The issues at stake under Turkey’s new leniency programme

Author: | Published: 26 Sep 2012
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Leniency and cartel whistle blowing program in Turkey are worthy of examination. From the historical background of the leniency under Turkish competition law comprising the promulgation of the Leniency Regulation and its aftermath to the Draft Guideline Regarding the Regulation on Active Cooperation for the Purpose of Discovery of Cartels (Guideline).

Background

The legislation Amending Certain Laws for the Harmonization with the Fundamental Criminal Laws made substantial amendments – mainly on Article 16 of Law No 4054 on the Protection of Competition and introduced immunity regime and leniency program for the first time in the history of the Turkish competition law regime.

The implementation steps for the immunity regime and leniency program have been taken by way of issuance of the Regulation on Active Cooperation for Discovery of Cartels (Regulation on Leniency), which came into force on February 15 2009. On February 19 that year, the Authority announced that a division had been delegated for the implementation of the Regulation. This unit is named Cartel and On-Site Inspections Support Division. Until the enacted amendment to Article 16 of Law No 4054, the Turkish competition legislation did not provide for an immunity regime or a leniency program. Although the old version of Article 16 of Law No 4054 gave effect to the mitigation of fines, total immunity from fines was not possible since the law had set a minimum amount for fines concerning substantive infringements.

However, as opposed to the previous version of Article 16, sub-paragraphs 6 and 7 of the amended version of the relevant clause had been drawn up in a manner to give the Board the right to grant total immunity to the undertakings that engaged in active co-operation with the Board in cartel cases. The new version of the provision reads as follows:

"Taking into account the conduct, efficiency and timing of the cooperation and by providing explicit reasons, the Board may exempt the undertakings or association of undertakings or their managers or employees that actively cooperate with the Competition Authority in discovering an unlawful application from the application of the fines set forth in paragraphs 3 and 4 above or such fines could be mitigated accordingly."

The conditions for determining the amount of administrative monetary fines pursuant to this article, the conditions for immunity or mitigating factors and the rules and procedures for co-operation shall be governed by the regulations issued by the Board.

As stated, the last sub-paragraph of the amended version of Article 16 required the Board to issue the relevant secondary legislation with a view to set out the main principles of immunity and leniency mechanisms as part of the ongoing trend of enriching the Turkish competition law legislation by issuing secondary legislation. The Regulation on Leniency serves this purpose.

Regulation on Leniency

The leniency program is available for so-called cartelists. The regulation does not apply to other forms of antitrust infringement. Section 3 of the Regulation on Leniency provides for a definition of cartel, which encompasses price fixing, customer/supplier/market sharing, restricting output or placing quotas, and bid-rigging.

The Regulation on Leniency empowers the Board to institute and delegate a sub-division in charge for leniency/immunity to deal with leniency applications/affairs (Leniency Division).

A cartelist may apply for leniency until the investigation report is officially served. Depending on the application order, there may be total immunity from, or reduction of a fine:

The first incumbent undertaking to file an appropriately-prepared application for leniency until the investigation report is officially served may benefit from total immunity. Employees/managers of the first applicant would also be totally immune. However, for there to be total immunity, the applicant must not be the ringleader. If this is the case, ie, if the applicant has forced the other cartelists to participate in the cartel, there would be a mere reduction of 33-50% for the undertaking and 33-100% for the employees/managers.

The second incumbent filing an appropriately-prepared application would receive a 33-50% reduction of the fine. Employees/managers of the second applicant that actively cooperate with the Competition Authority would benefit from a reduction of 33-100%.

The third applicant would receive a 25-33% reduction. Employees/managers of the third applicant that actively cooperate with the Competition Authority would benefit from a reduction of 25% up to 100%. Subsequent applicants would receive a 16-25% reduction. Employees/managers of subsequent applicants would benefit from a reduction of 16% up to 100%.

