim to facilitate the detection of cartels by expanding the opportunity for applications, it is criticized for the potential risk of abuse in the active cooperation process. Moreover, the fact that applications by natural persons will be considered in the context of discounts on fines may have a demotivating effect on the willingness of undertakings to apply for active cooperation, as it could reduce the discounts available to the undertakings. Encouraging undertakings to engage in active cooperation, rather than allowing executives and employees to apply independently, would be more appropriate for the purposes intended by the active cooperation institution.
  • The Draft Regulation introduces a new term called "cartel facilitator". A cartel facilitator is defined as "undertakings and economic unions that, without operating at the same level of the production or distribution chain as the cartel parties, mediate in the establishment and/or maintenance of a cartel, facilitating the creation and/or continuation of a cartel with their activities". This definition, added with the aim of determining the responsibility of undertakings that facilitate cartels, is both quite broad and ambiguous. It may pose a risk for undertakings that are in communication with a cartel party as part of their ordinary activities but have no knowledge of the cartel nor consciously contribute to the maintenance of the cartel. Given the Competition Board's ("Board") current evaluations regarding whether a given undertaking facilitates a cartel, the addition of this definition could be criticized as unnecessary in the Draft Regulation.
  • Another definition added to the Draft Regulation is that of a "value-adding document". In the Draft Regulation, a value-adding document is defined as "information and documents that, taking into account the evidence available to the Board, provide information and documents that would strengthen the Board's ability to prove the cartel." Essentially, this definition is also considered to be vague, and it is deemed more appropriate to define the boundaries with objective criteria.

   2. Changes Regarding Fines

  • In the Draft Regulation, Article 4 concerning the non-imposition of fines also references cartel facilitators unlike the Existing Regulation. Considering the criticisms mentioned earlier regarding the definition of cartel facilitators in the Draft Regulation, this reference could pose a risk of subjecting many undertakings that consciously did not participate in the cartel and had no facilitating effect on the establishment or continuation of the cartel to preliminary investigations/inquiries.
  • In the Draft Regulation, unlike the Existing Regulation, it is stipulated that the active cooperation application should be made within three months following the notification of the investigation, before the investigation report. While the purpose of introducing such a time limit is considered to be preventing delays in the investigation process, particularly in cases where there are legal time limits, this situation could have adverse consequences, especially for undertakings in the settlement process. Given that the relevant undertaking may prefer to file an active cooperation application in the case that the settlement process ends unfavorably within the three-month period, it is considered to be a regulation that would practically make it impossible for undertakings in the settlement process to file active cooperation applications. It is evident that there is a need for special regulation to ensure the compatibility of the settlement institution with the active cooperation institution.
  • In the Draft Regulation, lower limits for discounts on fines have been reduced. The lower limit for the first applicant has been decreased from one-third to twenty-five percent, the lower limit for the second applicant has been reduced from twenty-five percent to twenty percent, and the lower limit for other applicants has been lowered from one-sixth to fifteen percent. Given the potential benefits of uncovering cartels from the perspective of the Authority, these changes to the lower limits are considered to have a negative impact on encouraging undertakings to engage in active cooperation.
  • Considering the Authority's recent tendency to apply discount rates lower than the upper limit without relying on objective criteria regardless of added-value or effect, it is evident that there is a need to limit the Authority's discretion with objective measures. While the Settlement Regulation specifies how the settlement process will be conducted alongside an active cooperation application, the Draft Regulation's lack of a provision in this regard is seen as causing uncertainty.

   3. Regulations on Application Conditions and Procedures

  • Another rule introduced in the Draft Regulation is the possibility of accessing the information of the current executives and employees by the applicant. Concurrently, the applicant is expected to show the necessary diligence and care to provide information about former executives and employees. While the authority to conduct the necessary research lies with the Authority, imposing such an additional obligation on the applicant is another point of criticism. Obtaining information about former executives and employees directly by the Authority would likely lead to more effective results.
  • In the Draft Regulation, it is a prerequisite for information and documents submitted among the conditions for an active cooperation application to have added value for them to be considered for a reduction in fines or non-imposition.
  • The other provision introduced in the Draft Regulation is that if the applicant obtains additional information after the application, they can submit it before the expiration of the second written-defence period. To provide such an opportunity for additional evidence, there should be a legal basis, and the absence of such basis could create uncertainty.

   4. Regulations on Non-Imposition and Fine Reduction for Executives and Employees

  • The Draft Regulation separately regulates the conditions for non-imposition or fine reduction for executives and employees, which parallels the provisions for applicants. Since the added definition of the applicant in the Draft Regulation also encompasses executives and employees, there are criticisms suggesting that it would be more appropriate to have the provisions on non-imposition and fine reduction regulated under a single article.

   5. Regulations on the Cases to Which the Regulation Applies

  • The Draft Regulation stipulates that if it is determined as a result of the application that there is no cartel, but other violations are found under the Code, the provisions of the regulation will still be applied.
  • Finally, another significant provision is that for investigations already ongoing at the time when the Draft Regulation comes into effect, the provisions of the regulation that are favorable to the applicant will be applied.

The reduction in the lower limit of fines in the Draft Regulation is seen as potentially having a negative impact on encouraging cartel party undertakings to apply for active cooperation, contradicting the purpose of the active cooperation institution. Additionally, the term "cartel facilitator" could create a risky situation for businesses in vertical relationships with cartel parties. With consideration of the Authority's opinions, suggestions, and evaluations regarding the Draft Regulation, it is expected that adjustments can be made to address the concerns and uncertainties related to the criticized aspects.

First published by Legalink European Newsletter in Nov 29, 2023.

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