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Amendments Passed on Turkish Competition Law

Amendments Passed on Turkish Competition Law

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After rounds of revisions and failed attempts of enactment over a span of several years, the proposal for an amendment to the Law No. 4054 on Protection of Competition (“Law no. 4054”) (“Amendment Proposal”) has finally been approved by the Turkish parliament, namely the Grand National Assembly of Turkey, yesterday.

The latest version of the proposal was submitted to the parliament on May 15, 2020. On June 16, 2020, the amendments passed through the parliament but not yet entered into force. While the final version of the amendments as enacted is yet to be seen, the Amendment Proposal provides an insight as to the novelties we can expect from the new law in a nutshell.

According to the recital of the Amendment Proposal, these amendments aim at reflecting in the Law no. 4054 the Authority’s experience in over 20 years of enforcement and bringing Turkish competition law closer to the EU law. The Amendment Proposal essentially (i) clarifies certain mechanisms in the Law no. 4054 which might have led to legal uncertainty in practice to a certain extent, and (ii) introduces new mechanisms as to the selection of cases for the Authority to focus on, a new substantive test for merger control, behavioral and structural remedies for anti-competitive conduct and procedural tools enabling the Board to end its proceedings in certain cases without going the whole nine yards when the parties opt for commitments or settlement. The Amendment Proposal also includes certain provisions concerning the organizational structure and personnel of the Authority.

The most prominent changes introduced by this proposal are as follows:

De minimis principle

One of the most important amendments in the proposal is the introduction of the “de minimis” principle. With this amendment, the Turkish Competition Board (“Board”) will be able to decide not to launch a full-fledged investigation for agreements, concerted practices and/or decisions of association of undertakings which do not exceed the market share and turnover thresholds that will be determined by the Board. This principle will not be applicable to hard-core violations such as price fixing, territory or customer sharing and restriction of supply.

With this new mechanism, the Turkish Competition Authority (“Authority”) appears to aims steering its direction, as well as public resources, to more significant violations.

SIEC test

In line with the EU law, the Amendment Proposal replaces the current dominance test with the “significant impediment of effective competition” (SIEC) test. This amendment aims to allow a more reliable assessment for the unilateral and cooperation effects that might be arose as a result of mergers or acquisitions. With this new test, the Board will be able to prohibit not only transactions that may result in creating a dominant position or strengthening an existing dominant position, but also those that can significantly impede competition.

Behavioral and Structural Remedies for Anti-competitive Conduct

The Amendment Proposal aims to grant the Board the power to order structural remedies for anti-competitive conduct infringing Articles 4, 6 and 7 of the Law No. 4054, provided that behavioral remedies are first applied and failed. Both behavioral and structural remedies should be proportionate to and necessary to end the infringement effectively.

Settlement and Commitment

The Amendment Proposal introduces two new mechanisms that are inspired by the EU law and aim to enable the Board to end investigations without going through the entire pre-investigation and investigation procedures.

The first mechanism is the commitment procedure. It will allow the undertakings or association of undertakings to voluntarily offer commitments during a preliminary investigation or full-fledged investigation to eliminate the Authority’s competitive concerns in terms of Articles 4 and 6 of the Law No. 4054, prohibiting restrictive agreements and abuse of dominance. Depending on the sufficiency and the timing of the commitments, the Board can decide not to launch a full-fledged investigation following the preliminary investigation or to end an on-going investigation without completing the entire investigation procedure. However, commitments will not be accepted for violations such as price fixing between competitors, territory or customer sharing or and the restriction of supply. The Board will provide the details of these new procedures by secondary legislation. Additionally, the Board may reopen an investigation in the following cases: (i) substantial change in any aspect of the basis of the decision, (ii) the relevant undertakings’ non-compliance with the commitments, (iii) realization that the decision was decided on deficient, incorrect or fallacious information provided by the parties.

Second, the Amendment Proposal also introduces the settlement procedure. This would enable the Board, ex officio or upon parties’ request, to initiate the settlement procedure. Parties that admit an infringement can apply for the settlement procedure until the official service of the investigation report. The Board will set a deadline for the submission of the settlement letter and if settled, the investigation will be closed with a final decision including the finding of a violation and administrative monetary fine. If the investigation ends with a settlement, the Board can reduce the administrative monetary fine by up to 25%.

On-Site Investigation Process

The Amendment Proposal also includes an explicit provision that during on-site inspections, the Authority can inspect and make copies of all information and documents in companies’ physical records as well as those in electronic space and IT systems, which the Authority already does in practice. This is also confirmed in the Amendment Proposal’s preamble as it indicates that the amendment serves “further” clarification on the powers of the Authority which are particularly important for discovering cartels.

Self-Assessment Procedure

Before the amendment, Law No. 4054 stipulated that the Board may individually exempt certain agreements, concerted practices and decisions of associations of undertakings, which left it somewhat unclear whether “self-assessment” is applicable. The amendments aim to provide legal certainty as to the individual exemption regime by clarifying that the “self-assessment” principle applies to agreements (as well as concerted practices and decisions of associations of undertakings) that may potentially restrict competition. The option to apply to the Board for individual exemption is still available.

Time extension for the Authority’s Additional Opinion in Investigations

If the Amendment Proposal was accepted as is, certain changes are expected in the investigation procedures and the timelines with the amendments. This includes an option to double the time period for the submission of the Authority’s additional opinion (currently 15 days).

Conclusion

The Amendment Proposal contains elements that would help with the convergence of the enforcement of Authority with that in the EU. It is designed to be more compatible with the way the law is actually being applied and aims to further comply with the EU competition law legislation on which it is closely modelled and align with the amendments in the EU competition law. It introduces several new dimensions and changes which promise a procedure that is more efficient in terms of time and resource allocation as well as the amendments serving further clarification on the authorities of the Authority during on-site inspections. On the other hand, depending on whether or not the Amendment Proposal passed as is, the most significant discussion point would be if behavioral remedies necessarily have to be tried and proven to fail as a pre-condition for the Authority to be able to introduce structural remedies in a given matter.

By Gonenc Gurkaynak, Partner, ELIG Gürkaynak Attorneys-at-Law

ELIG Gürkaynak Attorneys-at-Law

ELIG Gürkaynak Attorneys-at-Law is an eminent, independent Turkish law firm based in Istanbul. The firm was founded in 2005. 

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