New development
With the Official Gazette dated December 27, 2024 and numbered 32765, the Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Limiting Competition and Abuse of Dominant Position (“New Regulation“) was updated and entered into force on the same date.[1] As such, the TCA removed the regulation with the same title (“Former Regulation“), published in the Official Gazette dated February 15, 2009 and numbered 27142.[2]
According to the announcement published on the Turkish Competition Authority’s (“TCA”) website,[3] the reason behind this amendment in the penalty regime is the emergence of different types of infringements in parallel with the changes in the nature of the markets where competition law is applicable, business models of undertakings, and consumer preferences, and the addressees of competition law over the approximately 15-years period since the Former Regulation came into force. In this context, the TCA placed an emphasis on the spread of competition violations over a wide economic area due to the increase in the market power of large-scale global technology undertakings and the negative effects of violations through algorithms and data monopolization.
The New Regulation on Fines introduces significant changes in the penalty regime for competition law violations, which we explain in detail below.
a. Base Fine Rate
With the New Regulation, the TCA removed the distinction foreseen for “cartels” and “other violations” in the determination of the base fine in the Former Regulation. In parallel, the TCA also abolished the lower and upper limits of the base fine applicable to different types of violations (i.e., 2% to 4% for cartels and 0.5% to 3% for other violations). Thus, there will be no distinction in the calculation of the fine according to the type of violation, and there will also be no limitation on the base fine rate.
In the past, the TCA took into account various factors such as the market power of undertakings and the severity of the actual or potential damage caused by the infringement when determining the base fine. Yet, the New Regulation lists these factors in a non-exhaustive manner and the New Regulation omits the market power of the undertakings from these factors. However, the New Regulation provides that the TCA shall determine the initial fine rate by considering the actual or potential damage as well as whether the nature of the infringement is naked and/or hardcore. In this context, the TCA will consider the nature of the violation and its negative impact on competition in the new penalty regime. However, the regulation does not include a definition of naked and/or hardcore violation. Therefore, it is currently unclear whether this will be limited to types of violations that fall under the definition of “naked and hardcore violations” [4] in secondary legislation or whether the TCA will consider other types of violations within this definition.
Previously, if the violation lasted for 1 to 5 years and longer than 5 years, the TCA increased the base fine by 50% and 100%, respectively. The New Regulation shortens the time intervals relevant to the duration of the violation and adopts different increase rates for each year for violations lasted longer than 1 year up to 5 years. The New Regulation preserves the provision to double the penalty rate for violations lasted longer than 5 years. To demonstrate, under the new regime, the TCA shall increase the base fine rate by:
- 20% for violations lasted 1-2 years,
- 40% for violations lasted 2-3 years,
- 60% for violations lasted 3-4 years,
- 80% for violations lasted 4-5 years,
- 100% for violations lasted longer than 5 years.
b. Aggravating Factors
While the New Regulation removed the lower limit for an increase in the fine due to the aggravating factors in the Former Regulation, it maintained the upper limit. In addition, the although preserving the concept of recidivism, the new regulation, unlike the previous decisions of the Competition Board (“Board”), [5] foresees that the TCA will increase the base fine rate by up to onefold, if the same undertaking or association of undertakings violates Article 4 and/or Article 6 of the Law No. 4054 on the Protection of Competition again. Accordingly, while in the past, violations of Article 4, which prohibits anti-competitive agreements, and Article 6, which prohibits abuse of dominant position, were not subject to recidivism due to not being the same type of violation, it appears that with the new regulation, recidivism can be applicable in case of violations of different provisions of the law. In addition, while the Former Regulation stipulated that the relevant increase would be applied for each recurrence, the New Regulation removed the provision on the number of recurrences in line with the practice.
Furthermore, the TCA changed the expression of “maintenance of the cartel” after the decision to launch an investigation (in the Former Regulation) to “maintenance of the violation”, thereby paving the way for an increase in the fine in case the undertaking(s) continue to carry out the non-cartel offences, too.
In addition, the New Regulation defines as an aggravating factor, the presence of a decisive influence, which the TCA defines as having an indispensable function in the occurrence and/or maintenance of the infringement. While the TCA previously enforced the concept of decisive influence in fines on managers or employees of undertakings which had such influence in cartels, it appears that the TCA can now consider such influence in any type of violation and for undertakings themselves.
Moreover, reinforcing the third paragraph of Article 12 of the Regulation on Settlement Procedures Applicable in Investigations on Agreements, Concerted Practices and Decisions Restricting Competition Abuse of Dominant Position, which entered into force in 2021, the New Regulation provides that the TCA may increase the base fine rate up to onefold in case of violation of the confidentiality obligation in the first paragraph of the same article.
