15 Feb Is the TCA’s Power to Conduct On-Sıte Inspectıons Expandıng, Even More?
Law no. 4054 on the Protection of Competition (“Competition Law”) provides the Turkish Competition Authority (“TCA”) with the power to conduct on-site inspections at undertakings and associations of undertakings. This power and its exercise are subject to various discussions; because the Competition Board's power to conduct on-site inspection is quite extensive, and serious administrative fines are envisaged in the case that such on-site inspections are hindered complicated. Especially with the amendments made in 2020[1] , the Board’s authority over digital data has been expanded and detailed.
With the amendments made in 2020, within the framework of Article 15 of the Competition Law, if it deems necessary, the Board; can examine all types of data and documents of undertakings kept on physical or electronic media and in information systems, and take copies and physical samples thereof. Prior to the aforementioned amendment, the relevant law provision was interpreted broadly and this type of data was also under inspection in practice, but the increasing use of instant messaging platforms and mobile devices in business life with digitalization made it necessary to make changes in the legislation which would bring legal certainty to the concerned inspections. In this context, during on-site inspections, besides written records of undertakings; correspondences kept in cloud systems and local servers, or computers or mobile devices used by employees for business purposes can be examined. Although this authority is granted for the protection of the free market and competition, hence the social welfare (or, according to the adopted school of thought, the consumer welfare); it needs to be balanced against fundamental rights and freedoms such as right to privacy, immunity of domicile and freedom of communication.
You can find our article on the lawfulness of the TCA's on-site inspection powers against fundamental rights and freedoms, especially within the scope of digital data, here .
In this context, with the course of the country's economy in recent years, we see an increase in the number of large-scale investigations including numerous undertakings such as the "labor market gentleman's agreements investigation" and the "retail market cartel investigation", which the Competition Board conducts quite extensively in many sectors. Naturally, many on-site investigations are carried out within the framework of investigations involving such a large number of undertakings, and many undertakings unfamiliar with competition law processes are faced with these procedures for the first time. As a matter of fact, we see that; the Competition Board’s decisions to impose administrative fines as a result of the hindering/complication of on-site inspection are increasing in parallel.
The TCA’s decision dated 08.09.2022 and numbered 22-41/560-224[2] , whose reasoned version published on 13.01.2023, (“Akcom Decision”) is one of the examples of such hindering of on-site inspection. However, the interesting aspect of this decision is that the undertaking, which was fined pursuant to Article 16 of the Competition Law due to the hindering of on-site inspection, is not actually a party to the investigation (which is the basis of the on-site inspection), and does not even operate in the same relevant product market as the investigation.
An investigation has been launched with the TCA’s decision dated 12.05.2022 and numbered 22-21/355-M; as to whether 17 enterprises operating in the field of egg production are in violation of Article 4 of the Competition Law. The TCA’s officials, while conducting on-site inspection at the headquarters of A.B. Gıda San. ve Tic. A.Ş. (“AB Gıda”) in Üsküdar on 17.05.2022, requested to examine the information systems of the undertaking; however, as stated in the decision, it has been seen that said services were outsourced by Akcom Bilişim ve Teknoloji Hizmetleri LTd. Şti. (“Akcom”).
Thereupon, the day after the concerned on-site inspection, with the Board ruled an on-site inspection to be conducted at Akcom with its decision dated 18.05.2022 and numbered 22-23/383-M.
Upon this decision, an on-site inspection was conducted by the TCA’s officials at Akcom's Ümraniye address on 26.05.2022. The officials, who arrived to the address of the undertaking at 12:00, reached the owner of the company via phone call since it was determined that there was no one present. The officials has made explanations regarding the on-site inspection, requested the owner of Akcom to come to the address and informed him with respect to the administrative fines which could otherwise be applied. The owner of the company stated that he could only come to the company after 3-4 hours due to the fact that he had various meetings within the scope of the service he provides to his customers. Afterwards, despite the phone calls and WhatsApp messages, the Akcom owner could not be reached until 16.00. As a result, on-site inspection could not be carried out and an official report was prepared accordingly.
