By Attorney Sibel ÖZTÜRK, LL.M.

A. Introduction

The "Regulation on Administrative Fines to be Imposed in Cases of Agreements, Concerted Practices, and Decisions Restricting Competition and Abuse of Dominant Position," which outlines the principles and procedures for determining administrative fines imposed for violations prohibited under Articles 4 and 6 of Law No. 4054 on the Protection of Competition, was published in the Official Gazette dated December 27, 2024, numbered 32765, and entered into force. The newly adopted Penalty Regulation has repealed the previous Penalty Regulation, which had been in effect for nearly 15 years.

The New Penalty Regulation introduces provisions that significantly differentiate it from the previous Regulation. Under the prior Regulation, the base fine rate was determined based on the type of violation, categorized as "cartels" or "other violations." However, in a major shift, the new Regulation does not adopt such categorization. Similarly, the new Regulation removes the lower and upper limits based on the "cartel" and "other violations" distinction.

Previously, the base fine for prohibited behaviors under Articles 4 and 6 of the Law was calculated as follows:

• For cartels: Between 2% and 4% of the annual gross revenue.
• For other violations: Between 0.5% and 3% of the annual gross revenue.

Under the new Regulation, the base fine rate will now be determined by the Competition Board based on the severity of the actual or potential harm caused by the violation, as well as whether the violation is deemed clear and/or severe. However, the Regulation does not define what constitutes a "clear and severe violation," leaving this matter currently ambiguous.

Another notable change concerns adjustments to the base fine rate based on the duration of the violation. Under the previous Regulation, fines were increased by half for violations lasting between one and five years and doubled for those exceeding five years. In contrast, the new Regulation shortens the time intervals considered for duration-based adjustments, aiming to more fairly reflect the violation's circumstances in the fines imposed.

In this regard, under the new Regulation, the base fine rate will be increased as follows:

• By one-fifth for violations lasting longer than one year but less than two years,
• By two-fifths for violations lasting longer than two years but less than three years,
• By three-fifths for violations lasting longer than three years but less than four years,
• By four-fifths for violations lasting longer than four years but less than five years,
• By 100% for violations lasting more than five years.

Furthermore, the new Regulation introduces changes to aggravating and mitigating factors. The lower limit for the increase due to aggravating factors and the lower and upper limits for the reduction due to mitigating factors have been removed.

The Competition Authority, in its official announcement, stated that these changes aim to ensure more effective punishment for competition violations and deter future violations. The announcement also noted that the evolving nature of markets where competition law is applied, the changing business models of undertakings, and shifts in consumer preferences necessitate a reassessment of the Competition Board's penalty policies.

The remainder of this article will examine the procedures and principles for determining administrative fines under the new Penalty Regulation.

B. Determining Administrative Fines Under the New Regulation

1. Fundamental Principles for Determining Administrative Fines

Under the new Regulation, the base fine rate for undertakings and associations of undertakings, as well as their members, will be determined separately for each violation by the Competition Board.

Unlike the previous Regulation, where base fines were calculated separately for each independent behavior prohibited under Articles 4 or 6 based on market, nature, and chronological process, the new Regulation stipulates that fines will be determined separately for each violation without requiring such conditions.

After determining the base fine rate, aggravating factors (Article 6) will first be applied to increase the fine. Then, mitigating factors (Article 7) will be considered to reduce the adjusted rate.

The total administrative fine will not exceed 10% of the annual gross revenue of the undertakings, associations of undertakings, or their members. If the calculated fine exceeds this threshold, it will be reduced to 10% of the annual gross revenue.

2. Determination of the Base Fine Rate

The base fine rate will be determined by starting with an initial rate, which may be adjusted based on the duration of the violation. The initial rate will be primarily determined based on the severity of the actual or potential harm caused by the violation and whether the violation is clear and/or severe.

The duration-based increases are as follows:

• 20% for violations lasting more than one year but less than two years,
• 40% for violations lasting more than two years but less than three years,
• 60% for violations lasting more than three years but less than four years,
• 80% for violations lasting more than four years but less than five years,
• 100% for violations lasting more than five years.

3. Aggravating Factors

If it is determined that the same undertaking or association of undertakings violated Articles 4 or 6 of the Law after a previous determination of violation, the base fine rate may be increased by up to 100%.

Previously, violations under Articles 4 and 6 were not treated as the same type of violation for recurrence. However, the new Regulation allows for recurrence to apply across different provisions of the Law.

Additionally, continuing a violation after being notified of an investigation decision, having a decisive influence in the violation, or breaching confidentiality obligations under the Settlement Regulation may result in an increase of up to 100%.

The new Regulation also introduces the concept of "decisive influence" as an aggravating factor. Decisive influence refers to an indispensable role in the occurrence and/or continuation of a violation. Previously, decisive influence was considered in penalties imposed on managers or employees in cartel cases. Under the new Regulation, it can apply to any type of violation and undertakings.

4. Mitigating Factors

The base fine rate, or the aggravated rate under Article 6, may be reduced if the undertaking or association demonstrates certain mitigating factors, such as:

• Providing assistance during on-site inspections,
• Being coerced into the violation by other undertakings,
• Limited participation in the violation,
• A low share of the activities subject to violation within the annual gross revenue,
• The existence of foreign sales revenues within the annual gross revenue used for calculating the fine.

Unlike the previous Regulation, the new Regulation removes the lower and upper limits for reductions based on mitigating factors, leaving the determination entirely to the discretion of the Competition Board.

5. Administrative Fines for Managers and Employees

If an administrative fine is imposed on undertakings or associations of undertakings, their managers or employees who had a decisive influence on the violation may be fined up to 5% of the fine imposed on the undertaking or association.

Under the new Regulation, no distinction is made between cartels and other violations in determining fines for managers and employees.

C. Conclusion

The new Penalty Regulation, effective as of December 27, 2024, allows the Competition Board to impose significantly harsher penalties for competition violations.

By replacing the distinction between "cartels" and "other violations" with criteria such as "severity of harm" and "whether the violation is clear and/or severe," the new Regulation could lead to higher penalties in the coming period.

The broad discretion granted to the Competition Board, particularly with the removal of lower and upper limits for adjustments based on aggravating or mitigating factors, may lead to uncertainties in predicting administrative fines until precedents are established.

Finally, the absence of transitional provisions in the new Regulation could raise legal issues, particularly regarding the principle of non-retroactivity, as fines cannot be imposed retroactively or increased beyond those prescribed at the time the violation occurred.

For further information and inquiries, please contact us.

Attorney Sibel ÖZTÜRK, LL.M.
 [email protected]
+90 312 909 46 76