Turkey: Can The Turkish Competition Authority Investigate Foreign Companies Located Outside Turkey? Yes, In Theory. Not Quite, In Practice.

It is without dispute that the Turkish Competition Authority ("TCA") has, at least according to its laws and regulations, the power to investigate and fine companies outside Turkey, if the practices of the companies are considered to affect Turkish markets¹. The TCA, however, has so far not been able to exercise this jurisdiction consistently and effectively primarily due to deficiencies in the procedures related to the service of certain necessary documents on foreign companies located outside Turkey. These deficiencies are considered to be due to lack of international agreements between Turkey and the countries in which the investigated companies are located, as well as lack of established local practice and regulations in Turkey.

The focus of this Article will be on these procedural deficiencies in light of the TCA's decisions in the Glencore Istanbul², Glencore International³ Anadolu Cam/Yioula⁴, Johnson&Johnson⁵, Sun Express/Condor⁶ and Block Train⁷ matters, in which the TCA had failed either to serve the notification of its investigations on the foreign companies or to affect such serve without significant and meaningful delays.

As such, we will discuss in the following, (i) first, the law governing the service of the notifications to foreign companies; (ii) second, the methods used by the TCA for serving foreign companies; (iii) third, the facts of the subject decisions; (iv) and lastly, our suggestions for possible solutions.

What is the applicable law on the notifications to foreign companies?

The local law governing the fundamentals of notification and the method of service is the Turkish Notification Law No. 7201 ("Notification Law"). Article 25 of the Notification Law regulates notifications to be served in foreign countries. Pursuant to this Article, the documents subject to the law are to be directly sent to the Turkish Embassy or Consulate, or through the Ministry of Foreign Affairs⁸. Finally, the Turkish Embassy or Consulate affects service as provided for in the local law of the country in question by means of the relevant authority responsible for the service in that country.

Article 25 of the Notification Law is to be applied in the absence of an international agreement governing service of the documents. The documents subject to service by the TCA, however, are administrative documents in nature and Turkey is not a party to any international agreement that covers the service of administrative documents. Therefore, Notification Law appears to be the only statutory authority to be used in assessing the efficacy of the services of the TCA's documents. Having said that, the following international conventions should be noted in this article as the TCA has attempted and failed to serve its administrative documents according to these international conventions: (i) The Hague Convention on Civil Procedure (1954), and (ii) Additional Treaty on Legal Proceedings to Hague Convention (1988).

The following section provides a list of methods used by the TCA when serving official documents such as Investigation Notice and Investigation Reports on the recipients.

Which methods were used by the TCA when notifying foreign companies?

As a preliminary matter, under Article 43 of the Act No: 4054 on the Protection of Competition ("Competition Law"), the TCA is required to serve its investigation notice on the parties concerned within 15 days following its decision on initiating the investigation, requesting their first written defenses. Further, pursuant to Article 45 of the Competition Law, the TCA is required to serve its final investigation report on the parties concerned, and request their second written defences⁹. Indeed, carrying out the investigation in the absence of these notifications violates the concerned parties' due process rights to a defense under fundamental principles of Turkish law¹⁰.

As such, the TCA, when notifying foreign companies, has (i) tried to serve the notification on the Turkish subsidiary, or the Turkish liaison office¹¹ of the concerned foreign company, if any, (ii) requested either through the Ministry of Foreign Affairs under the Notification Law or by directly sending the notification to the relevant Turkish Embassy or Consulate in the country where the subject company is located,  (iii) requested that the Ministry of Justice serve the notification in accordance with the International Conventions discussed above, or (iv) served the notification directly through registered post by the Turkish Postal Service ("PTT").

Surprisingly enough, the last method used by the TCA, i.e. the use of the PTT, has turned out to be the most effective method of service used so far, although a method not provided for under the Notification Law¹².

The following sections will discuss the TCA decisions dealing with notification issues, in which the abovementioned notification methods were used.

The history of attempts by the Turkish authorities to notify foreign companies.

