Sanctions For Violation Of Competition Rules

In order for the current competition in the market to continue in a decent way, it is necessary to ensure the applicability of the established rules. For this reason, various sanctions have been laid out. The purpose of the sanctions is to deter undertakings from engaging in behaviors that limit the competition. In this regard, sanctions are examined under two main titles. The first one is criminal sanctions and the second is legal sanctions.

 

            Articles 16 and 17 of the Law on Protection of Competition regulate administrative fines. In summary, in these articles, it is stated that an administrative fine will be imposed according to the revenue. It should also be noted that fines are regulated to be lighter for procedural offenses and heavier for fundamental offenses.

 

            Procedural offenses are regulated under LPC art.16 paragraph 1. Revenue is the basis in relation to procedural offenses. That is to say; 

a) "Providing false or misleading information or documents in applications for exemption and negative clearance, as well as applications for permission for mergers and acquisitions,"

b) "Carrying out permit-required mergers and acquisitions without the permission of the Board, (given to each of the parties in merger transactions and only to the transferee in acquisition transactions)”

c) In the event of “Submitting false or misleading information or documents or any failure to provide the information or document within the specified period in the implementation of Article 14 and 15 of the law”, an administrative fine which will be determined by the Board will be imposed up to ten percent of the undertakings, associations of undertakings or the members of these associations’ annual gross income at the end of the previous fiscal year before the date of the final decision. If this calculation is not possible, the most recent year’s annual gross income from the date of the final decision is used as base.

d) In case of "Preventing or complicating on-site inspection", an administrative fine of five per thousand of their gross income (which will be determined in the same way) will be given. But the penalty that will be determined on this basis cannot be less than ten thousand Turkish Liras.

 

            Fundamental offenses are regulated by LPC Art.16 paragraph 3. In accordance with the relevant paragraph, “To those who engage in prohibited behaviors which are stated in Articles 4, 6, and 7 of this law; an administrative fine which will be determined by the Board will be imposed up to ten percent of the undertakings, associations of undertakings or the members of these associations' annual gross income at the end of the previous fiscal year before the date of the final decision. If this calculation is not possible, the most recent year’s annual gross income from the date of the final decision is used as base.” Accordingly, the fundamental offenses are as follows;

-        Agreements, Concerted Practices and Decisions that Limit Competition, in accordance with Article 4

-        Abuse of a Dominant Position, in accordance with Article 6

-        Mergers or Acquisitions that create a dominant position irregularly or strengthen the current dominant situation, in accordance with Article 7

If the act requiring a fine has been going on for a very long time, constitutes a grave violation, or its effects cause harm to the market, undertakings, or consumers, the fine may be higher in amount. The amount of the fine is determined by the Board. Therefore, the Board has a discretion in this regard. The Board determines the amount of the fine by examining many details such as the act, the damage, the extent of the violation, the power and position of the undertaking that constitutes a violation in the market.

 

When determining the magnitude of the penalty, the Board also takes Article 17(titled “administrative fine”) of the Law of Misdemeanor into account. A direct reference is made in LPC Art.16/5 to the relevant provision of Law of Misdemeanors. In accordance with this provision in Article 17 of the Code of Misdemeanors: “When determining the amount of an administrative fine, in addition to the unfairness content of the wrongdoing, the misconduct and the economic situation of the offender are taken into account together as well.” meaning that the Board must also look at the gravity of the misconduct and the economic situation of the offender.

 

      Among the provisions of the LPC related to sanctions, conusance is also regulated. Penalties to be imposed on undertakings or the associations of undertakings, or their managers and employees that actively cooperate with the Authority in order to uncover a violation of the law, can be abated by taking into account the nature, effectiveness and timing of cooperation and clearly showing the justification. In this regard, the Regulations to be issued by the Competition Board and the procedures and principles will be determined.

 

In Article 17 of the LPC, temporary fines are regulated. In the relevant article titled "Relative administrative fine", without prejudice to the penalties specified in Article 16;

a) Non-compliance with obligations or commitments made by a final decision or an interim measure, 

b) Preventing or complicating on-site inspection, 

c) In the event of any failure to provide the information or document within the specified period according to Article 14 and 15 of the law, an administrative fine which will be determined by the Board will be imposed up to five-ten-thousandth of the undertakings, associations of undertakings or the members of these associations’ annual gross income at the end of the previous fiscal year before the date of the final decision. If this calculation is not possible, the most recent year’s annual gross income from the date of the final decision is used as base. The second paragraph of Article 17 regulates the waiting periods for the relevant penalties to be given to the relevant persons:

(a)   The administrative fine for the act in this (a) subparagraph may be given starting from the expiration of the period established for compliance with the obligations in the relevant decision. If no time has been set in the decision that imposes an obligation, it may also be given from the day following the notification of this decision.

(b)  The administrative fine for the acts in this (b) subparagraph may be given from the day following the day on which the act took place.

(c)   The administrative fine specified in this (c) subparagraph may be given from the expiration of the period established for compliance with the obligations in the relevant decision.

