The Regulation on Fines to Apply in Cases of Agreements, Concerted Practices, and Decisions Limiting Competition, and Abuse of Dominant Position ("Former Regulation"), which had been implemented by the Competition Board since 2009 to set administrative fines to impose on competition infringements, was repealed. The Regulation, which was published in the Official Gazette dated 27 December 2024 and no 32765 entered into force ("New Regulation"). The New Regulation addresses key elements such as definitions—most notably the newly introduced concept of "Decisive Influence"—and fine calculation principles of administrative fines, including the elimination of separate ranges for cartel and other violations.
The distinction between "cartel" and "other violations" in the determination of administrative fines and the lower and upper limits of base fines, which were based on this distinction were removed and aggravating factors and mitigating factors were redefined with the New Regulation.
The Turkish Competition Authority ("TCA") also refine the categorization of aggravating and mitigating factors, remove certain mechanisms for active cooperation, and expand liability for managers and employees with the New Regulation. By recalibrating both the scope and severity of potential sanctions, the New Regulation signals a shift toward broader discretion for the TCA.
This article examines the central modifications introduced by the New Regulation and assesses their potential impact on both undertakings and their managers and employees.
1. Changes in the Definitions
The New Regulation introduces several new definitions, such as "Decisive Effect," "Undertaking," "Association of Undertakings," and "Settlement Regulation." At the same time, the definitions of "Cartel," "Other Infringements," and "Active Cooperation," which were present in the Former Regulation, have been removed.
The concept of "Decisive Effect" has gained particular significance under the New Regulation. It is defined as the indispensable role an undertaking, or its managers/employees play in the creation or continuation of a competition law violation. This definition may lead to the imposition of more severe or frequent penalties on managers and employees.
The definition of "Annual Gross Revenue" has also been expanded. The New Regulation clarifies that when calculating income closest to net sales, the main operating income and other accounting items will be taken into account.
2. Principles for Determining Administrative Fines
In the New Regulation, the criteria for determining the base fine have been revised. Unlike the Former Regulation, which based the calculation on the concept of "independent behaviour," the New Regulation now refers to "each violation" as the basis for calculation. The sequence for evaluating aggravating and mitigating factors has also been redefined. The New Regulation introduces a system where the fine is first increased by considering aggravating factors, and then reduced by applying mitigating factors. While the upper limit for fines remains unchanged, administrative fines cannot exceed 10% of an undertaking's revenues from the previous fiscal year. Furthermore, the provisions regarding active cooperation practices have been removed, and no special regulations on this matter have been included in the New Regulation.
3. Base Fine Rate
Previously, fines differed for cartels versus other violations. Under the New Regulation, such distinctions have been abolished. The base fine rate now depends on the severity and nature of the violation, namely, whether it is considered naked/hardcore.
Violation duration is also subject to a new, graduated increase system (e.g., up to a one-time increase for violations exceeding five years). This unified approach removes the predetermined percentage ranges and grants the TCA broader discretion in setting base fines, considering the nature and gravity of the violation. Consequently, administrative fines for a resale price maintenance violation could be imposed at the same rate as those for a cartel violation, depending on the specific circumstances of the case as determined by the TCA.
4. Aggravating Factors
In the New Regulation, violations under Articles 4 and 6 of Competition Act No. 4054 explicitly serve as grounds for recidivism, resulting in a one-time increase in the base fine for each repetition offenses (previously half to one time).
When multiple aggravating factors arise simultaneously, the New Regulation requires combining their respective increase rates. The New Regulation clarifies the sequencing for applying aggravating and mitigating factors when adjusting fines:
- Aggravating Factors: Applied first, increasing the fine.
- Mitigating Factors: Applied afterward, reducing the fine.Newly introduced aggravating factors include fine increases of up to 100% for a "Decisive Effect" or "Confidentiality Violations" while recidivism and continued violations may also lead to increases of up to 100%.
Conversely, several previously listed aggravating factors, such as non-cooperation, have been removed.
5. Mitigating Factors
The New Regulation also provides a more detailed framework for mitigating factors:
- Cooperation during inspections: Undertakings offering physical/technical assistance or voluntarily submitting relevant information and documents may qualify for fine reductions.
- Limited Participation: A more detailed evaluation framework for undertakings with marginal involvement in a violation is introduced.
- Foreign Revenues: If a significant portion of annual turnover is derived from overseas markets, this can be considered a mitigating factor.
However, specific numerical fine reduction percentages (e.g., 25% to 60%) previously outlined for mitigating factors have been removed, leaving room for discretionary assessment by the TCA.
6. Fines Imposed on Managers and Employees
The distinction between cartel and other violations for individual fines has been eliminated. Any manager or employee having a "Decisive Effect" on the violation, regardless of type, can face a fine of up to 5% of the fine imposed on the undertaking.
Additionally, previous provisions for leniency or reductions based on cooperation no longer apply, signaling a stricter stance on individual accountability.
7. Intakes and Conclusions
The New Regulation marks a significant shift in the way administrative fines are determined and applied under Turkish competition law. By removing the rigid distinctions between cartel and other violations, introducing a tiered fine escalation system based on duration, and clarifying the sequencing of aggravating and mitigating factors, the New Regulation aims to foster greater transparency and predictability in enforcement.
By the New Regulation is aimed to ensure that the objective conditions of the infringement are fairly reflected in the fines. However, the removal of specific numerical ranges for fine reductions under mitigating factors and the elimination of provisions related to active cooperation may lead to increased discretion for the TCA.
The most significant issue raised by the New Regulation concerns its impact on ongoing investigations. The key criterion for determining whether the New Regulation applies to ongoing investigations as of its effective date is whether its application would result in an unfavorable outcome. It is anticipated that the practical implications of this criterion will become clearer over time.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