In the light of this information, pursuant to the subparagraph (d) of the first paragraph of Article 16 of the Competition Law; it has been decided by the TCA that an administrative fine amounting to five in thousand of its gross revenues shall be imposed on Akcom, due to hindering of on-site inspection; however, since this amount is even below the lower limit of the penalty stipulated in the same provision, in accordance with the Communiqué on Lower Limit of Administrative Fine[3] , an administrative fine of 47.409 TL has been imposed.
However, the explanations of the owner of Akcom, both stated during the phone call on the day of on-site inspection and included in the letter submitted to the TCA’s records on 13.06.2022 and with record number 28811, are of significance. The owner stated that:
- Akcom, which is a company operating on a relatively small scale, has only one employee and it’s him; therefore he is not present in the company most of the time as he goes to customer services,
- There are no servers or products which would contain company data or account information for accessing such data belonging to AB Gıda or any another company within Akcom,
- AB Gıda's e-mails are kept in the Microsoft Office 365 cloud system, Akcom does not have access to these e-mail servers since they do not have administrator passwords and
- Akcom assists AB GIDA for camera systems, computer repair and other issues, if there is a problem in the e-mail infrastructure, he obtains the necessary authorized user passwords from someone else in order to solve the problems.
.
As the explanations stated in the reasoned decision; Akcom does not provide a server service to AB Gıda in the classical sense, that is, AB Gıda's data is not stored on a server within Akcom. Akcom only provides information systems consultancy/support services to AB Gıda. The e-mails which the TCA officials actually want to reach are stored in the Office 365 cloud system within Microsoft. In this context, Akcom does not host the data subject to on-site inspection within any server or does not have the necessary passwords to access the relevant data.
In this context, we consider that to impose an administrative fine due to hindering of on-site inspection (i) within the scope of an investigation regarding undertakings operating in the field of egg production, (ii) against an undertaking operating in the field of information services, which is not included in the investigation, (iii) despite the fact that it does not possess e-mails or data with respect to the investigation would be a broad interpretation of the limits of the powers granted by the Competition Law, leading to legal uncertainty.
Indeed, reasoned dissenting vote of the Chairman of the Board Birol Küle, included in the decision, also underlines significant points in this context:
- It should be considered natural that Akcom, which is a small-scale company that is not a party to the investigation, cannot understand and cooperate with an investigation that they are not a party to, only through telephone conversations; and
- Akcom only provides “hardware supply and consultancy services” to AB Gıda, and therefore it is the responsibility of AB Gıda, which is the direct party of the investigation, to provide all kinds of information and documents necessary for the investigation.
Based on the relevant decision of the Board, in the case that undertakings using cloud infrastructure, as in the case of AB Gıda, are subject to on-site inspection; it can be expected that it will be possible for undertakings to by-pass liability via directing the officials, who come for examination, to cloud service providers such as Microsoft or Google, by stating that they do not have servers in their organization. And even, it would be possible for an undertaking to risk to refuse to provide information to the TCA in case of an on-site inspection while facing negligible amounts of administrative fines; if it establishes an (seemingly) independent company which is a server provider with the sole purpose of storing the concerned undertaking’s own e-mails and digital data and, transfers all its data there.
It is obvious that these scenarios do not fit within the framework of legal logic. Therefore, considering that since Microsoft Office 365 system is a cloud infrastructure, it can be accessed from anywhere and by anyone if they have the required password; instead of conducting an on-site inspection at Akcom, requesting information and documents regarding access passwords in accordance with Article 14 of the Competition Law would provide both more reasonable and faster results.
In the light of the information we have given above; We agree with the Chairman of the Board, Birol Küle, in the opinion that the evaluation made by the Competition Board in the relevant decision is not appropriate.
[1] Law No. 7246 Amending the Law on the Protection of Competition, Official Gazette dated 24.06.20202 and numbered 31165.
[2] The TCA’s reasoned decision can be reached via this link:
https://www.rekabet.gov.tr/Karar?kararId=3cc40769-142d-4d9f-ad37-04ba12ce89dd
[3] Communiqué No. 2022/1 On The Increase Of The Lower Threshold For Administrative Fines Specified In Paragraph 1, Article 16 Of The Act No 4054 On The Protection Of Competition, To Be Valid Until 31/12/2022
