Category: Turkiye

After Personal Data Protection Law number 6698 came into force (April 7, 2016) in Turkey, and following a two-year-transition period (which concluded on April 7, 2018), the compliance process has been initiated in regard to general principles and rules on processing of personal data.

Only “personal data” – defined as “any information relating to an identified or identifiable natural person (‘data subject’).” – is classified as protected under the Personal Data Protection Law. Therefore, the “personal data” that needs to be protected by companies should be separated from other data. In this scope, natural and legal persons who qualify as “data controllers” should first identify that data when conducting data inventory and data mapping in compliance projects. The classification should be made carefully, taking into consideration the characteristics and regulations of the sector that the data controller participates in.

Obligations of Data Controllers 

A “data controller” is defined as any natural or legal person who determines the purposes and the tools of personal data and who is responsible for installing and administering the data register system. Natural persons, companies, public institutions, occupational organizations, foundations, and associations can all qualify as “data controllers.” All obligations and liabilities under this legislation are stipulated for only those data controllers. 

The main obligations of data controllers under the legislation are: (i) to inform, (ii) to provide data security, (iii) to fulfill the demands of data subjects, and (iv) to conduct inspections. 

Transfer of Personal Data Abroad 

In principle, it is possible to transfer personal data abroad if the explicit consent of the data subject exists, or where an adequate level of protection is provided in the foreign country the data will be transferred to. In addition, the Turkish Data Protection Authority (DPA) may give its consent to the transfer where data controllers in Turkey and in the foreign country where data will be transferred to guarantee adequate protection. 

The countries providing an adequate level of protection shall be identified and announced by the DPA. When determining whether an adequate level of protection exists, the DPA will consider: (i) reciprocity between Turkey and the country which data will be transferred to, (ii) the characteristics and purpose of processing the personal data, (iii) the regulations of the country where data will be transferred to, and (iv) guarantees given by the data controller in the foreign country which the data will be transferred to. 

Sanctions

If data controllers do not comply with this legislation, the following sanctions may be applied: (i) Pecuniary damages; (ii) Non-pecuniary damages; (iii) Imprisonment of one to seven years; or (iv) Administrative fines of between five thousand to one million Turkish liras.

Main Steps to be Taken

In light of current developments, the following main steps should be taken by companies in the compliance process:

1. Conduct a data flow mapping, and create a data inventory in order to have information about which data you have, where it is kept, who is responsible for managing it, what its purpose and the legal basis of data processing is, who the recipients of the personal data are, and for what period the personal data will be kept (or the statutory data retention period), etc.
2. Create appropriate informed-explicit consent mechanisms.
3. Revise the company’s contracts, and, where appropriate, conduct negotiation processes accordingly.
4. Ensure that electronic surveillance systems in the workplace such as camera surveillance, electronic or biometric entry and time detection, global positioning systems, and electronic transmission surveillance are compatible with regulations.
5. Set up mechanisms to ensure data security such as restricting employees’ access to data, pseudonymizing or encrypting data, using multi-layered security software, firewalls, and anti-virus programs, using remote wiping softwares, using privacy-enhancing technologies, choosing right and safe cloud services, backing up files, excluding data from the cloud which could be classified as confidential business information or sensitive data, and regularly testing, assessing, and evaluating the effectiveness of technical and organizational measures.
6. Assign a managing director who will be responsible for data protection under the provisions of the Turkish Commercial Code.
7. Draw up/revising privacy, cookies, and cybersecurity policies.
8. Evaluate the compliance of data transfer both in domestic and foreign territories and drawing up data transfer contracts.
9. Inform and train employees about current regulations relating to security and protection of personal data.  

By Hatice Zumbul, Head of Data Protection and Privacy, Nazali Attorney Partnership  

This Article was originally published in Issue 5.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

After three years of investigation, on July 18, 2018, The European Commission (“Commission”) issued its decision on the well-known Android case and fined Google LLC (“Google”) an astounding €4.34 billion for abusing its dominant position. The Commission held that “since 2011, Google has imposed illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search”. The fine imposed to Google is the biggest of all times. The decision also opens the door to civil actions under which affected parties may claim compensation for damages incurred due to Google’s abusive conduct.

A Brief Summary of the Android Case

Android is the most popular smartphone operating system in the world which is used by various device manufacturers. According to the Commission, about 80% of smartphones in Europe uses Android as their operating system. The Commission determined three types of illegal restrictions imposed by Google on Android device manufacturers. The Commission determined that Google had:

• required manufacturers to pre-install the Google Search and Google Chrome apps, as a condition to access Google Play Store (Application Store),
• made payments to some large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices and
• prevented manufacturers wishing to pre-install Google apps from selling any smart devices running alternative “forked” versions of Android that were not approved by Google.

