1 Legal and enforcement framework
1.1 Which legislative and regulatory provisions apply to cartels in your jurisdiction?
The main legislation on cartels is the Law on Protection of Competition 4054. Law 4054 relies on Article 167 of the Turkish Constitution of 1982, which authorises the government to take appropriate measures to secure a free market economy. Article 4 of Law 4054 lays down the basic principles of cartel regulation.
Article 4 is essentially modelled on Article 101(1) of the Treaty on the Functioning of the European Union. It prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices that have (or may have) as their object or effect the prevention, restriction or distortion of competition within a Turkish product or services market, or a part thereof. As a general provision, Article 4 prohibits all forms of restrictive agreements, including any form of cartel. It also sets forth a non-exhaustive list of anti-competitive practices that potentially violate Law 4054, which include most common types of cartels, such as price fixing, market division and concerted control of output or input.
Secondary legislation issued by the Turkish Competition Authority also includes specific provisions on cartels. The Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Limiting Competition and Abuse of Dominant Position sets out the range of the base fines for cartels. Under the Regulation on Active Cooperation for Detecting Cartels, cartel members that actively cooperate with the authority may be granted full immunity or a discounted fine, depending on the timing of their leniency application.
1.2 Do any special regimes apply to cartels in specific sectors?
Law 4054 does not exempt any sector or activity as a whole from its scope of application. State-owned entities are also captured by Article 4.
1.3 Which authorities are responsible for enforcing the cartel legislation?
Competition law in Turkey is enforced by the Turkish Competition Authority, a legal entity with administrative and financial autonomy, which consists of a board and five case units. The Competition Board is the decision-making body of the authority and is responsible, among other things, for deciding whether agreements, concerted practices and decisions of undertakings active in various markets restrict competition. The board has seven members and is seated in Ankara. The five case units each focus on all types of competition cases (ie, Article 4 cases including cartels, mergers and abuse of dominance) in certain industries.
A cartel matter is primarily adjudicated by the board. The relevant parties can also bring private action against cartels before the courts for their damages. Due to a treble damages clause which allows applicants to obtain three times their losses as compensation, private antitrust litigation is becoming increasingly common in the cartel enforcement arena. In practice, the courts do not usually analyse whether there is an anti-competitive agreement or concerted practice, and defer to the board to render its opinion on the matter, thus treating the issue as a prejudicial question. As the courts usually wait for the board to render its decision rather than deciding on the matter themselves, a court decision can be obtained in a shorter period in follow-on actions.
1.4 How active are the enforcement authorities in investigating and taking action against cartels in your jurisdiction? What are the statistics regarding past and ongoing cartel investigations? What key decisions have the enforcement authorities adopted most recently?
Although the Competition Authority does not officially publish specific statistics on cartel investigations, its investigations concerning horizontal violations under the scope of Article 4 of Law 4054 provide some insight in this regard.
The authority has not yet published its annual report for 2018. However, its annual report for 2017 stated that the board decided a total of 80 cases relating to competition law violations in 2017. Of those 80 cases, 37 related to Article 4, 29 cases related to both Article 4 and Article 6 (abuse of dominant position) and one case concerned allegations regarding Article 4, Article 6 and Article 7 (merger control).
The board issued monetary fines amounting to a total of TL 41,320,930 and TL 38,776,937 for cases analysed under Article 4 and TL 2,543,993 for cases analysed under Article 4 and Article 6. These monetary fine figures of 2017 show that the Board has in total imposed roughly four times less monetary fines in Article 4 cases while the monetary fines imposed in Article 6 cases have tripled. In 2017 the board also imposed monetary fines in cases that were analysed under both Article 4 and Article 6 for the first time in five years.
Since 1999, the Board has concluded 1,224 investigations.
Although 2018 saw no ground-breaking cartel cases or record fines for cartel activity, one recent decision (Orthodontic Products, 18-09/157-77, 29 March 2018) concerned allegations that nine undertakings had participated in price fixing relating to the sale of orthodontic products and had violated Article 4 of Law 4054. In this recent preliminary investigation, the authority accessed employees' WhatsApp conversations from their private mobile phones during an on-site inspection. This landmark decision has triggered a debate on the limits of case handlers' authority during on-site inspections and employees' right to privacy.
Another noteworthy decision on cartels concerned an investigation against 13 financial institutions – including local and international banks – active in corporate and commercial banking in Turkey (Corporate Loans, 17-39/636-276, 28 November 2017). The investigation started when Bank of Tokyo-Mitsubishi UFJ Turkey AÞ (BTMU) filed a leniency application in relation to an alleged cartel executed through the exchange of competitively sensitive information on loan conditions. However, the board ultimately found no cartel, while concluding that some undertakings had indeed exchanged competitively sensitive information. The board imposed administrative monetary fines on ING Bank AÞ and The Royal Bank of Scotland Plc in the amount of TL 21.1 million and TL 66,000 respectively, calculated on the basis of their annual turnover in 2016. Contrary to its decisional practice and the explicit rule in the Regulation on Active Cooperation for Detecting Cartels that the leniency regime applies to cartel cases only, the board provided full immunity to BTMU.
In Burdur Province Freelance Mechanical Engineers (17-41/640-279, 14 December 2017), the board investigated 16 freelance mechanical engineers to determine whether they had violated Article 4 of Law 4054 through a profit-sharing cartel. One of the parties to the investigation applied for leniency during the preliminary investigation. The board concluded that 14 of the freelance mechanical engineers had engaged in a profit-sharing cartel. The board granted the leniency applicant full immunity from fines, while also relieving one of the freelance mechanical engineers from an administrative monetary fine.
