Turkey: Will Turkey Be Able To Catch Up With The Class-Action Related Developments In EU?

A new EU Directive (published in December 2014) ^[1] introduced collective redress as an additional tool to deter undertakings from infringing competition rules. While some of the EU countries allow victims to claim compensation for damages suffered, the European Commission requires Member States to bring into force the rules and administrative provisions necessary to comply with the Directive by 26 December 2016. As an accession country, Turkey remains in an undetermined condition, since the debate on collective redress in Turkey is marked with obstacles on both the merits and procedural issues.

Legislative Process and Developments in EU

The green light which eased the way for developing the EU Directive came in the mid-2000s by the publication of a Green Paper^[2]. Specifically, on the issue of limited access to evidence, the debate on damage calculation and the discussions on applicable law were the outlined obstacles to an efficient system for bringing claims for infringement of EU competition law.

The Green Paper -together with the comments received, studies^[3] and Q&A press releases^[4] in 2005- evaluated the problems with effectiveness of collective redress mechanisms in the EU. The studies and consultations were followed by the White Paper^[5] which was built on the issues addressed in the Green Paper and posed possible measures for resolving the issues. The main proposition in the White Paper was the recommendation to expand possible damage claims to include indirect purchasers. The White Paper also proposed opt-in collective actions and suggested full compensation for the real value of loss including profits.

While there was still no legislative framework, the Commission intended to build a unified policy and produced a consultation paper in 2009^[6]. While the Commission sought and encouraged an effective instrument of private enforcement of competition rules, this initiative went on with an intention of establishing a study^[7] in 2011. Further, the European Parliament published a Resolution in 2012 calling the Commission to take necessary measures  to provide a proper use of the collective redress mechanism^[8].

In 2013, the Commission published a recommendation for collective redress mechanisms in the Member States^[9]. The Recommendation set out non-binding principles such as an opt-in system, procedural safeguards and alternative dispute resolution which should be put in place within two years at the latest. The Recommendation proposed a Directive on private enforcement of EU competition law in addition to public enforcement of competition rules^[10].

In November 2014, the Commission officially signed into law the Directive which is the latest step to encourage private enforcement. In fact, the Directive aims to harmonize relevant rules by creating a procedural framework for all Member States to encourage a "robust competition culture", according to the Commission.

The main regulations in the Directive are summarized as follows:

• Full compensation: Member States shall ensure that any victim is able to claim and obtain full compensation for that harm.
• Disclosure of evidence: Parties will have easier access to evidence which is necessary for them in actions for damages for infringement of competition law.
• Limitation periods: Member States shall ensure that the limitation periods for bringing actions for damages are at least 5 years.
• Liability: Any participant in an infringement will be responsible jointly and severally towards the victims for the whole harm caused by the infringement.
• Passing on defence: If direct customers of an infringer offset the increased price they paid by raising the price they charge on their own customers, the infringer can reduce compensation to direct customers by the amount they passed on to indirect customers.
• Presumption of harm: A rebuttable presumption that cartels cause harm has been set out in order to facilitate compensation.

The Directive establishes that the Member States need to implement the rules in their national legal systems by 27 December 2016. While these new rules will likely ensure  harmonization of collective redress across EU, it is evident that the Turkish system should be improved by removing the obstacles in enforcement.

Collective redress and Turkey's accession to EU

Turkey has been linked to the EU since 1964, a customs union was established in 1995, and has been granted the status of candidate country in December 1999. Since then, Progress Reports including the evaluations of the Commission for Turkey have been published regularly. As Turkey is not an EU Member State, the Directive is not directly applicable. However, as an accession country, it remains to be seen whether enforcement in the EU should effect the reinforcement of an effective judicial system about collective redress in Turkey.

As for class actions or collective redress, there is no provision in Turkish law. However, pursuant to Turkish Procedural Law, class action is only available for legal entities and associations. Accordingly, pursuant to Turkish Commercial Code, associations and other legal entities aiming to protect the interest of their members or on their behalf, may initiate a class action to remove an unlawful situation or prevent any future violation. However, the lawsuit cannot be filed to claim compensation for damages suffered by their members or associates. In practice, the number of class action cases is very small.

The Turkish Competition Act does not include any provision for filing class action lawsuits in respect of competition law infringements. Article 57 of the Competition Act establishes that anyone who prevents, distorts or restricts competition via practices, decisions, contracts or agreements, or abuses dominant position, is obliged to compensate for any damages of the injured. Also, Article 58 states that those who suffer from the violation of an agreement or a decision of the parties may be awarded by treble damages.

Currently, the enforceability of these Articles is being tested before the courts and competition-based lawsuits are increasing in practice. Several lawsuits have already preceded before the courts but none of them have been concluded yet. For instance, the competitor of an undertaking operating in the FMCG industry brought an action and the trial is currently ongoing. Similarly, in relation to the Turkish Competition Authority's decision concerning the abuse of dominant position in the telecommunications market, the competitor as well as the distributor of the dominant undertaking brought an action for damages and the decision is still pending. Moreover, following the Turkish Competition Authority's decision to impose a fine of approximately €400 billion on the banks, it is known that a consumer association filed a case against banks.

Lack of a precedent and a unified practice has caused a number of discussions about the enforcement of the abovementioned Articles. These discussions remain in "procedure" phase such as discussions about competent courts, the role of the claimant, etc. Also, the most intense discussion has been shaped around the subject of "limitation periods". Since there is no rule on limitation periods in the Competition Act, there is a dispute as to which piece of legislation should be taken as a reference in the aforementioned cases. In fact, pursuant to Article 72 of the Turkish Code of Obligations, action for damages concerning competition law violations are subject to 2 years limitation period.

In practice, the Court of Appeal prefers to set a prejudicial issue in case the Turkish Competition Authority has not yet decided on the competition infringement. In respect of the limitation periods, some (and even court decisions) argue that the period should begin at the time of discovery of the infringement. As for "continuing infringements", there are also opinions that claim the period should begin from the publication date of the Turkish Competition Authority's reasoned decision.

The most recent discussion about the limitation periods appeared in a lawsuit before the Court of Appeal. In fact, the Court of Appeal decided that an 8-year limitation period should be applied to private enforcement cases in compliance with the Misdemeanour Act since competition infringements are described as "misdemeanour". The debate will be solved by the unified decision of the chambers.

For the moment, there are still important issues to be decided since there are still procedural obstacles for the collective redress enforcement in Turkey. However, as the EU Directive determines that national  legal systems shall be aligned by the end of 2016, Turkey as an accession country should accelerate its enforcement. As the success of Turkey with respect to the EU rules on collective redress will depend on the available legal framework and an effective practice, the resolution of ongoing cases and the establishment of a legal basis of collective redress would enhance the countries' compliance with EU rules. Otherwise, the Progress Reports might continue referring to "limited progress or no progress" in 2017.

^{[1] Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union.}