(July 9, 2020) On June 16, 2020, Turkey’s parliament passed a law amending the country’s Law on the Protection of Competition (LPC).
The explanatory memorandum of the bill that became the amending law explains that the main purpose of the amendments is to reflect in Turkish law the developments that have occurred in European Union (EU) competition law since 2003, which began with the modernizing reforms adopted by Council Regulation (EC) No 1/2003 of 16 December 2002 (Regulation 1/2003).
Among other things, the amending law significantly incorporates into Turkish competition law the following six features that exist under EU competition law.
Revision of the Exemption Regime and Self-Assessment
In EU law, the core legal provision prohibiting agreements and concerted practices that prevent, restrict, or distort competition in the internal market is article 101 of the Treaty on the Functioning of the EU (TFEU). Article 101(3) of the TFEU provides for conditions that, if fulfilled, could justify exempting an otherwise anticompetitive agreement or practice EU legal prohibitions. These conditions for exemption were reflected in the previous version of the LPC. Article 1(2) of Regulation 1/2003 had established a bright-line rule whereby agreements and practices that fulfilled the conditions of article 101(3) would be not be prohibited by article 101. The amending law introduces this bright-line rule into article 5 of the LPC, which previously left it to the discretion of the Turkish Competition Authority (TCA) to decide whether to start proceedings against agreements or practices that fulfilled the conditions for exemption. The amendment also clarifies that undertakings may apply to the TCA to obtain a declaratory statement that a certain agreement or practice fulfills the conditions for exemption.
Regulation 1/2003 essentially established a new enforcement system that primarily relies on self-assessment by undertakings and after-the-fact competition control and enforcement by competition authorities. To date, the European Commission has adopted many detailed notices and guidelines explaining substantive and procedural matters so that undertakings can be cognizant of the rules. According to its explanatory memorandum, through the amendments in article 5 of the LPC, Turkish competition law now clearly adopts the self-assessment regime of EU competition law. Consequently, under the current regime in Turkish law, undertakings must first check if they benefit from block exemptions published in accordance with Article 5(4) LPC relevant to the agreements that they are entering into, and if not, they must self-assess if their agreement or practice fulfills the exemption conditions under article 5(1).
In the enforcement area of mergers, Council Regulation (EC) No 139/2004 of 20 January 2004 (EC Merger Regulation, EUMR) had changed the test used to determine which mergers are disallowed under EU law. The old, substantive test under Article 2(3) of the repealed Council Regulation (EEC) No 4064/89 of 21 December 1989 disallowed mergers between undertakings whose outcome is a concentration that “creates or strengthens a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it.” The new test under article 2(3) of the EUMR instead prohibits concentrations that “significantly impede effective competition, in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position” (emphasis added). This new test is commonly called the “significant impediment of effective competition” (SIEC) test. The amending law introduces the SIEC test to Turkish competition law by amending article 7 of the LCP.
Behavioral Remedies before Structural Remedies
The amending law incorporates in article 9(1) of the LCA’s new language echoing article 7(1) of Regulation 1/2003, requiring that in antitrust, abuse of dominant position, and merger control infringements, the TCA must impose structural remedies on undertakings only if behavioral remedies are imposed first but fail to effectively remedy the infringement, and that such structural and behavioral remedies should be “proportionate to the infringement committed and necessary to bring the infringement effectively to an end.”
De Minimis Rule
The amending law incorporates a de minimis rule in article 41(2) of the LCP, which provides a legal basis for the TCA to desist from pursuing agreements and practices that do not have an appreciable impact on the competition in the market because of the limited market share or revenues of the undertakings involved. Agreements between competitors that constitute clear and grave violations, such as price fixing, allocating customers, or restricting supply cannot benefit from the de minimis rule. Under EU competition law, the European Commission engages in a similar practice, providing a “safe harbor” from enforcement for agreements entered into by undertakings that have a limited market share and are not aimed at restricting competition.
Article 9 of Regulation 1/2003 authorizes the European Commission to adopt “commitment decisions” as an additional enforcement tool, whereby the Commission may require undertakings under investigation to offer binding commitments to meet the concerns of the Commission regarding anticompetitive practices. The conclusion of a commitment decision results in preventing an infringement decision and the Commission suspending its enforcement proceeding, which may be reopened if the undertaking violates the commitment decision. The regulation also enables the national competition authorities of EU member states, which are required to enforce EU competition rules regarding conduct that is capable of affecting trade between member states, to accept commitments as an enforcement tool. While limits to the competency of national competition authorities (NCAs) to adopt commitment decisions vary among EU member states, all member-state NCAs have some authority to accept commitments. The amending law introduces a provision that explicitly authorizes the TCA to use commitments as an enforcement tool, and the TCA has previously used commitments in its enforcement practices. The use of commitments was provided for by the TCA’s Communiqué No. 2010/4, but the amendment now establishes a legal basis for the practice.
The amending law introduces the settlement mechanism in Turkish competition law, whereby the TCA may decide to initiate a settlement with undertakings involved in an investigation, taking into account the procedural benefits that might arise from the swift conclusion of the investigation or a diversity of opinion concerning the existence or scope of the violation. (LPC art. 43(5).) Matters that are included in the settlement decision cannot be made subject to a lawsuit by parties to the settlement, and the TCA may reduce the administrative fines that apply to a violation that is made subject to a settlement by 25%. (Art. 43(7) & (8).) The European Commission uses a settlement mechanism particularly in its anti-cartel enforcement practice.