The conditions for benefiting from the immunity/reduction are as follows:

  • The applicant must submit information on the products affected by the cartel; information on the duration of the cartel; names of the cartelists; dates, locations, and participants of the cartel meetings; and other information/documents about the cartel activity. The required information may be submitted verbally.
  • The applicant must avoid concealing/destroying the information/documents on the cartel activity.
  • Unless the Leniency Division decides otherwise, the applicant must stop taking part in the cartel.
  • Unless the Leniency Division instructs otherwise, the application must be kept confidential until the investigation report has been served.
  • The applicant must continue to actively cooperate with the Competition Authority until the final decision on the case has been rendered.

A manager/employee of a cartelist may also apply for leniency until the investigation report is officially served. Such an application would be independent from any applications by the cartelist itself. Depending on the application order, there may be total immunity from, or reduction of a fine for such manager/employee. The reduction rates and conditions for immunity/reduction are the same as above.

Leniency cases

Following the introduction of the Regulation on Leniency, several leniency applications were submitted to the Board. However, since leniency applications are confidential, only a limited number of applications that reflected to the short or reasoned decision of the Board could be assessed and disclosed.

The most significant case where the Board has considered leniency is the Gaz Cartel case, in which Berk Gaz was the first applicant to apply for leniency. Being convinced that Berk Gaz provided sufficient documents and information, while also fulfilling the other conditions set out in the Leniency Regulation, the Board granted full immunity to Berk Gaz in spite of the fact that the new evidence uncovered during the on-site inspection had shed light on the investigation.

The second and most recent publically available case in which the Board discussed leniency concerns the sodium sulphate case. It is understood from the short form decision of the Board concerning the sodium sulphate, crystal sodium sulphate and raw salt market that one of the undertakings which were under investigation, Sodas Sodyum Sanayi, made a leniency application and received a reduction of one third of the fine to be imposed. In addition, the general manager Serdar Salanci of the same undertaking also applied for leniency and received a 50% reduction in fines.

It should be noted here that ELIG has also assisted some clients in the submission of leniency applications that have not been subject to the Competition Authority's reasoned decisions yet.

Active cooperation

The draft Guideline was published on June 15 2012 through the Competition Authority's website, which opened it to public discussions and comments, allowing the commentators to submit their views in terms of the content of the Guideline. The ensuing part highlights some of the parts that could create controversy and ambiguity. Needless to say, it remains to be seen whether the Turkish Competition Authority will adopt the relevant guideline because it's now open for public consultation.

The cartel definition in the Regulation on Leniency is kept limited to its literal meaning and many agreements or concerted practices, which may be regarded as a violation within the scope of the Article 4 of Law No. 4054, are not included in the cartel definition of the Leniency Regulation.

Such a situation may create serious uncertainties and problems in practice. For example, an undertaking which is a party to an operation (such as an information transfer in a manner that restricts competition) that is not explicitly listed under the cartel definition of the Leniency Regulation may submit an application within the scope of the Leniency Regulation. Since there is a possibility that the Competition Authority may dismiss the application by stating that "the act subject to the application does not fall within the cartel definition provided by Leniency Regulation", the undertaking in such a situation would have already exposed itself while trying to comply with the law by revealing a violation with the purpose of realising its legal obligation. This would subject it to serious sanctions.

The Leniency Regulation and draft Guideline state: "The ones applying to benefit from the Regulation should submit all the possessed information and documents regarding the cartel". It is worth mentioning that inquiring all the information from the undertaking in the initial phase would stand in the way of leniency applications. Discretion and initiative should rest with the applicant in such a case, if new information and document is supplied besides the one presented by the applicant, then the applicant may be unable to benefit from the immunity or reduction. Moreover, it should not be used against the client if an information or document is simply missed out.

If the applicant has made sufficient examination/research within the undertaking and presented the findings, did not conceal or destroy information or documents, then they should be granted immunity or reduction. This carries an essential value for the leniency program to succeed. Because leniency applicants submit rapidly, with information and documents they could gather for the initial phase. In any way, undertakings are obliged to supply other information and documents under the cooperation obligation. Setting the standards this high removes the necessity of onsite inspection or information document request during the Competition Authority's investigation period. The undertaking would have supplied all the information and documents by then.