Per the Commission, Google was in a dominant position in the markets for general internet search services, licensable smart mobile operating systems and app stores for the Android mobile operating system. The Commission concluded that Google illegally tied the Google Search app and the Google Chrome browser to Play Store and foreclosed the relevant markets to its competitors. Furthermore, the Commission decided that the incentives Google provided to device manufacturers for exclusively pre-installing Google’s applications also cemented its dominant position in the relevant markets. The most critical basis behind the Commission’s reasoning was that pre-installation of certain services led to market foreclosure due to strong “status-quo bias”, which means that the consumers do not prefer to change pre-installed services even if, at least from a technical perspective, they can very easily do so.

Critics from a Competition Law Perspective

The Commission’s decision has been viciously criticized immediately after its publication despite the limited available information on the merits. A significant majority of the criticisms pointed out the same exact problem; that the consumers will most likely suffer due to this decision of the Commission. Many agreed with the proclamation of Google’s CEO that “Android has created more choice for everyone, not less. A vibrant ecosystem, rapid innovation, and lower prices are classic hallmarks of robust competition.” As a matter of fact, since Android is a free to use open source project, it boosts innovation and ultimately benefits the consumers. 

Although there seems to be numerous weak points to address in the decision, it seems that the “Achilles Heel” is the market definition. To say the very least, it seems counterintuitive to accept that iOS is not a direct competitor of Android. When the fact that the world is basically divided in two groups as “Android People” and “Apple People”, the Commission could have a better chance to defend that Boston Red Sox and New York Yankees are not competitors. As this seems to be too absurd a claim to viably hold, the Commission also points out that there is no substitutability between Android and iOS from the perspective of OEMs, simply because iOS is not available to the OEMs. This approach raises another question: Since iOS constitutes a separate relevant market where Apple enjoys a monopoly, can OEMs claim that Apple controls an essential facility and that it is abusing its dominant position by refusing to allow OEMs access to iOS. As unreasonable as this question might seem, the Commission’s claims might justify such a claim.

Moreover, although it is too early to jump to conclusions, it seems very unlikely that the final decision of the Commission will include satisfying economic justifications concerning the concrete effects of the so called “status-quo bias”. Yet, it would be very disappointing if the Commission solely relies on empirical data showing the number of customers that actually prefer the competitors of the pre-installed services. This is because; such an approach would completely disregard the fact that the pre-installed services here refers to Google Chrome and Google Search, which are undoubtedly the most preferred products in the market, and it would be comical to simply assume that the customers would not have preferred these services had they been not pre-installed in the first place.

As a final remark, some critics refer to a set of empirical study which shows that the Commission’s decisions had effects of slowing down Research & Development (“R&D”) in numerous markets¹. According to “The Global Innovation 1000”, Google has the second biggest R&D budget with €11,8 billion². It is probable that the decision of the Commission will force Google to cut its R&D investments. Therefore, considering the market reality, Commission’s decision may harm consumers by hindering effective competition and forestalling innovation. 

Is it Possible that the Commission may be Pursuing a Different Agenda

This is not the first time Google has been under the Commission’s scrutiny. Just one year passed since the Commission has fined Google €2.42 billion for abusing its dominant position by leveraging its dominant position in the search market to provide undue competitive advantage to Google Shopping. In that case, the Commission determined that Google gave featured placement to Google Shopping, in Google search results and therefore restricted competition in comparison shopping markets. Currently, Google’s compliance with the EU competition watchdog’s decision is being vigorously monitored. Further, it should also be noted that the Commission is currently investigating whether Google has reduced consumer choice by preventing third-party websites from sourcing search ads from Google’s search advertising service, AdSense’s competitors and expected to render its decision in a little while.

It is beyond doubt that the Commission must apply the competition rules to the full extent whenever there is a violation and it is not the Commission’s problem if this means imposing a fine of approximately €7 billion to a single company (which is higher than the total GDPs of San Marino and Montenegro). However, it is difficult to overlook the Commission’s obsession with the American tech giants. Considering Commission’s obvious hostility, one inevitably questions whether there may be other motives behind the astronomical fines imposed on the American tech giants. The latest Android decision (in light of the available data) as well as the Google Shopping decision support the doubts regarding the motives of the Commission are not baseless. Hence, one should at least entertain the idea that the Commission is no longer applying the EU competition law in a “purely technical manner” and it is pursuing a wider policy adopted by the European Union against the absolute dominancy of Silicon Valley.

What does this mean for Turkey

On February 9, 2017, the Turkish Competition Authority (“TCA”) has also initiated an investigation against Google to investigate (i) Google’s allegedly abusive practices concerning the supply of its mobile operating system and mobile applications/services and (ii) the agreements made between Google and OEMs. The alleged abusive behaviours of Google are probably very similar (if not the same) with those investigated and penalized by the Commission.” 

