Sponsored briefing: Bells are ringing: Information exchange and obstruction of on-site inspections

Two main subjects have been in the Turkish Competition Authority (the Authority)’s spotlight in recent years. These two subjects are namely information exchange between competitors and fines for obstruction of on-site inspections.

Information exchange naturally has always been a matter of discussion in many Turkish Competition Board (the Board) decisions. What has changed over the years is the approach of the Board which has become gradually stricter and has reached a point of very little tolerance. The milestone decision regarding competitively sensitive information exchange is the Automotive1 decision in 2011 as it marks the first fine that was given mainly for information exchange. Following this, we have seen the Board imposing fines with a single document exchange containing information about future interest rates of competitors in the Banking2 decision in 2013. This change of approach has become more apparent in the Poultry II3 decision rendered in 2019, as the Board has stated that obtaining information regarding prices from third-party dealers was a breach of competition rules, if it has become a way of business and does not occur within the natural flow of commercial life such as dealers sharing the prices of competing suppliers as a means of price bargaining. This was contradictive of the Board’s Poultry I4 decision rendered in 2009 regarding the same market, as in that decision it was stated that obtaining competitively sensitive information from third parties was deemed acceptable in scope of competition rules. As a result of this shift of approach, doubts and uncertainties regarding obtaining information from third parties have arisen with this decision.

In the following years, we have seen the Board focusing its investigations on information exchange, rather than agreements. This has caused a change as the standard of proof decreased both in launching investigations and rendering penalty decisions. As mentioned, at its time of rendering, Banking decision was a breaking point as a fine was imposed based on a single document. However, in the years that followed that decision we have seen this becoming the situated practice of the Board. For example, in Fertilizer5 decision it is seen that an investigation has been initiated toward an undertaking with a single document and in Insurance6 decision, a single document was again considered to be sufficient to deduce a competition law violation. The Board’s attitude evolving into an even stricter one in this way has resulted in undertakings to gain a raised level of awareness as the stakes got higher.

One of the most recent and the most newsworthy decision of the Board is the Retail7 decision rendered in December 2021. One aspect of this decision is that the Board has given the greatest fines in its history both per undertaking and per investigation which are respectively 958.129.194,39 TL and 2.682.539.593,70 TL. However, the more interesting and concerning aspect of the decision is in the way the Board has classified information exchanges. In this decision we have seen that information exchange has been evaluated as a cartel for the first time. This has been a very remarkable change since information exchange has always been classified within ‘other violations’ and classifying it as a cartel has caused the minimum possible amount of penalties to quadruple, ergo the record-breaking penalties mentioned above. The decision is also a first as it is the first hub and spoke decision in Turkish competition law precedence. Another new approach seen in this decision is that the Board has abandoned its previous opinion regarding past information. Previously exchange of past information has been deemed acceptable in many Board decisions. However, in this decision the Board has stated that suppliers obtaining information regarding their competitors’ past sales data from third-party retailers would constitute a competition law breach.

As a possible reflection of this increasingly aggressive approach, it has been seen that negative clearance applications made by associations of undertakings regarding information exchanges – which were previously accepted– have been declined by the Board in three different sectors (ceramics, construction equipment and industrial transportation equipment) in 2021. However, Otomotiv Sanayi Derneği, which is an automotive manufacturers association of undertakings that our firm represents, has been granted a negative clearance. Therefore, it is not possible to make a certain assessment on whether the Board’s aggressive attitude towards competitively sensitive information has dispersed to the area of negative clearance, and it would be possible to make more accurate evaluations as the precedents widen.

Another remarkable point is the recent decisions regarding obstruction of on-site inspection. Especially in recent years, the undertakings that have been fined within this framework have been the leading global undertakings in the relevant sectors and the increase in the number of undertakings that have been fined has attracted a considerable amount of attention. In addition, it should be noted that the increase in the number of undertakings fined for obstruction of on-site inspections in 2021 caused the total fines imposed by the Board to increase at a record level. Namely, the total administrative fines imposed for hindering/complicating on-site inspections in 2020 is 2.550,979.70 TL. In 2021, this amount increased to 121,038,512.29 TL. Therefore, the administrative fines imposed has increased by approximately 48 times in one year.

In this context we would like to mention the hindering of on-site inspections decisions of Unilever8 and Siemens9 in 2019. In fact, the two decisions are quite similar to each other.

In both decisions the Board conducted an on-site inspection in the undertakings’ premises, and it was stated that Microsoft Office 365 software was used within the undertakings. It has been stated by the undertakings that such inspection through this application should be made through ‘eDiscovery’ and the necessary permissions must be granted at a global level. However, in both cases this access was not given for various reasons, such as the authorisation necessary for data related to Turkey cannot be distinguished from the authorisation needed for all global data. Therefore, administrative fines were imposed on the mentioned undertakings due to hindering/complicating on-site inspections.

On the other hand, different opinions have come to the fore in the administrative jurisdiction regarding the controversial Unilever decision. First, it should be stated that Administrative Court has annulled this decision. As the reason for the annulment decision, it was stated that the ‘eDiscovery’ search permission was granted on the same day and the time interval was reasonable. In addition, it has been stated that no concrete evidence has been presented by the Authority regarding Unilever’s data concealing or the possibility of data concealing. On the other hand, the Regional Court of Appeal stated that there is no legally acceptable and valid reason for the need to obtain permission from a limited number of managers working abroad for an examination to be made on the works that are carried out within the Turkish organisational structure of the undertakings and are subject to inspection. In this context, the higher court concluded the on-site inspection was hindered for six hours and 45 minutes without being based on a legally and valid justification. Thus, the higher court found the Authority to be justified and annulled the decision of the first instance court.

The Unilever and Siemens decisions have concretely demonstrated that global undertakings can face heavy sanctions due to their internal procedures. For this reason, it is recommended that global companies review their on-site inspection procedures and permit processes in line with these decisions.

On the other hand, the imposition of administrative fines on 11 different undertakings due to the hindering of on-site inspections in 2021 received a great amount of reaction. When the decisions regarding these 11 undertakings are examined, it is firstly seen that the devices of the employees are inspected without making any distinction between the personal or business devices by the Authority’s case handlers. In most of the relevant decisions, administrative fines were imposed due to deleting WhatsApp correspondences. Even if the deleted WhatsApp correspondence could be obtained from the other employees, the Board imposed an administrative fine. In addition, it is not important whether the deleted correspondence is in violation of competition law to impose a fine for hindering of on-site inspection. Similarly, it does not matter whether the deleted information contains personal or undertakings data. In summary, in the event that a document/correspondence is deleted, regardless of the deleted content, the Board accepts that on-site inspection is hindered or complicated.

According to Turkish competition law, if an undertaking obstructs on-site inspection, an administrative fine equal to the five per thousand of its turnover generated in the previous fiscal year will be imposed. In light of these decisions rendered in 2021, it should be emphasised that the deletion of WhatsApp correspondences by a single employee is considered sufficient to impose a fine, and even the recovery of deleted WhatsApp correspondences does not prevent administrative fines. For this reason, undertakings may face very high administrative fines due to the instantaneous mistakes of the employees during on-site inspections. In this regard undertakings should be more careful in on-site inspections.

Considering the approach of the Authority and the Board regarding competitively sensitive information exchange and obstructing on-site inspections in the recent years along with the amount of penalties given it is clearly seen that both Turkish and foreign undertakings who have operations in Turkey should act with extreme caution especially in these two matters. In this scope and in order to minimise the risks, we would recommend detailed competition compliance procedures in line with the recent decisions to be adapted and all employees to be well-trained in competition law as a starting point.