Sanctions

Criminal sanctions

What, if any, criminal sanctions are there for cartel activity?

The sanctions that can be imposed under the Law on Protection of Competition No. 4054 of 13 December 1994 (the Competition Law) are administrative in nature. Therefore, the Competition Law leads to administrative fines (and civil liability), but no criminal sanctions. Cartel conduct will not result in imprisonment against individuals implicated. That said, there have been cases where the matter had to be referred to a public prosecutor before or after the competition law investigation was complete. On that note, bid rigging activity may be criminally prosecutable under section 235 et seq of the Turkish Criminal Code. Illegal price manipulation (manipulation through disinformation or other fraudulent means) may also be punished by up to two years of imprisonment and a judicial fine under section 237 of the Turkish Criminal Code.

Civil and administrative sanctions

What civil or administrative sanctions are there for cartel activity?

In the case of a proven cartel activity, the undertakings concerned will be 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 Turkish 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 that had a determining effect on the creation of the violation may also be fined up to 5 per cent of the fine imposed on the undertaking or association of undertakings. After the recent amendments, the new version of the Competition Law makes reference to article 17 of the Law on Minor Offences to require the Board to take mitigating and aggravating factors into account (eg, the level of fault and amount of possible damage in the relevant market, the market power of the undertakings within the relevant market, the duration and recurrence of the infringement, the cooperation or driving role of the undertakings in the infringement, and the financial power of the undertakings or the compliance with their commitments) in determining the magnitude of the monetary fine.

In addition to the monetary sanction, the Competition Board of the Competition Authority (the Board) is authorised to take all necessary measures to terminate the restrictive agreement, 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. Furthermore, such a restrictive agreement shall be deemed legally invalid and unenforceable with all its legal consequences. Similarly, the Competition Law authorises the Board to take interim measures until the final resolution on the matter in case there is a possibility of serious and irreparable damages.

In 2020, the Board fined a number of undertakings for hindering on-site inspections. In this respect, in its Groupe SEB İstanbul Decision (9 January; 20–03/31–14), Groupe SEB İstanbul was fined 0.05 per cent of its turnover generated in 2018 for hindering an on-site inspection. Similarly, the Board imposed a fine of 0.5 per cent upon Unilever for not granting access to Unilever’s email system for a search by using ‘eDiscovery’ for approximately eight hours during the on-site inspection. (Unilever Decision, 7 November 2019, 19–38/584–250)

In 2019, the total amount of fines imposed on undertakings that obstructed on-site inspection was 38,116,076.71 Turkish lira.

In 2017, the Board has levied administrative monetary fines within an investigation launched against 13 financial institutions, including local and international banks, active in Turkey’s corporate and commercial banking markets (28 November 2017, 17–39/636–276). The main allegations concerned the exchange of competitively sensitive information on loan conditions (such as interest and maturities) regarding loan agreements and other financial transactions. After an in-depth investigation lasting 19 months, the Board unanimously concluded that BTMU (which has since been renamed MUFG Bank), ING and Royal Bank of Scotland (which became a direct subsidiary of NatWest Holdings in 2019) violated article 4 of the Competition Law. The Board imposed administrative monetary fines on ING and RBS in the amount of 21.1 million Turkish liras and 664,000 Turkish liras, respectively, based on their annual turnovers in the 2016 financial year. However, the Board resolved that it would not impose an administrative monetary fine on BTMU, pursuant to the bank’s leniency application that granted it full immunity, and relieved the remaining 10 undertakings from paying administrative monetary fines.

Another decision in 2017 concerned allegations that 10 undertakings that were active in producing ready-mix concrete in Turkey’s İzmir region planned to artificial increase the prices of ready-mix concrete by entering into an anticompetitive agreement or concerted practice (22 August 2017, 17–27/452–194). The Board took into account that economic evidence showed the relevant undertaking was not involved in an anticompetitive agreement or concerted practices, and it is understood that the Board took the defendants’ view that it was implausible that the reached an arrangement within the alleged duration of the anticompetitive agreement, which was three months. The Board’s decision constitutes a good example that the undertakings subject to an investigation based on allegations of anticompetitive agreements or concerted practice can defend themselves using economic and legal evidence, even when they are under the presumption of having engaged in a concerted practice of article 4 of the Competition Law, and so shows the importance of economic evidence.

