Turkey: Turkish Competition Authority Published Regulation On Immunity From Fines And Reduction Of Fines In Cartel Cases On 15 February 2009

On 15 February 2009 "the Regulation on Active Cooperation for the Purpose of Detection of Cartels" ("the Regulation"/ "the Regulation on Cooperation") entered into force. The concept of leniency in cartel cases for the first time was introduced by the amendment on 28/01/2008 to article 16 (Fines) of the Turkish Competition Act ("the Act") and the Turkish Competition Authority ("the TCA") was conferred the authority to issue a regulation on the application of a leniency program.¹

The aim of the Regulation is to set out the conditions and procedure for qualification for immunity from fines or reduction of fines in cartel cases where an undertaking or a director or employee of an undertaking enters into active cooperation with the TCA in its detection of a cartel.

Article 16 (3) and (4) of the Turkish Competition Act imposes fines on undertakings and in certain cases on their directors and/or employees where an infringement of article 4 (agreements and concerted practices), article 6 (abuse of dominant position) and in certain cases of article 7 (concentrations creating or strengthening a dominant position in the market) of the Act has occurred. Fines that can be imposed on undertakings can be as high as the 10% of the annual turnover of the relevant undertaking in the Turkish Market as of the end of the fiscal year preceding the final decision of the TCA or if this cannot be determined 10% of the annual turnover as of the end of any fiscal year closest to the final decision. The Regulation on Fines to be imposed on infringements of articles 4 and 6 of the Act introduced on 15 February 2009 defines detailed steps and criteria for determining the amount of fines in case of infringements. Article 5 of the Regulation provides that in cartel cases, 2 to 4 % of the annual turnover in the Turkish Market shall constitute the basis of the fine to be imposed.

Where an undertaking is fined, its managers and/or employees who are found to have a decisive impact on the infringement will also be fined up to 5% of the fine imposed on the relevant undertaking.
The Regulation on Cooperation sets out the Requirements and Procedure for Undertakings to qualify for Immunity from fines in cartel cases.

Immunity from fines which would otherwise have been imposed on an undertaking shall be granted by the TCA if that undertaking before any decision for preliminary investigation² independently from the other members to the cartel is the first to submit information and evidence on the cartel and to fulfill other conditions set out in the Regulation. Directors and managers of undertakings qualifying for immunity are also immune from fines.

An undertaking which is found to have taken steps to coerce other participants to infringement is not eligible for immunity from fines. (The undertaking may still qualify for a reduction of fines if it fulfills the relevant conditions.)

1. Timing for Application: The application for immunity shall be made before any decision of the TCA to undertake a preliminary inquiry on the relevant cartel. No other prior application should exist by any other member of the cartel or by their managers or employees.
   
   It is also possible to qualify where the application is made within the time frame between a decision for a preliminary inquiry and the formal notification of the investigation report, provided that at the time of the application there are no evidences available to the TCA to find an infringement of article 4 of the Act. No prior application as described in the preceding paragraph should exist.
2. Information and Documents to be shared with the TCA (art 6/a): The Regulations requires the provision of the following information for benefiting from immunity; The products affected by the cartel, the duration of the cartel, names of the parties, the dates, locations and the participants of alleged cartel contacts and other relevant information and documents on the cartel. No further description of the information to be given is provided.
3. Other conditions for qualification
   
   1. The applicant undertaking must not have concealed or destroyed any evidence or information on the cartel.
   2. The applicant must cease participation in the cartel, unless otherwise instructed by the relevant task force to be found by the TCA where the task force considers cease of membership would be prejudicial to revealing the cartel.
   3. The application must be kept confidential until notification of the investigation report unless otherwise instructed by the relevant task force of the TCA.
   4. The cooperation must have continued until final decision of the Turkish Competition Board upon completion of the investigation.
4. Procedure

The undertaking may either initially apply for a marker or immediately proceed to make a formal application to the TCA. Where the application is for a marker, the relevant task force will grant the applicant a period to submit the relevant information and documents cited under article 6/a of the Regulation as outlined above. To qualify for the grant of such a period, the applicant must have provided the TCA with information on the market affected by the cartel, the duration of the cartel and the names of the participants to the cartel.

