Turkish Competition Board Acknowledged that Reassessment of a Decision Must Not Harm the Appellant

In its decision,
the High State Court summarized the TPA's legal basis
for its appeal as follows: (i) the Board had failed to define any relevant product market in its
decision, (ii) the Board was not authorized to review the TPA's practices arising from its powers
that were vested and conferred by its establishing documents (iii) the Board failed
to justify the use of its discretionary powers for the determination of the
administrative monetary fine, and (iv) the practices subject to the investigation
did not constitute a competition law violation.

2.   The High State Court's Judgment

It should be noted at the outset that the High State Court did not assess all the
grounds for appeal that were asserted by the TPA. Rather, its evaluation of the
case revolved around the following questions: (i) whether the Board was authorized
to review the TPA's practices,
(ii) whether the TPA's practices
violated Article 4 of the Law No. 4054 and whether they failed to comply with
the conditions for receiving an individual exemption under Article 5 of the Law
No. 4054 (and thus, whether the Board's decision to task the Presidency of the
Competition Authority to send a written opinion under Article 9(3) of the Law
No. 4054 was lawful), and (iii) whether the Board's determination of the
administrative monetary fine was lawful.

The High State Court affirmed that, as a public professional
association, the TPA qualified
as an association of undertakings under the definition provided by Article 3 of
the Law No. 4054. However, the High
State Court also examined whether or not the Board had the authority to
review the TPA's practices in
light of the relevant precedents. According to the landmark decisions of the
High State Court's Grand Chamber of Administrative Trials,[1] which
were referenced in the High State Court's decision, the Competition Authority
does not possess the power to conduct judicial review pursuant to the Law No.
4054 with regard to practices that arise from the implementation of the applicable
legal provisions regarding the duties of public associations or professional chambers
that have been established in accordance with the laws. According to the High
State Court, judicial review of such practices must be sought and conducted through
annulment requests before administrative courts.

On the other
hand, relying on the approach of the High State Court's Grand Chamber of Administrative
Trials,
the High State Court excluded practices whose
execution had no legal basis in a statutory power from this analysis, and asserted that such practices should
fall under the scope of the Law No. 4054. The High State Court concluded that the Board possessed the power to
initiate a full-fledged investigation against the practices of an association
of undertakings that did not arise from the duties specified or assigned by the
association's founding legal documents (e.g.,
articles of association) and that were determined to be anti-competitive. More specifically,
the High State Court analyzed
whether the TPA's practices under scrutiny fell under the scope of the Turkish
Pharmacists Law No. 6643 ("Law No. 6643"). Accordingly, the
High State Court found that these practices did not fall under the scope of
Article 39 of the Law No. 6643, which enumerates the duties of the TPA. Therefore,
the High State Court ultimately concluded
that the Board had not exceeded its authority and that the Board's exercise of
its power with respect to the TPA's practices under scrutiny had been lawful.

With respect to the substantial review of
the Board's decision, the High State
Court concluded that (i) the Board's assessments regarding the TPA's
practices had been lawful and that the TPA's practices violated Article 4 of the
Law No. 4054, and (ii) these practices did not fulfill the conditions that must
be satisfied to receive an individual exemption under Article 5 of the Law No.
4054. Accordingly, the High State Court
declared that the section of the Board's decision tasking the Presidency of the
Competition Authority with sending a written opinion under Article 9(3) of the Law
No. 4054 had also been lawful.

Finally, regarding the determination of
the administrative monetary fine, the High
State Court found that the Board's decision subject to appeal had failed
to include any assessments regarding the specific aspects of the case that had been
taken into account when determining the amount of the administrative monetary
fine. In particular, the High State
Court stated that the Board's decision had failed to set forth: (i) any
justification for the Board's use of its discretionary powers when setting the exact
ratio to be used in determining the administrative monetary fine amount (i.e., as a percentage of the TPA's revenues),
in accordance with the range interval stipulated by legislation, (ii) a clear and
thorough evaluation regarding the potential existence of aggravating and/or
mitigating factors, and (iii) a clear explanation with respect to the potential
impact of the gravity of the TPA's prohibited conduct on the determination of
the administrative monetary fine amount. Against this background, the High State Court concluded that the substance
of the Board's assessments regarding the determination of the administrative
monetary fine amount lacked the clarity required for a judicial review of the
administrative monetary fine decision, and therefore annulled the relevant
section of the Board's decision.

C.     The Board's Assessments Regarding the
Administrative Monetary Fine and the Principle of Reformatio in Peius

Following the High State
Court's decision, the Board reassessed the
determination of the administrative monetary fine amount in light of the Law
No. 4054 and the Regulation on Monetary Fines for Restrictive Agreements,
Concerted Practices, Decisions and Abuses of Dominance ("Regulation on Fines").
The Board acknowledged that the administrative monetary fine must be calculated
on the basis of a three-step process: (i) the determination of a base fine amount
according to Article 5 of the Regulation on Fines (which includes the incorporation
of the duration multiplier, if applicable), (ii) the consideration and factoring in of aggravating circumstances
under Article 6 of the Regulation on Fines, and (iii) the consideration
and factoring in of mitigating factors under
Article 7 of the Regulation on Fines. The Board subsequently determined that
the violation in this case fell under the category of "Other Violations" as per Article 5 of the Regulation
on Fines, and asserted that an administrative monetary fine corresponding to
between 0.5 to 3 percent of the turnover generated in the fiscal year preceding
the date of the administrative fine decision should be imposed. The Board then noted
that a number of relevant factors, such as the market power of the
undertakings/associations concerned and the seriousness of the damage which
occurred or is likely to occur as a result of the violation, should also be
taken into consideration in determining the level of the abovementioned base
percentage. Finally, the Board ruled that there were no applicable
aggravating and/or mitigating factors in the present case, and concluded that the
duration of the infringement did not necessitate increasing the base fine amount
either.

