What’s New?
The Law on Amending the Law No. 4054 on the Protection of Competition (“Law No. 4054“) was published in the Official Gazette dated June 24, 2020 and No. 31165 and entered into force on the same day (“New Law“). Previously, the Law No. 4054 entered into force after being published in the Official Gazette dated December 13, 1994 and No. 22140.
Changes Brought by the Law
The New Law brings many innovative changes to competition law practices such as behavioral and structural measures; significant impediments to effective competition test in mergers and acquisitions; settlement and commitment procedures; and a de minimis exception. These changes are expected to streamline competition law enforcement and increase procedural efficiencies for both undertakings and the Competition Authority (“Authority“).
Significant changes ushered in by the New Law include:
“Significant Impediment to Effective Competition” (SIEC) Test in Mergers and Acquisitions: The New Law amends the first paragraph of Article 7 of the Law No. 4054 to introduce significant impediments to the effective competition test, in addition to the dominant position test during merger control review. This particular test is already being used in the competition law enforcement in the European Union. This test does not only evaluate the effects of a merger or acquisition in terms of creating or strengthening a dominant position; instead, transactions that may result in significant reductions of the effective competition in the market may fail to receive clearance from the Authority.
Competition Board’s Power to Issue Behavioral and Structural Remedies: The New Law amends the first paragraph of Article 9 of the Law No. 4054 so that the Competition Board (“Board“) may hand down behavioral and structural measures as a part of its judgments. This change empowers the Competition Board to order structural remedies such as transferring commercial activities, shareholding or assets of the undertaking. The amending provision includes an internal safeguard stating that structural remedies may be implemented only when (i) behavioral remedies requiring a certain course of conduct to be adopted or refrained were previously effected; (ii) the behavioral remedies failed to create the intended result; and (iii) the structural remedy should be proportionate and necessary for the effective termination of the violation in question. Finally, the amendment states that undertakings or association of undertakings will be permitted at least 6 months to carry out the structural remedies once the Competition Board issues a final decision to the effect that behavioral remedies have failed to create the intended result.
On-site Inspection Powers of Case Handlers: The scope of the on-site inspection power of the Competition Authority’s case handlers is further clarified with the amendment made to Article 15 of the Law No. 4054. In this context, experts will be able to examine undertakings’ books; any data and documents kept in the physical/electronic environment and information systems; and obtain copies and physical samples of these data and documents in the on-site inspections carried out by the experts of the Authority.
“De Minimis” Exception: The New Law amends Article 41 of the Law No. 4054 to provide that the Competition Authority may refrain from pursuing a violation of competition law in the form of an investigation if the violation does not noticeably harm the competition in the market. This exception is also available in the European Union competition law enforcement and is termed the “de minimis” exception. Clear and hardcore violations such as price setting, market or customer allocation, and restriction of supply cannot benefit from this exception. The purpose of the legislation is to serve procedural utility by focusing public resources on enforcement priorities as opposed to conduct failing to create a noticeable reduction on competition based on criteria such as market share and turnover.
Commitment and Settlement Procedures in Preliminary Inquiries and Investigations: The New Law amends Article 43 of the Law No. 4054 to add commitment and settlement procedures, available in the European Union jurisprudence, to the competition law legislation and enforcement.
- Submitting Commitments: An investigation may not be initiated or an investigation may be terminated on the undertaking or association of undertaking where the elimination of competition concerns arising under Articles 4 or 6 of the Law No. 4054 are deemed to be adequately addressed by the Competition Board after reviewing the investigated parties’ commitments in both depth and timing. Commitments will not be accepted for clear and hardcore violations such as price setting, market or customer allocation, and restriction of supply. The Board may re-open an investigation after accepting commitments if (i) there is a substantial change in the elements that form the basis of the decision; (ii) the undertakings or association of undertakings concerned are in violation of their commitments; or (iii) the decision had been made based on incomplete, incorrect or misleading information provided by the parties.
- Settlement Procedure: The Board can initiate settlement procedures based on parties’ requests or ex-officio after taking into account the benefits arising from the prompt completion of the investigation process and the differences in opinion regarding the existence or scope of the violation. Settlement may be completed until the investigation report is served on the investigated undertakings. A settlement will require establishing an infringement and an admission of guilt from the investigated party. The timeframe for the settlement will be set by the Board and settlement submissions made after the deadline will not be taken into consideration. The New Law states that administrative fines may be reduced by up to 25% if the settlement mechanism is used, and that secondary legislation will be provided on the procedure and substance of this mechanism. The parties are prohibited from appealing the administrative fine or matters included in the decision of the Board once the settlement procedure is completed.
Conclusion
The New Law takes great strides in expanding the Board’s review and bringing competition law in line with enforcement in the European Union through behavioral and structural remedies, commitments and settlement mechanisms. The amendments modernize legislation and strive to achieve procedural efficiency. It will be valuable to see how concerns about property rights and the market effects of structural remedies, as well as challenges to the protection of data privacy during the Authority’s on-site electronic reviews will play out during the implementation and enforcement of the changes.
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