Another decision concerned allegations that 10 undertakings producing ready-mix concrete in the Ýzmir region in Turkey had artificially increased their prices by entering into an anti-competitive agreement or concerted practice (Ýzmir Ready-mix Concrete, 17-27/452-194, 22 August 2017). The board took into account the economic evidence showing no concerted practice and concluded that it was implausible that the parties could have reached agreement within the alleged duration of the infringement, which was three months.
In a more recent case (Mosaþ, 18-20/356-176, 21 June 2018), the board imposed an administrative monetary fine on Mosaþ Akýllý Ulaþým Sistemleri AÞ's for obstructing an on-site inspection in the scope of a cartel investigation concerning alleged bid rigging. During the on-site inspection conducted at Mosaþ's premises, employees cut off the electricity and internet connection, deleted emails, denied access to computers and prevented case handlers from making copies of the reviewed documents. The board imposed two separate administrative monetary fines on Mosaþ:
- a fixed fine for obstructing the on-site inspection, in the amount of 0.5% of its 2017 turnover; and
- a proportional fine of 0.05% of its 2017 turnover for each day that the violation continued (ie, until Mosaþ invited the authority for another on-site inspection).
2 Definitions and scope of application
2.1 How is a ‘cartel' defined in the cartel legislation?
Article 4 of Law 4054 prohibits all forms of ‘restrictive agreement', including any form of cartel. In contrast to the Treaty on the Functioning of the European Union (TFEU), Article 4 of Law 4054 does not refer to ‘appreciable effect' or ‘substantial part of a market', and thus includes no de minimis exception.
In line with Article 101(1) TFEU, Article 4 includes price-fixing, market allocation and refusal to deal agreements as examples of restrictive agreements that have consistently been deemed to be anti-competitive per se.
Furthermore, cartels are explicitly defined by the secondary legislation of the Competition Authority, namely the Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Limiting Competition and Abuse of Dominant Position and the Regulation on Active Cooperation for Detecting Cartels. According to these regulations, "agreements restricting competition and/or concerted practices between competitors for fixing prices; allocation of customers, providers, territories or trade channels; restricting the amount of supply or imposing quotas, and bid rigging" are prohibited as cartel activity (see Article 3 of the Regulation on Fines and Article 3 of the Regulation on Active Cooperation). Recital 5 of the Guidelines on Explanation of the Regulation on Active Cooperation for Discovery of Cartels, published by the Competition Board in April 2013, further describes cartels as "the most serious competition infringements".
The prohibition on restrictive agreements and practices does not apply to agreements that benefit from a block exemption or an individual exemption (or both) issued by the board. The applicable exemption rules parallel those applicable in the European Union. That said, given that cartels fail to fulfil the conditions for exemption under Article 5(3) and relevant block exemption regulations, this type of conduct is unlikely to benefit from an exemption from Article 4.
2.2 What specific offences are defined in the cartel legislation?
As explained in question 2.1, according to the Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Limiting Competition and Abuse of Dominant Position and the Regulation on Active Cooperation for Detecting Cartels, "agreements restricting competition and/or concerted practices between competitors for fixing prices; allocation of customers, providers, territories or trade channels; restricting the amount of supply or imposing quotas, and bid rigging" are considered as cartels (see Article 3 of the Regulation of Fines and Article 3 of the Regulation on Active Cooperation).
2.3 Is liability under the cartel legislation civil, criminal or both?
The Turkish cartel legislation is administrative and civil in nature, not criminal. That said, certain antitrust violations, such as bid rigging in public tenders and illegal price manipulation, may also be criminally prosecutable, depending on the circumstances.
2.4 Can both individuals and companies be prosecuted under the cartel legislation?
Law 4054 applies to ‘undertakings' and ‘associations of undertakings'. An ‘undertaking' is defined as a single integrated economic unit capable of acting independently in the market to produce, market or sell goods and services. Law 4054 therefore applies to individuals and corporations alike, if and to the extent that they act as an undertaking within the meaning of Law 4054.
Additionally, pursuant to Article 16 of Law 14 and Article 8 of the Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Limiting Competition, employees or members of executive bodies of undertakings or associations of undertakings that had a determining effect on a cartel may also be fined between 3% and 5% of the fine imposed on the relevant undertaking or association of undertakings.
2.5 Can foreign companies be prosecuted under the cartel legislation?
Turkey is an ‘effect theory' jurisdiction. According to Article 2 of Law 4054, the Competition Board has jurisdiction over any cartel that affects Turkish markets, regardless of the nationality of the cartel members, where the cartel activity has taken place or whether the members have a subsidiary in Turkey. The board has refrained from declining jurisdiction over non-Turkish cartels or cartel members in the past, as long as there has been an effect on the Turkish markets (see The Suppliers of Rail Freight Forwarding Services for Block Trains and Cargo Train Services, 15-44/740-267, 16 December 2015; Güneº Ekspres/Condor, 11-54/1431-507, 27 October 2011; Imported Coal, 10-57/1141-430, 2 September 2010). However, the board is yet to enforce monetary or other sanctions against firms located outside Turkey without any presence in Turkey, mostly due to enforcement challenges (eg, difficulties in formal service or failure to identify a tax number).
2.6 Does the cartel legislation have extraterritorial reach?
As explained in question 2.5, Article 2 of Law 4054 captures all restrictive agreements, decisions, transactions and practices to the extent they affect a Turkish market, regardless of where the conduct takes place. That said, the specific circumstances surrounding indirect sales are not tried under Turkish cartel rules. Article 2 of Law 4054 would at least support an argument that the Turkish cartel regime does not extend to indirect sales because the cartel activity that takes place outside of Turkey does not in and of itself produce effects in Turkey.