While the Former Regulation regulated failure to comply with commitments, failure to assist in the inspection and compelling other undertakings to violate as discretionary aggravating factors, these are present in the New Regulation.
Finally, the TCA clarified the calculation of the increase rate in the presence of more than one aggravating factors and it resolved that the it will apply the increase rate by summing up the increase rates and applying them to the base fine rate.
The purpose of all these regulations appears to be to sanction competition violations that harm consumer welfare more effectively and to deter future competition violations.
c. Mitigating Factors
The New Regulation abolished the lower and upper limits of the reduction rate available in case of mitigating factors, and left the reduction rate entirely to the Board’s discretion.
The New Regulation clearly draws the limits of the mitigating factors, which the TCA listed in a non-exhaustive manner in the past. In this framework, “assisting the inspection beyond the legal obligation”, which was one of the mitigating factors under the Former Regulation, is preserved in more detailed in the New Regulation. Accordingly, the TCA may reduce the fine in cases of assisting the on-site inspection by providing physical and/or technical means to ensure that the on-site inspection is completed in a shorter time or to be carried out more effectively, or submitting additional information or documents related to the subject of the inspection are voluntarily during the on-site inspection.
However, unlike the Former Regulation, the New Regulation does not list the following as mitigating factors: encouragement by of public institutions, voluntary payment of compensation, and termination of other violations. Instead, the New Regulation introduces limited participation in the infringement and the presence of foreign sales revenues within the annual gross revenues which is the basis for the monetary fine as mitigating factors. As discussed in the recent Board decisions,[6] this change indicates that the TCA will take into account total revenues of undertakings in fine calculation instead of domestic revenues, and consider having exports only as a reason for reduction in the fine.
d. Administrative Fines on Managers and Employees
The new regulation removes the distinction between cartel and other violations, and the managers or employees of the undertaking or association of undertakings who had decisive influence in any kind of violation may be subject to an administrative fine up to five percent of the fine imposed on the undertaking or association of undertakings.
e. Administrative Fine for Multiple Violations
Under the Former Regulation, in case of presence of multiple conducts in violation of competition law, the law required that these behaviors be independent of each other in terms of market, nature and chronological process for the TCA to impose separate fines for these conducts. The New Regulation stipulates that the TCA shall impose separate fines for each violation directly without requiring the presence of these conditions.
Conclusion
The New Regulation abandoned the approach of determining the base fine rate based on different types of violations, indicating that the TCA may punish non-cartel offences more severely depending on their negative impact on competition.
The New Regulation adopts a fair system by shortening the time intervals for increases based on the duration of the violation and adopting a gradual system. However, the most significant difference between the Former Regulation and the New Regulation is that Board has been granted very broad discretion in determining the subjective conditions of the violation, in other words, the initial rate of the base fine and the increase and reduction rates in terms of aggravating and mitigating factors. This may create uncertainty in terms of the predictability of the potential administrative fine until the Board’s case law on the New Regulation is established.
Finally, the New Regulation was published in the Official Gazette on 27.12.2024, and entered into force on the same date, without foreseeing a transition period. Therefore, it is understood that the New Regulation can also be applied within the scope of ongoing investigations.
[1] The Amended Regulation on Fines can be accessed here.
[2] The Former Regulation on Fines can be accessed here.
[3] The announcement can be accessed here.
[4] Naked and hardcore violation is defined as “agreements and/or concerted practices as well as decisions and practices of associations of undertakings on the following subjects, the goal of which is to directly or indirectly prevent, distort or restrict competition in the market for a good or service, or which have led or may lead to such effects: 1) Price fixing among competing undertakings, allocation of customers, suppliers, regions or trade channels, restriction of supply amounts or imposing quotas, collusive bidding in tenders, sharing competitively sensitive information including future prices, output or sales amounts; 2) fixing or determining minimum sales price of the buyer in a relationship between undertakings operating at different levels of a production or distribution chain.”
[5] For example; Turkcell, 10.01.2019, 19-03/23-10; Mey İçki, 16.02.2017, 17-07/84-34; Volkan Tourism, 19.07.2017, 17-23/384-167; Corporate Loans, 28.11.2017, 17-39/636-276; Türk Telekom, 09.06.2016, 16-20/326-146; Turkcell II, 23.12.2009, 09-60/1490-379.
[6] For example; Numil Gıda (Settlement), 30.06.2022, 22-29/483-192; Erbak Uludağ (Settlement), 05.10.2023, 23-47/897-317.
