Turkey: A decisive moment

Author: | Published: 1 Oct 2010
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One of the most important amendments made to the Law No. 4054 on Protection of Competition (the Competition Law) in January 2008 was the amendment on fining managers and employees of infringing undertakings or associations of undertakings who have had a decisive influence in the perpetration of the infringement. While this amendment enabled the Turkish Competition Board (the Board) to impose monetary fines on managers and employees of undertakings or associations of undertakings that violated the Competition Law, the concept of decisive influence was not clear since the relevant provision of the Competition Law and the secondary legislation did not provide a clear explanation on the issue. Furthermore, the question on how the Board would adopt the concept of decisive influence to its decisional practice remained a mystery for almost two years: it did not discuss this issue in any of its decisions until the end of 2009.

The Board imposed its first fine on a manager of an undertaking at the end of the year 2009 and revealed valuable information regarding the application of imposing monetary fines on managers and employees of infringing undertakings or associations of undertakings who have had a decisive influence in the perpetration of the infringement. A more recent decision of the Board, of which the reasoned decision is not published as of the date of publish, further provides important insight on the issue.

2008 amendments

Before the 2008 amendments, the Competition Law did not contain any provision that would enable the Board to impose monetary fines on managers and employees of undertakings or associations of undertakings that have violated Article 4 (agreements, concerted practices and decisions that impede competition), Article 6 (abuse of dominant position) and Article 7 (failure to notify mergers and acquisitions) of the Competition Law. In order to increase the deterrence of the sanctions envisaged for violating the Competition Law, a new paragraph was added to Article 16 of the Competition Law. According to this managers and employees of infringing undertakings or associations of undertakings who have had a decisive influence in the perpetration of the infringement will be fined up to 5% of the fine that is imposed on the undertaking or association of undertakings.

Moreover, the Board enacted the regulation on "Monetary Fines for Restrictive Agreements, Concerted Practices, Decisions and Abuses of Dominance" on February 15 2009 and highlighted the borders of Article 16 of the Competition Law. According to Article 8 of the Regulation on Fines, the Board does not have any discretion over imposing monetary fines to managers and employees of undertakings or associations of undertakings in cartel cases and must impose a monetary fine within 3% to 5% of the monetary fine imposed on the undertaking or association of undertakings. On the other hand, in the case of other infringements, the Regulation on Fines leaves the imposition of the monetary fine to the Board's discretion. Furthermore, the Regulation on Fines also envisages reducing fines for managers and employees that actively cooperate with the Turkish Competition Authority (the Authority) to reveal the infringement.

As can be seen, both Article 16 of the Competition Law and Article 8 of the Regulation on Fines set the legal test for an individual to be found to have participated in an infringement as whether that individual had decisive influence in the perpetration of the infringement. Therefore, the concept of decisive influence must be carefully analysed. While the Bodrum Ferry decision whereby the Authority proposed imposing a monetary fine on individuals, the Board did not attend this issue at all in its reasoned decision. Therefore, the White Meat decision of the Board is the first and only decision (as of the date of publish) in which the Board discussed the issue and imposed a monetary fine on the manager of an undertaking.

Decisive influence

In June 2008, the Authority conducted a preliminary investigation following intense media coverage of claims regarding a price fixing agreement in the white meat sector. On August 14 2008, the Board decided to launch an ex-officio investigation against 27 white meat producers and the Poultry Meat Producers and Breeders Association (Besd-Bir) pursuant to Article 41 of the Competition Law. According to the information and documents obtained from the undertakings and seized at the onsite investigations, the Board ascertained that (i) the undertakings agreed to increase the price of white meat, (ii) conducted actions to reduce the supply of white meat in the market, (iii) tried to increase the transparency of the white meat sector by sharing confidential information and future price lists, and (iv) tried to hinder the other white meat producers' over production decisions by agreeing with the distributors. Moreover, at the end of the investigation the Board found that Besd-Bir had a facilitative effect on these conducts.

The mentioned conducts above constitute an example of a typical cartel under competition law literature. Article 4 of the Competition Law clearly prohibits agreements and concerted practices between undertakings, and decisions and practices of associations of undertakings which have as their object or effect or likely effect the prevention, distortion or restriction of competition directly or indirectly in a particular market for goods or services. In case of such a cartel, Article 16 of the Competition Law foresees administrative fines up to 10 % of the annual gross income of affiliated undertakings.