The TCA closely follows the case law of the Commission and in a vast majority of the cases it adopts a similar approach with that of the Commission’s. Since TCA’s following the Commission’s footsteps is also welcomed by the administrative courts, the TCA might be tempted to do the same in its ongoing investigation as well. However, the TCA should not disregard the possibility that this case might actually be different. It is crucial that the TCA assesses whether it would be adopting the “technical viewpoints of the Commission” or “its political motives”. As the latter merely serves the industrial policies and the goals of the European Union (which are probably quite different than those of Turkey), the TCA should not rely on the Commission’s analyses in case it has any doubts in that respect. 

If the application of the competition rules is going to be affected by industrial policies (which, we believe is bad for the economy), it should at least be ensured that they are not affected by someone else’s industrial policies. 

^{_{1. The European Commission Is Undermining R&D and Innovation: Here’s How to Change It, Thibault Schrepel, Assistant Professor at Utrecht University School of Law.
2. https://www.strategyand.pwc.com/innovation1000}}  

By Barıs Yuksel, Senior Associate, Mehmet Salan, Associate ACTECON

In Turkey, the authority to initiate dumping or subsidy examinations, upon complaint or, where necessary, ex officio, is given to the Ministry of Economy (“Ministry”). Within the scope of this authority, the Ministry announces its decisions with the communiqués published on the Official Gazette.

During the second quarter of 2018, the Ministry has initiated a number of anti-dumping and anti-circumvention investigations and announced its decisions upon concluding several of the ongoing investigations.

Below is a bullet-point summary of the status of the trade defense cases initiated, concluded or amended during the 2nd quarter of 2018: 

• Communique No. 2018/16 dated May 4th, 2018 concerning the imports of granite originating from Socialist Republic of Vietnam:

The Ministry announced its decision upon the completion of the new exporter review investigation in relation to the current dumping measures on imports of granite classified under the CN Codes 6802.23 and 6802.93 originating from Socialist Republic of Vietnam. Accordingly, the Ministry decided not to apply anti-dumping duties on imports of granite under the CN codes 6802.23 and 6802.93 of the new exporter company originating from Socialist Republic of Vietnam, along with two other companies.

• Communique No. 2018/18 dated May 22nd, 2018 concerning the imports of plywood originating from People’s Republic of China: 

The Ministry announced its decision upon the completion of the expiry review in relation to the current dumping measures on imports of plywood, classified under the CN codes 4412.10, 4412.31, 4412.33, 4412.34 and 4412.39 originating from People’s Republic of China. Accordingly, the Ministry decided to apply an anti-dumping duty of 140 USD/m3 on imports of plywood classified under the CN codes 4412.10, 4412.31, 4412.33, 4412.34 and 4412.39 originating from People’s Republic of China.

• Communique No. 2018/21 dated May 22nd, 2018 concerning the imports of products classified as “others” under CN Code 3903.19.00.00.00 originating from Islamic Republic of Iran: 

The Ministry initiated an anti-dumping investigation against imports of products classified as “others” under the CN code 3903.19.00.00.00 originating from Islamic Republic of Iran upon the complaint of the local producer Aschem Petrokimya Sanayi A.Ş. 

• Communique No. 2018/19 dated May 24th, 2018 concerning the imports of granite originating from People’s Republic of China: 

The Ministry announced its decision upon the completion of the expiry review in relation to the current dumping measures on imports of granite, classified under the CN codes 6802.23 and 6802.93 originating from People’s Republic of China. Accordingly, the Ministry decided to continue to apply the anti-dumping duty of 174 USD/Ton on imports of plywood classified under the CN codes 6802.23 and 6802.93 originating from People’s Republic of China.

• Communique No. 2018/20 dated May 24th, 2018 concerning the imports of polyester synthetic discontinuous fibers (polyester fiber) originating from People’s Republic of China:

The Ministry initiated an expiry review in relation to the current dumping measures on imports of polyester synthetic discontinuous fibers (polyester fiber) classified under the CN Code 5503.20.00.00.00 originating from People’s Republic of China. 

• Communique No. 2018/22 dated June 19th, 2018 concerning the imports of igniters (only to be used as ignition systems of gas furnaces and ovens) originating from People’s Republic of China: 

The Ministry announced its decision upon the completion of the anti-dumping investigation on igniters (only to be used as ignition systems of gas furnaces and ovens), classified under the CN code 9613.80.00.00.11 originating from People’s Republic of China. Accordingly, the Ministry decided to apply an anti-dumping duty at a rate of 24.55% on all imports of igniters (only to be used as ignition systems of gas furnaces and ovens), classified under the CN code 9613.80.00.00.11 originating from People’s Republic of China.