Additionally, it is fair to say that export cartels do not fall within the scope of jurisdiction of the Competition Authority as per Article 2 of Law 4054. In Poultry Meat Producers (09-57/1393-362, 25 November 2009), the authority launched an investigation into allegations that included, among other things, an export cartel. The board found that export cartels are not sanctioned as long as they do not affect the markets of the host country. Although some other decisions (Paper Recycling, 13-42/538-238, 8 July 2013) suggest that the authority might sometimes be inclined to claim jurisdiction over export cartels, it is fair to assume that an export cartel would fall outside of the authority's jurisdiction if and to the extent that it does not produce an impact on Turkish markets.
2.7 What is the statute of limitations to prosecute cartel offences in your jurisdiction?
The Competition Board can impose administrative monetary fines on a cartel within eight years of the date of the infringement. If cartel infringement is ongoing, this eight-year period is counted from the date on which the infringement ceases or is repeated. The eight-year limitation period is suspended where the board takes any action to investigate a claimed cartel infringement. In private litigation, the general provisions of the Turkish Code of Obligations are applicable with regard to limitation periods. Accordingly, a damages claim against a cartel can be brought before a court within 10 years of the event which gave rise to the damage to the plaintiff. Prosecution of criminal offences (eg, bid-rigging activity and illegal price manipulation) is subject to the criminal statutes of limitation, which may vary depending on the severity of the sentence that may be imposed.
3 Investigations – general
3.1 On what grounds may the enforcement authorities commence an investigation?
The Competition Board is entitled to launch an investigation into an alleged cartel ex officio or in response to a notice or complaint. A notice or complaint may be submitted orally or through a petition. The Competition Authority has an online system through which complaints may be submitted via an online form on its official website. The board will commence a preliminary investigation if the notice or complaint concerns an alleged violation within the scope of Law 4054. If, after this preliminary investigation, the board finds these allegations "serious and sufficient" under Article 42 of Law 4054, the board will initiate a full investigation. Although this is exceptional in practice, the board may also initiate a full investigation directly without a preliminary investigation.
Additionally, for the standard of proof adopted by the board, see question 4.8.
3.2 What investigatory powers do the enforcement authorities have in conducting their investigation?
The Competition Board, and the case handlers authorised by the board, are entitled to request all information deemed necessary from all public institutions and organisations, undertakings and trade associations. Officials of these bodies, undertakings and trade associations are obliged to provide the necessary information within the period specified by the board. Failure to comply with a request for information may lead to a turnover-based fine of 0.1% of the turnover generated in the financial year preceding the date of the fining decision (or, if this is not available, the turnover generated in the financial year closest to the date of the fining decision). The minimum fine is currently TL 26,027. Where incorrect or incomplete information is provided in response to a request for information, the same penalty may be imposed.
Article 15 of Law 4054 also authorises the board to conduct on-site investigations and dawn raids. Accordingly, the board is entitled to:
- examine the books, paperwork and documents of undertakings and trade associations and, if necessary, take copies of these materials;
- request from undertakings and trade associations written or oral explanations; and
- conduct on-site investigations at the premises of the relevant undertakings.
Refusal to grant case handlers access to business premises may lead to a fixed fine of 0.5% of the Turkish turnover generated in the financial year preceding the date of the fining decision (or, if this is not available, the turnover generated in the financial year closest to the date of the fining decision). It may also lead to a fine of 0.05% of the Turkish turnover generated in the financial year preceding the date of the fining decision for each day of violation (or, if this is not available, the turnover generated in the financial year closest to the date of the fining decision).
Case handlers can obtain a court order to conduct a dawn raid where the relevant undertaking refuses to allow the dawn raid. Other than that, case handlers do not need a court order for dawn raids.
While Law 4054 requires the relevant undertaking's employees to provide oral explanations during dawn raids, in practice case handlers will allow a delay in responding, so long as there is quick written follow-up correspondence. Therefore, in practice, employees can avoid providing answers during dawn raids on information they are not certain of at the time, provided that a written response is submitted within a mutually agreed timeframe.
Pursuant to Article 15 of Law 4054, case handlers are required to carry with them an authorisation certificate when conducting on-site inspections, showing the subject matter and purpose of the inspection and explaining that an administrative fine shall be imposed should incorrect information be provided. The case handlers' authorisation for dawn raids is therefore limited to the scope set out in this certificate.
3.3 To what extent may the enforcement authorities cooperate with their counterparts in other jurisdictions during their investigation? How common is such cooperation in practice?
Article 43 of Decision 1/95 of the EC–Turkey Association Council authorises the Competition Authority to notify and request the European Commission (Directorate-General of Competition) to apply relevant measures if it believes that cartels organised in the territory of the European Union are adversely affecting competition in Turkey. The provision grants reciprocal rights and obligations to the parties (the European Union and Turkey), and thus the European Commission can likewise request the authority to apply relevant measures to restore competition in relevant markets.
There are also a number of bilateral cooperation agreements between the authority and the competition agencies in other jurisdictions (eg, Romania, Korea, Bulgaria, Portugal, Bosnia-Herzegovina, Russia, Croatia and Mongolia) on cartel enforcement matters. The authority additionally has close ties with the Organisation for Economic Co-operation and Development, the United Nations Conference on Trade and Development, the World Trade Organization, the International Competition Network and the World Bank.
3.4 Is there an opportunity for third parties to participate in the investigation?
The Competition Board is entitled to request all information it deems necessary from all public institutions and organisations, undertakings and trade associations. Officials of these bodies, undertakings and trade associations may participate in the investigation process by providing the necessary information. Although third parties cannot request access to the file under Communiqué 2010/3, they can apply for information under Law 4982 on the Right to Information. On third parties' intervention in the appeal of board decisions, see question 7.2
3.5 What are the general rights and obligations of the enforcement authorities during the investigation?
See questions 3.2 and 3.6.
