Steps have been taken to implement the immunity regime and leniency programme introduced through the Regulation on Active Cooperation for Discovery of Cartels (the Leniency Regulation), which came into force on February 15 2009 (for further details please see "Regulations providing details of leniency programme and monetary fines enacted"). On February 19 2009 the Competition Authority announced, via its website, that a division had been delegated for the implementation of the regulation, later named the Cartel and On-Site Inspections Support Division.
Before the enacted amendment to Article 16 of the Law on the Protection of Competition (4054), Turkish competition legislation did not provide for an immunity regime or a leniency programme. Although the previous version of Article 16 gave effect to the mitigation of fines, total immunity from fines was impossible as the law had set a minimum fine amount for substantive infringements.
However, in contrast to the previous version of Article 16, paragraphs 6 and 7 of the amended version of the relevant clause were drawn up to give the Competition Board the right to grant total immunity to undertakings that engage in active cooperation with the board in cartel cases. The new version of the provision reads as follows:
"Taking into account the conduct, efficiency and timing of the cooperation and by providing explicit reasons, the Board may exempt the undertakings or association of undertakings or their managers or employees that actively cooperate with the Competition Authority in discovering an unlawful application from the application of the fines set forth in paragraphs 3 and 4 above or such fines could be mitigated accordingly.
The conditions for determining the amount of administrative monetary fines pursuant to this article, the conditions for immunity or mitigating factors and the rules and procedures for cooperation shall be governed by the regulations which shall be issued by the Competition Board."
The last sub-paragraph of the amended version of Article 16 required the board to issue the relevant secondary legislation with a view to setting out the main principles of immunity and leniency mechanisms as part of the ongoing trend of enriching the competition law legislation. The Leniency Regulation serves this purpose.
The basics of the regulation can be summarised as follows.
The leniency programme is available for 'cartelists'. The regulation does not apply to other forms of antitrust infringement. Section 3 of the regulation provides for a definition of 'cartel', which encompasses:
- price fixing;
- customer/supplier/market sharing;
- restricted output or imposition of quotas; and
- bid rigging.
The regulation empowers the board to institute and delegate a sub-division in charge of leniency and immunity and to deal with leniency applications and affairs (the Leniency Division).
A cartelist may apply for leniency before the investigation report is officially served. Depending on the application order, total immunity or a reduced fine may be offered. For example:
- the first incumbent firm to file an appropriately prepared application for leniency before the investigation report is officially served may benefit from total immunity. Employees and managers of the first applicant will also be totally immune. However, in order for total immunity to be awarded, the applicant must not be the ring-leader. If this is the case (ie, if the applicant has forced the other cartelists to participate in the cartel), the firm will receive a fine reduction of between 33% and 50% and the employees and/or managers will receive a reduction of between 33% and 100%;
- the second incumbent firm to file an appropriately prepared application will receive a fine reduction of between 33% and 50%. Employees and managers of the second applicant that actively cooperate with the authority will benefit from a reduction of between 33% and 100%;
- the third applicant will receive a reduction of between 25% and 33%. Employees and managers of the third applicant that actively cooperate with the authority will benefit from a reduction of between 25% and 100%; and
- subsequent applicants will receive a reduction of between 16% and 25%. Employees and managers of subsequent applicants will benefit from a reduction of between 16% and 100%.
The conditions for benefiting from immunity or a reduced fine are as follows:
- The applicant must submit:
- information about the products affected by the cartel;
- information about the duration of the cartel;
- the names of the cartelists;
- the dates, locations and participants of the cartel meetings; and
- any other information or documents concerning the cartel activity.
- The required information may be submitted verbally.
- The applicant must avoid concealing or destroying any information or documents about the cartel activity.
- Unless the Leniency Division decides otherwise, the applicant must stop taking part in the cartel.
- Unless the Leniency Division instructs otherwise, the application must be kept confidential until the investigation report has been served.
- The applicant must continue to cooperate actively with the authority until a final decision on the case has been rendered.
A manager or employee of a cartelist may also apply for leniency before the investigation report is officially served. Such an application will be independent from any applications made by the cartelist itself. Depending on the application order, the manager or employee may benefit from total immunity or a reduced fine. The reduction rates and conditions for immunity or reduced fines are the same as those mentioned above.
In the aftermath of the entry into force of the regulation, several leniency applications were submitted before the board. However, since leniency applications are confidential, only those applications that reflected the short and/or reasoned decisions of the board can be assessed here.
The most significant case in which the board considered leniency was Gaz Cartel,(1) in which BerkGaz was the first applicant to apply for leniency. Convinced that BerkGaz had provided sufficient documents and information and had fulfilled the other conditions set out in the regulation, the board granted it full immunity, despite the fact that new evidence uncovered during the on-site inspection had shed light on the investigation.
The second and most recent publicly available case(2) in which the board discussed leniency was the sodium sulphate case. It is understood from the board's short-form decision concerning the sodium sulphate, crystal sodium sulphate and raw salt market that one of the undertakings under investigation, Sodas Sodyum Sanayi AS, made a leniency application and received a reduction of one-third of the fine to be imposed. In addition, its general manager, Serdar Salanci, also applied for leniency and received a 50% reduction in his fine.
The Draft Guideline Regarding the Regulation on Active Cooperation for the Purpose of Discovery of Cartels(3) was published on June 15 2012 through the authority's website. The authority opened it to public discussion and comments, allowing commentators to submit their views in terms of the content of the guideline. Some of the below sections may create controversy and ambiguity; therefore, whether the authority adopts the guideline as it stands has been opened to public consultation remains to be seen.
The definition of 'cartel' in the Leniency Regulation has been kept as limited to its literal meaning. Many agreements or concerted practices that may be regarded as a violation of Article 4 of Law 4054 are not included such definition.