• Communique No. 2018/23 dated June 21st, 2018 concerning the imports of partially drawn polyester yarn:

Currently, anti-dumping duties are imposed to the imports of polyester textured yarns classified under the CN Code 5402.33 originating from People’s Republic of China, Malaysia, Republic of Indonesia, Chinese Taipei, Thailand and Socialist Republic of Vietnam as per the Communiqué No. 2017/5. With the Communiqué No. 2018/23 dated June 21st, 2018, the Ministry announced its decision upon the completion of the anti-circumvention investigation regarding the imports of partially drawn polyester yarn classified under the CN Code 5402.46 due to its impairing effect on the anti-dumping duties imposed on the imports of polyester textured yarns. Accordingly, the Ministry decided to apply an anti-dumping duty at a rate of 8% on imports of partially drawn polyester yarn originating from India, Chinese Taipei, Thailand, Socialist Republic of Vietnam, Republic of Indonesia and Malaysia, excluding two companies from India, one company from Thailand and four companies from Republic of Indonesia, for which the Ministry decided to apply anti-dumping duties at lower rates differentiating from %2.45 to 7.12%.

• Communique No. 2018/24 dated June 19th, 2018 concerning the imports of lead pencils and crayons, originating from People’s Republic of China and Thailand: 

Currently, anti-dumping duties are imposed to the imports of lead pencils and crayons classified under the CN Code 9609.10 originating from People’s Republic of China as per the Communiqué No. 2003/1. As per the Communiqué No. 2007/5, the Ministry decided to include Thailand within the scope of the measures. With the Communiqué No. 2018/24 dated June 19th, 2018, the Ministry initiated an anti-circumvention investigation regarding the imports of lead pencils and crayons originating from Egypt.

• Communique No. 2018/25 dated June 19th, 2018 concerning the imports of granite originating from Islamic Republic of Iran: 

Currently, anti-dumping duties are imposed to the imports of granite classified under the CN Codes 6802.23 and 6802.93 originating from People’s Republic of China as per the Communiqué No. 2012/14. As indicated above, the Ministry decided to continue to apply the anti-dumping duty of 174 USD/Ton on imports of plywood classified under the CN codes 6802.23 and 6802.93 originating from People’s Republic of China after the completion of the expiry review. As per the Communiqué No. 2016/4, the Ministry decided to include Socialist Republic of Vietnam (excluding two companies) within the scope of the measures after the completion of an anti-circumvention investigation. With the Communiqué No. 2018/25 dated June 19th, 2018, the Ministry initiated another anti-circumvention investigation regarding the imports of granite originating from Islamic Republic of Iran. 

 (First published by Mondaq on July 16, 2018)

By Gonenc Gurkaynak, Partner, Ceren Yıldız, Associate, Sinem Ugur, Associate, Nazlı Gurun, Associate ELIG Gürkaynak Attorneys-at-Law

This article will address significant amendments and novelties introduced for Turkish capital markets legislation during the first half of 2018 as in line with specific needs and interests of public and private institutions, companies, shareholders and/or investors being subject to such legislation.

In this respect, the following legislation will be examined in this article toward the past: 

• Communiqué on Takeover Bids (Communiqué No. II-26.1)
• Communiqué on Real Estate Investment Trusts (Communiqué No. III-48.1)
• Istanbul Settlement and Custody Bank (Takasbank) – Central Clearing And Settlement Regulation
• Communiqué on Common Principles Regarding Significant Transactions and Appraisal Right (Communiqué No. II-23.1)
• Communiqué on Material Events Disclosure (Communiqué No. III-15.1)

I. Amendments and Novelties

1. Communique on Takeover Bids (Communique No. II-26.1)

The Communiqué No. II-26.1 mainly focuses on share takeover bids in companies. Within this scope, the communiqué stipulates that in case any person or persons acting in concert acquire(s) management control of a company through share transfer(s) partially or wholly, then such person(s) shall be liable to make a takeover bid to other shareholders of the target company by protecting their rights. 

Article 18 of the Communiqué No. II-26.1 stipulates certain circumstances that the Capital Markets Board (“CMB”) may grant exemption for the foregoing takeover bid requirement, upon application of the relevant parties and as the case may be. 

In accordance with the recent amendments published on the Official Gazette on June 5, 2018 which was entered into force on the same date, two new circumstances have been inserted to Article 18 of the Communiqué No. II-26.1. As per these changes, the CMB may grant exemption for the takeover bid requirement in case of the following circumstances as well: 

As a result of a default of repayment a loan which has been secured by the shares granted to the bank, transfer of those shares to a special purpose vehicles (SPV) incorporated by the bank; acquisition of those shares by third parties from the bank or SPV;

Transfer of shares to fulfil a regulatory requirement which determines shareholding qualification.

