Within the scope of a noteworthy decision1 published by the Turkish Competition Authority (the “TCA“) recently, the decision regarding imposition of an administrative monetary fine on Farmasi Enternasyonal Ticaret A.Ş. (“Farmasi“), a cosmetics company, due to the submission of misleading information including, inter alia, an incorrect data in the financial statements within the response letter submitted by the undertaking to the TCA has been evaluated.
With this decision published by the TCA, it is understood that in case the information and document requests addressed to the undertakings by the TCA are fulfilled by means of directly submitting documents prepared by a Certified Public Accountant (“CPA“), the responsibility for the accuracy of these documents shall still be upon the undertaking.
General Information on the TCA’s Authority to Request for Information
Within the framework of the authority granted under Article 14 of the Law No. 4054 on the Protection of Competition (“Law No. 4054“), the Turkish Competition Board (the “TCB“) may request any information it deems necessary from all public institutions and organisations, undertakings and associations of undertakings while performing its duties set forth under the Law No. 4054. Accordingly, all undertakings, associations of undertakings and public institutions are obliged to provide the requested information within the period to be determined by the TCB.2
Article 14 of the Law No. 4054 stipulates that the TCB may request information that it deems “necessary”, thereby TCB’s broad discretionary power to request information is limited with the condition of “necessary information”3. The requested information should be limited to the subject and purpose of the examination4. It is important to note that the 13th Chamber of the Council of State ruled that the power to request information and documents should not be limited only to the investigation stage5. Thus, it is understood that the information requests may be addressed to the relevant parties during the preliminary investigation and investigation stage, merger control filings, as well as sector inquiries.
In case an infringement occurs in terms of the TCA’s information requests as stipulated in Article 14 of Law No. 4054, administrative monetary fines are imposed. These infringements may be committed by providing incorrect or misleading information or documents within the context of applications for exemption or negative clearance, or filings for mergers and acquisitions, as well as by providing incomplete, false or misleading information or documents in the application of aforementioned Article 14, and Article 15 of Law No. 4054 which concerns on-site inspections, or by not providing the information or documents within the specified period, or not at all.6
Article 16(1) of the Law No. 4054 stipulates that in such cases an administrative monetary fine of one thousandth of the annual gross income of the undertakings and associations of undertakings or the members of these associations at the end of the financial year preceding the decision or, if it is not possible to calculate this, at the end of the financial year closest to the date of the decision and which will be determined by the TCB, shall be imposed.
Subparagraph (c) of Article 17(1) of the Law No. 4054 also stipulates that in the implementation of Articles 14 and 15, if the requested information or document is not provided within the specified period, an administrative monetary fine of five in ten thousandths of the annual gross revenues of the relevant undertakings and associations of undertakings and/or members of these associations, which are calculated at the end of the fiscal year preceding the decision, or if it is not possible to calculate this, at the end of the fiscal year closest to the date of the decision, and which will be determined by the TCB, will be imposed for each day.
In the Annual Report published by the TCA for 20227, it is seen that administrative monetary fines of approximately TRY 3.5 million was imposed in 2022 due to the provision of incomplete, incorrect or misleading information and documents within the scope of information request and/or on-site examination.
As can be seen, the power to request information is an important procedural power in Turkish competition law, that is frequently used and should be used with care in order for competition authorities to effectively fulfil the duties assigned to them pursuant to the provisions of the legislation.8 Within this scope, the recent Farmasi decision is analysed below, by taking the general issues regarding the TCB’s power to request information into consideration.
I. The Farmasi Decision
An investigation was launched with the TCB’s decision dated 20.10.2022 with number 22-48/696-M(2) to determine whether Farmasi violated Article 4 of Law No. 4054 by determining resale prices and restricting internet sales, and the investigation was finalized under settlement procedure upon the acceptance by the TCB of the final settlement text sent by Farmasi. In this context, it has been decided to impose an administrative monetary fine of TRY 19,181,311.27 on the undertaking over its gross revenues for 2021 calculated by the TCB for resale price maintenance and restriction of internet sales.9
The TCB found that the responses submitted by the undertaking within the scope of the said investigation constituted incorrect/misleading information with two separate actions of the undertaking, and accordingly, within the framework of subparagraph (c) of Article 16 of Law No. 4054, Farmasi was imposed an administrative monetary fine of one in thousandth of its annual gross revenues at the end of the fiscal year 2021 as determined by the TCB10. In the decision, it was first determined that the article referred to in the e-mail contents obtained during the on-site investigation was not included in the contract which was declared to be up-to-date in the response letter sent by the undertaking, the provision which was alleged to have been added by the undertaking in 2018 was actually included in 201711, and then it was determined that the amounts of the back sales for export purposes made by Farmasi during the investigation process were declared differently in each document.
Thereupon, Farmasi requested re-evaluation of the TCB’s decision dated 26.01.2023 with number 23-06/69-20, regarding the imposition of an administrative monetary fine due to providing incorrect and misleading information within the scope of the Administrative Procedure Law No. 2577.12 With this application of Farmasi, it was stated that the fine imposed due to the incorrect reporting of intra-group sales was unfair, that the intra-group sales information was calculated by the CPA who makes the independent audit of Farmasi, that the CPA prepared the letter in question with his own signature by writing the title “to the Presidency of the Competition Authority” in its letter, and that it was not in accordance with equity principle to consider this issue as incorrect/misleading information and to make it the subject of an administrative monetary fine.
