Settlement Procedure in Turkish Competition Law: in effect and in use

The case relates to alleged anti-competitive agreements between distributors of consumer electronics. The Turkish Competition Authority (TCA) had been investigating potential restrictions of online sales by authorised dealers as well as the fixing of resale prices. Then, on 5 August 2021, the TCB, the TCA’s decision making body, accepted settlement letters from the firms under investigation and concluded its probe. For now, further information on the case is limited.

However, it is clear that the settlement decision marks an important milestone. It indicates that the TCB is ready and willing to engage with parties looking to acknowledge infringements in return for a penalty discount.

Notably, the settlement decision was made less than a month after the settlement procedure became fully effective. The procedure was introduced into Turkey’s competition regime following amendments to Law No. 4054 on the Protection of Competition (the Competition Law) in June 2020. A year later, on 15 July 2021, secondary legislation setting out relevant principles and procedures, the Regulation on the Settlement Procedure (the Settlement Regulation), entered into force. We reported on the draft Regulation when the TCA published it for consultation in March. The final version provides some significant revisions and additional clarification.

What does the settlement procedure bring?

Undertakings wishing to settle with the TCA will be subject to the following procedures: 

General principles of the settlement procedure

• Settlement is an option for investigations opened before the Settlement Regulation entered into force, but only if the TCA has not yet notified the investigation report to the parties. 
• When deciding whether to use the settlement procedure in any particular case, the TCB will take into account the procedural benefits arising from the swift conclusion of the investigation and the different views concerning the existence of a violation and its scope. In particular, the TCB will weigh up: 
  • the number of parties under investigation;
  • whether a significant proportion of the parties have applied for settlement;
  • the scope of the violation and the evidence available; and 
  • whether it is possible to reach a conclusion as to the existence of a violation and its scope. 
• The TCB may decide to terminate the settlement procedure (in whole or in part) if:
  
  • the expected procedural benefits cannot be achieved, or it is not possible to reach a common understanding with the parties under investigation as to the existence and scope of the violation;
  • there is a risk of obscuring evidence; and
  • a party fails to comply with the confidentiality obligation specified in the Settlement Regulation.
• Settlement could result in a reduction of up to 25% of a parties’ administrative fine; the final version of the Settlement Regulation clarifies that the discount will not be less than 10%. 

Initiation of the settlement procedure

The TCB can initiate a settlement procedure, ex officio or upon parties’ request, after an investigation has been launched. 

• Upon application: Parties under investigation can submit their settlement requests to the TCA in writing. The TCB will decide whether to accept or reject requests, and may invite other parties to any settlement meetings. The Settlement Regulation now allows the TCB to postpone its decision if it considers that a more detailed investigation is needed to determine the nature and scope of the alleged violation.
• Ex officio: The TCB may invite parties under investigation to settlement meetings. The final form of the Settlement Regulation imposes a 15-day deadline for parties to respond to the TCB’s invitation. The response must be directed to the TCA in writing, stating whether the party wishes to participate in the settlement meetings. 

Settlement meetings

• Settlement meetings will start as soon as practically possible after acceptance of the settlement procedure by the TCB or the parties, as the case may be. Parties can withdraw from the settlement procedure at any time until submission of the settlement letter. 
• Where the settlement procedure includes more than one party, meetings will be conducted separately and recorded with meeting minutes.  
• During the settlement meetings, the parties under investigation will be informed of:
  • the allegations against them;
  • the type and scope of the alleged violation (“duration” has been removed in the final version of the Settlement Regulation);
  • the underlying evidence (with confidential information redacted);
  • the envisaged deduction in the administrative fine; and
  • an envisaged range of the administrative fine to be imposed.