After establishing the base fine percentage, the Board
turned its attention to determining the fiscal year that would be
taken into account for
calculating the base fine.
In this regard, the Board turned its attention to the
criminal procedure principle of avoiding reformatio
in peius (Latin: "change for the
worse," which occurs when, as the result of an appeal, the
appellant is put in a worse position than if they had not appealed). In this
context, the Board declared that the principle of reformatio in peius,
which is defined under Article 307(4) of the Law No. 5271 on Criminal
Procedure in Turkey, would also be applicable to administrative monetary fines
levied by the Board. To that end, in an effort to reach the most advantageous base fine amount
for the TPA, the Board calculated three different turnover figures for 2011,
2014 and 2017, which respectively represented the years preceding (i) the High
State Court's stay-of-execution decision, (ii) the High State Court's annulment
decision, and (iii) the Board's previous monetary fine decision. Subsequently,
the Board compared these turnover figures with the corresponding figures for 2009
and decided to use the TPA's turnover figures for 2014 when determining the
amount of the base fine, as it was the lowest turnover figure among the three
years under consideration. The Board thereby respected and incorporated the
principle of reformatio in peius into its decision.

D.   The Principle of Reformatio
in Peius in Turkish Competition Law

The
prohibition on reformatio in peius is
a statutory restriction on judicial authorities that obliges them not to resolve
an appeal (or objection) with a decision that puts the appellant in a worse
position than if it had never appealed. Reformatio
in peius is an important procedural rule that is observed by Turkish courts
as an established legal principle. It can be reasonably argued that the Turkish
Competition Board should respect and abide by the principle of reformatio in peius and thereby avoid
rendering decisions that put an appellant undertaking in a worse position than it
would have been under the initial Board decision.

In fact,
the High State Court has previously affirmed this approach in the Aktif-İriyıl Otomotiv İnşaat Turizm Ticaret
ve Sanayi Limited Şirketi ("Aktif İriyıl") case.[2]
In that lawsuit, the High State Court reviewed a Board decision[3]
that was a reassessment made upon an annulment order[4]
rendered by the Ankara 9^th Administrative Court. Previously, the Ankara
9^th Administrative Court had delivered its annulment decision upon
Aktif İriyıl's appeal against the Board decision imposing an administrative
monetary fine on the undertaking in the amount of TL 109,418.33 (approximately
EUR 46,363 at the prevailing exchange rate).[5]
In light of its reassessment, the Board decided to impose a larger administrative
monetary fine on Aktif İriyıl (TL 156,473.67, approx. EUR 66,302 at the time). Aktif İriyıl subsequently challenged the
Board's reassessment decision. With respect to Aktif İriyıl's appeal, the Ankara
9^th Administrative Court (which was the court of
first instance that had rendered the previous annulment decision) concluded
that the reassessment decision should also be annulled, to the extent that the newly
imposed administrative monetary fine exceeded the previous fine's amount (TL
109,418.33). The Ankara 9^th Administrative Court reasoned as
follows: "In a state governed by the rule
of law, exercising one's legal rights should not result in detriments being incurred."
Subsequently, the High State Court
upheld the Ankara 9^th Administrative Court's decision and,
accordingly, decided that the administrative monetary fine imposed by the Board
should be reduced to TL 109,418.33.[6]
This decision was final and
unappealable, since the High State Court rejected the Competition Authority's
final appeal (i.e., the request for a revision of the decision).[7]

Although
there aren't a high number of precedents demonstrating the implementation of
the principle of reformatio in peius in
the context of competition law, the High State Court's Aktif İriyıl decision provides a powerful and clear-cut example for
the Board and administrative courts to follow.

D.   
Conclusion

We believe
that the decision discussed above is highly significant, as it (i) provides comprehensive and
instructive explanations on the method to be used for
lawfully determining the administrative monetary fine amount, and (ii) sheds
light on the correct and proper implementation of the principle of reformatio in peius by the Board when reassessing
the administrative monetary fine amount subsequent to an annulment order by an administrative
court. To that end, this decision may serve as a powerful reference for future
cases in which the Board will be required to reassess its decisions,
particularly in cases where it will have already imposed an administrative
monetary fine.

Authors: Gönenç Gürkaynak, Esq., Betül Baş Çömlekçi,
Ezgi Hepşen and Cansu Tekşen, ELIG Gürkaynak Attorneys-at-Law

(First
published by Mondaq on October 1, 2018)

[1] The High
State Court's Grand Chamber of Administrative Trials decisions (i) dated March
11, 2004, and numbered (stay of execution objection number) 2004/93, (ii) dated
February 11, 2010, and numbered 2008/1881, and (iii) dated March 27, 2008, and numbered
(stay of execution objection number) 2007/774.

[2] The 13^th
Chamber of the High State Court's decision dated November 11, 2015, and
numbered 2015/5483 E. and 2015/3835 K.

[3]
The Board's decision dated April 16, 2014, and numbered 14-15/277-119.

[4] The Ankara
9^th Administrative Court decision dated December 24, 2013, and
numbered 2013/752 E. and 2013/2064 K.

[5] The
Board's decision dated April 12, 2012, and numbered 12-20/557-141.

[6] See Footnote 5.

[7]
The 13^th Chamber of the High State
Court's decision dated May 25, 2016, and numbered 2016/750 E. and 2016/1955 K.