Enforcement proceedings in dominance in Turkey

Enforcement proceedings

Which authorities are responsible for enforcement of the dominance rules and what powers of investigation do they have?

The national competition authority for enforcing competition law in Turkey is the Competition Authority, a legal entity with administrative and financial autonomy and consists of the Competition Board, presidency and service departments. Five divisions with sector-specific work distribution handle competition law enforcement work through approximately 130 case handlers. A research department, a leniency unit, a decisions unit, an information-management unit, an external-relations unit, a management services unit and a strategy development unit assist the five technical divisions and the presidency in the completion of their tasks. As the competent body of the Competition Authority, the Competition Board is responsible for, inter alia, investigating and condemning abuses of dominance.

The Competition Board has relatively broad investigative powers. It may request all information it deems 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 fixed by the Competition Board. Failure to comply with a decision ordering the production of information or failure to produce in a timely manner may lead to the imposition of a turnover-based fine of 0.1 per cent of the turnover generated in the financial year preceding the date of the fining decision (if this is not calculable, the turnover generated in the financial year nearest to the date of the fining decision will be taken into account). Where incorrect or misleading information has been provided in response to a request for information, the same penalty may be imposed. The administrative monetary fine may not be lower than 26,027 lira for 2019.

Article 15 of Law No. 4054 also authorises the Competition Board to conduct on-site investigations. Accordingly, the Competition Board can examine the records, paperwork and documents of undertakings and trade associations and, if need be, take copies of the same; request undertakings and trade associations to provide written or verbal explanations on specific topics; and conduct on-site investigations with regard to any asset of an undertaking.

Law No. 4054, therefore, grants the Competition Authority vast authority to conduct dawn raids. A judicial authorisation is obtained by the Competition Board only if the undertaking concerned refuses to allow the dawn raid. While the mere wording of the law allows oral testimony to be compelled of employees, case handlers do allow delaying an answer so long as there is a quick written follow-up correspondence. Therefore, in practice, employees can avoid providing answers on issues that are uncertain to them, provided a written response is submitted in a mutually agreed timeline. Computer records are fully examined by the experts of the Competition Authority, including deleted items. Refusing to grant the staff of the Competition Authority access to business premises may lead to the imposition of fines.

What sanctions and remedies may the authorities impose? May individuals be fined or sanctioned?

The sanctions that could be imposed for abuses of dominance under Law No. 4054 are administrative in nature. In case of a proven abuse of dominance, the incumbent undertakings concerned shall be (each separately) subject to fines of up to 10 per cent of their Turkish turnover generated in the financial year preceding the date of the fining decision (if this is not calculable, the turnover generated in the financial year nearest to the date of the fining decision will be taken into account). Employees or members of the executive bodies of the undertakings or association of undertakings (or both) that had a determining effect on the creation of the violation are also fined up to 5 per cent of the fine imposed on the undertaking or association of undertakings. In this respect, Law No. 4054 makes reference to article 17 of the Law No. 5326 on Minor Offences and there is also a Regulation on Fines (Regulation No 27142 of 16 February 2009). Accordingly, when calculating fines, the Competition Board takes into consideration factors such as the level of fault and amount of possible damage in the relevant market, the market power of the undertakings within the relevant market, duration and recurrence of the infringement, cooperation or driving role of the undertakings in the infringement, financial power of the undertakings, compliance with the commitments and so on, in determining the magnitude of the monetary fine.

In addition to the monetary sanction, the Board is authorised to take all necessary measures to terminate the abusive conduct, to remove all de facto and legal consequences of every action that has been taken unlawfully, and to take all other necessary measures in order to restore the level of competition and status as before the infringement.

Additionally, article 56 of Law No. 4054 provides that agreements and decisions of trade associations that infringe article 4 are invalid and unenforceable with all their consequences. The issue of whether the ‘null and void’ status applicable to agreements that fall foul of article 4 may be interpreted to cover contracts entered into by infringing dominant companies is a matter of ongoing controversy. However, contracts that give way to or serve as a vehicle for an abusive conduct may be deemed invalid and unenforceable because of violation of article 6.

The highest fine imposed to date in relation to abuse of a dominant position is in the Tüpraş case where Tüpraş, a Turkish energy company, incurred an administrative monetary fine of 412 million lira, equal to 1 per cent of its annual turnover for the relevant year (Tüpraş, 17 January 2014, 4-03/60-24).

Can the competition enforcers impose sanctions directly or must they petition a court or other authority?

The Competition Board is entitled to impose sanctions directly. Article 27 of the Law No. 4054 deems taking necessary measures for terminating infringements and imposing administrative fines within the duties and powers of the Board. A preliminary approval or consent of a court or another authority is not required.

What is the recent enforcement record in your jurisdiction?

The recent enforcement trend of the Competition Authority showed that the Authority has directed its attention toward refusal to supply and exclusive dealing cases. The Competition Authority has conducted several pre-investigations and investigations with regard to refusal to supply. These instances include Daichii Sankyo (22 May 2018; 18-15/280-139), Türkiye Petrol Rafinerileri (12 June 2018; 18-19/321-157) pre-investigations and Zeyport Zeytinburnu (15 March 2018; 18-08/152-73) and Kardemir Karabük Demir Çelik (7 September 2017; 17-28/481-207) investigations. As for exclusive dealings, the Competition Authority has conducted several pre-investigations including Mars Media (18 January 2018; 18-03/35-22) and Frito Lay (12 June 2018; 18-19/329-163). Furthermore, the Competition Board has imposed a fine in the amount of 17.5 million lira in the investigation conducted against Trakya Cam for de facto application of the exclusive distribution agreements as of 2016, which have been determined to be in violation of articles 4 and 6 of Law No. 4054 through the Competition Board’s decision dated 2 December 2015 and numbered 15-42/704-258 (14 December 2017; 17-41/641-280).