 

In addition to criminal sanctions, civil sanctions may also be imposed to the undertakings that violate the rules of the Law on Protection of Competition and cause competition-limiting effects on the market. The results of the limitation of competition in the field of private law are mainly examined under two main headings. These are regulations related to invalidity and compensation.

 

            According to Article 56 of LPC; competition-limiting agreements and the decision of the associations of undertakings are invalid. In Article 4 of the LPC; “Decisions and actions of undertakings' such as agreements, concerted actions and associations of undertakings that are intended to prevent, decimate or restrict competition directly or indirectly in a particular market of goods or services, or that have or may have this effect, are unlawful and prohibited.” is the primary provision. Therefore, a decision or agreement of the kind referred to in article 4 will be considered invalid in the context of article 56. Agreements that have received an individual exemption and agreements that benefit from a block exemption will be considered valid, as they are an exception to this rule.

 

            There is no obligation to behave concertedly between the parties in the concerted actions listed in Article 4 of the Law. Therefore, since concerted actions are not binding and do not have a legal existence, there is also no possibility for them to be considered invalid.

 

            As the most basic consequence of invalidity, the execution of actions arising from agreements and decisions that are considered invalid will not be requested. If a refund is requested due to the invalidity of previously fulfilled actions, the parties' refundable debt is subject to Articles 63 and 64 of the Code of Obligations. Article 63 of TCO regulates; the matter being legal, the consent of the victim, the greater good(individual or common), necessary defence, competent public authority not being able to intervene at the right time (which are cases that annul the illegality) and the responsibility in these cases. On the contrary, there is a clear regulation in Art. 56’s last paragraph that states the provision of Article 65 of the Code of Obligations entitled “liability for equity” will not be applied to disputes arising out of LPC.

 

            There is a decision of the Council of State that the Competition Board is authorized to make decisions on the invalidity of an agreement. (Council of State 10th Department 2002/693 E. 2003/5295 K.)

 

            In the Turkish legal system, in general, those who harm others with misconduct and wrongful acts must compensate for this damage. Those who have been harmed can prove their damage with any proof to the extent permitted by the Evidence Law. A special arrangement has been made regarding compensation and proof at LPC.

 

            The right of compensation is regulated in Article 57 of LPC. According to the relevant article, anyone who prevents, disrupts or restricts competition by an act, decision, contract or agreement that is contrary to the provisions of the LPC, or abuses their dominant position in a particular market of goods or services, they are obliged to compensate all kinds of damages for those who have suffered from it. If the occurrence of damage has occurred as a result of the behavior of more than one person, joint liability will be set forth.

 

            Those who have suffered from restriction of competition, can demand the price they paid and the price difference they would be paying if the competition was not limited as damages. Competitor undertakings that are affected by the limitation of competition can demand compensation for all damages from the undertaking/s that limit competition. In determining the damage, all the profits that the damaged undertakings had hoped to make are calculated (taking the balance sheets of previous years into account). In fact, the article of the law has created a fairly wide scope by stating "all damages". There are opinions in the doctrine that the concept of “all damages” has the meaning of all material and moral damages.

 

            If the damage is caused by an agreement or decision of the parties, or gross negligence, the judge, at the request of the aggrieved persons, can decide on compensation amounting threefold of the material damage suffered or the profits that those who caused the damage received or are likely to receive.

 

As a result, the damages that may be caused by limiting competition, as the wording of the article of the law implies, are as follows: moral damages, value difference, lost profits, material damage, three times the amount of compensation of the profits made or likely to be made by violators.

 

As for proof, The compensation within the scope of Article 57 and further of the LPC is not binded to absolute liability. Therefore, it is mandatory for the plaintiff to prove that the defendant is at fault. This rule is based upon the rule that everyone has the obligation to prove their claim. The existence of agreements, decisions and practices which limit competition can be proved with all kinds of evidence. Article 59 of the law contains a provision that eases the burden of proof in relation to concerted actions. If the damaged persons present evidence which gives the impression that the competition in the market is disrupted, sharing of markets, the observed stability of the market price for a long period of time, the price being increased at intervals by undertakings operating in the market to the judicial bodies, the burden of proving that the undertakings are not taking concerted action will be on the defendants. Thus, the burden of proof will be reversed by being passed to the defendant. 

 

 

            In this article (within the framework of the provisions of the Law on the Protection of Competition), the prescribed sanctions for undertakings that take actions, decisions and practices that limit competition, and in which cases they are in question, are covered. Sanctions are examined in two main headings: criminal and legal sanctions. Criminal sanctions constitute procedural offenses and fundamental offenses while civil sanctions constitute invalidity and compensation obligations.

In this article, the legal and criminal sanctions that the person who commits the act that constitutes a violation due to non-compliance with the competition ban within the scope of Competition Law are detailed. It is extremely important to know what behaviors cause this violation in order to avoid competition ban violation, to avoid criminal sanctions and to ensure a fair competition environment.