3.6 What are the general rights and obligations of the target company during the investigation?
See question 3.2. In addition, target companies are entitled to protect confidential or proprietary information. The main legislation regarding protection of commercially sensitive information is Article 25(4) of Law 4054 and Communiqué 2010/3 on Regulation of Right to Access to File and Protection of Commercial Secrets. Communiqué 2010/3 places the burden of identifying commercial secrets and justifying such classification on undertakings. Therefore, undertakings must request confidentiality from the Competition Authority and justify the reasons for confidentiality of the information or document in writing. Under Article 15(2) of Communiqué 2010/3, the authority may not take confidentiality requests into consideration if they relate to information and documents that are indispensable as evidence of competition infringement. In such cases, the authority can disclose information and documents that could be considered as trade secrets, by taking into account the balance between the public interest and private interest, and in accordance with the principle of proportionality.
Additionally, target companies have the right to access the case file under two legal grounds in the Turkish competition law regime: Law 4982 on the Right to Information and Communiqué 2010/3. Article 5/1 of Communiqué 2010/3 provides that the right to access the case file will be granted upon written request of the parties within due time during the investigation. This gives the applicant access to information and documents in the case file that do not qualify as internal documents of the authority or trade secrets of other firms or trade associations. Third parties cannot request access to the case file under Communiqué 2010/3, but can apply for information under Law 4982.
3.7 What principles of attorney-client privilege apply during a cartel investigation?
Correspondence with an independent attorney (ie, an attorney without an employment relationship with the relevant undertaking, regardless of admission to the Turkish Bar) may benefit from attorney-client privilege, provided that it relates to the right of defence; communications with in-house counsel are not covered by this privilege. In Sanofi Aventis (09-16/374-88, 20 April 2009), the Competition Board recognised that the principles adopted by the European Court of Justice in AM&S Europe v European Commission (Case 155/79  ECR 1575) could apply to documents protected by attorney-client privilege in Turkey. In CNR/NTSR (14-29/496-262, 20 August 2014), the board took another major step in favour of attorney-client privilege by elaborating on the conditions of the European Court of Justice under which privilege will apply, and concluding that the same rules will apply under Turkish competition law. Additionally, the board discussed the basic principles of legal professional privilege, considering its definition, scope, enforcement and boundaries, in Dow (15-42/690- 259, 2 December 2015) and Enerjisa (16-42/686-314, 6 December 2016). Accordingly, if a document includes correspondence between the undertaking and external counsel (who is not an employee of the undertaking) and relates to the exercise of the undertaking's right of defence, that document will be protected under attorney-client privilege. Accordingly, if the document includes counsel's advice regarding how to infringe competition law or how to cover up an infringement, this will not be protected by privilege.
That said, the Eighth Administrative Chamber of the Ankara Regional Administrative Court issued a unique decision on attorney-client privilege in 2018 (Enerjisa, 2018/1236, 10 October 2018). The decision concerned an internal review report of outside counsel for competition law compliance purposes, which had been prepared before the authority opened an investigation against Enerjisa. The report was taken by the case handlers during a dawn raid conducted in the scope of the investigation against this company at a later stage. The court held that although the document was correspondence "between an independent attorney and the undertaking", it was not protected under attorney-client privilege given that "it was not directly related to the right to defence", due to its preparation prior to an investigation.
3.8 Are details of the investigation publicly announced? If so, what principles of confidentiality apply?
Article 53 of Law 4054 provides that "Decisions of the Board are published on the website of the Authority in such a way not to disclose the trade secrets of the parties". That said, undertakings must request confidentiality from the Competition Authoroty and justify their reasons for the confidentiality of the information or document in writing. The authority may not consider confidentiality requests relating to information and documents that are indispensable as evidence of competition infringement. In such cases, the authority may disclose such information and documents that could be considered as trade secrets, by taking into account the balance between the public interest and private interest, and in accordance with the principle of proportionality.
4 Investigations – step by step
4.1 What initial steps do the enforcement authorities take to commence a cartel investigation?
See question 3.1. During a preliminary investigation, unless there is a dawn raid, the undertakings concerned are not notified that they are under investigation. Dawn raids and other investigatory tools (eg, formal information request letters) are used during this preliminary investigation process. At the end of this preliminary stage, a preliminary investigation report of the case handlers will be submitted to the Competition Board within 30 days of a pre-investigation decision being taken by the board. The board will then decide within 10 days whether to launch a formal investigation. If the board decides to initiate an investigation, it will send notice to the undertakings concerned within 15 days.
Although this is exceptional in practice, the board may also initiate a full investigation directly without a preliminary investigation. The board has opened a direct investigation in only a few instances, such as the investigation against Türk Telekomünikasyon Aª (02-60/755-305, 2 October 2002).
4.2 Are dawn raids commonly conducted in your jurisdiction? If so, what are the pre-conditions for conducting a dawn raid? When, where and by whom are they conducted? Do the enforcement authorities have the power to search private as well as company premises?
See Question 3.2.
Pursuant to Article 15 of Law 4054, the Competition Authority can conduct dawn raids "at undertakings and associations of undertakings". This should be (and is in practice) interpreted as the company premises only, since Article 21 of the Turkish Constitution provides that no domicile may be entered or searched without a warrant from a court on certain grounds, or unless there is a written order of an agency authorised by law in cases where delay is prejudicial, again on certain grounds. Also, the decision of the competent authority shall be submitted for the approval of the court. The authority is not among the agencies authorised to search premises.
4.3 What powers do officers have during the dawn raid? Are there any limitations on these powers?
See question 3.2.
