The Competition Authority’s (“Authority“) Regulation on the Settlement Procedure for Investigations on Anticompetitive Agreements, Concerted Practices, Decisions and Abuse of Dominant Position (“Regulation“) was published in the Official Gazette dated 15 July 2021 and No. 31542 and entered into force on the same day. The settlement procedure has been introduced by the Law No. 7246 Amending the Law No. 4054 on the Protection of Competition (“Law No. 4054“), which entered into force on 24 June 2020, where the procedures and principles for the settlement procedure have been left to the regulation to be issued by the Turkish Competition Board (“Board“). In this regard, the draft regulation was announced on the Authority’s website on 18 March 2021 (“Draft Regulation“) and was opened to public opinion until 19 April 2021. You may find our legal alert on the Draft Regulation here. Following the public opinions on the Draft Regulation, the Regulation entered into force with the aim of saving on time and resources in investigations by concluding the investigation process rapidly and conclusively. Despite being quite similar to the Draft Regulation, the finalized version of the Regulation brings further clarifications and some changes on certain points.
What do the developments mean?
The Regulation is another effort of the Authority to harmonize the Turkish competition law regime with the EU. The Regulation aims to regulate the procedures and principles for the settlement mechanism applicable for the undertakings or associations of undertakings investigated for their conduct under Articles 4 and 6 of Law No. 4054, which prohibits restrictive agreements and abuse of dominance, respectively. The Regulation implements the following procedures and principles:
- Applicable for any kind of anticompetitive conduct: Unlike the de minimis exception and the commitment mechanism, which were also newly introduced by Law No. 7246, amending Law No. 4054 and further regulated through communiqués published recently, the settlement mechanism would be applicable for any type of violation falling under Articles 4 and 6 of Law No. 4054 and would not exclude clear and hardcore violations.
- The time limitation for settlement: In line with Article 43 of Law No. 4054, the Regulation provides that the Board could settle with the investigated parties, who accept the existence and scope of the violation, until the official service of the investigation report.
- Procedure for the initiation of the settlement process: The settlement procedure can commence after the initiation of an investigation based upon the investigated parties’ written request or ex officio by the Board. In case the investigated parties request a settlement, the Board may accept or reject the request, or may decide to invite the other investigated parties (if any) for settlement discussions. Differently from the Draft Regulation, the Regulation introduces that when the Board receives the parties’ request for settlement, if a more detailed investigation is required to reveal the nature and scope of the alleged violation, the Board may postpone its decision on the initiation of the process.
If the Board commences the settlement process ex officio, the investigated parties should submit their intention to commence the settlement discussions within 15 days following the receipt of the Board’s invitation. Any submissions after this period would not be taken into consideration. While the Draft Regulation provided that the parties should submit their intention within a reasonable period to be designated by the Board, the Regulation brings legal certainty on that front by determining an exact period for this submission.
In terms of the initiation of the process, the Board will consider the procedural benefits derived from concluding the investigation process rapidly and any differences in opinion of the investigated parties and the Board itself on the existence and scope of the violation. The Board may also take into account: (i) the number of the investigated parties; (ii) whether a significant number of investigated parties apply for settlement; (iii) the scope of the violation and nature of the evidence; and (iv) the possibility of reaching a common understanding on the existence and scope of the violation with the investigated parties.
- Settlement discussions with the Authority: The Regulation indicates that once the investigated parties’ request for settlement is accepted or they duly accept the Board’s invitation, the settlement discussions will start as soon as possible. Article 6/2 of the Regulation underlines that a party would not be deemed to accept the allegations because it participates in settlement discussions and the parties might rescind their acceptance before the submission of the settlement letter. As per Article 6/5 of the Regulation, during these discussions, the Authority will enable the parties to obtain information on: (i) the content of the allegations against the relevant party; (ii) the nature and scope of the alleged violation; (iii) the primary evidence used to determine the alleged violation; (iv) potential reduction rates; and (v) the range of potential administrative fines. The settling party will also be allowed to provide its opinions on the foregoing matters during the discussions. Settlement discussions shall be recorded with the minutes of the discussion to be agreed by the parties that attended the discussion. These records will be kept as the Authority’s internal correspondence, i.e., the records cannot be accessed under the right of access to file as per Communiqué No. 2010/3 on the Regulation of the Right of Access to the File and Protection of Trade Secrets.
