Settlement Mechanism under Turkish Competition Law
March 2021 – The Turkish Competition Authority (“Authority”) has recently presented for public consultation its draft Settlement Regulation on Anti-competitive Agreements, Concerted Practices and Decisions, and Abuse of Dominance (“Draft Settlement Regulation” or “Draft Regulation”).
After the adoption on 24 June 2020 of Law No. 7246 on Amendments to the Law on the Protection of Competition, the Authority introduced, among others, the settlement mechanism into Turkish competition law. With the settlement mechanism the Authority aims to lower the costs of ordinary investigation procedures, which may be time-consuming and burdensome for both the undertakings party to the investigation as well as for the Authority. If the parties agree to settle during an on-going investigation, the Board will speed-up the investigation process and adoption of a final decision, which would reduce its workload and reallocate its resources to handle other cases. The settlement mechanism also has benefits for undertakings under investigation, as the parties would have the opportunity to preclude a burdensome investigation process that costs considerable time and legal fees.
Law No. 4054 on the Protection of Competition (“Law No. 4054”), as amended, outlines the rules applicable to the settlement mechanism and provides that the Turkish Competition Board (“Board”), upon the written request of the investigated undertakings is entitled to initiate a settlement procedure during a full-fledged investigation. In a similar vein, if the Board deems it necessary, it could also invite the parties to engage in a settlement. As per Article 43 of Law No. 4054, the Board may settle with parties that acknowledge the presence and scope of a violation of Law No. 4054, until the date that the official investigation report (which, similar to the statement of objections, is the main document that outlines the competition law concerns identified by the case handlers at the Authority) is served to the investigated parties. Further to Law No. 4054, the parties could benefit from the settlement mechanism provided that they submit a settlement letter to the Authority within the time period defined by the Board. Under such circumstance, the Board will conclude its investigation with a final decision, which will demonstrate the finding of an infringement and the imposing of an administrative monetary fine. The Board will reduce the amount of the penalty by up to 25% if an investigation ends with a settlement. It is noteworthy that the Board’s decision on a settlement is a “final” decision, which means that the settlement letter or administrative monetary fine cannot be challenged before a court. Other procedures and principles relating to the settlement mechanism will be determined through secondary legislation, i.e., the “Settlement Regulation”.
This article sets out the procedures and principles provided under the Draft Settlement Regulation.
Procedures and Principles under the Draft Regulation
Initiation of the settlement process:
First and foremost, according to the Draft Settlement Regulation, the settlement mechanism is applicable to any kind of anti-competitive conduct. Indeed, the Draft Regulation does not make a distinction of de minimis or hard-core violations, and it is applicable to all types of violations of Articles 4 and 6 of Law No. 4054.
As delineated under amended Article 43 of Law No. 4054, the Draft Regulation provides that the Board may settle with parties that concede the existence and scope of the breach, until the official delivery of the investigation report.
The settlement process commences either based upon the request of the investigated parties or upon invitation by the Board. Should the settlement process start upon a party’s request, the Board can accept or reject such a request, or it may decide to invite the other parties to the investigation to initiate a settlement process. Furthermore, taking into account the procedural advantages stemming from concluding the investigation swiftly or drawbacks caused by the lack of consensus on the existence and scope of the violation, the Board may, upon its own initiative, initiate a settlement process by inviting the parties to settle. In this respect, the Board in particular considers the following: (i) the number of investigated parties; (ii) whether a significant number of the parties apply for settlement; (iii) the scope of the violation and nature of evidence; and (iv) whether the Board is likely to have common ground on the existence and scope of the violation with the parties. After the invitation for settlement, the parties to the investigation notify the Board in writing within the timeframe set out in the invitation whether they are willing to settle. The Board will not review any submissions after the designated time period.
Further to the Draft Settlement Regulation, the Board will start settlement discussions as soon as possible after the request or invitation for settlement is accepted. Participating in settlement discussions does not suggest the acceptance of any allegations, and the parties may withdraw from the settlement process until the submission of the settlement letter.
The Board will carry out settlement discussions separately if there is more than one party involved. The discussions will be recorded with an affidavit agreed upon by the parties participating in the settlement discussions.
The parties are entitled to have information on (i) the content of the allegations against the relevant party; (ii) the nature, scope and duration of the alleged violation; (iii) the main evidence used to establish the alleged violation; (iv) possible reduction rates; and (v) the range of possible administrative monetary fines.
The Board’s interim decision on the settlement
When the settlement discussion comes to a conclusion, the Board will issue an interim decision on the settlement process, which will include (i) the nature, scope and duration of the violation; (ii) the minimum and maximum penalty rate calculated in accordance with the Regulation on Fines Applicable in Cases of Agreements, Concerted Practices and Decisions Restricting Competition, and Abuse of Dominance; (iii) the reduction rate to be applied as a result of the settlement procedure; (iv) the minimum and maximum reduction rate pursuant to the Regulation on Active Cooperation for Detecting Cartels (“Regulation on Leniency”), if applicable; (v) the minimum and maximum rate and amount of the administrative monetary fine to be imposed; (vi) the time period for the submission of the settlement letter to the Authority (which cannot exceed 15 calendar days); and (vii) a statement indicating that the interim decision will not be binding for the Board if the settlement letter is not submitted on time.
The settlement mechanism does not prejudice a party from benefitting from an application for leniency. As per the Draft Regulation, a party can benefit both from reductions awarded under the Regulation on Leniency and the settlement mechanism. If a party to the settlement mechanism also applies for leniency, a combined reduction rate consisting of the rate established under the Regulation on Leniency and the reduction rate for settlement will apply.
If the parties accept the content of the Board’s interim decision, they will submit a settlement letter to the Authority.
The settlement letter should demonstrate the parties’ explicit affirmation on the existence, scope, duration, and results of the violation and the responsibility stemming from the violation. The settlement letter further consists of the maximum rate and amount of the penalty to be imposed, which the settling party has accepted. Moreover, the settlement letter must include the parties’ acknowledgment of being adequately informed of the allegations and their ability to deliver their opinions and explanations, as well as the fact that the administrative monetary fine and the content of the settlement letter cannot be appealed before the courts.
Once a party submits its settlement letter to the Authority, it cannot be rescinded.
The Board’s final settlement decision
Once the settlement letter is submitted to the Authority’s records, the Board will have 15 days to terminate the on-going full-fledged investigation against the settling party with a final decision comprised of the determination of the infringement and the administrative monetary fine.
If the process does not end with a settlement, the Board will continue to investigate the relevant party based on the usual investigation procedure. Under this scenario, the declarations of the parties will be removed from the scope of the file and the final decision cannot be based on such declarations.
Confidentiality obligation of the parties
Article 12 of the Draft Settlement Regulation provides that settling parties are obliged to keep the content of the settlement discussions as well as all information and documents they receive during the discussions confidential. If the Board establishes a violation of the confidentiality obligation, it could launch another investigation against the violating party or parties. Furthermore, the Board will factor such a violation as a matter of aggravation for the determination of the administrative monetary fine.
The Draft Settlement Regulation illustrates the Authority’s attempt to align Turkish competition law with EU norms. We are of the view that investigated parties may prefer to opt for a settlement mechanism over the usual investigation procedure, as the settlement mechanism allows communication and discussion with the Authority throughout the process. Direct dialogue would probably also help the parties to render an informed decision on the settlement procedure, depending on the tone and openness of the Authority on a given case.