26 June 2020
The long-awaited Law Amending the Law on Protection of Competition numbered 7246 (“Law No.7246”), has entered into force upon its publication in the Official Gazette numbered 31165 and dated 24 June 2020.
Pursuant to the reasoning of the Law No. 7246, the amendments aim to support innovation, research and development in line with the ideal of high efficiency and to provide a predictable environment suitable for investment opportunities.
With the amendments made to the Law on Protection of Competition No. 4054 (“Law”) which has been adopted in 1994, a novel structural framework is drawn in order to comply with the amendments made in the European Union legislation so far and to create a modern competition legislation.
With the Law No. 7246, there are fundamental amendments such as improving the legal certainty of the exemption regime by focusing on the self-assessment method, implementation of the settlement-commitment system, strengthening the diversity of tools in order to realize structural changes and clarification of the regime, integration of the “de minimis” principle, which has long been included in the European Union legislation, into the competition legislation and establishment of electronic and digital data search procedures etc. The details of the amendments are, of course, await further clarification by secondary regulations of the Competition Authority ("Authority") such as communiqués and guidelines and the Competition Board ("Board") decisions.
The key amendments to the law are briefly described below.
The wording of Article 5 of the Law has been amended to emphasize the “self- assessment” principle adopted in the reasoning. Accordingly, it is clearly stated that if the undertakings are convinced that the exemption criteria listed in the article are satisfied by them, they will, in principle, be exempt from the scope of Article 4. The possibility of application to the Board to obtain a conclusive decision on the applicability of the exemption to acts and behaviors which may be deemed within the scope of Article 4 is however, preserved.
By emphasizing “effective competition” in the wording of Article 7, “significant impediment to effective competition test” (SIEC) has been put forward as a determining criterion in the evaluation of the effects of mergers and acquisitions in place of the “dominant position test” which has been pertinent to this day. Henceforth, the subjective scope of the provision is extended. Nevertheless, it is specified in the reasoning that it would be appropriate to make use of past practices, considering that in most of the situations that result in a significant impediment to effective competition, there is usually also a case of dominant position.
With the paragraph inserted to Article 41 of the Law regulating the "preliminary inquiry" procedure, the principle of "de minimis" regarding the authority of the Board to not examine the agreements and practices which do not seriously affect the competition conditions, has been adopted. According to the amendment; Board has the discretion not to start investigation regarding the agreements and actions, concerted actions or decisions of association of undertakings; provided that they do not significantly restrict competition in the market according to the criteria such as market share and turnover. However, explicit and severe violations such as price fixing, sharing of territories or customers and restriction of supply among competitors are excluded from the scope of the provision. It is also stated that the principles regarding the implementation of the amendment will be determined under the communiqué to be issued by the Board.
It is introduced that, upon the detection of violations of Articles 4, 6 and 7 of the Law by the Board as per a request of the Ministry of Commerce or ex officio, behavioral measures will be applied by the Board in the first place, and if these measures fail then the Board will have the authority to apply binding structural measures in accordance with proportionality and necessity principles. It is envisaged that at least 6 months will be provided to undertakings to comply with the structural measures to be applied upon a final decision determining that the behavioral measures have not yielded the expected results. Structural measures are exemplified in the article in the form of notification of the behaviors that should be fulfilled or avoided for the establishment of the competition or transfer of shares and/or assets. Decisions by the Board on this issue will be enlightening in the acknowledgement of the possible consequences of the amended provision.
As per the amendment, the authority of on-site inspection of the Board has been extended to encapsulate all data kept electronically and obtaining copies of such data is permitted.
In the reasoning of the Law No. 7246, the necessity of harmonization of the Law with the European Union competition legislation is emphasized by referring to the Council Regulation (EC) No. 1/2003. However, Article 20/2/b of the Council Regulation (EC) No. 1/2003 regulates that the on-site inspections to be made by the board may be carried out on the books and other records to the extent that they are related to “the business”, not on all information and documents. In contrary to the regulation referred to, the relevant provision under the Law No. 7246 is broadly regulated in a manner to allow on-site inspections to be carried out on all information and documents.
It should be noted that although the procedures of on-site inspection and copying of information/documents exist under European Union legislation, it is also stated that such activities should be carried out in accordance with the purpose of the inspection.
In this regard, Article 25 of the Law titled “Prohibitions” should be noted. Pursuant to this provision, the members and staff of the Board cannot disclose and use in their own or others' interests the confidential information and trade secrets that they have learned during the implementation of the Law even if they have left their office. This obligation, which is not amended by the Law No. 7246, remains as the only guarantee available to protect trade secrets in the legislation.
The number of vice presidents of the Competition Authority has been increased to three and additional changes have been made regarding the organizational structure of the Authority, the staff and advancement to the position of expert of competition.
The Law No. 7246 has preserved the regulation that the President and members of the Board, and its personnel who commit offences about their offices shall be deemed civil servants under Article 60 of the Law which regulates the offences committed on the funds, paperwork and properties of the Authority. However, it has been added via a sentence that Article 104 of the Banking Law shall be applied by analogy for the criminal and civil liability of these persons.
Significant provisions on commitment and settlement procedures have been introduced through the amendment made to Article 43 of the Law, which regulates the commencement of investigation.
The relevant undertakings or associations of undertakings are entitled to submit commitments during the on-going preliminary inquiries or investigations. In case the Board concludes that competitive concerns are eliminated through such commitments, it may decide not to initiate an investigation or to finalize an on-going investigation through rendering such commitments binding for the undertakings or associations of undertakings. However, in cases of explicit and severe violations, the commitments shall not be admitted.
After rendering decision, it is possible to reopen an investigation in case:
Additionally, it has been introduced that the Board may apply a settlement procedure within the scope of an investigation. As per the relevant provision, following the commencement of the investigation, the Board, ex officio or upon the request of the parties, may decide to initiate the settlement procedure. While deciding that, the procedural benefits arising from the completion of the investigation process in an accelerated manner and differences of opinion regarding the existence or scope of the violation shall be considered. The Board may settle with the undertakings or associations of undertakings, against which an investigation has been initiated and which have accepted the existence and scope of the violation, until the notification of the investigation report.
As a result of the settlement procedure, the Board may reduce the administrative fine by up to twenty-five percent. In case the investigation is concluded with a settlement, no lawsuit can be initiated regarding the administrative fine and the subjects in the settlement letter.
Ece Güner Toprak
Burçak Kurt Biçer