4.4 What are the rights and obligations of the target company and any individuals targeted during a dawn raid?
As explained in question 3.2, Law 4054 requires the relevant undertaking's employees to provide oral explanations during dawn raids, although case handlers will allow a delay in responding so long as there is quick written follow-up correspondence. Therefore, in practice, employees can avoid providing answers during dawn raids on information they are not certain of at the time, provided that a written response is submitted within a mutually agreed timeframe.
The relevant parties have a right to legal counsel. The company's legal counsel can be present in order to supervise the inspection. Counsel may be a company lawyer and/or an independent lawyer. That said, case handlers of the Competition Authority who conduct the dawn raid are not obliged to wait for the undertaking's counsel to assist with the dawn raid. Indeed, in a recent decision (Çekok Gýda, 18-04/56-31, 08 February 2018) in which the board imposed a fine on an undertaking for obstructing a dawn raid, the board dismissed an argument that the delay was caused by the wait for external counsel to arrive.
4.5 What evidence can be seized during a dawn raid? Do the enforcement authorities have the power to interview witnesses and take statements during a dawn raid?
See question 3.2.
4.6 How can a company best prepare itself for dawn raids? What best practices should it follow in the event of a dawn raid?
In order to avoid the risk of an administrative monetary fine, case handlers should be allowed to access business premises and examine the books, paperwork and documents of undertakings, and if necessary take copies of the same without prejudice to attorney-client privilege.
As stated in question 4.4, the company's legal counsel can be present in order to supervise the inspection. The lawyer may be a company lawyer and/or an independent lawyer. During a dawn raid, legal counsel should assist the client without obstructing the inspection of the case handlers. In addition, legal counsel should supervise the inspection and intervene as necessary if case handlers exceed the scope of their authorisation during the dawn raid. The most common reasons for the intervention of legal counsel during a dawn raid include preventing the case handlers from obtaining documents that are protected by attorney-client privilege or outside the scope of the relevant investigation.
4.7 What are the next steps in the cartel investigation following a dawn raid? What timeframe do these typically follow?
If the dawn raid is conducted during a preliminary investigation, this investigation shall be completed within 30 calendar days of the date on which the Competition Board opens the preliminary investigation. At the end of this period, the case team will prepare a so-called ‘preliminary investigation report' for the board, explaining its findings and including its recommendation on whether to proceed with a full investigation. The board will decide whether to launch a full investigation within 10 calendar days. If the board decides to initiate a full investigation, it will send notice to the undertakings concerned. The parties then have 30 calendar days to submit their first written defence against the investigation notice. The investigation is completed within six months with the issue of the case team's investigation report (the equivalent of the European Commission's statement of objections). If deemed necessary, this period may be extended by the board for an additional period of up to six months.
Once the investigation report has been served on the parties, they have 30 calendar days to respond, extendable for another 30 days (second written defence). The case team then has 15 days to prepare an opinion concerning the second written defence. The parties will have another 30-day period to reply to the additional opinion (third written defence), which can be extended for an additional 30 days. Once the parties' responses to the additional opinion have been submitted to the authority, the investigation process will be completed (ie, the written phase of the investigation involving claim or defence exchange closes on submission of the third written defence).
After the third written defence, an oral hearing may be held ex officio or upon request by the parties. Oral hearings are held within between 30 and 60 days following completion of the investigation process under Communiqué 2010/2 on Oral Hearings Before the Board. The board will render its final decision within 15 calendar days of the hearing if an oral hearing is held or within 30 calendar days of completion of the investigation process if no oral hearing is held. Any appeal must be brought within 60 calendar days of official service of the reasoned decision. It usually takes around three to four eight months (from announcement of the final decision) for the board to serve a reasoned decision on the counterpart.
4.8 What factors will the enforcement authorities consider in assessing whether cartel activity has taken place?
The standard of proof applied by the Competition Board in considering whether a cartel exists is frequently criticised as too low. In order to prove an undertaking's participation in cartel activity, the board must demonstrate that there was such cartel activity or, in the case of multilateral discussions or cooperation, that the particular undertaking was a participant. The board has established an extremely low standard of proof concerning cartel activity, with a broad interpretation of the Competition Law and especially Article 4, which states that conduct whose object or effect is to restrict competition is prohibited. The standard of proof is even lower insofar as concerted practices are concerned. In practice, if parallel behaviour is established, a concerted practice might readily be inferred and the undertakings concerned might be required to prove that the parallel behaviour is not the result of a concerted practice, but is rather based on economic and rational business decisions. Law 4054 provides for a ‘presumption of concerted practice', which enables the board to bring an Article 4 case where price changes in the market, supply-demand equilibrium or fields of activity of enterprises resemble those in markets where competition is obstructed, disrupted or restricted. That said, in most decisions, the board has recognised that companies may consciously follow the commercial strategies of their competitors and, in the absence of communication between competitors regarding a collusion or exchange of commercially sensitive information, parallel conduct alone will be insufficient to meet the standard of proof for a cartel.
4.9 In case of a finding of cartel activity, can the company seek to negotiate a settlement, plea bargain or similar resolution? If so, what is the process for doing so?
The Competition Board does not enter into plea bargain arrangements. A mutual agreement on other liability matters (which would have to take the form of an administrative contract) has also not been tested in Turkey. Once enacted, amendments to Law 4054 are expected to introduce a form of settlement procedure.
5.1 Is a leniency programme in place in your jurisdiction? If so, how does this function?
A leniency programme has been in force in Turkey since 15 February 2009. The Regulation on Active Cooperation for Detecting Cartels sets out the main principles of immunity and leniency mechanisms. The Competition Authority Board also published the Guidelines on Explanation of the Regulation on Active Cooperation for Discovery of Cartels in April 2013 to provide guidance on the application of the leniency programme.