As mentioned above, before the amendment, the Competition Law did not provide the imposition of monetary fines to the managers and employees of undertakings or associations of undertakings. This was brought with the amendments to the Competition Law in 2008 and the "decisive influence of managers and employers" concept was introduced to the Turkish competition law literature. It is evident that this provision will not only be applied to the board of directors but the employees of an undertaking as well.

The significance regarding the White Meat Decision of the Board was its evaluation regarding the chairman of the executive board of one of the undertakings subject to the investigation. In this decision, the Board decided that the chairman had a "decisive influence" on the establishment and execution of the unity in the white meat sector. According to the findings, the chairman had encouraged the other undertakings active in the white meat market to reduce the supply of the chicken meat, invited them to cartel meetings to discuss his suggestions on such anticompetitive behaviour, agreed with the distributors to end price competition and increase the prices of white meat, forced the other white meat producers to reduce the supply of white meat. He also aimed to increase the transparency in the white meat sector and unite the producers. All the evidence pointed towards the fact that the chairman put in extra effort to form the cartel and maintain its anticompetitive activities. Therefore, the Board decided that the chairman had a decisive influence on the cartel to maintain its permanency and operability, since he had a leading role in the cartel, he proposed price fixing agreements, arranged cartel meetings and coordinated the unity in the white meat market, encouraged other undertakings to reduce supply and followed up on whether the cartel decisions were being applied by the undertakings. Thus the Board imposed an administrative monetary fine to the chairman of 3% of the administrative fine imposed to the relevant undertaking.

As indicated above, a more recent decision of the Board, although its reasoned decision is not yet published, further provides some insight on the decisive influence concept. The investigation conducted against 56 Peugeot distributors throughout Turkey was finalised and the Board rendered its decision on August 11 2010. The Board investigated claims regarding price fixing among the Peugeot distributors in Turkey through a Distributors' Council. The case was referred to as a typical cartel case and the Board decided that the distributors violated the Competition Law and imposed monetary fines on 44 of the total 56 undertakings. Furthermore, the Board also had the chance to evaluate the "decisive influence" concept as the Authority claimed that nearly all of the members of the Distributors' Council had decisive influence in the perpetration of the infringement. Although the Board dismissed these claims and did not impose any fines on the Distributors' Council members, we cannot yet know the logic behind this as the reasoned decision is not published. However, it will not be too far off to say that the Board made the right decision by not imposing monetary fines to the council members for decisive influence. Surely decisive influence is a much stronger concept and cannot be exercised by so many individuals.

While there are only two decisions regarding decisive influence of individuals so far, the Board already marked the boundaries of the decisive influence concept. According to this, there must be specific evidence of "intent" and "fundamental role in inception against individuals in order to decide on the decisive influence of individuals in an infringement for the purposes of separate fining of individual employeesº.

About the author

Gönenç Gürkaynak is a qualified attorney admitted to the Istanbul and New York Bars and is a qualified solicitor in England and Wales. He is the head of the competition law practice at ELIG Attorneys-at-Law. Gönenç received his LLM from Harvard Law School and has extensive experience of Turkish competition law counselling issues, as well as being involved in the establishment of the Turkish Competition Authority. He has led defence teams in dozens of written and oral defences before the Turkish Competition Authority, represented clients before the Administrative Courts and the High State Court on many appeals and has represented clients in more than 100 files before the Turkish Competition Board. Gönenç also worked for many years as a competition lawyer in international law firms in New York and Brussels.

Gönenç has one book published by the Turkish Competition Authority and dozens of competition law articles published by numerous Turkish and international publishers, as well as having delivered many speeches at national and international conferences. He is a highly recommended competition lawyer in Turkey, mentioned in the Who’s Who of Competition Lawyers 2006, 2007, 2008, 2009 and 2010,  Legal Experts 2006, 2007, 2008, 2009 and 2010, Legal500 2006, 2007, 2008, 2009 and 2010,  and 40 Under 40.

Contact information

Gönenç Gürkaynak
ELIG

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

Tel +90212 327 1724
Fax +90212 327 1725
Email:info@elig.com ;gonenc.gurkaynak@elig.com
Web:www.elig.com