Monetary Fine on the Financial Institutions Annulled

by Şeyma İnal and Yasemin Işık

On February 16, 2022; Ankara 3rd Administrative Court (“Court”) annulled the Turkish Competition Board’s (“Board”) decision dated 02.07.2020 with no. 20-32/397-179, in which administrative monetary fines were imposed on several international banks for the failure to provide the requested information/data.

 The Nature of the Requested Information and Board’s Decision

The Turkish Competition Authority (“Authority”) was conducting a preliminary inquiry against twenty financial institutions (17.01.2020; 20-05/48-M) and in this respect, it issued requests for information from the relevant undertakings, which included Citibank A.Ş. (“Citibank”), Goldman Sachs TK Danışmanlık Hizmetleri A.Ş. (“Goldman Sachs”), ING Bank A.Ş. (“ING”), JPMorgan Chase Bank National Association Merkezi Colombus Ohio İstanbul Türkiye Şubesi (“JPMorgan Turkey”) and Türkiye Garanti Bankası A.Ş. (“Garanti BBVA”). These are either the Turkish branches, or direct/indirect subsidiaries of foreign parent companies, located in the USA or the UK.

The Authority requested all conversations made between 01.01.2018 – 17.01.2020 through Bloomberg and Reuters platforms by each bank’s top 10 traders with the highest quoted transaction volume in Turkish Lira who are employed in the USA and the UK (separately for each country), emphasizing that such data should include the main group of the relevant undertakings.

Citibank, ING, JPMorgan, Goldman and Garanti BBVA did not provide the requested information by claiming various reasons, some of which was as follows:

  • The data of the main undertaking (e.g. JPMorgan Chase & Co.) are not held by them (e.g. JPMorgan Turkey) and they do not have access to, or control over such data.
  • The requested information is beyond the powers of the Authority; the request for information seeks information which belongs to companies domiciled outside of Turkey and kept on servers which are abroad.
  • The local companies are in no position to assess the legality of provision of data to the Authority in terms of the norms of the USA and the UK.
  • The content which are outside of Turkey can be gathered as per the rules of relevant countries on collection of evidence and if necessary, through official and duly formed correspondences with the relevant authorities in such countries.
  • Notification must be duly made to the main undertaking in the USA or the UK within the framework of international legal norms, such as the Hague Convention; otherwise the risk of infringing those countries’ laws arises.
  • The said information should be requested from the main undertaking (not from the local company) due to regulations such as GDPR and protection of banking secrets pursuant to the banking regulations.
  • There is a need to anonymize the data.

However, none of these arguments were accepted by the Board, as, from the Board’s perspective, the Turkish branches or direct/indirect subsidiaries of relevant international banks do possess and are under the obligation to share the information belonging the main companies, due the notion of undertaking in Turkish competition law, which is akin to the EU regime. Accordingly, the Board had imposed administrative monetary fines on these undertakings as per sub-paragraph (c) of Article 16 of the Law No. 4054 on Protection of Competition[1] (“Law No. 4054”) for the failure to comply with the obligation to provide the information requested by the Authority.[2]

The Court’s Decision and its Reasoning

Upon the separate administrative lawsuits initiated by Citibank, JPMorgan, Goldman and Garanti BBVA for the annulment of the Board’s decision imposing administrative monetary fines, Ankara 3rd Administrative Court annulled the Board’s decision imposing monetary fines on the relevant undertakings.[3]

According to the Court decisions that are published at the Authority’s website, the relevant undertakings requested the annulment of the decision arguing that; the requested information and documents are not in their possession, but in possession of their affiliates in the USA and the UK, therefore the Authority’s letter was not duly served to the actual recipients in accordance with the Notification Law No. 7201 (i.e. the general notification legislation in Turkey) or the international and bilateral agreements, and that the Board cannot apply the principle of economic unity in the notification process, since it is not a procedural principle but a competition law principle.

The Court’s reasoning in these separate lawsuits is essentially the same (setting aside certain assessments specific to each bank):

  • the Hague Convention cannot be applied in the present case since the Board decision is in the nature of an administrative act, which is not within the scope of the Convention,
  • the procedure of the notifications as per the Law No. 4054 are subject to the Notification Law No. 7201, such notification should be made in accordance with the provisions of the Notification Law regulating notification to foreign parties, in the absence of a bilateral or multilateral agreement on legal aid and cooperation between the countries or if the notification process falls outside of these agreements, and
  • most importantly, the economic unity approach, which is a competition law principle that allows holding the parent liable for the anticompetitive actions of its affiliate, does not serve the purposes of (and thus, is not applicable to) a procedural matter (i.e. the notification process).

In a nutshell, the Court ruled that the records of the persons employed by the relevant group entities in the USA and the UK should have been requested from them. More significantly, as for Goldman Sachs, it has been determined that while the addressee of the information request was determined as Goldman Sachs International who has no affiliation relationship with Goldman Sachs, the latter was served with the information request. Accordingly, within the annulment decision, it was stated that the acceptance of an economic unity and holding Goldman Sachs responsible for not providing the information held by Goldman Sachs International was clearly incompatible with the purposes of the competition law.

For these reasons thereof, the Board’s monetary fine decision was found unlawful by the Administrative Court based on undue notification process.

Conclusion

 The Court’s decision is important for multinational Turkish companies who have parents and/or affiliates located outside of Turkey, as it sets forth a benchmark for the international notification procedures not only for the Board decisions, but for all administrative decisions as well. Although it is reasonable to expect that the Court’s decision will be appealed by the Authority, if upheld, the scope of the principle of economic unity will be well established, as limited to the issues of competition law.

[1] Sub-paragraph (c) of Article 16 of the Law No. 4054 stipulates that, in case incomplete, false or misleading information or document is provided, or information or document is not provided within the determined duration or at all, in implementation of provisions concerning on-site inspections and requests for information, the Board shall impose on natural and legal persons having the nature of an undertaking and on associations of undertakings or members of such associations, an administrative fine by one in thousands of annual gross revenues of undertakings and associations of undertakings or members of such associations which generate by the end of the financial year preceding the decision.

[2] The Board’s decision dated 02/07/2020 and numbered 20-32/397-179.

[3] Ankara 3rd Administrative Court’s decisions dated 16.02.2022 and numbered E. 2021/428, K. 2022/267;

Ankara 3rd Administrative Court’s decisions dated 16.02.2022 and numbered E. 2021/432, K. 2022/268;

Ankara 3rd Administrative Court’s decisions dated 16.02.2022 and numbered E. 2021/554, K. 2022/269;

Ankara 3rd Administrative Court’s decisions dated 16.02.2022 and numbered E. 2021/435, K. 2022/270; and

Ankara 3rd Administrative Court’s decisions dated 16.02.2022 and numbered E. 2021/756, K. 2022/271.

(Mondaq Link)

2022-04-27T14:30:55+03:00