The First Settlement Case in Turkish Competition Law

April 2022 Can Yıldız
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Introduction

The settlement mechanism has only recently been introduced to Turkish competition law practice. It entered into force with the amendment made to the Law on the Protection of Competition (“Law”) numbered 4054 on 16.06.2020, and has been in effect for less than two years. In this relatively short period of time, parties in a variety of cases under investigation received a penalty reduction based on reaching a settlement. However, the first settlement case that was reflected in the reasoned decisions of the Competition Board (“Board”) was the case that concluded with decision dated 05.08.2021 and numbered 21-37/524-258, published in late March 2022.

This investigation, which involved Türk Philips Ticaret A.Ş. (“Philips”), Dünya Dış Ticaret Ltd. Sti. (“Dünya”), Melisa Elektrikli ve Elektronik Ev Eşyaları Bilg. Don. İnş. San. Tic. A.Ş. (“Melisa”), Nit-Set Ev Aletleri Paz. San. ve Tic. Ltd. Şti. (“Nit-Set”) and GİPA Dayanıklı Tüketim Mamülleri Tic. A.Ş. (“Gipa”), was the first case that resulted in a settlement after all of the undertakings submitted their requests for settlement to the Competition Authority (“Authority”) and the requests were accepted by the Board. As it is the first concrete example of how the Board oversees the settlement procedure, the decision in question needs to be examined.

Scope of the Investigation and Procedural Steps

Philips, Dünya, Melisa, Nit-Set and Gipa are undertakings operating in the small household appliances market. In the investigation, which was initiated based on receiving complaints, the allegations against these undertakings were that they restricted the resale prices that their distributors and authorized dealers could charge, and prevented them from conducting sales over the internet.

It is well known that internet sales are principally considered to be “passive sales” from a competition law perspective. Therefore, restrictions imposed by suppliers on a buyers’ passive sales are considered vertical restraints which limit competition under Article 4 of Block Exemption Communiqué on Vertical Agreements No. 2002/2 and Article 4 of Law.

On 07.01.2021, after considering the findings obtained in the preliminary investigation, the Board launched its main investigation to determine whether the five undertakings listed above had violated Article 4 of the Law by intervening in the resale prices of their distributors and other authorized resellers, and restricting their internet sales.

Following the investigation decision of the Board, the investigated undertakings submitted their requests to submit commitments to the Authority in order to conclude the case without receiving any penalties. However, the Board did not accept these requests as the allegations were quite serious.

Subsequently, the investigated undertakings submitted their settlement requests to the Authority in May 2021. As a result of the settlement negotiations, the settlement proposals were submitted to the Authority in July. Then, with its interim settlement decisions dated 14.07.2021 and numbered 21-35/495-MUA, 21-35/496-MUA, 21-35/497-MUA, 21-35/498-MUA, 21-35/499-MUA, the Board determined the conditions of settlement. Subsequently, within the framework of the settlement proposals submitted by Philips, Dünya, Gipa, Melisa and Nit-set in July, it determined that it would be appropriate to conclude the investigation with a settlement.

Evaluations Regarding the Settlement Procedure

In general, when an investigation is concluded with a settlement, in the final decision of settlement, in addition to the elements that must be included in every reasoned decision according to Article 52 of the Law, the following additional elements that must be present:

a) The content of the allegations made against the party.

b) The nature and extent of the violation.

c) Evidence that forms the basis for the finding of violation about the party.

d) The administrative fine imposed on the party and the discount rate applied based on the settlement procedure.

e) The declaration that the party accepts the existence of the violation and the administrative fine.

When the decision is examined the following points become clear:

a) In the decision, it is clearly stated that the investigated allegations against the undertakings were (i) interfering with the resale prices of their buyers and (ii) restricting the internet sales of their buyers.

b) These violation allegations were examined in detail for each undertaking, and evaluations regarding the determination of the resale price were listed under paragraphs 73 and 160, and those regarding the prohibition of internet sales are listed under paragraphs 161 and 187. The Board evaluated the findings and provided explanations on how the undertakings committed the relevant violations.

c) Evidence regarding the violations is also extensively included in paragraphs 26 - 72 of the decision.

d) There are explanations regarding the discount rate to be applied to the parties and the administrative fine imposed under paragraphs 188-205 of the decision. Accordingly, the parties benefited from a discount in fines of 25% due to their settlement.

e) Finally, in paragraphs 206 – 213 of the decision, the conditions under which the parties had come to an agreement were discussed and it was stated that the investigated undertakings admitted to the existence and scope of the violation, accepted the maximum rate and amount of the administrative fine to be applied, and committed to not appealing against it.

Accordingly, within the framework of the interim decisions of the Board dated 14.07.2021 and the settlement proposals submitted by Philips, Dünya, Gipa, Nit-set and Melisa, the administrative fines calculated for each undertaking within the scope of the Penalty Regulation were reduced by 25% and the investigation was concluded with a settlement.

Conclusion

The examined decision is important in that it is the first settlement decision issued after the settlement mechanism was introduced to Turkish competition law. As a matter of fact, in the period before this decision, competition investigations could not be concluded early even if the investigated parties were willing to accept the allegations of a violation, and this was a situation that negatively affected the procedural economy for all stakeholders. This decision shows that the Board is open and willing to consider settlement applications and that it is possible to conclude an investigation early.

In addition, the decision reveals that it is possible for the investigated undertakings to settle even in cases with violations that are considered to be serious violations, such as fixing resale prices. The decision also constitutes a useful example for examining what elements must be present in the reasoned decisions issued in settlement cases.

An issue that needs to be emphasized is that even if an investigation process results in settlement, the determination of a violation and the related findings and evidence are also included in the settlement decision, as in an ordinary investigation decision. Considering that the undertakings lose their right to bring the violation finding and the administrative fines imposed before the courts once they settle, the inclusion of these findings and evidence in the decision is important in terms of compensation lawsuits that may be filed against the undertakings. As a matter of fact, it becomes considerably easier for third parties who prove that they have suffered injury to demonstrate the unlawfulness of a violation in compensation cases because the ability of the undertakings to refute this claim is significantly limited.

Another point to mention is that 25% is the maximum fine reduction that is permitted by the regulation in cases concluding with a settlement. Thus, this case illustrates that the Board is open to adopting and applying the highest possible remission rate of 25%. Therefore, it may be appropriate for undertakings with concrete evidence of violations stacked up against them to consider resorting to settlement.

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