The Legal 500

Contributed by Gönenç Gürkaynak, Esq.
Partner
ELIG, Attorneys-at-LawApril 2007

In the 10 years since the competition legislation came into force in Turkey, sectors have faced a vast number of antitrust investigations.

Application of Article 4 with Insufficient Body of Evidence

Many firms have been subject to severe fines on many occasions for being party to restrictive agreements and concerted practices as well as for involving in abuses of dominant position. Among the penalized infringements, restrictive agreements and concerted practices that are dealt under Article 4 of Law 4054 on the Protection of Competition (the “Competition Law”) constituted the majority. During its first 10 years, the Turkish Competition Authority had handled many Article 4 investigations without placing adequate emphasis on the standards of proof, except for the recent cases. There had been cases where the evidences gathered to back up claims of infringements may not have, in a more mature competition law jurisdiction, met the required level of certainty and precision to establish antitrust liability on the accused undertakings. As a derivative of this manner, the defenses of the investigated parties were sometimes taken just to fulfill the formal procedural requirements and were not treated with the desired amount of diligence. This had caused a certain level of uneasiness and anxiety especially in frequently investigated sectors, and had created a legal environment –or at least a feeling at the defending parties- where the outcome of an investigation was more or less predetermined once the claims of infringements were initially raised in the beginning of the investigation period.The inclination to rely on rather low standards of proof was particularly eminent in cases of concerted practices. The Competition Board (the “Board”) explicitly exhibited its intention to condemn undertakings for participating in concerted practices merely on the existence of price parallelism without resorting to use of a satisfactory level of corroborating evidences. The Yeast Producers[1] constitutes a clear example of such handling of the Competition Board where the investigated yeast producers in Turkey were accused of engaging in concerted practices throughout a certain period of time. The Board merely identified the parallel prices, in isolation from the specific features of the yeast market which was defended to be a pure oligopoly where parallel prices were a natural outcome of the market dynamics. The Board did not hold any other substantial evidence that would show direct or indirect exchanges of information –or any kind of facilitating practice- between the yeast producers. Although the economic and factual counter evidences -that could otherwise be deemed sufficient to justify the parallelism in prices- were laid down by the defense attorneys and economists, the Board did not put much emphasis on any of these efforts in its reasoned decision, and nevertheless levied monetary fines on the investigated parties.Recent Developments – Attention to Standards of Proof The Board has finally broken away from its own habits in three recent decisions relating to investigations conducted in the cement and ready-mixed concrete markets, one investigation conducted in an alleged market for glass packaging materials, and one investigation in the healthcare sector. Due to the fact that the result of the investigation in the healthcare sector has only been served on us as the Turkish competition law attorney to the investigated party, and since the reasoned decision in that investigation is not yet in the public domain, this summary will not cover any further issues relating to that topic. The same sensitivity applies to the “no liability” decision concerning the biggest Turkish glass manufacturer and its Eastern European counterpart. In the other successful defenses where ELIG presented the Turkish competition law defenses of the parties in three sets of written submissions, administrative law cases, and oral hearings, the investigations – which were initiated following alleged violations of Article 4 of the Competition Law - were dropped by the Turkish Competition Authority with no liability determination on the investigated entities. The Board has correctly weighed defenses of the parties against the claims of violation and has shown consideration to the standards of proof.Mediterranean Cement (06-69) was adopted at the Board meeting on October 3, 2006. The Board pronounced only its short final decision and has yet to issue its reasoned decision. The Board, having assessed the evidence and the parties' defenses, concluded that due to an "insufficiency of evidence of constructing a horizontal agreement" between the investigated parties, Article 4 of the Competition Law had not been violated by cement producers active in the western part of the Mediterranean region. Aegean Ready-Made Concrete (06-88) was adopted at the Board meeting of December 7, 2006 and concerned an investigation into resale price-fixing claims raised against certain producers of ready-made concrete in the Aegean region. The Board again concluded that the producers had not violated Article 4 of the Competition Law through vertical arrangements amounting to resale price-fixing due to the fact that there was insufficient evidence to substantiate the violation claims. Aegean Cement (06-88), which was adopted at the same Board meeting, concerned an investigation into vertical infringement claims made against certain producers of cement active in the Aegean region. The Board once more cleared the cement producers of infringement claims, citing a lack of evidence. However, as the Board has already released its reasoned decision in this case, the legal grounds on which the decision was based are clearer than in the two previous decisions. The producers were accused of taking part in vertical arrangements that amounted to market partitioning. The Board assessed the evidence gathered to substantiate these claims and concluded that: "Since there is no evidence other than the affidavits of the dealers and the colored packages and shipment codes found by the reporters during investigations on the dealer's premises, the evidence is not sufficient to prove that the cement producers had prevented and controlled active or passive sales of their resellers."For this reason, the Board relieved the producers of any antitrust liability.Conclusion 

The recent decisions – when taken into consideration together with the more recent and yet to be published decisions in the healthcare and glass sectors - are indicative of the fact that the Board has recently placed more emphasis on the adequacy of evidence. In other words, the Board's recent approach has been to adhere strictly to the standards of proof. Since the Board is keen on submission of substantial evidence beyond reasonable doubt for it to establish antitrust liability, this handling leaves more room to defense efforts, and to the hope that only infringers will be placed under the threat of administrative monetary fines that could go up to 10% of Turkish turnover.

 By Gönenç Gürkaynak, Esq.; Partner; ELIG, Attorneys-at-Law.