The TCA, in Glencore Istanbul, initiated a preliminary investigation in 2003 against companies exporting coal to Turkish markets, the Austrian Krutrade, the Swiss Mir Trade and the Swiss Glencore International. The preliminary investigation became a full-fledged one against Mir Trade, Krutrade, and Glencore International's Turkish subsidiaries. The TCA later concluded that Glencore International also makes its own direct sales to Turkey and a separate investigation against Glencore International was initiated in 2005.

Regarding service, the Turkish authorities used a variety of methods, revealing the dilemma it found itself in given the gaps in the applicable laws discussed above.  To start with, the Austrian Krutrade was served with the investigation notice without any trouble by service on its Turkish liaison office as the liaison office accepted the service on behalf of Krutrade without objection.  As for the Swiss Mir Trade, the TCA, pursuant to Article 25 of the Notification Law, requested the Ministry of Foreign Affairs to send the notification to the Turkish Embassy in Bern, where the company is located.

In the meanwhile, the TCA had attempted to serve the investigation notification on Glencore International through its Turkish subsidiary, Glencore Istanbul. Glencore Istanbul, however, refused to accept service of the notification on behalf of its parent company. As a result, the TCA requested that the Ministry of Foreign Affairs send the notification to the Turkish Embassy in Bern, the procedure it followed with respect to the Swiss Mir Trade. The Turkish Embassy in Bern failed, after months of effort, to locate Mir Trade¹³.

The Ministry of Foreign Affairs eventually suggested the notification be served through the Turkish Ministry of Justice in accordance with the international conventions discussed above.

In the meantime, while the TCA was trying to solve its notification problems in Glencore Istanbul, the Yioula matter was in the investigation phase, encompassing among others a Greek glass packaging company Yioula. The TCA had already requested that the Ministry of Justice send its investigation notification to Yioula pursuant to the international conventions. The Ministry of Justice, however, had rejected the requests, correctly observing that the international conventions' scope do not cover "administrative, social and financial documents"¹⁴. For that reason, the TCA chose not to involve the Ministry of Justice in Glencore Istanbul. The TCA after a couple of months found that Mir Trade had established a Turkish liaison office, on which the investigation report was served accordingly.

As a result, neither the investigation notice nor the subsequent investigation report was served on Glencore International and the Greek Yiolua in the respective investigations whereas Mir Trade was only served with the investigation report. Further, the TCA was unable to serve the investigation report on Krutrade as its liaison office had been closed in the meantime. Although Krutrade and Glencore International were found by the TCA to have violated the Competition Law through anti-competitive practices in the Turkish market, the TCA was unable to complete its investigation and a final decision was not rendered on the respective companies given the TCA's inability to fulfill its procedural obligation to affect both its investigation notice and investigation report¹⁵. With regards to Yioula, The TCA determined that the practices of the investigated companies did not restrict competition in Turkish markets. Accordingly, the failure of the service to Yioula did not affect the outcome of the decision.

In the Johnson&Johnson matter, the TCA had initiated an investigation against, among others, Johnson&Johnson Medical Limited located in the UK. It served its investigation notice on the Turkish liaison office of Ethicon Limited, a UK subsidiary of Johnson&Johnson. Johnson&Johnson participated in the proceedings but objected to the efficacy of the service made on its subsidiary's Turkish liaison office on the grounds that a liaison office, pursuant to the Competition Law, is not an "undertaking" and thus not subject to that law¹⁶. The TCA rejected the objection, arguing that liaison office's nature, whether an undertaking or not, was not relevant with regard to the adequacy of service. Further, the TCA took the position that the liaison office operated on Johnson&Johnson's behalf in Turkey, and can thus be properly served on Johson&Johnson's behalf¹⁷. Considering the liaison office in question was the liaison office of Ethicon Limited, and not of Johnson&Johnson, it appears the TCA acted in contradiction, at least on its face, of its previous practice in Glencore Istanbul, where the investigation notice served on a foreign company's subsidiary in Turkey was deemed defective. Therefore, Johnson&Johnson's objection may have been successful had it been based on the service on its subsidiary was inconsistent with the TCA's previous practices.