Article 4 provides as follows:
"Agreements and concerted practices between undertakings, and decisions and practices of associations of undertakings which have as their object or effect or likely effect the prevention, distortion or restriction of competition directly or indirectly in a particular market for goods or services are illegal and prohibited. Such cases are, in particular, as follows:
a) Fixing the purchase or sale price of goods or services, elements such as cost and profit which form the price, and any terms of purchase or sale,
b) Partitioning markets for goods or services, and sharing or controlling all kinds of market resources or elements,
c) Controlling the amount of supply or demand in relation to goods or services, or determining them outside the market,
d) Complicating and restricting the activities of competing undertakings, or excluding undertakings operating in the market by boycotts or other behaviour, or preventing potential new entrants to the market,
e) Except exclusive dealing, applying different terms to persons with equal status for equal rights, obligations and acts,
f) Contrary to the nature of the agreement or commercial usages, obliging to purchase other goods or services together with a good or service, or tying a good or service demanded by purchasers acting as intermediary undertakings to the condition of displaying another good or service by the purchaser, or putting forward terms as to the resupply of a good or service supplied."
Such a situation may create serious uncertainties and problems in practice. For example, an undertaking that is a party to an operation (eg, an information transfer in a manner that restricts competition) that is not explicitly listed under the definition of 'cartel' in the regulation, may submit an application within the scope of the regulation. Since there is a possibility that the authority may dismiss the application by stating that "the act subject to the application does not fall within the cartel definition provided by Leniency Regulation", an undertaking in such a situation may find that it has already exposed itself while trying to comply with the law, by revealing a violation with the purpose of realising its legal obligations, and could therefore be subject to serious penalties.
Both the regulation and the draft guideline provide that: "The ones applying to benefit from the Regulation should submit all the possessed information and documents regarding the cartel." Requiring "all" information from the undertaking in the initial phase is an exceptionally high standard and will stand in the way of leniency applications. Discretion and initiative should rest with the applicant; if new information and documents are later supplied in addition to those presented by the applicant, the applicant may be unable to benefit from the immunity or reduction. However, such measures should not be used against the client if information or a document is simply omitted. If the applicant has undertaken sufficient research within the undertaking and presented the findings, and does not conceal or destroy information or documents, then it should be eligible for immunity or reduction.
This is essential if the leniency programme is to succeed; leniency applications are akin to a contest in which undertakings make their first applications rapidly with the information and documents that they are able to gather for the initial phase. Nonetheless, undertakings are obliged to supply other information and documents under the obligation to cooperate. Setting the standards so high removes the necessity of on-site inspections or information document requests during the authority's investigation period, as the undertaking will have supplied "all" information and documents by this point.
Under the draft guideline, once the investigation report has been served, it will no longer be kept confidential. As it is widely known that applicants for leniency can be the target of civil actions, this provision is likely to create hesitation for those who intend to make a leniency application but are concerned that their identities may be disclosed. In Europe, especially since Pfleiderer,(4) the relation between the leniency programme and actions for damages has gained greater significance. Therefore, the maintenance of applicants' confidentiality will promote and contribute to the success of the programme, making applicants more willing to apply for leniency.
The regulation and draft guideline provide that:
"if perceived that the immunity is withdrawn on the grounds that conditions are not fulfilled or the applicant coerced the other undertakings that are members of the alleged cartel respected undertaking may be granted a reduction of fine by one thirds to half."
This clause may also create complications in practice and hinder the expected benefits of an efficient leniency mechanism, as the withdrawal of immunity or a reduction of imposed fines should be limited to exceptional conditions only, and such conditions should be clearly specified. As a policy of competition law, once an applicant has been granted immunity or a reduction in its fine, these may be withdrawn only in exceptional situations. When an application for leniency is regarded as insufficient for various reasons, it would discourage undertakings considering applying for leniency, as in effect it would have negative consequences.
The European Commission has withdrawn conditional immunity only in one case - Row Tobacco in 2005. Although there are two other cases for which the commission considered withdrawing immunity (the Exotic Fruit (banana) case in 2011 and the Chloroprene Rubber case in 2007), in its conclusion the commission opted not to withdraw the immunity due. Thus, in parallel with the other competition law regimes, the disqualification for immunity or reduction should be exceptional (ie, only where extraordinary reasons are present) and great care shall be shown during the review related to the issue.
As the above examples illustrate, the draft guideline is expected to be a useful tool for providing procedural hints in how to make a dignified leniency application. Opinions and comments on the draft guideline had to be submitted by June 6 2012 and the final version of the guideline is anticipated toward the end of 2012. Until such time, uncertainties will linger as to whether the drafters of the guideline will manage to address the ambiguities before it is published. In any event, it should be anticipated that there will be an increase in the number of leniency applications following publication of the formal guideline, as at least some of the uncertainties raised by the regulation will hopefully be resolved and explanations provided therewith.
As a relatively recently system introduced to the competition law regime, leniency (as set out under the regulation) is still under development. In comparison to its potential benefits, as well as the number of leniency applications pending in other jurisdictions such as the European Union and the United States, cases in which the relevant parties have applied for leniency remain rather minimal. It is anticipated that this will change in the near future, as the authority is close to enacting a guideline that will further clarify the regulation and consequently the application of leniency in cartel cases.
(2) Although the reasoned decision is not yet available, the board's short decision was published on May 16 2012 (2-24/711-199). For further details please see "Competition Board demonstrates increased interest in pricing behaviour".
(3) As of the date of publication of this update, the Guideline Regarding the Regulation on Active Cooperation for the Purpose of Discovery of Cartels is available only in draft format, as the authority has not promulgated the final version of the guideline.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.