Law Number 4054 on the Protection of Competition has been substantially amended by Law Number 5728 published in the Official Gazette on February 8 2008. The Amendments provide for: (i) the calculation of fixed fines; (ii) the introduction of new fines to be levied against the directors and employees of the undertakings who exerted decisive influence that resulted in the infringement of the law; (iii) the introduction of a leniency mechanism; and lastly (iv) the collection of fines.
The Amendments are expected to significantly increase the enforcement powers of the Competition Board.
Originally, fines levied where there was a failure to comply with procedural requirements (for example, notification of mergers and acquisitions or supply of information upon a request for information) were relatively insignificant and fixed by statute. In contrast with the old regime, the amount for fines under the Amendments is based on the turnover (net sales) achieved in the preceding year.
The Board may now impose a fixed fine equal to one-thousandth of the turnover achieved by the undertaking in the preceding year in the following cases:
a) Incorrect or misleading information is provided to the Board in mergers and acquisitions, exemptions or negative clearance notifications.
b) Merger or acquisition transactions subject to approval of the Board are consummated without the approval of the Board.
c) No information is provided whatsoever or within the period fixed by the Board, or incomplete, incorrect or misleading information is provided under the application of Article 14 (where a request for information letter has been sent with regard to an undertaking), or with respect to Article 15 of the law (that is, during an on-the-spot inspection).
The Amendments distinguish the case where on-the-spot inspections are prevented or hindered by the undertakings and introduce an even higher fixed fine in that instance equal to five thousandths of the turnover (net sales) of the undertaking in the preceding year. The amount of the fine calculated according to turnover may not be less than TL10,000 ($8,500).
The fines referred to under item (b) above will be applied in a merger to each participant. For example, in a case where a merger is consummated without the Board's approval, and each party's annual revenue is TL100 million, the Board may impose a fine of TL100,000 ($85,000) on each party. On the other hand, only the acquiring party will be subject to fines in the context of an acquisition.
In another example, if the experts of the Board are prevented from conducting an on-the-spot inspection, and if the annual turnover (net sales) of the undertaking in question in the preceding year is TL100 million, the Board may impose a one-time fine of TL500,000 ($420,000).
Under the former articles of the law, no fines were imposed on the directors of undertakings that were found to have violated the law. The only fines that were imposed were those for failure to comply with procedural requirements (that is, failure to notify with respect to mergers or acquisitions).
Under the Amendments, the Board may now impose fines on directors or employees of the undertakings who are found to have exerted substantial influence on transactions that have violated the law. These fines against directors and employees can be as high as 5% of the amount of the fines assessed against their respective companies. For example, if the Board imposed fines of TL1 million on a company, and the director of that company actively participated in or exerted decisive influence to cause the violation of the law, then the Board may impose fines of TL50,000 ($44,000) on the individual directors or employees of the company.
The Amendments also introduce daily fines (to be applied for each day that the incompliance continues) that are based on annual turnovers of the undertakings. The Board may impose daily fines of five-thousandths of the turnover (net sales) achieved in the preceding year in the following instances:
a) Failure to comply with a final decision or an interim measure.
b) Prevention or hindrance of on-the-spot inspections.
c) Failure to punctually provide information requested pursuant to Article 14 (where a request for information letter is sent regarding an undertaking) or Article 15 of the law (that is, during an on-the-spot inspection).
Accordingly, if a company does not provide the information requested by the Board through a request for information letter in due time, and if the annual turnover of the company in the preceding year is TL100 million, the Board may impose a daily fine of TL50,000 ($44,000) until the company provides the requested information.
The need for a leniency mechanism has long been discussed in Turkey. It was finally addressed in a white paper issued by the Board last year. However, the Board's authority and scope of discretion was disputed on the basis that the law did not provide the necessary authority to the Board to waive fines with respect to an undertaking in violation of the law.
The Amendments granted power to the Board to implement a leniency mechanism. The Board now has the discretion to waive fines if the target company actively cooperates with the Board to identify and reveal the violation. The waiver is subject to the level and effectiveness of that cooperation.
Before the Amendments, companies found to be in violation of the law were given a period of three months in which to pay the fines. This period enabled the parties to prepare and file petitions before the Council of State (the appellate court) and to request an order for suspension of the fines from the court. Although the court's decision on such requests was not rendered on a timely basis in all matters, the court's decision was important as a right in protecting the parties from fines imposed where substantial or procedural errors were clearly committed by the Board in its decision.
The Amendments abolished the three-month period for payment of the fines. Now, companies and individuals that are fined are required to make payment immediately on receipt of the violation order (that is, within 10 days).