The leniency programme is applicable only for cartels as defined in question 1.5.
A cartel member may apply for leniency until the investigation report has been officially served on it. Depending on the timing of the application, the applicant may benefit from full immunity or a fine reduction.
The first cartel member to file an appropriately prepared application for leniency before the investigation report is officially served may benefit from full immunity. Employees and managers of the first applicant can also benefit from the full immunity granted to the applicant firm. However, the applicant must meet several conditions to receive full immunity from all charges. One of these is not to be the coercer of the reported cartel. If this is the case (ie, if the applicant forced the other cartel members to participate in the cartel), the applicant firm and its employees may receive only a fine reduction of between 33% and 100%. The other conditions are as follows:
- The applicant must submit information and evidence in respect of the alleged cartel, including the products affected, the duration of the cartel, the names of the undertakings party to the cartel, and specific dates, locations and participants of cartel meetings;
- The applicant must not conceal or destroy information or evidence relating to the alleged cartel;
- The applicant must end its involvement in the alleged cartel, except where otherwise requested by the assigned unit on the grounds that investigating the cartel would become complicated;
- The applicant must keep the application confidential until the end of the investigation, unless otherwise requested by the assigned unit; and
- The applicant must maintain active cooperation until the board has taken its final decision after the investigation is completed.
If an applicant does not qualify for full immunity, a fine reduction may still be available for applications filed before the investigation report is served. Accordingly, the second leniency applicant will be eligible for a reduction of 33% to 50%, the third leniency applicant will be eligible for a reduction of 25% to 33% and all other applicants will be eligible for a reduction of 16% to 25%. The same conditions for full immunity above also apply to fine reduction.
5.2 What are the benefits of applying for leniency, both for the first mover and for subsequent applicants?
See question 5.1.
Additionally, Amnesty Plus is available under Article 7 of the Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Limiting Competition and Abuse of Dominant Position. The fine to be imposed on an undertaking which cannot benefit from full immunity for this conduct can be reduced by one-quarter if it provides the information and documents specified in Article 6 of the Regulation on Active Cooperation for Detecting Cartels prior to the Competition Board's preliminary investigation decision in relation to another cartel.
5.3 What steps does a leniency application involve? What timeframe do these typically follow?
As stated in question 5.1, a cartel member may apply for leniency until the investigation report has been officially served. Although the Regulation on Active Cooperation for Detecting Cartels does not provide detailed principles on the ‘marker system', the authority can grant a grace period to applicants to submit the necessary information and evidence. For the applicant to be eligible for a grace period, it must provide minimum information concerning the affected products, the duration of the cartel and the names of the parties. A document (showing the date and time of the application and a request for time to prepare the requested information and evidence) will be given to the applicant by the assigned unit.
5.4 What are the rights and obligations of the applicant during the leniency application and over the course of its cooperation with the enforcement authorities?
According to the principles set forth under the Regulation on Active Cooperation for Detecting Cartels, the applicant (ie, the undertaking or employees or managers of the undertaking) must keep the application confidential until the end of the investigation, unless otherwise requested by the Competition Authority. The same level of confidentiality also applies to subsequent cooperating parties.
Nevertheless, to the extent that the confidentiality of the investigation will not be harmed, the applicant undertakings can provide information to other competition authorities and institutions, organisations and auditors. The applicant is in any case obliged to maintain active cooperation until a final decision is taken by the Competition Board following the conclusion of the investigation. As per paragraph 44 of the Guidelines on Explanation of the Regulation on Active Cooperation for Discovery of Cartels, if the employees or personnel of the applicant undertaking disclose the leniency application to other undertakings and thus breach confidentiality, the board will evaluate the situation on a case-by-case basis based on whether the person at issue is a high-level manager and whether the board was notified promptly of the breach.
While the board can also evaluate information and documents ex officio, the general rule is that information and documents that are not requested to be treated as confidential will be treated as non-confidential. Undertakings must request confidentiality from the board in writing and justify their reasons for the confidential nature of the information or documents that are requested to be treated as commercial secrets. Non-confidential information may become public through a reasoned decision, which is typically announced within three to four months of the board deciding on the case.
Since active cooperation is required of all applicant cartel members in order to benefit from the leniency or immunity granted by the board, extra effort should be spent on keeping the board informed to the fullest extent possible regarding the cartel that is subject to investigation.
As regards settlement, plea bargaining and similar resolution procedures, see question 4.9.
5.5 Is the leniency programme open to individuals? Can employees or former employees benefit from a leniency application filed by their employer? Do the authorities operate a programme for individual whistleblowers separate to the leniency programme?
Pursuant to Articles 1, 4 and 5 of the Regulation on Active Cooperation for Detecting Cartels, employees of a cartelist also benefit from the same level of leniency or immunity that is granted to the entity if the relevant conditions set out in questions 5.1 and 5.2 are met.
An executive or employee of a cartelist may also apply for leniency before the investigation report is officially served. Such an application is independent from any application by the cartel member itself. Depending on the application order, there may be total immunity from fine, or a reduction in fine, for such executive or employee. The reduction rates and conditions for immunity or reduction are the same as those for companies.
5.6 Can leniency be denied or revoked? If so, on what grounds?
On the conditions which an applicant must meet to receive full immunity from all charges or a fine reduction, see question 5.1. If these conditions are not met, the board can reject or revoke leniency.