 

Civil actions

Numbers of civil actions are still rare but are increasing. The majority of private lawsuits in Turkish antitrust enforcement are based on allegations of refusal to supply and price manipulation. Civil damage claims are usually settled among the involved parties prior to a court rendering judgment.

Similar to US antitrust enforcement, the most distinctive feature of Turkish competition law is that it provides for civil lawsuits for treble damages, and so supplements administrative enforcement with private lawsuits. Articles 57 et seq of the Competition Law entitle any legal or real person injured in their business or property by reason of anything forbidden in the antitrust laws, to sue the violators for three times their damages, plus litigation costs and attorney fees. The case must be brought before the competent general civil court. In practice, courts do not usually engage in an analysis as to whether there is a condemnable anticompetitive agreement or concerted practice, and wait for the Board to render its opinion on the matter, therefore treating the issue as a pre-judicial question. As courts usually wait for the Board’s decision, the court’s decision can be obtained in a shorter period as compared to regular full judiciary processes in follow-on actions.

Guidelines for sanction levels

Do fining or sentencing principles or guidelines exist? If yes, are they binding on the adjudicator? If no, how are penalty levels normally established? What are the main aggravating and mitigating factors that are considered?

After the recent amendments, the new version of the Competition Law makes reference to article 17 of the Law on Minor Offences to require the Board to take 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, the duration and recurrence of the infringement, the cooperation or driving role of the undertakings in the infringement, the financial power of the undertakings, compliance with their commitments, etc, in determining the magnitude of the monetary fine. In line with this, the Regulation on Monetary Fines for Restrictive Agreements, Concerted Practices, Decisions and Abuse of Dominance (the Regulation on Fines) sets out detailed guidelines as to the calculation of monetary fines applicable in the case of an antitrust violation. The Regulation on Fines applies to both cartel activity and abuse of dominance, but illegal concentrations are not covered by the Regulation on Fines.

The Regulation on Fines states that fines are calculated by determining its base level. In the case of cartels, each undertaking’s fine is set at between 2 per cent and 4 per cent of its turnover in the financial year preceding the date of the fining decision; if this is not calculable, the turnover for the financial year nearest the date of the decision is used. Then aggravating and mitigating factors are factored in. Such factors are set forth in the Regulation on Fines.

Article 5/3, states that the amount of the fine may be increased by 50 per cent if a violation lasted between one and five years, and by 100 per cent if it lasted for more than five years, and article 6, allows for the base fine to be increased by 50 per cent to 100 per cent for each repetition of the violation and also further increased by one fold if the cartel is maintained after the notification of the investigation decision.

Aggravating factors are defined under article 6 in a non-exhaustive manner and accordingly, the base fine may also be increased by:

·     50 per cent to 100 per cent, if an undertaking’s commitments made regarding the elimination of competition problems raised within the scope of article 4 of the Competition Law have not been met;

·     up to 50 per cent, if an undertaking does not provide assistance with an investigation; and

·     up to 25 per cent in cases such as coercing other undertakings into the violation.

 

The provisioned increase for not providing assistance with the investigation differs from the administrative monetary fine set forth in article 16 of the Competition Law for undertakings that obstruct the investigation process by way of providing misleading information or documents or not providing any information or documents at all, or preventing or obstructing an on-site inspection. In such cases, the Board would impose a separate administrative monetary fine, for each instance of obstruction, which is separate from the final administrative monetary fine that is imposed at the end of the investigation process.

Mitigating factors are regulated under article 7 of the Regulation on Fines in a non-exhaustive manner (ie, the Board has flexibility in deciding what constitutes mitigating factors in each specific case). In this regard, the base fine may be reduced by 25 per cent to 60 per cent if:

  • the concerned undertaking, or association of undertakings:
    • provided assistance to the investigation beyond the fulfilment of their legal obligations;
    • provided evidence of public authorities encouraging, or other undertakings coercing, other undertakings to take part in the violation;
    • made voluntary payments of damages to those harmed;
    • voluntarily terminated other violations; or
  • the violating practices formed a very small part of the undertakings’ business, in relation to its annual gross revenue.

 

The Regulation on Fines also applies to managers or employees who held ringleader roles within the violation (eg, those participating in cartel meetings made decisions that would involve the company in cartel activity), and also provides for certain reductions in their favour when there are mitigating factors to the violation or the undertaking has provided assistance during the course of the investigation.