2. Communique on Real Estate Investment Trusts (Communique No. III-48.1)

According to Article 45/2 of the Communiqué No. III-48.1, real estate investment companies are not allowed to distribute cash dividend before public offering or sale of the shares to qualified investors. However, in accordance with the recent amendment published on the Official Gazette on May 10, 2018 and which was entered into force on the same date, the foregoing limitation will not be applied for the real estate investment companies which operate a portfolio consisting of exclusively infrastructure investments and services until December 31, 2019. Before this amendment, the foregoing date was stipulating in the Communiqué No. III-48.1 for such real estate investment companies as December 31, 2017. The amendment has extended that term for 2 (two) years more.

3. Istanbul Settlement and Custody Bank (Takasbank) Central Clearing and Settlement Regulation (Central Clearing and Settlement Regulation)

As per the amendments published on the Official Gazette on May 8, 2018 which was entered into force on the same date, Central Bank of the Republic of Turkey (“Turkish Central Bank”) has been introduced as de facto member of central clearing and settlement institution and it has been ruled that the Turkish Central Bank is not subject to provisions of the Central Clearing and Settlement Regulation and relevant market directives and procedures.

Furthermore, two new transaction collateral types have been defined in Article 38 of the Central Clearing and Settlement Regulation. Within this scope, (i) publicly traded precious metals and (ii) electronic product securities are accepted as new types of transaction collaterals. 

4. Communique on Common Principles regarding Significant Transactions and the Appraisal Right (Communique No. II-23.1)

In general, provisions of the Communiqué No. II-23.1 are related to types of significant transactions, obligatory procedures of those, concept of appraisal rights granted to the shareholders and mandatory takeover bids in companies. 

This being the case, Article 12 of the Communiqué No. II-23.1 defines certain significant transactions which do not grant appraisal right to shareholders. In accordance with the amendments published on the Official Gazette on April 18, 2018 and which was entered into force on the same date, a new significant transaction – which does not grant appraisal right to shareholders – has been inserted to Article 12 as follows:

   -Asset transfers to third parties (other than related parties), on the condition that at least 90% of the funds arising from the asset transfer will be used for payment of the cash loans        and/or other debts arising from the issued debt instruments within 1 (one) month, for the purpose of strengthening financial position of the company. However, if entire of funds will be used for payment of the cash loans and/or other debts arising from the issued debt instruments, the foregoing ratio (i.e. 90%) is not taken into consideration.

In parallel of said amendment, Article 12/3 of the Communiqué No. II-23.1 has been revised as stipulating that the board of directors of a company engaging a significant transaction as explained above shall adopt a board resolution and disclose that resolution together with details of payment(s) (i.e. payment amounts, realization of payments etc.) to the public.

5. Communique on Material Events Disclosure (Communiqué No. III-15.1)

According to the amendment published on the Official Gazette on February 13, 2018 and which was entered into force on the same date, it has been stipulated in Article 12/4 of the Communiqué No. III-15.1 that in case a real person or legal entity directly reaches or falls below 5%, 10%, 15%, %20%, 25%, 33%, 50%, 67% or 95% of shares representing share capital of a publicly traded company, the relevant disclosure liability is performed by the Central Registry Agency (MKK) without prejudice to other disclosure requirements of said real person or legal entity arising from other paragraphs of Article 12.  

II. Conclusion

Capital markets have sensitivities and may rapidly be affected by economic circumstances. Therefore, as a consequence of global and/or domestic economic developments (i.e. economic turmoil, cash deficiency etc.), Turkey frequently amends and updates its capital markets legislation. While some of those amendments are related to internal functioning of capital markets institutions, many of them are related to direct interests and rights of the companies, shareholders and/or investors.

(First published by Mondaq on July 9, 2018). 

By ELIG Gurkaynak are Gonenc Gurkaynak, Partner, Damla Dogancalı, Counsel, Selen Sakar, Associate ELIG Gürkaynak Attorneys-at-Law

By publishing its reasoned decision¹ on the preliminary inquiry against Duru Bulgur Gida San. ve Tic. A.S. (“DURU”), the Turkish Competition Authority (“TCA”) has added a new one to its decisions which include effect analysis of resale price maintenance (“RPM”) practices.

Although, Article 4(1)(a) of Block Exemption Communiqué No. 2002/2 on Vertical Agreements provides that RPM practices would not benefit from block exemption and the TCA used to evaluate RPM as a per se violation, in its recent decisions², the TCA subjects RPM practices to a rule of reason analysis and assesses the effects of such practices. In these decisions, the TCA has analysed the effects of RPM by considering several factors such as market structure, competition level and effect on consumers.

The TCA has initiated ex-officio preliminary inquiry against DURU which is active in the production and wholesale of dry food including bulgur, legumes and rice in order to determine whether Article 4 of the Competition Law is violated by DURU via RPM practices. It is interesting to note that the preliminary inquiry was initiated based upon a document which was obtained by the TCA during the on-spot inspection within the scope of another preliminary inquiry against a retailer association.