The length of abuse of dominance proceedings depends on the specific dynamics of each case and the workload that the Competition Board has. However, it is fair to say that the average length of these proceedings from initial investigation to final decision is between one and one-and-a-half years.

Where a clause in a contract involving a dominant company is inconsistent with the legislation, is the clause (or the entire contract) invalidated?

Article 56 of Law No. 4054 ordains that any agreements and decisions of associations of undertakings, contrary to article 4 of Law No. 4054, are invalid and unenforceable with all their consequences. The agreement stands if the clause that is inconsistent with the legislation may be severed from the contract according to severability principles.

To what extent is private enforcement possible? Does the legislation provide a basis for a court or other authority to order a dominant firm to grant access, supply goods or services, conclude a contract or invalidate a provision or contract?

Private enforcement is available to the extent of seeking damages. However, Law 4054 does not envisage a way for private lawsuits to enforce certain behavioural and other remedies. Articles 9 and 27 of Law No. 4054 entitle the Competition Board to order structural or behavioural remedies in case of violation of article 6 of Law No. 4054. Failure by a dominant firm to meet the requirements so ordered by the Competition Board would lead it to initiate an investigation, which may or may not result in the finding of an infringement. The legislation does not explicitly empower the Competition Board to demand performance of a specific obligation such as granting access, supplying goods or services or concluding a contract through a court order.

Do companies harmed by abusive practices have a claim for damages? Who adjudicates claims and how are damages calculated or assessed?

A dominance matter is primarily adjudicated by the Competition Board. The Competition Board does not decide whether the victims of the abusive practices merit damages. These aspects are supplemented with private lawsuits. Pursuant to article 57 of Law No. 4054, real or legal persons that bear losses owing to distortion of competition might compensate the loss from the parties causing the loss. Article 58/1 of Law No. 4054 provides that the damage is the difference between the cost the injured parties paid and the cost they would have paid if competition had not been limited and thus, indicate that the actual losses suffered by the claimant would be subject to compensation. Furthermore, the same article stipulates that the competitors who were not involved in the competition law violation and suffered because of the violation may claim compensation for ‘all of their damages’ (ie, actual damages and loss of profit). Moreover, as for the damages exceeding the amount of the claimant’s loss, the most distinctive feature of the Turkish competition law regime is the rule of triple damages (also known as ‘treble damages’). As per article 58/2 of Law No. 4054, which regulates the treble compensation, is as follows: ‘If the resulting damage arises from an agreement or decision of the parties, or from cases involving gross negligence of them, the judge may, upon the request of the injured, award compensation by treble of the material damage incurred or of the profits gained or likely to be gained by those who caused the damage.’ In order for the application of the treble damages, (i) the damage should be the result of an agreement or decision of the parties, or an act of gross negligence of them; and (ii) only the material damage (and not moral) could be subject to compensation threefold. Besides, the damage should be actual damages. However, it should be noted that the issue regarding the enforcement method of the this article is controversial in practical terms. To wit, certain opinions in the doctrine argue that the judge can solely conclude a treble compensation if the conditions are fulfilled, thus a different multiplier cannot be used. Nevertheless, the prevailing opinion in the doctrine and the practice of the local courts are in the direction that the judge has discretion to conclude ‘up to’ treble compensation. There are decisions of courts of first instance where the court ruled for (i) onefold compensation (Istanbul 12th Consumer Court, 6 June 2017, 2016/82 E, 2017/220 K), (ii) twofold compensation (Istanbul Anatolian 4th Commercial Court of First Instance, 12 December 2017, 2015/1008 E. 2017/1325 K); and (iii) threefold compensation (Marmaris 1st Civil Court of First Instance in the capacity of Consumer Court, 14 November 2017, 2017/17 E, 2017/494 K).

Article 58 of Law No. 4054 determines the general rule to follow in the calculation of the damages (ie, ‘the difference between the cost the injured paid and the cost the injured would have paid if competition had not been restricted’). This is also called the ‘difference theory’. This reference specifically concerns the artificially increased prices that resulted from the competition law violations and aims to compensate the damage suffered by the purchasers who paid more than the normal price of a product because of the increase in the prices applied by the cartelists.

Most of the civil courts wait for the decision of the Competition Board in order to build their own decision on the Competition Board’s decision. The 19th Civil Chamber of the Court of Appeals has annulled the decision of the court of first instance, through its decision of 1 November 1999 (decision no. 99/3350 E, 99/6364 K) given that the action on damages based on the abuse of dominant position allegation was rendered without considering whether there was any application filed to the Authority and concluded that the application before the Authority should have been considered as a preliminary issue (also see 11th Civil Chamber of the Court of Appeals, 5 October 2009, 2008/5575 E, 2009/10045 K). The decision of the Competition Board is not binding on the court. However, the existence of a Competition Board decision becomes relevant in a number of aspects of civil litigation. The majority of private lawsuits in Turkish antitrust enforcement rely on refusal to supply allegations.

To what court may authority decisions finding an abuse be appealed?

Final decisions of the Board, including its decisions on interim measures and fines, can be submitted to judicial review before the administrative courts in Ankara by filing an appeal case within 60 days of receipt by the parties of the justified (reasoned) decision of the Board according to Law No. 2577. Decisions of the Competition Board are considered to be administrative acts, and thus legal actions against them shall be pursued in accordance with the Turkish Administrative Procedural Law. The judicial review comprises both procedural and substantive review.