The Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Restricting Competition, and Abuse of Dominant Position

Former Regulation on Fines 

When calculating the base fine under the Former Regulation on Fines, undertakings that engage in conduct prohibited under Articles 4 and 6 of Law No. 4054 on the Protection of Competition (“Law No. 4054”) had their annual gross revenues at the end of the financial year preceding the final decision, or if it was not possible to calculate this, at the end of the fiscal year closest to the date of the final decision, determined by the Board, taken as a basis, with a ratio of (i) between two percent and four percent for cartels, and (ii) between five per thousand and three percent for other violations. In this context, a base fine was calculated by determining the relevant rates according to the type of violation committed by the undertaking, and then additional rates relating to aggravating and mitigating circumstances were applied to the base fine.

New Regulation on Fines

With the new regulation on fines, a very different approach to administrative fines has come to the forefront. Accordingly, the approach based on the distinction between “cartel” and “other violations”, which was the basis for calculating the base fine, has been abandoned. With the New Regulation on Fines, by removing the relevant lower and upper limits, the amount of fine to be determined shall be based on the amount of the administrative fine imposed on the undertaking at the end of the fiscal year preceding the final decision, or if it is not possible to calculate this, it shall be calculated based on the annual gross revenues at the end of the fiscal year closest to the date of the final decision to be determined by the Board. It shall not exceed ten percent of these revenues (“Initial Fine Rate”).

Under the New Regulation on Fines, the Initial Fine Rate is determined by considering the gravity of the damage that has occurred or is likely to occur due to the violation and whether the nature of the violation is apparent and/or severe. In case the conditions are met, the basic fine rate is calculated by increasing the rates of the Initial Penalty due to the duration of the violation (“Base Fine Rate”).

Accordingly, the Initial Fine Rate shall be increased as follows: 

• One-fifth for violations lasting more than one year and less than two years,
• Two-fifths for violations lasting more than two years and less than three years,
• Three-fifths for violations lasting more than three years and less than four years,
• Four-fifths for violations lasting more than four years and less than five years,
• One time for violations lasting more than five years,

After calculation of the Base Fine Rate, in case of aggravating and mitigating factors, the Base Fine Rate shall be increased by considering the aggravating factors and then reduced by considering the mitigating factors.

Aggravating Factors

The aggravating factors are defined in the New Regulation on Fines as the recurrence of the violation, the continuation of the violation after the notification of the investigation decision, the presence of a decisive influence in the violation, and the violation of confidentiality obligations in the settlement process. In the event of a recurrence of a violation, the Base Fine Rate is increased up to one fold, and in the presence of other aggravating factors, it may be increased up to one fold (“Aggravated Fine Rate”).

Mitigating Factors

Base Fine Rate or Aggravated Fine Rate may be deducted if the relevant undertaking or association of undertakings proves such cases:

• Assisting the on-site inspection beyond the fulfillment of legal obligations, by providing physical and/or technical facilities that enable the on-site examination to be completed in a shorter time or to be carried out more effectively, submitting additional information or documents related to the inspection by the inspected undertakings themselves,
• Pressure by other undertakings into taking part in the violation,
• Limited participation in the violation,
• Violating activities’ insignificance within the annual gross revenues,
• The presence of foreign sales revenues within the annual gross revenues subject to administrative fines 

Fines to be imposed on Managers and Employees

The Former Regulation on Fines stipulated that each of the managers and employees of the undertaking whose decisive influence was determined in the cartel may be fined individually between three percent and five percent of the fine imposed on the undertaking, and the managers and employees whose decisive influence was determined in other violations may be fined up to five percent of the fine imposed on the relevant undertaking or association of undertakings.

The New Regulation on Fines stipulates that, without making any distinction according to the type of violation, the managers or employees of the undertaking or association of undertakings, whose decisive influence on the violation^[2] shall be imposed an administrative fine up to five percent of the fine imposed on the undertaking or association of undertakings.

Conclusion

As a result, the practice of determining the fine rate based on the types of violations determined as “cartel” and “other violations” in the Former Regulation on Fines has been abandoned with the New Regulation on Fines, and it has been stipulated that the initial administrative fine rate that undertakings may face for any violation of competition law cannot exceed ten percent.

In addition, the practice of determining the rates of fines to be imposed on employees and managers based on the type of violation has been abandoned, and it has been regulated that the relevant employees will be fined up to five percent of the fine imposed on the undertaking, regardless of the type of violation.