6 Penalties and sanctions
6.1 What penalties may be imposed in criminal proceedings on companies? What penalties may be imposed on individuals?
As explained in question 2.3, the sanctions that may be imposed under Law 4054 are administrative in nature. Therefore, Law 4054 leads to the imposition of administrative fines (and civil liability), but not criminal sanctions. That said, there have been cases where the matter had to be referred to a public prosecutor after the competition law investigation was complete. Bid rigging may be prosecuted under Sections 235 and following of the Turkish Criminal Code if it relates to public tenders. Illegal price manipulation (ie, manipulation through disinformation or other fraudulent means) can also be punished by up to two years' imprisonment and a civil monetary fine under Section 237 of the Turkish Criminal Code.
Law 4054 applies to ‘undertakings' and ‘associations of undertakings'. An ‘undertaking' is defined as a single integrated economic unit that is capable of acting independently in the market to produce, market or sell goods and services. Law 4054 therefore applies to individuals and corporations alike if they act as an undertaking.
The sanctions specified below may apply to individuals if they engage in business activities as an undertaking. Similarly, sanctions for cartel activity may also apply to individuals acting as the employees or board members/executive committee members of the infringing entities, if such individuals had a determining effect on the violation. Apart from these, there are no sanctions specifically for individuals.
For cartels, the board may impose a fine of up to 10% of the relevant company's Turkish turnover generated in the financial year preceding the date of the fining decision (or, if this is not available, the turnover generated in the financial year closest to the date of the fining decision). Employees and/or managers of an undertaking/association of undertakings who had a determining effect on the violation can also be fined up to 5% of the fine imposed upon the undertaking/association of undertakings.
6.2 What penalties may be imposed in civil proceedings on companies? What penalties may be imposed on individuals?
The most distinctive feature of the Turkish competition law regime is that it provides for lawsuits for treble damages. In this way, administrative enforcement is supplemented by private lawsuits. Articles 57 and following of Law 4054 entitle any party that is injured in its business or property by reason of anything forbidden in the antitrust laws to sue the violators for three times the damages plus litigation costs and attorneys' fees. If individuals engage in business activities as an undertaking or are held responsible due to their determining effect on the violation, a lawsuit for treble damages can be brought against them.
6.3 How are penalties in cartel cases determined? In deciding on the applicable penalties, will the enforcement authorities consider penalties imposed in other jurisdictions?
With reference to the Law on Minor Offences, Article 17 of Law 4054 requires the Competition Board to consider the following factors when determining penalties:
- the level of fault and the extent of possible damage in the relevant market;
- the market power of the undertaking(s) within the relevant market;
- the duration and recurrence of the infringement;
- the cooperation or driving role of the undertaking(s) in the infringement;
- the financial power of the undertaking(s); and
- compliance with any commitments.
The Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Limiting Competition and Abuse of Dominant Position sets out the methodology to calculate fines for anti-competitive conduct. According to the regulation, for cartels the basic fine will be between 2% and 4% of the company's turnover in the financial year preceding the date of the fining decision (or, if this is not available, the turnover generated in the financial year closest to the date of the fining decision); aggravating and mitigating factors are then factored in. The regulation also applies to executives or employees who have had a determining effect on the violation and provides for certain reductions in their favour.
In addition to monetary sanctions, the board is authorised to take all necessary measures to:
- terminate the restrictive agreement;
- remove all de facto and legal consequences of every action that has been taken unlawfully; and
- take all other necessary measures in order to restore the same level of competition and status as existed before the infringement.
Additionally, Law 4054 authorises the board to take interim measures until the final resolution on the matter if there is a possibility of serious and irreparable damage. Such a restrictive agreement is void and unenforceable, with all its legal consequences.
The board does not take into account penalties imposed in other jurisdictions, as well as overlapping liability for damages in other jurisdictions.
6.4 Can a defendant company pay the legal costs incurred by and/or penalties imposed on its employees?
There is no statutory law which prohibits a defendant company from paying the legal costs incurred by and/or penalties imposed on its employees. However, legal compensation of the employer will not result in the transfer of the legal liability for the costs incurred or fines imposed.
7.1 Can the defendant company appeal the enforcement authorities' decision? If so, which decisions of the authority can be appealed (eg, all decisions or just the final decision) and to which reviewing authority? What is the standard of review applied by the reviewing authority (eg, limited to errors of law or a full review of all facts and evidence)?
As per Law 6352, which entered into force as of 5 July 2012, final decisions of the Competition Board, including decisions on interim measures and fines, can be submitted to the administrative courts for judicial review within 60 days of the receipt of the board's reasoned decision. Decisions of the board are considered administrative acts and thus legal actions against them shall be pursued in accordance with Law 2577 on Administrative Procedure. The judicial review comprises both procedural and substantive review.
As per Article 27 of Law 2577, filing an administrative action does not automatically stay execution of the decision of the board. However, upon the request of the plaintiff, the court, by providing its justifications, may decide to stay execution of the decision if this is likely to cause serious and irreparable damage and the decision is highly likely to be against the law (ie, showing of a prima facie case).
Judicial review before the Ankara administrative courts usually takes about eight to 24 months. Decisions of the Ankara administrative courts are subject to appeal before the regional courts (appellate courts) and the Council of State. If the challenged decision is annulled in full or in part, the administrative court will remand it to the board for review and reconsideration.
After the legislative changes, administrative litigation cases will become subject to judicial review before the newly established regional courts (‘appellate courts'). The new legislation has created a three-level appellate court system consisting of administrative courts, regional courts (appellate courts) and the Council of State. The regional courts will go through the case file on both procedural and substantive grounds, investigate the file and make their decision considering the merits of the case. The regional courts' decisions will be considered final.
However, decisions of the regional courts will be subject to review by the Council of State in exceptional circumstances, which are set forth in Article 46 of Law 2577. In this case, the decision of the regional court will not be considered final. In such case the Council of State may decide to uphold or reverse the regional court's decision. If the decision is reversed by the Council of State, it will be remanded to the regional court, which in turn will issue a new decision which takes into account the Council of State's decision.