- Interim decision on the settlement: As settlement discussions come to an end, the Board issues an interim decision on the settlement process, which lays out the basis of the settlement letter. The interim decision will mainly include: (i) the nature and scope of the alleged violation; (ii) the maximum administrative monetary fine calculated pursuant to the Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Limiting Competition, and Abuse of Dominant Position (“Regulation on Fines“); (iii) reduction rate as a result of the settlement procedure; (iv) reduction rate pursuant to Regulation on Active Cooperation for Detecting Cartels (“Leniency Regulation“), if applicable; (v) maximum administrative fine rate and amount to be imposed; and (vi) period for the submission of the settlement letter to the Authority. Should the parties agree with this interim decision, they must submit their settlement letter within the Board’s determined period, which should not exceed 15 days. Otherwise, the interim decision will not be binding for the Board.
- Settlement letter: If the parties accept the content of the interim decision, they will submit their settlement letter to the Authority, which should include the parties’ explicit declaration of acceptance on: (i) the existence and the scope of the violation; (ii) the maximum rate and amount of fine that the Board may impose; (iii) them being sufficiently informed about the allegations and allowed to provide their opinions and explanations; and (iv) not challenging the administrative monetary fine and content of the settlement letter. Once the settlement letter is duly submitted to the Authority, it cannot be withdrawn. However, if the submission lacks the required points, the Board will grant the submitting party seven days to complete the letter for once. The Board has no discretion but to grant this additional period when a party’s submission is deficient. If the settling party does not complete the deficiencies in this period, the Board will terminate the settlement procedure. Again, the settlement letter will be kept as the Authority’s internal correspondence.
- Settlement decision: Within 15 days upon the submission of the settlement letter before the Authority, the Board terminates the investigation against the relevant party with a final decision finding a violation and including the fines.
- Non-settlement: If the settlement party does not submit the settlement letter, does not complete the deficiencies in the settlement letter in due time, or withdraws from the settlement process during discussions, the ordinary investigation process will continue. This will also be applicable where the Board decides to terminate the settlement process given that it concludes: (i) that the expected procedural benefits cannot be achieved or that no consensus on the existence and scope of the violation can be reached with the investigated parties; (ii) a risk of obscuration of evidence; and/or (iii) a failure to fulfill the confidentiality obligation. The final decision will include the reasoning of the Board’s decision on the termination of the settlement procedure due to the foregoing considerations or the rejection of the settlement request. However, in case of non-settlement, the information and documents submitted by the relevant party during the settlement discussions will be removed from the file and cannot be used against the relevant party as the basis for the final decision on the investigation.
- Second-time submissions are prohibited: The undertakings cannot request for settlement in case the process does not result in settlement, the undertaking does not accept the Board’s invitation for the initiation of the settlement process, or the undertaking does not respond to this invitation in due time.
- To settle or not to settle: The settlement procedure seems to be a strategic decision for undertakings in terms of saving on costs and time. One would have to weigh the potential advantages and disadvantages when deciding to settle.
- Reduced fines: While the Draft Regulation did not provide for a lower limit of the reduction in the fines, the Regulation envisages a 10% to 25% reduction in fines.
- Best of both worlds — leniency and settlement: A settlement procedure does not prejudice a party’s benefits under a leniency application. Pursuant to Article 7/3 of the Regulation, a party could still benefit from reductions awarded under these two different procedures, i.e., the reduction of the fine granted to the parties for settlement will be added to their leniency reward.
- Judicial review restriction: As also stipulated under Article 43 of Law No. 4054, the Regulation deprives settling parties from appealing the administrative monetary fine and content of the settlement letter.
- Confidentiality obligation: As per Article 12 of the Regulation, settling parties should keep the content of the settlement discussions, and information and documents they obtained during the settlement discussions, confidential until the final decision. If the Board detects a violation of this obligation, it has the authority to launch another investigation and will consider it as an aggregating factor for determining the administrative monetary fine.
- Application of the Regulation to Ongoing Investigations: The Regulation provides that the regulation provisions can also be applied to the ongoing full-fledged investigations where investigation reports are yet to be served.
The Regulation is an important step for the Authority in catching up with a decade of the EU’s settlement enforcement and keeping its position aligned with EU competition law. The Regulation is expected to bring compelling gains to both the investigated parties and the Authority in terms of reduced fine amounts and saving on time and resources arising from the full-fledged investigations.