The majority of documents obtained during the preliminary inquiry stage was related to the price negotiations between DURU and retailers on shelf prices (12 documents) and the communication between the parties regarding activities and inserts (15 documents), while the remaining documents include DURU’s warnings to retailers for fixing their shelf prices. In this context, the TCA expressed that retailers and DURU communicated with each other in order to determine the shelf prices, especially during campaigns and discounts periods.

In its assessment on RPM, the TCA has focused on the following: 

− whether the market has a competitive structure, 

− the degree of the competition between brands, 

− the concentration level of the market, 

− the market power of the concerned undertaking and its competitors, 

− whether buyer power is present or not, 

− buyers’ compliance with recommended sales price and 

− whether an inspection and/or sanction mechanism has been established by the supplier

First, the TCA addressed the sector’s general character and competitive structure. Accordingly, the TCA has established that there are more than hundred large and small players in the grains and legumes market in Turkey. Further, it was seen that the HHI was below 1000 (it is assumed that markets with HHI below 1000 are competitive). From the retailer perspective, the TCA has stated that especially discount stores and retail chains were able to exert competitive pressure on the suppliers as they have significant buyer power and that the suppliers were not able to dictate their terms on such retailers. The TCA expressed that the anti-competitive effects of RPM would have been more visible in concentrated markets. The TCA noted that although DURU may be considered a strong player in some geographical areas, it was seen that retailers in such areas followed the prices of their competitors and did not allow DURU to force them to charge higher prices. Given the significant buyer power and high competitive pressure of discount stores and retail chains, the overall effects of DURU’s RPM practices were effectively neutralized.

Second, the TCA has made a comparison between the prices of DURU products and other brands’ products. The TCA determined that although DURU products were generally more expensive than the other brands, there were certain brands that had the same price levels with DURU.  

The TCA further examined whether the possible negative effects of RPM were actually realized. Within this scope, price increases that can be regarded as the most significant negative impact were evaluated. In this context, it was seen that DURU closely monitored shelf prices of retailers and had a tendency to intervene. However, the documents obtained during the on-spot inspections showed that retailers negotiated with DURU based on other retailers’ prices and that the retailers were more likely to follow each other’s prices and sell DURU products for cheaper prices than foreseen by DURU.

Finally, the TCA examined the sales agreements between DURU and retailers and determined that there is no provision that justified RPM in the agreements. 

In light of the foregoing, the TCA decided not to initiate a full-fledged investigation against DURU. On the other hand, since there was concrete evidence of DURU’s intervention with the prices of the retailers, the TCA decided to issue an opinion pursuant to the Article 9(3) of the Competition Law (which is parallel to the European Union Regulation No 17: First Regulation implementing Articles 85 and 86 of the Treaty), stating that RPM practices of DURU must be terminated. 

By issuing this decision, the TCA clearly showed that the TCA consolidated its position on conducting an effect-based analysis in RPM cases. Consequently, in near future, it is highly probable that the TCA may be dealing with large-scale RPM cases by using the same effect-based approach. 

1. TCA’s Duru Decision dated 08.03.2018 and numbered 18-07/112-59.

2. TCA’s Çilek Decision dated 20.08.2014 and numbered 14-29/597-263; Dogati Decision dated 22.11. 2014 and numbered 14-42/764-340; Yataş Decision dated 27.09.2017 and numbered 17-30/487-211.

By Aybert Kurt, Associate, ACTECON

The Current Legal Landscape and Major Areas of Risk Exposure Based on Practical Experience

As an emerging market, Turkey is rightly considered to be a business and commercial hub for the EMEA region, as well as an important market for many multinational companies. In 2017, Turkey received a score of 40 points in Transparency International’s Corruption Perceptions Index, on a scale of 0 (“highly corrupt”) to 100 (“very clean”). As this score is relatively closer to the lower end of the scale and since Turkey’s anti-corruption efforts are an ongoing progress and its related legislation is continuously evolving, multinational companies that are currently active in Turkey (or will be in the future) should keep themselves well-informed about the local anti-corruption climate and strive to stay up-to-date about any new developments. This will enable multinationals to take precautionary measures that could mitigate their liabilities under extraterritorial legislative anti-corruption regimes, such as the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act (UKBA), as well as relevant domestic laws in Turkey. 