However, considering that Farmasi is an undertaking with a finance department, the TCB did not consider it reasonable that Farmasi had not realised the error in the reply letters submitted, and considered that all information and documents submitted by the CPA, attorney or representative during the entire investigation process were undoubtedly under the responsibility of the undertaking.
Just like the Poultry Sector Decision13, the TCB emphasised that the information provided by an undertaking regarding a fact, such as sales information, must be accurate and complete, otherwise, accepting that the responses to the requested information are indisputable will invalidate all the analyses to be made by competition authorities from the beginning.14 In particular, it is underlined that the conditions and limits of the agreement subject to the examination or the infringing practice can only be revealed in line with the information obtained from the undertaking and the framework of the analyses can be drawn within these limits, and that this situation becomes even more important in examinations regarding exemption and dominant position violations.
II. Assessment and Conclusion
In case the TCB requests information and documents from an undertakings, it is beyond doubt that the undertakings must respond to the TCB’s such request in a timely manner, including accurate information. In the event that incomplete or misleading information is provided or the information is not provided in due time, administrative monetary fines specified in the relevant articles of Law No. 4054 will be imposed based on the relevant undertaking’s annual revenue.
Information requests are one of the most fundamental tools that undertakings may bring forward during the preliminary investigation and investigation stages against the allegation that they have been engaged in anti-competitive behaviour. Therefore, in order to ensure that the TCB conducts the preliminary investigation and investigation processes in a transparent manner, the involvement of the relevant parties in these processes by cooperating with the TCB will lead to a fairer and more competitive environment.
In this respect, taking into consideration that the responsibility of the undertaking also continues in terms of the information provided through a CPA, by proxy or representative, undertakings should ensure the consistency and accuracy of the information included in their responses to information and document requests, even in cases where such information is financial in nature and is included in the documents prepared by the CPA.
Footnotes
1. The Turkish Competition Board’s decision no. 23-10/153-47 dated 23.02.2023 (https://www.rekabet.gov.tr/Karar?kararId=3eafa860-39b5-4622-bc41-767533ed724f).
2. In European Union competition law, which is source of for the Turkish competition legislation, the European Commission may request undertakings or associations of undertakings to provide all necessary information in order to fulfil the tasks assigned to it (Council Regulation (EC) No 1/2003 of 16 December 2002)[2]. As in Turkish law, Article 18/1 of Regulation No 1/2003, by its provision of “In order to fulfil the tasks assigned to it by this Regulation (…)”[2], limits the Commission’s power to request information from a purpose point of view.
3. Emel Badur & Burcu Ertem, The Means of Competition Authority’s Supervisory Powers – Decisions of the Interim Measures, Request for Information and On-the-Spot Inspection (http://tbbdergisi.barobirlik.org.tr/m2010-90-639).
4. Ejder Yılmaz, Evidences in Competition Law, Thoughts on the Collection and Evaluation of Evidences, Symposium on the Current Developments in Competition Law, 2004.
5. The Decision Dated 14.03.2006 with File No. 2005/134 and Decision No. 2006/1402 of the 13th Chamber of the Council of State (https://www.rekabet.gov.tr/Safahat?safahatId=d4235d7d-95fb-4087-b084-b9957f38fc45).
6. Under EU competition law, administrative monetary fines, including time limited fines, are imposed in cases where undertakings provide false/misleading information, whether intentionally or negligently, in response to a request for information by the Commission.
7. https://www.rekabet.gov.tr/Dosya/yillik-rapor-2022.pdf.
8. The Authority to Request Information and the Sanctions related to this, Elif Nurdan Şarbak, 62.
9. The Turkish Competition Board’s decision no. 23-09/143-42 dated 16.02.2023 (https://www.rekabet.gov.tr/Karar?kararId=1474cccd-c0a2-4c5d-8b39-034c7dfa1cac).
10. The Turkish Competition Board’s decision no. 23-06/69-20 dated 26.01.2023 (https://www.rekabet.gov.tr/Karar?kararId=b55d06df-20df-4a93-977e-9683b33b577e).
11. It has been determined that the contracts for the determination of the resale price of the buyers and the restriction of internet sales were in force in 2018 and before, but the relevant documents were not submitted by the undertaking in response to the Authority’s request for information.
12. Article 11 of the Administrative Procedure Law No. 2577with title “Appeal to higher authorities” stipulates that before filing an administrative lawsuit, the concerned persons may request from the higher authority, or in the absence of a higher authority, from the authority which has performed the procedure within the time limit for filing an administrative lawsuit, the abolishment, withdrawal, amendment of the administrative procedure, or the performance of a new procedure.
13. The Turkish Competition Board’s decision no. 19-12/155-70 dated 13.03.2019 (https://www.rekabet.gov.tr/Karar?kararId=ecfabeca-53c4-44e3-9d86-648ddaea2d7b).
14. In the first written defence of Tad Pilic Fenni Yem San. Ve Tic. Ltd. Şti., it was informed that its sales were mainly made abroad, whereas it was seen from the sales data presented by the said undertaking that all the sales were related to domestic sales. Following the first written defence, the officials of the undertaking were requested to correct this information, which were found to be contradictory, but no correction was made by the relevant undertaking on the sales data. In this context, the Board imposed an administrative monetary fine on the undertaking for providing incorrect and misleading information within the scope of the investigation, which formed its second written defense in parallel with its previous defense despite not having corrected the relevant data therein.
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