The Regulation on Administrative Fines For Competition Violation Amended

The Regulation on Fines to Apply in Cases of Agreements, Concerted Practices, and Decisions Limiting Competition, and Abuse of Dominant Position (“New Regulation on Fines”) was published in the Official Gazette dated 27.12.2024 and numbered 32765, and has entered into force. Pursuant to Article 9 of the New Regulation on Fines, the previous Regulation on Administrative Fines to Apply in Cases of Agreements, Concerted Practices, and Decisions Limiting Competition and Abuse of Dominant Position, published in the Official Gazette dated 05.02.2009 and numbered 27142 (“Former Regulation on Fines”), has been repealed.

As highlighted in the announcement by the Competition Board (“Board”) dated 27.12.2024, developments in various markets, particularly digital markets, along with the Board’s evolving policies and precedents, necessitated the establishment of a new regulatory framework to ensure that fines imposed for competition violations are determined fairly.[1] 

1.         Changes Regarding the Determination of Base Fines

Under the Former Regulation on Fines, base fines were determined by distinction between “cartels” and “other violations.” The base fine was calculated as a percentage of the undertakings’ annual gross revenues, ranging from 2% to 4% for cartels and from 0.5‰ to 3% for other violations. In determining the base fine within these ranges, the undertakings’ market power and the actual or potential harm resulting from the violation were considered. Additionally, the fine amount was increased proportionally based on the duration of the violation.

The New Regulation on Fines removes the distinction between “cartels” and “other violations”, along with the associated lower and upper limits set under the Former Regulation on Fines. Instead, the base fine percentage will be determined by the Board, separately for each violation. Therefore, it may be concluded that the Board has a greater discretion in determining the fines.

According to the New Regulation on Fines, when determining the base fine percentage, the Board first determine the initial fine percentage by taking into consideration the severity of the actual or potential harm caused by the violation and whether the nature of the violation constitutes a naked or hard-core infringement. If the violation lasts for at least one year, the initial percentage will be increased incrementally, from one-fifth to up to one full increment, depending on the duration of the violation. The resulting base fine percentage may then be adjusted based on aggravating or mitigating factors, as outlined in the regulation.  

2.       Changes Related to Increase Rates Based on Duration of Violation

In the Former Regulation on Fines, the duration of the violation was a factor that warranted an increase in the base fine. The prior regulation stipulated that if the violation lasted between one and five years, the fine would be increased by half, and if it lasted more than five years, the fine would be doubled.

In the New Regulation on Fines, while duration remains a factor for increasing the base fine, the increments based on the duration have been divided into shorter intervals. The initial fine percentage will be increased as follows, depending on the duration of the violation:

     a) By one-fifth for violations lasting more than one year but less than two years,

     b) By two-fifths for violations lasting more than two years but less than three years,

     c) By three-fifths for violations lasting more than three years but less than four years,

     ç) By four-fifths for violations lasting more than four years but less than five years,

     d) By one full increment for violations lasting more than five years.

This change aims to reflect the objective factor of violation duration more equitably in the determination of fines. Instead of applying the same increase rate for violations lasting between one and five years, the regulation now provides a proportional increase based on the specific duration.

3.       Changes Regarding Aggravating and Mitigating Factors

Aggravating and mitigating factors were also addressed under the Former Regulation on Fines, which specified the ranges for increases or reductions in fines due to these factors. The New Regulation on Fines revises these provisions by removing the lower limit for aggravating factors and both the lower and upper limits for mitigating factors.

According to the New Regulation on Fines, once the base fine percentage is determined, it will be adjusted upward or downward based on the aggravating and mitigating factors set forth in Articles 6 and 7 of the regulation. The aggravating factors listed in Article 6 include:

     (1) A repeat violation of Articles 4 and/or 6 of the Competition Law by the same undertaking or association of undertakings after such a violation was previously determined by the Board, warranting an increase of up to one full increment.

     (2) Continuing the violation after the notification of the investigation decision, exercising a decisive influence in the violation, or violating the confidentiality obligation under Article 12(3) of the Settlement Regulation, which may result in an increase of up to one full increment.

     (3) If multiple aggravating factors under the first and second paragraphs are present, the respective increases will be combined and applied to the base fine.

The mitigating factors specified in Article 7 of the New Regulation on Fines include:

     a) Voluntary assistance during on-site inspections by providing physical and/or technical means to facilitate or expedite the process, or by voluntarily submitting additional relevant information or documents during the inspection,

     b) Coercion by other undertakings to participate in the violation,

     c) Limited involvement in the violation,

     d) A low share of the infringing activities in the annual gross revenues,

      e) The inclusion of foreign sales revenues in the annual gross revenues considered for the administrative fine.

The New Regulation on Fines introduces additional mitigating factors, such as limited involvement in the violation and the inclusion of foreign sales revenues, which were not recognized under the Former Regulation on Fines.

4.         The Concept of Decisive Influence

Article 3 of the New Regulation on Fines provides a definition of the concept of “decisive influence,” describing it as an “indispensable function in the creation and/or continuation of the infringement.” Under Article 8 of the New Regulation on Fines, managers or employees found to have exercised decisive influence in the violation may be subject to an administrative fine of up to 5% of the fine imposed on the undertaking. It is noteworthy that under the Former Regulation on Fines, executives and employees found to have decisive influence in a cartel were subject to fines ranging from 3% to 5% of the fine imposed on the undertaking. Given that the distinction between cartels and other violations has been removed, the rates associated with this distinction are not incorporated in the New Regulation on Fines.

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