Under the draft Guideline, once the investigation report is served, the names of the leniency applicants will no longer be kept confidential once the investigation report is served, it will no longer be kept confidential. Such provision is likely to create hesitation for those who intending to make an application, concerned that their identities will be disclosed. In European literature, especially since the Pfleiderer AG v Bundeskartellamt case, the relation between Leniency Programs and actions for damages has gained more significance. Therefore, confidentiality of the applicants would promote and contribute to the success of Leniency Program as the applicants would be more willing to apply for leniency.

The Leniency Regulation and draft Guideline provide that "if perceived that the immunity is withdrawn on the grounds that conditions are not fulfilled or the applicant coerced the other undertakings that are members of the alleged cartel respected undertaking may be granted a reduction of fine by one thirds to half."

This clause could create complications in practice and hinder the expected benefits of an efficient leniency mechanism. Since withdrawal of immunity or reduction of fines should only be limited to exceptional conditions and such conditions should be clearly specified. As a policy of competition law, if an applicant is granted immunity or reduction in fines, these may be withdrawn only in very exceptional situations. When an application for leniency is regarded as insufficient for various reasons it would be discouraging for undertakings which consider applying for leniency, which would have negative consequences. The EC has withdrawn conditional immunity in only the Row Tobacco case in 2005. Although there are two other cases where the Commission considered withdrawing the immunity (2011's Exotic Fruit case and 2007's Chloroprene Rubber case), the Commission opted to not withdraw the immunity due to its policy. In parallel with the other competition law regimes, the disqualification for immunity or reduction should be exceptional in cases of the presence of extraordinary reasons and great care shall be shown during the review.

As illustrated the draft Guideline is expected to be a very useful tool for providing procedural hints for leniency applications. Although the Competition Authority made an announcement that opinions and comments on the draft Guideline should be submitted by June 6 2012, the final version of the Guideline is anticipated at the end of 2012. Until then, the uncertainties will linger as to whether the drafters will manage to address the ambiguities in the Guideline. In any event, it should be anticipated that there will be an increase in the number of leniency applications post-publication of the formal Guideline since at least some of the uncertainties raised by the Leniency Regulation hopefully will be resolved with the explanations provided therewith.

Being a relatively recently introduced system in the Turkish competition law regime, leniency is still under development. Compared to its potential benefits as well as the number of leniency applications pending in other jurisdictions such as the EU and the US, the cases where in which the relevant parties applied for leniency remain rather minimal. It is anticipated that this would change in the near future as the Competition Authority is close to enacting a guideline which would bring further clarifications to the Leniency Regulation and therefore to the application of leniency in cartel cases.

Gönenç Gürkaynak
 

ELIG
Citlenbik Sokak No:12
Yildiz Mahallesi
Besiktas, 34349 Istanbul
Turkey

T: +90 212 327 17 24
F: +90 212 327 17 25
E: gonenc.gurkaynak@elig.com
W: www.elig.com

Gönenç Gürkaynak is a partner in charge of competition law matters at ELIG in Istanbul, Turkey.

Gürkaynak graduated from Ankara University, Faculty of Law in 1997, and was called to the Istanbul Bar in 1998. He then worked on Turkish competition law issues for the first three years of antitrust enforcement in Turkey and obtained his degree from Harvard Law School, also studying as a research assistant in antitrust law during 2000. After qualifying in New York, he practised at an international law firm in New York until the end of 2002. He then transferred to Brussels to work on EC competition law matters, and also became a solicitor of the Law Society of England and Wales (currently non-practising) after passing the QLTT. Gürkaynak worked on all aspects of European competition and merger control with an international law firm in Brussels.

Every year Gürkaynak and his team of 11 specialists in ELIG represent multinational companies and large domestic clients in more than 10 written and oral defences in investigations of the Turkish Competition Authority, about 12 antitrust appeal cases in the high administrative court, and over 30 merger clearances of the Turkish Competition Authority.

He is the author of a book published by the Turkish Competition Authority, and numerous articles in English and in Turkish on matters of EC competition law and Turkish competition law. Gürkaynak frequently speaks at conferences and symposia on competition law matters. He teaches undergraduate and graduate level courses at three universities, and gives lectures in other universities in Turkey.


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