Firstly, in order to keep pace with the recent international developments in this field, Turkey has passed up-to-date anti-corruption legislation and it has also signed and ratified all territorially applicable international treaties regarding anti-corruption, including the OECD Anti-Bribery Convention. The main domestic legislation that is applicable to acts of corruption is the Turkish Criminal Code No. 5237 (Criminal Code), which prohibits bribery, malversation, malfeasance and embezzlement. Apart from the Criminal Code, there are also a few other legislative regulations dealing with the prevention of corruption, such as the Turkish Criminal Procedure Law No. 5271, the Law No. 657 on Public Officials, and the Law No. 5326 on Misdemeanors. Furthermore, in 2016, Turkey finally ratified the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism. Additionally, to bolster the fight against corruption, the Turkish Prime Minister published Circular No. 2016/10 on Increasing Transparency and Strengthening the Fight Against Corruption in 2016, following the expiration of the Strategy on Increasing Transparency and the Strengthening of the Fight Against Corruption. This Circular sets forth a number of precautions aimed at increasing prevention, as well as certain precautions aimed at strengthening the enforcement of sanctions. Moreover, the Circular introduces various provisions that focus on enhancing social awareness. Overall, the Circular’s directives and precautions mainly seek to regulate the rules of ethical behavior for public officials and attempt to remove the obstacles to their adjudication.

Turkey also participated in several international anti-corruption initiatives through its membership in the Group of States against Corruption, which oversees the compliance of these states with the anti-corruption standards put forth by the Council of Europe. As a result, Turkey’s anti-corruption legislation was amended to bring it in line with international standards in this regard. Consequently, Turkey has since (i) increased sentences for the crime of bribery; (ii) criminalized offering, promising, or requesting bribes, directly or indirectly; (iii) criminalized bribery of foreign public officials; (iv) broadened the scope of the definition of “foreign public officials”; and (v) imposed administrative liabilities on corporations whose representatives or persons acting on their behalf commit the offence of bribery.

Currently, only real persons are considered to be the main perpetrators of a crime under the Criminal Code, as Article 20 of the Criminal Code plainly states that criminal liability is personal and further declares that criminal sanctions may not be imposed against legal persons. In other words, the Criminal Code accepts the principle of “personal criminal liability,” which has been challenged and debated over the years, although any relevant amendments are yet to be enacted. Moreover, it should be noted that the Turkish legal system does not accommodate non-prosecution or deferred prosecution agreements, nor does it allow compliance programmes to serve as mitigating factors.

However, this is not to suggest that companies are entirely off the hook when it comes to anti-corruption. As mentioned above, under Turkish law, companies can be held civilly or administratively liable. Accordingly, the Law No. 5326 on Misdemeanors foresees and sets forth administrative fines against firms whose corporate organs or representatives commit the crimes of bribery or bid-rigging (among other prohibited acts listed under the relevant article) for the benefit of the corporation while they were acting within the scope of the activities of the corporation. Furthermore, various security measures can also be imposed upon corporations, such as (i) invalidation of a license granted by a public authority, (ii) seizure of goods used in the omission of (or that result from) a crime committed by the representatives of the legal entity, or (iii) seizure of pecuniary/financial benefits arising from (or provided for) the commission of the crime.

Schemes Multinationals May Consider to Prevent or Mitigate Corporate Risk

Turkey is a sensitive region for conducting business when it comes to compliance issues. It is important to note that there is no specific government agency that is tasked with and responsible for enforcing anti-corruption laws in Turkey; therefore, the judiciary has full and exclusive powers to apply the provisions stipulated under the relevant laws in relation to anti-corruption laws and regulations.

Under Turkish law, companies are not required to set up compliance programmes and the existence of a compliance programme is not considered to be a mitigating factor. However, keeping Turkey’s distinctive cultural context in mind, maintaining such a programme would always be prudent and considered an asset for a multinational company. As such, companies are advised to adapt their compliance programmes to the Turkish jurisdiction, as it is critical to understand that the culture, as well as the business environment, of the relevant jurisdiction plays a significant role in determining the shape of its anti-corruption scene. For example, there is a long-standing and widespread culture of hospitality and gift-giving in Turkey and this culture cannot be changed or transformed by merely instructing employees not to engage in such acts when doing business. Rather, a company that seeks to prevent such gift-giving would need to lay down written rules on the subject, carefully train its employees, conduct comprehensive audits and enforce disciplinary measures when the applicable rules are broken, in order to foster a culture of compliance. In this respect, it is highly advisable to use the local language in the employee training sessions, as what employees could consider to be cultural practices (i.e., gift-giving and paying for entertainment expenses) may constitute corruption under the relevant laws and it is important to avoid any language-related misunderstandings in this regard. Acquiring companies should also carefully review the gift-giving, travel and meal expenses that are incurred in relation to third parties and dig deeper to uncover the exact nature of such expenses where necessary. (This is particularly important since the Criminal Code does not differentiate in any way between facilitating payments and bribes. Accordingly, any gifts, travel expenses, or payments for meals or entertainment could potentially be deemed as bribery under Turkish laws.)