In Sun Express/Condor, the TCA, after receiving a leniency application¹⁸ initiated an investigation in 2010 against two airlines, the German Condor and Turkish Sun Express, of alleged anti-competitive practices with respect to their flights between Turkey and Germany. Even though the Ministry of Justice had previously rejected the TCA's request in Yioula, the TCA again tried to submit its Investigation Notice to Condor through the Ministry of Justice. Not surprisingly, the Ministry of Justice's response was the same, i.e. the international conventions' scope did not cover "administrative, social and financial documents". The TCA then requested that the Ministry of Foreign Affairs send the investigation notice to the Turkish Embassy in Berlin. The Turkish Embassy reported that the relevant authority responsible to serve the notification on the recipient in Berlin had not informed it as to the status of the service.

After failing in its previous two attempts to affect service, the TCA, by its own initiative, sent the notification to Condor by registered mail through the PTT, and the PTT served the document successfully on Condor. Upon the service by mail of the Investigation Notice, Condor submitted its defenses to the TCA. The TCA was able to move forward to decision, imposing administrative fines on Condor for anti-competitive practices under the Competition Law.

In Block Train, the TCA, also after receiving a leniency application, initiated an investigation in 2014 against, among others, the Swiss K+N Switzerland, the Greek K+N Greece and the Hungarian GYSEV, all of which operate in the rail freight forwarding services market. The TCA directly requested the Turkish Consulates in Zurich, Athens-Piraeus, and the Turkish Embassy in Budapest to serve the investigation notice on the respective foreign companies. Afterwards, the Consulates and the Embassy requested the relevant authorities to affect service as provided for in the local law of the countries in question, which was accomplished with respect to GYSEV and K+N Greece. The Turkish Consulate in Zurich, however, rejected the TCA's request, claiming erroneously the investigation notice should be served through Ministry of Justice pursuant to the international conventions, a procedure that contradicts with the practice of the Ministry of Justice and the express language of those conventions. No doubt frustrated, the TCA, as it did with regard to Condor, simply sent the notification to K+N Switzerland by the registered mail through the PTT, and the notification was served shortly thereafter. The TCA was able to proceed with the investigation and render its decision, determining in this case that the practices in question did not affect Turkish markets.

Which method is correct and what else could be done?

The applicable law is clear that administrative documents to be served in a foreign country must be sent directly to the Turkish Embassy or Consulate or through Ministry of Foreign Affairs. Finally, the Turkish Embassy or Consulate affects service as provided for in the local law of the country in question by means of the relevant authority responsible for the service in that country.

Accordingly, the opinion of the Ministry of the Foreign Affairs, expressed in the Glencore Istanbul and Glencore International matters, and expressed by the Turkish Consulate in Zurich in the Block Train matter, i.e. that the TCA is to serve its documents through the Ministry of Justice, would seem to have no legal basis. Had Turkey had an international agreement with the subject countries as to the service of the administrative documents as such, then the opinion would have been accurate.

In addition, the TCA's attempts, albeit arguably successful, to serve the documents by regular registered post through PTT, for companies located outside Turkey, is not a method provided for in the Notification Law. It would seem K+L Switzerland and Condor had the right to refuse the notification served through the regular registered post, but instead apparently choose to waive that right by making an appearance and participated in the proceedings. In other words, the TCA would not have been deemed to have fulfill its notification obligations, and would not have the jurisdiction to render an enforceable decision, had the foreign companies simply refused to participate in the proceedings due to inadequacy of the service. As shown by the matters discussed above, there exists no established practice for notifying the foreign companies as required by Articles 43 and 45 of the Turkish Competition Law. It should be noted that this is observed to be due to deficiencies in the law beyond the scope of this competition law and control of the TCA.

Unsuccessful attempts to notify foreign companies lead to loss of significant amount of time and resources. Investigation periods need to be extended and investigations end up taking significantly longer than usual. Further, it should be noted that although the foreign companies in the abovementioned decisions were all located in Europe, where geographically and logistically speaking Turkish authorities have relatively easy access, the TCA still often failed to affect the necessary service.