Interim decision of the TCB

Following completion of the settlement meetings, the TCB will render its interim decision. That decision will include:

• the type and scope of the alleged violation (the term “duration” has been removed from the final version of the Settlement Regulation);
• the maximum administrative fine that might be imposed (a requirement to include the minimum administrative fine has been removed from the final version of the Settlement Regulation);
• the level of settlement deduction;
  The deduction will be based on an amount not exceeding 10% of the annual gross revenue of the undertakings and associations of undertakings.
• the level of any deduction awarded for the party’s active cooperation in the TCA’s investigation (a requirement to include the minimum and maximum deduction level has been removed from the final version of the Settlement Regulation);

If the party has also submitted a leniency application under the Active Cooperation Regulation, the level of deduction for cooperation will be added to the settlement discount and applied together.

Parties can submit applications to benefit from the Active Cooperation Regulation up until submission of a settlement letter. If the settlement procedure is subsequently terminated, the time limits envisaged under the Active Cooperation Regulation will then apply. 

• the deadline for the party to submit a settlement letter (maximum 15 days); and
• a statement that the TCB will not be bound by the interim decision if a settlement letter is not submitted within the specified deadline.

The issues included in the interim decision cannot be negotiated by the parties. 

Settlement letter

If a party participating in a settlement procedure wishes to accept the content of an interim decision, it must submit a settlement letter in writing to the TCA indicating:

• a clear statement that the party acknowledges the existence and scope of the violation (the text “duration and consequences of the violation and its liability arising thereof” has been removed from the final version of the Settlement Regulation);

This part of the letter may be submitted orally. Any such oral statement will be recorded  in a letter drafted by a TCA  member of staff and must be confirmed by the representatives of the relevant party.

• that the party accepts the level of discount and the amount of the maximum administrative fine the TCB may impose;
• that the party was informed of the allegations against it and had sufficient opportunity to explain its position; and
• that the party will not challenge the administrative fine or any other issue covered under the settlement letter before the courts.

The final version of the Settlement Regulation introduces a procedure for correcting deficiencies in a submitted settlement letter. On one occasion only, the TCB will ask the party to correct the deficiencies identified within seven days. If the party does not correct the deficiencies by that deadline, the investigation will continue as if no settlement has been reached.

Final decision on the settlement

The TCB must make a final decision, terminating its investigation, within 15 days starting from the date of submission of the settlement letter. The final settlement decision will include the TCB’s infringement finding and the determined administrative fine.

In addition to those stipulated under article 52 of the Competition Law, the final settlement decision will include the following:

• the allegations against the settling party;
• the type and scope of the violation (the term “duration” has been removed in the final version of the Settlement Regulation);
• the underlying evidence;
• the level of deduction applied and the administrative fine; and
• the fact that the settling party accepts the administrative fine.

In hybrid cases, where the standard investigation continues for one or more other parties, the final settlement decision will not be notified to the settling party until the final decision on the investigation is rendered. 

Confidentiality requirements

The Settlement Regulation requires parties participating in the settlement procedure to keep the content of the settlement meetings, as well as the information and documents available to them during the settlement meetings, confidential until the final decision on the settlement is rendered. If the TCA discovers a breach of the confidentiality obligation after the final decision has been rendered, it may initiate a new investigation against the relevant parties. Any violation of the confidentiality obligation will also be an aggravating circumstance when the TCB determines the administrative fine. 

What happens if the settlement procedure fails?

The ordinary course of a standard investigation will resume if: (i) the relevant party does not submit the settlement letter on time or fails to complete any deficiencies in the settlement letter on time; (ii) the TCB decides to terminate the settlement procedure; or (iii) the relevant party withdraws from the settlement procedure.

In such a scenario, the information and documents submitted by the relevant party during any settlement meeting will be excluded from the investigation file and cannot be used by the TCB as a basis for its final decision. Notably, the final version of the Settlement Regulation uses the terms “information and documents” rather than just “statements”. 

The final version of the Settlement Regulation now also requires the TCB to include its reasons for a decision to terminate the settlement process or reject a settlement request in its final decision.

And the Settlement Regulation is now clear that a party will lose its opportunity to make a settlement request if it rejects a TCB settlement invitation or fails to respond to the invitation.