Therefore, multinational companies (especially acquiring companies) are encouraged to devise and implement compliance programmes aimed at detecting and preventing possible unlawful acts, which will raise awareness among employees about combating corruption. Moreover, such companies should bear in mind that one of the biggest mistakes they can make is to simply adopt and incorporate a global compliance programme without adapting it first to the particular needs and characteristics of the local compliance climate in which the company operates. As a result, the global compliance programme may fail to serve as a sufficient robust deterrent against corruption or as an adequate tool for detecting and preventing such corrupt activities. Another crucial step towards securing a corruption-free business environment, which goes hand-in-hand with the compliance programme, is proper employee training. Employee training should include a clear definition of what constitutes corruption, explain the risks and consequences of corrupt acts, and incorporate real-life examples to deter employees from engaging in such acts. Finally, employee training programmes should also inform employees about the various requests and offers that they might receive from third parties (i.e., bribes, gifts, kickbacks, etc.) and how to deal with such requests and offers, which they should ignore/decline and also consider reporting to their supervisors, where appropriate. 

Companies would also be well-advised to set up control and monitoring mechanisms to supervise the implementation of their anti-corruption policies. Periodic audits and implementing whistleblower protection procedures are some of the methods that can be used to control/monitor whether anti-corruption policies are being carried out in an effective manner. It is also advisable that corporate guidelines clearly indicate how and whom to approach in case of a suspected act of corruption. 

Currently, there is no legislation or guideline in Turkish law that mandates self-disclosure as a mitigating factor for either real persons or legal persons. Thus, whether or not a judicial authority should consider the voluntary disclosure of facts as a mitigating factor is left entirely to the discretion of the judge adjudicating the case file. Companies should also keep in mind that self-disclosure itself carries the risk of “spillover” to other jurisdictions where the disclosure may pose certain legal hazards. Therefore, companies should take utmost care when transmitting such sensitive information to the public authorities. Having said that, it should be noted that the Turkish criminal system does provide a leniency mechanism, which allows and incentivizes companies to self-disclose violations in exchange for reduced penalties. For the crime of bribery, the Turkish criminal system suggests that a person who gives or receives a bribe, but who then informs the investigating authorities about the bribe before an investigation has been launched, should not be punished for the crime of bribery. However, this rule does not apply to persons who offer a bribe to a foreign public official.

Case Studies: Recent Anti-corruption Cases and Decisions

Within the past year, a number of anti-corruption cases and investigations have been initiated against individuals rather than private companies. In one case relating to the charge of bribing public officials, a total of 46 people (including 15 public officials) were taken into custody due to bribery allegations. According to the allegations, the suspects had paid bribes between the amounts of 200 Turkish Lira (approx. 40 EUR) and 10,000 Turkish Lira (approx. 2,000 EUR) in order to facilitate the processing of their requests at the Title Deed Directorate (the Turkish equivalent of the Land Registry). The suspects used coded phrases such as “I brought the fig” and “I left your goods at the bakery” to signal and indicate the bribe payments. 14 people, including six public officials, were subsequently arrested in connection with the case.

In another investigation, an inspector at the Istanbul Provincial Directorate of the Social Security Administration was arrested on the grounds of requesting bribes from a shoe manufacturing company. Upon inspecting the shoe factory and finding a number of violations, the inspector had allegedly offered to cover up (i.e., not to report) these violations in exchange for a bribe of 2,000 EUR. Furthermore, the inspector had allegedly proposed to provide the company with monthly consulting services for the same payment amount. After the owner of the company notified the Public Security Branch Office of these events, the authorities arrested the inspector in question, after verifying that he had received the bribe money on his second visit to the factory.

A different investigation involved bribery allegations against public officials at the Istanbul Courthouse Execution Offices. The investigation was also conducted by using hidden cameras and it was determined that certain individuals had offered cash payments varying between 100 Turkish Lira (approx. 20 EUR) and 10,000 Turkish Lira (approx. 2,000 EUR) by using envelopes placed inside the case files. Accordingly, a criminal case was initiated against 34 suspects regarding bribery and misconduct charges.

In October 2017, a network of public servants who were allegedly engaged in corrupt activities has been uncovered at the Turkish Standards Institute (TSI), as a result of a letter that was received by the Ankara Police Department from certain TSI employees, notifying the authorities about the corrupt activities taking place inside the TSI. Allegedly, this group was receiving bribes in the form of cash, valuable gifts, scholarships for relatives and paid off holiday expenses, in exchange for providing certain documents to companies. Upon receipt of the notification letter, the Ankara Police Department monitored the suspects by using technical and physical methods, gathered evidence and substantiated the allegations, and 12 people were taken into custody shortly thereafter. 

By ELIG Gurkaynak are Gonenc Gurkaynak, Partner, Ceren Yıldız, Associate and Nazlı Gurun, Associate ELIG Gürkaynak Attorneys-at-Law