Amendments in the Law on the Protection of Competition

July 2020 Zeynep Ezgi Yanarateş
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Law No. 7246 Amending the Law on the Protection of Competition, which has been in the draft phase for a long time (“Law No. 7246”) entered into force by being published in the Official Gazette dated 24.06.2020 and numbered 31165. Law No. 7246 brought important amendments to Law on the Protection of Competition numbered (“Law No. 4054”).

Law No. 7246 contains the most comprehensive amendments since the adoption of Law No. 4054, and deficiencies have been completed with the amendments. Law No. 7246 amends 12 Articles of Law No. 4054 regarding the undertakings and organizational structure of the Competition Authority ("Authority") and competition expertise.

The changes concerning particularly the undertakings are summarized, below:

Amendments were made to the exemption system

Article 4 of Law No. 4054 prohibits agreements and concerted practices between undertakings and decisions and practices of associations of undertakings that limit competition. The prohibition is not absolute, and if the conditions listed in Article 5 of Law No. 4054 are satisfied, undertakings may be exempted from the application of the provisions of Article 4.

Even though prior to the amendment, Article 5 of Law No. 4054 noted, "The relevant undertakings or undertakings of associations may apply to the Authority to be determined by the Board that the agreement, concerted action or decision of association of the undertaking under Article 4 meet the exemption conditions," it was changed to read, "In case of the existence of all of the conditions stated, below, the agreement, the concerted action and the decision of the association of undertakings are exempt from the application of the provisions of Article 4."

There are two important changes in this context. Firstly, the debate over whether the Authority has discretion to grant exemptions has ended. With Law No. 7246, it has been clarified that the agreements will be exempted from the application of the provisions of Article 4, if all of the conditions listed in Article 5 are present.

Secondly, since the phrase “may apply to the Authority,” has been removed with the amendment, it is now possible for the undertakings to apply to the courts for exemption.

It should be noted that it is possible for the undertakings to make a “self-assessment” if they believe that their agreements meet the conditions listed in Article 5. It is not obligatory to obtain permission from the Authority or the courts. However, in order to prevent an incorrect evaluation, if the undertakings wish to apply for exemption, they may both apply to the Authority or the courts.

In concentration analysis, instead of the dominant position test, a “significant impediment of effective competition” test is introduced

The first paragraph of Article 7 of Law No. 4054 has been changed with Law No. 7246 in a way that the effects that may result from the merger and acquisition transactions will be subject to a significant impediment of effective competition test.

While the dominance test was applied to the transactions submitted to the Authority prior to the amendment, now a significant impediment of effective competition test, which is currently applied in the European Union, will be put into effect. Within this context, being dominant or strengthening the existing dominant position are not stated as the only criteria in the evaluation of the effects of mergers and acquisitions, but they are stated as examples of situations wherein effective competition will significantly decrease.

In this case, it is appropriate to say that the limits of the test have been expanded since it is possible to intervene in the concentration processes that do not create a dominant position, or strengthen the current dominant position.

Competition Board (“Board”) is given the authority to apply structural measures

By changing the first paragraph of Article 9 of Law No. 4054, a regulation has been introduced that the Board may apply to structural measures in cases where behavioral measures do not yield results.

Structural measures known as division, decomposition, and separation of the undertakings may only be applied after applying behavioral measures, and determining that no results can be obtained through behavioral measures.

Authority's on-site inspection powers are expanded

With the amendment made in paragraph (a) of the first paragraph of Article 15 of Law No. 4054, the scope of the Board's authority during on-site inspections has been detailed to include the books, data and documents kept in the physical/electronic environment and the information systems of the undertakings.

The Authority conducts inspections in the undertakings and association of undertakings within the scope of the preliminary investigations and investigations carried out, and examines the computers, e-mails, agendas, Whatsapp correspondence of the employees of the undertakings. In this context, the Board has very extensive authority. With the amendment, the scope of the on-site inspection has become clear, and uniformity has been achieved between the application of the Board and the text of the Law.

De minimis rule

With Law No. 7246, the sub-paragraph, below, has been added to Article 41 of Law No. 4054:

"The Board may refrain from starting an investigation for the agreements, concerted actions and decisions of associations of undertakings that do not significantly restrict competition based on criteria, such as market share and turnover, except for clear and severe violations, such as price determination among competitors, territory or customer sharing, and restriction of supply. The procedures and principles regarding the implementation of this paragraph are determined by the communiqué issued by the Board.”

With the amendment, in line with European Union legislation, it has been decided that an investigation may not be initiated by the Board for some agreements, concerted actions and decisions of associations of undertakings that have a low impact on competition.

According to De-minimis Notice (2014 / C 291/01) being implemented in the European Union, if there is no serious and clear violation, and the total market share of undertakings that are parties to the violation is below 10% if they are competitors, and below 15% if they are not competitors, then they will not be subject to investigation. The principles regarding the implementation of the amendment in Turkey, such as market share and turnover of the undertakings, will be determined in the coming days by a communique issued by the Board.

Commitment and reconciliation mechanisms are introduced

Two important mechanisms brought by the amendments in favour of the undertakings are commitment and reconciliation mechanisms.

  • Commitment mechanism

Paragraph 3 of Article 9 of Law No. 4054 regulates that the Board may inform the undertakings or associations of undertakings in writing of its opinions concerning how to terminate the infringement. In this context, there are violations in which the Board sent an opinion without imposing a penalty. However, since the decisions of Article 9/3 have opinion value, there have been problems with the application of it.

With the commitment mechanism, the undertakings will have the opportunity to submit a commitment during a preliminary investigation and investigation within the scope of Law 4 of 4054 (agreements, concerted actions and decisions restricting the competition) and Article 6 (abuse of dominant position). If the commitments in question are deemed sufficient by the Board, it is possible for the Board to make these commitments binding, and decide not to open an investigation, or to terminate the current investigation.

However, in the case of severe violations, such as price determination amongst competitors, region or customer sharing, submission of a commitment is not accepted.

In addition, although it is possible to terminate the preliminary investigation or investigation with a commitment, if i) there is a substantial change in any element that constitutes the basis of the decision, ii) the related undertaking or association of undertakings acts contrary to the commitments, or iii) the decision is made based on incomplete, incorrect or misleading information submitted by the parties, an investigation may be re-opened.

  • Reconciliation Mechanism

Article 43 of the Law no. 4054 regulates that after the investigation is opened, until the notification of the investigation report, the Board may initiate the reconciliation process at the request of the relevant parties or ex officio for all violations, including the severe violations. Accordingly, the existence and scope of the violation must be accepted within the scope of reconciliation, and as a result of the reconciliation mechanism, up to a 25% reduction in administrative fines may be assessed. It is also regulated that if the investigation is terminated by the settlement mechanism, the parties may not apply to the court, and administrative fines, and the issues in the settlement agreement, cannot be the subject of the case. Secondary regulations on how to implement commitment and reconciliation mechanisms are expected to be explanatory.

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