Competition Law Compliance Programme: Golden Rules to Avoid Millions of Liras in Fines and Reputational Damage
Competition law is a branch of law that aims to ensure that all players in the markets compete under fair rules and provides highly deterrent sanctions against those who violate these rules. In Turkey, the Competition Authority, which operates within the framework of the Law No. 4054 on the Protection of Competition, is authorised to impose administrative fines of up to 10% of the previous financial year’s turnover of companies for acts that restrict competition, such as price fixing (cartel), market sharing and abuse of dominant position among competitors. These fines may amount to millions or even billions of liras. In the face of such a high risk, companies do not have the luxury of saying “we did not know” or “it happened by mistake”. At this point, a proactive Competition Law Compliance Programme is not just a recommendation, but a necessity. In this article, we will examine in detail the basic prohibitions of competition law, how an effective compliance programme should be designed, and how to benefit from the leniency mechanism in the event of a possible violation.
Basic Prohibitions of Competition Law: Red Lines There are two main prohibitions that a compliance programme should focus on:
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Agreements, Concerted Practices and Decisions Restricting Competition (Art. 4 of Law No. 4054): This includes “cartel” behaviour, which is considered the most serious violation. Companies are strictly prohibited from entering into any direct or indirect agreements or exchanging information with their competitors on these matters.
- Price Fixing: Determining selling prices, price increases or discounts together with competitors.
- Market Sharing: Sharing geographical regions, customer groups or production quotas with competitors.
- Control of the Quantity of Supply: Agreeing with competitors to limit the quantity of goods or services to be offered to the market.
- Bid Rigging: Colluding with competitors in public or private tenders to determine who will win or which bid will be submitted. Such behaviour is considered to restrict competition “in terms of purpose” and is prohibited regardless of whether it has any positive effect. In order to detect such violations, the Competition Board is authorised to conduct unannounced on-site inspections (“dawn raids”) of companies and seize all kinds of documents and digital data.
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Abuse of Dominant Position (Art. 6 of Law No. 4054): The dominant position of one or more undertakings in a particular market is not prohibited per se. What is prohibited is the abuse of this power in a way that restricts competition. Examples
- Predatory Pricing: Charging prices below cost in order to drive competitors out of the market.
- Discrimination: Applying different terms (price, maturity, etc.) to equally-situated buyers.
- Tying: Linking the sale of one good or service to the purchase of another good or service.
- Refusal to Supply: Refusing to sell goods or services to a customer without a justified reason.
Components of an Effective Competition Law Compliance Programme: A compliance programme that will protect your company from these severe risks should include the following elements:
- Senior Management Support and Risk Analysis: The programme should have the full support of the board of directors and should start with a risk analysis focusing on the most risky departments of the company, especially sales, marketing, purchasing and senior management.
- Clear and Comprehensible Compliance Policy: A policy that does not merely repeat the text of the law, in a language that employees can understand and full of practical examples should be prepared. This policy should especially focus on sensitive issues such as “Rules of Communication with Competitors”. For example, it should be clearly stated what can and cannot be discussed with competitors (never discuss sensitive commercial information such as price, customer, cost) at association meetings, fairs or social environments.
- Scenario Based and Periodic Trainings: Trainings should go beyond providing theoretical information. They should be conducted interactively through concrete scenarios that employees may encounter in their daily work (for example, “What should you do if a competitor calls you and asks what you think about price increases in the sector?”). These trainings should be repeated regularly and should be mandatory for new recruits.
- “Do’s and Don’ts” Guides: Practical pocket-sized or digital guides summarising the basic rules of competition law should be prepared for easy reference by employees.
- Internal Audit and Control: The compliance department or legal unit should conduct unannounced email audits or interviews to check the extent to which policies are being followed. Expense forms, meeting notes and e-mail correspondence are particularly risky areas.
- Consultation and Reporting Mechanism: It should be ensured that employees know whom to consult when they encounter a suspicious situation in terms of competition law (for example, a customer providing information about competitor prices) and that they can report potential violations through a secure channel.
Leniency Programme: If an infringement has occurred despite all measures, the “Effective Leniency Regulation” of Law No. 4054 provides an important opportunity. If a company that is a party to a cartel agreement notifies the Competition Authority (before the Authority initiates an investigation) and actively cooperates with the Authority, it may be fully exempted from fines. The first company to apply after the initiation of the investigation may benefit from a fine reduction of up to 50 per cent, while other companies may benefit from lower fines. This mechanism is highly effective in uncovering cartels and should be made known to all employees as part of the compliance programme.
Compliance with competition law is not a “choice” for companies, but an “obligation” that directly affects their financial and reputational survival. The record level of fines imposed by the Competition Authority in recent years clearly shows how high the risk in this area is. A risk-oriented, practical and viable competition law compliance programme with the full support of senior management is the most effective shield to protect the company from these devastating fines. In the event of a possible violation, the existence of a leniency mechanism and knowing how to use it is a vital strategy to minimise the damage. It should not be forgotten that the cheapest and most effective solution in competition law is proactive measures taken before the violation occurs.