The application or the request for a marker shall be made in writing by or on behalf of the undertaking. However information cited under article 6/a can be also submitted orally. In such case the oral submissions shall be put in writing by the TCA and verified by or on behalf of the undertaking. These submissions can be examined by the addressees of the investigation report at the premises of the TCA upon formal notification to them of the investigation report.

An acknowledgment of the receipt of the undertaking's application for a marker or of the formal application for immunity from fines, confirming the date and time of the application, will be provided to the applicant.

Upon completion of the application, the TCA will upon decision of the Competition Board in that regard, grant the undertaking immunity from fines conditional upon compliance with the relevant provisions of the Regulation.

If at the end of the investigation procedure, the undertaking has met the conditions set out in the Regulation, it will qualify for immunity from fines in the final decision given upon completion of the investigation. However if the TCA finds that the undertaking has not met the conditions, the undertaking will not benefit from immunity. In such case the TCA has the powers to reduce the fines, which otherwise would have been applicable, by one third or by half. In such case fines to be imposed on relevant directors and/or employees can also be reduced by at least 1/3 or they will not be fined depending on circumstances.

The Regulation also sets out the Procedure and Conditions to qualify for Reduction of Fines

An undertaking which does not qualify for immunity from fines as described above, may still benefit from a reduction of any fine that would otherwise have been imposed, if that undertaking independently from the other members to the cartel within the time frame between a decision by the TCA to conduct a preliminary inquiry and the notification of the investigation report, submits information and evidence on the cartel as described under article 6/a of the Regulation (see above) and fulfills other conditions set out in the Regulation. Fines that would have been otherwise imposed on the directors and/or employees of the relevant undertaking shall also be reduced accordingly.

In such cases directors and/or employees who would have been fined would also benefit from relevant reduction or not be fined at all.

If the applicant for a reduction of a fine is the first to submit evidence as a result of which the amount of the fine should increase due to increase of gravity or duration of the infringement or similar reasons, the TCA will not take such additional facts into account when setting any fine to be imposed on the undertaking which provides this evidence.

Procedure for application and other conditions for qualification are almost the same as explained in relation to qualification for immunity from fines.

At the end of the administrative procedure, the TCA will in its final decision determine the exact level of reduction the undertaking will benefit from within the bands specified above. In determining the level of reduction the Board will take into consideration the quality of the cooperation, the effectiveness and the timing of the cooperation. The reduction to be made at the end of the proceeding cannot be less then the minimum rate and more than the maximum rate of the reduction band notified to the undertaking upon its application.

Even if undertakings or their directors applying for immunity or reduction of fines are found to have failed to meet the conditions for eligibility, information and documents submitted to the TCA can still be used as evidence.

Application of the Regulation to Directors and Employees

Directors or employees, independently from undertakings and rest of the directors or employees participating in the cartel, sharing with the TCA the relevant information and documents, would also be entitled to immunity from fines or reduction of fines subject to almost the same conditions cited above in relation to qualification for immunity from fines for undertakings.

Reductions to be applied shall be for the first director or employee not less than 1/3, for the second directors or employee not less than ¼, for subsequent directors or employees not less than 1/6. The TCA is entitled in such cases not to impose a fine.

The Regulation entails certain gaps and ambiguities in relation to various issues and is not as detailed as it should have been. The reasoning issued by the TCA for the Regulation provides that where there are ambiguities or gaps, the Regulation shall be interpreted in favor of whistle blowers and their position should not be impaired compared to undertakings that do not cooperate.

Footnotes

1 Art 16/6 of the Act, (as amended on 23.01.2008) provides "an immunity from fines or a reduction of fines that would have been otherwise been imposed can be provided to undertakings, their directors or employees who for the purpose of detection of the cartel enter into active cooperation with the Competition Authority considering the quality of the cooperation, the effectiveness and the timing ...

2 The Competition Board ex officio or upon a complaint is entitled to start directly an investigation or decide to start a preliminary inquiry in order to conclude on the necessity of starting an investigation where it does not possess enough evidence to directly start an investigation. In case of a decision for preliminary inquiry (which is not a compulsory stage of the investigation process) one or more case reporters are appointed to examine and opine on the allegations and evidence who are to issue a report to the Board within 30 days of their appointment. Within receipt of the preliminary inquiry report the Board has to convene and decide on the necessity to open an investigation.

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