Turkey, to ensure it has the ability to protect itself from unfair competition by the companies located outside Turkey, needs to negotiate and execute international agreements governing the service of key administrative documents such as notices of the initiation of investigations and reports thereof. In this context, Decision No. 1/95 of the EC-Turkey Association Council¹⁹ explores the nature of the cooperation between the European Community, now the European Union, and Turkey in matters related to competition law. Article 43 of this decision states that Turkey or the Community, as the case may be, may request the other party's competition authority to initiate appropriate enforcement actions, if anti-competitive activities affecting the requesting party's markets are believed to be carried out on the territory of the requesting party. Although the Association Council Decision does not cover notifications and the competition authorities of the member states have no authority to notify the foreign companies located in their jurisdiction on behalf of another member state's competition authority, the Decision may serve as a roadmap for such agreements, according to which further agreements as to the service of documents by European and EU competition authorities can be executed between Turkey and, at least, the EU member states.

Footnotes

1 Act No: 4504 on the Protection of Competition, Article 2.

2 TCA's 02.09.2010 dated and 10-57/1141-430 numbered decision.

3 TCA's 11.09.2006 dated and 06-62/848-241 numbered decision.

4 TCA's 28.02.2007 dated and 07-17/155-50 numbered decision.

5 TCA's 07.05.2007 dated and 07-38/410-158 numbered decision.

6 TCA's 27.10.2011 dated and 11-54/1431-507 numbered decision.

7 TCA's 16.12.2015 dated and 15-44/740-267 numbered decision.

8 The Ministry of Foreign Affairs, on 7 October 2011, notified by letter to, among others, the TCA that, effective immediately, the documents to be served in a foreign country are to be directly sent to the concerned Turkish Embassy or Consulate, which then affects service as provided for in the local law of the country in question.

9 Pursuant to same Article, the TCA is also required to serve its additional report on the parties, which is prepared upon the parties' second written defenses; and request the parties' response to the additional report. Such requirement will not be discussed in this Article as the decisions herein did not involve any notification as to the additional report.

10 Constitution of the Republic of Turkey, Art. 36; European Convention on Human Rights, Art. 6, which Turkey is a party to.

11 Establishment of a liaison office of a foreign company is provided for under the Turkish Foreign Direct Investment Law for the purposes of, among others, communicating with and providing information to the associated company.

12 Article 25 of the Notification Law provides only that such documents are required to be sent to the relevant Turkish Embassy or Consulate; there is no mention of service using the PTT as an alternative for the companies located outside Turkey.

13 It is worth noting that in line with a suggestion by the Ministry of Foreign Affairs, formal cooperation requests were lodged with Swiss and Austrian competition authorities and the European Commission, all of which were rejected. Given the issues covered in these requests were significantly broader than those covered the notifications, those requests will not be covered in depth under this Article. The cooperation requests lodged with the foreign competition authorities includes, among others, initiating investigations against the companies concerned and forwarding the evidences found in these companies' premises to the TCA.

14 TCA's Glencore Istanbul decision, para. 330.

15 TCA's Glencore Istanbul decision, para. 2660 and Glencore International decision, para 240.

16 Scope of the Competition Law is stipulated under Article 2, and covers only undertakings. An undertaking is defined as "natural and legal persons who produce, market and sell goods or services in the market, and units which can decide independently and do constitute an economic whole" according to Article 3.

17 TCA's Johnson&Johnson decision, p. 32.

18 A leniency application is a tool to encourage whistle-blowing that, if made and accepted, offers a member of a cartel (an association of companies whose purpose is found to be the maintenance of high prices and otherwise the restriction of competition) the chance of total immunity from fines.

19 EC-Turkey Association Council was established in 1963 and aimed at securing Turkey's full membership in the EEC through the establishment in three phases of a customs union which would serve as an instrument to bring about integration between the EEC and Turkey.

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