It takes approximately one to two years for the regional courts to finalise their review of a file. Appeal before the Council of State usually takes about 24 to 36 months. Decisions of courts in private suits can be appealed to the Supreme Court of Appeals. The appeal process in private suits is governed by the general procedural laws and usually lasts 24 to 30 months.
An appeal is typically initiated by the infringing party or parties in cases where the board finds a violation, or by complainants if there is no finding of a violation. The Competition Authority also has the right to challenge a court decision.
7.2 Can third parties appeal the enforcement authorities' decision, and if so, in what circumstances?
Pursuant to Article 2(1a) of Law 2577, anyone - including a third party - can appeal the Competition Authority's decisions if it can prove an interest.
Third parties can also join appeal proceedings, subject to the relevant court's approval, if they have sufficient interest in the case. Pursuant to Article 66 of Code 6100 on Civil Procedure, to which Law 2577 refers on the intervention of third parties in appeals of administrative decisions, if a third party has a legitimate interest in the outcome of proceedings pending before the court and its rights will be directly affected by the outcome of the proceedings, it may seek to join the ongoing proceedings as an intervening party until a final decision is rendered. If the third party's legal interest will be affected by the ruling of the court, the intervention request should be deemed appropriate.
8 Private enforcement
8.1 Are private enforcement actions against cartels available in your jurisdiction? If so, where can they be brought?
See questions 1.3 and 6.2.
8.2 Can private enforcement actions be brought against both companies and individuals?
As stated in question 2.4, both individuals and companies may violate competition law if they act as an undertaking within the meaning of Law 4054. Thus, if individuals engage in business activities as an undertaking and injure someone by reason of anything forbidden in the antitrust laws, a lawsuit for treble damages can be brought against them.
8.3 Are class actions or other forms of collective action available in your jurisdiction?
Turkish procedural law does not allow for class actions or procedures. Class certification requests are granted by the Turkish courts. While Article 73 of Law 6502 on the Protection of Consumers allows for class actions by consumer organisations, these are limited to violations of Law 6502 on the Protection of Consumers and do not extend to antitrust infringements. Similarly, Article 58 of the Turkish Commercial Code enables trade associations to bring class actions against unfair competition behaviour, but this has no reasonable relevance to private suits under Articles 57 and following of Law 4054.
Turkish procedural law allows for group actions under Article 113 of the Turkish Procedure Law 6100. Associations and other legal entities may initiate a group action to "protect the interest of their members", "to determine their members' rights", and "to remove the illegal situation or prevent any future breach". However, group actions do not cover actions for damages. A group action can be brought before the court as a single lawsuit only. The verdict shall encompass all individuals within the group.
8.4 What process do private enforcement actions follow?
The case must be brought before the competent general civil court. As a general rule, plaintiffs or defendants can appeal decisions of the general civil courts before the regional courts of civil chambers within two weeks of the reasoned general civil court's decision. Parties to the lawsuit can also appeal the decision of regional courts of civil chambers within two weeks of the reasoned appealable decision before the High Court of Appeal.
8.5 What types of relief may be sought and what types of relief are most commonly awarded? How is the relief awarded determined?
As stated in question 6.2, Articles 57 and following of Law 4054 entitle any person that is injured in its business or property by reason of anything forbidden in the antitrust laws to sue the violators for three times the damages plus litigation costs and attorneys' fees. In practice, courts usually do not analyse whether there has been a condemnable agreement or concerted practice, and instead wait for the Competition Board to render its opinion on the matter, therefore treating the issue as a prejudicial question. Since courts usually wait for the board to render its decision, a court decision can be obtained within a shorter timeframe in follow-on actions.
Claims for damages arising from competition law are ultimately subject to the general tort rules - that is, the Turkish Code of Obligations. Accordingly, in order for a private tort claim to be accepted by the court, the following four conditions must be cumulatively met:
- existence of an illegal act;
- damage; and
- causal link.
In Competition Authority proceedings, the purpose or intent to restrict competition is considered adequate to prove infringement of Law 4054. In civil actions, however, the plaintiff must demonstrate all elements of wrongful act, fault, damage and casual link.
As private action arising from competition law violations is a relatively new concept in Turkish competition law, there are as yet no publicly available court decisions which have exhausted all appeal stages.
8.6 Can the decision in a private enforcement action be appealed? If so, to which reviewing authority?
Yes; see question 8.4.
9 Trends and predictions
9.1 How would you describe the current cartel enforcement landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?
The major development expected in relation to the Turkish competition law regime is the adoption of the draft law amending Law 4054.
Currently, another significant expected development is the introduction of the Draft Regulation on Administrative Monetary Fines for the Infringement of Law 4054, which is set to replace the Regulation on Monetary Fines for Restrictive Agreements, Concerted Practices, Decisions and Abuse of Dominance. There is no anticipated date for the enactment of the draft regulation, which is heavily inspired by the EU guidelines on the method of setting fines set out in Article 23(2)(a) of EU Regulation 1/2003. Thus, the introduction of the draft regulation clearly demonstrates the Competition Authority's intention to bring the secondary legislation into line with EU competition law during the harmonisation process. The draft regulation was sent to the Turkish Parliament on 17 January 2014, but no enactment date has as yet been announced.
10 Tips and traps
10.1 What would be your recommendations to companies faced with a cartel investigation and what potential pitfalls would you highlight?
An undertaking facing a cartel investigation should immediately consult attorneys with extensive experience in Competition Authority investigations in order to safeguard their right to defence and commence a self-compliance procedure regarding Law 4054. Additionally, the undertaking should cooperate with the authority to the fullest extent possible and should not obstruct a dawn raid.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.