The Regulation on Fines is binding on the Competition Authority.

Compliance programmes

Are sanctions reduced if the organisation had a compliance programme in place at the time of the infringement?

Article 7 of the Regulation on Fines follows that the Board may reduce the base fine at a rate of 25 to 60 per cent if the undertakings or association of undertakings concerned prove certain facts such as provision of assistance to the examination beyond fulfilment of legal obligations, existence of encouragement by public authorities or coercion by other undertakings in the violation, voluntary payment of damages to those harmed, termination of violations and occupation of a very small share by practices subject to the violation within annual gross revenues.

Mitigating factors are regulated under article 7 of the Regulation on Fines in a non-exhaustive manner, in such a way that the base fine may be reduced by 25 per cent to 60 per cent if:

  • the concerned undertaking, or association of undertakings:
    • provided assistance to the investigation beyond the fulfilment of their legal obligations;
    • provided evidence of public authorities encouraging, or other undertakings coercing, other undertakings to take part in the violation;
    • made voluntary payments of damages to those harmed; or
    • voluntarily terminated other violations; or
  • the violating practices formed a very small part of the undertakings’ business, in relation to its annual gross revenue.

 

Regarding mitigating factors, there have been several cases where the Board considered the existence of a compliance programme as an indication of good faith (Unilever, 12–42/1258–410; Efes, 12–38/1084–343). However, recent indications suggest that the Board is disinclined to consider a compliance programme to be a mitigating factor. Although they are welcome, the mere existence of a compliance programme is not enough to counter the finding of an infringement or even to discuss lower fines (Frito Lay, 13–49/711–300; Industrial Gas, 13–49/710–297). In Industrial Gas, the investigated party argued that it had immediately initiated a competition law compliance programme as soon as it received the complaint letters, which were originally submitted to the authority. However, the Board did not take this into account as a mitigating factor. On the other hand, the Board’s Mey İçki decision (16 February 2017, 17–07/84–34) might be signalling a change in its perception of compliance programmes. The Board applied a 25 per cent reduction on the grounds that Mey İçki (a producer and distributors of spirits) ensured compliance with competition law by taking into account the competition law sensitivities highlighted by the Board before the Board issued its final decision. Similarly, in its Consumer Electronics decision (7 November 2016, 16–37/628–279), the Board applied a 60 per cent reduction to an undertaking due to its compliance efforts, since the undertaking amended its contracts before the final decision of the Board.

Director disqualification

Are individuals involved in cartel activity subject to orders prohibiting them from serving as corporate directors or officers?

The sanctions specified in terms of undertakings themselves may apply to individuals if they engage in business activities as an undertaking. Similarly, sanctions for cartel activity may also apply to individuals acting as an infringing entity’s employees or board or executive committee member if such individuals had a determining effect on the creation of the violation. Apart from these, there are no other sanctions specific for individuals. On that note, bid rigging activity may be criminally prosecutable under sections 235 et seq of the Turkish Criminal Code. Illegal price manipulation (ie, manipulation through disinformation or other fraudulent means) may also be punished by up to two years’ imprisonment and a civil monetary fine under section 237 of the Turkish Criminal Code.

Debarment

Is debarment from government procurement procedures automatic, available as a discretionary sanction, or not available in response to cartel infringements?

Bid riggers in government procurement tenders may face blacklisting (ie, debarment from government tenders) for up to two years under article 58 of the Public Tenders Law No. 4734. The blacklisting is decided by the relevant ministry implementing the tender contract or by the relevant ministry that the contracting authority is subordinate to or is associated with. It is a duty, not an option, for administrative authorities to apply blacklisting in cases of bid rigging in government tenders. Blacklisting is only applicable to bid rigging. It is not available in cases of other forms of cartel infringement.

Parallel proceedings

Where possible sanctions for cartel activity include criminal and civil or administrative penalties, can they be pursued in respect of the same conduct? If not, when and how is the choice of which sanction to pursue made?

Yes. The same conduct can trigger administrative or civil sanctions (or criminal sanctions in the case of bid rigging or other criminally prosecutable conduct) at the same time.

Law stated date

Correct on

Give the date on which the information above is accurate.

8 November 2020.