Cartels in Competition Law
Cartels in Competition Law: Definition, Elements, Types, Proof, Sanctions, and Their Place in Practice
1. Introduction
The healthy functioning of a free market economy depends on businesses being able to make independent decisions and on competition between them being maintained without distortion. Protecting competition not only ensures that consumers have access to products and services at lower prices; it also encourages innovation, lays the groundwork for efficient use of resources, and supports economic growth in the long run.
However, throughout history, the existence of clandestine agreements aimed at eliminating competition between rival undertakings has always been observed. While such collaborations may seem beneficial to the undertakings in the short term from an economic perspective, they lead to a loss of social welfare. This is why the prohibition of cartelsconstitutes one of the most fundamental pillars of modern competition law.
In Turkish competition law, the prohibition of cartels is explicitly regulated by Law No. 4054 on the Protection of Competition, which came into force in 1994. Article 4 of the law prohibits agreements, concerted actions, and decisions of undertakings that restrict competition; among these, cartels are highlighted as the most serious type of violation.
2. Definition and Legal Basis of Cartels
2.1. General Description
A cartel is a written, oral, or covert agreement between competing undertakings aimed at eliminating or significantly restricting free competition. Cartels are often conducted secretly and are considered the most serious violation of competition law due to their disruptive effects on the economic order.
2.2. Regulation in Turkish Law
Article 4 of Law No. 4054 prohibits all agreements that restrict competition. The text of the article "purpose or effect ." Accordingly, aimed at are already considered a violation; agreements that do not aim to restrict competition but actually produce an effect also fall within the scope of the cartel prohibition.
2.3. Connection with International Law
In European Union law Article 101 of the Treaty on the Functioning of the European Unionregulates the prohibition of cartels. Turkish law has taken EU competition law as a model, and there is a parallel in practice. In this way, Turkey also fulfills its harmonization obligations within the framework of the Customs Union with the EU.
3. Elements of the Cartel
3.1. Agreement or Concerted Action Between the Parties
A written agreement is not required for a cartel. Implicit agreements between competing undertakings, regular meetings, and coordinated price movements are sufficient.
3.2. The Existence of Competing Enterprises
Cartels only exist in horizontal relationships , that is, between undertakings operating at the same production or distribution level
3.3. Purpose or Effect of Restricting Competition
In terms of intent, cartels constitute "hard-core" infringement. This means they are considered infringing without the need for further impact analysis.
3.4. Impact on the Market
The doctrine of effect has been adopted in Turkish competition law . According to this doctrine, even if a cartel agreement is made abroad, if it has an effect in the Turkish market, Law No. 4054 applies.
4. Types of Cartels
Cartels can eliminate competition through various methods. The main types are:
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Price Fixing Cartel
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Determining sales prices, discount rates, or profit margins together.
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The consumer directly pays a higher price.
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Customer or Territory Sharing Cartel
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The division of markets among enterprises.
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For example: "You sell to the Aegean region, and I'll sell to the Marmara region."
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Restriction of Production or Supply
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By restricting the supply of the product, the goal is to raise prices.
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Bid-Rigging
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Collusive bidding, alternating wins, agreed-upon withdrawals.
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It is common in public tenders.
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Labor Market Cartels
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Businesses jointly determining employee wages or benefits.
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No-poaching agreements.
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Cartel through Information Exchange
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Sharing trade secrets such as future pricing and production quantities.
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Even seemingly innocent information exchanges can facilitate cartels.
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Hub and Spoke Cartels
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Competitors coordinating indirectly through a supplier or distributor between them.
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5. Proof of the Cartel
Cartels are often difficult to prove because they operate secretly. The Competition Authority can uncover cartels using both direct and indirect evidence
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Direct Evidence: Correspondence, emails, meeting minutes, audio recordings.
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Indirect evidence: Similar price movements, abnormal bid similarities, parallel behavioral patterns.
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Economic Analysis: Market structure, price trends, supply and demand balance.
6. Sanctions Applied to Cartels
6.1. Administrative Fines
According to Article 16 of Law No. 4054, undertakings that violate cartel regulations are fined a certain percentage of their annual gross income. This rate generally ranges from 2% to 4%, but can reach up to 10% in cases of serious violations.
6.2. Managers' Responsibility
Company executives and employees can also be held directly responsible.
6.3. Sanction for Invalidity
Cartel agreements are absolutely null and void under the Turkish Code of Obligations.
6.4. Right to Compensation
Those harmed by the cartel can claim compensation up to three times the amount of the damages they suffered.
7. Special Mechanisms in Combating Cartels
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The Repentance Program: Impunity or reduced sentences for the first undertaking to expose the cartel.
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Settlement Mechanism: Reduced penalties for businesses that admit to the violation.
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On-site Inspection Authority: The institution has the power to collect documents through surprise raids.
8. Turkish Judicial and Board Practice
The Competition Board's decisions are particularly important in the implementation of laws concerning tender cartels, collusive bidding in public procurement, and price fixing in the energy and food sectors. The Supreme Court also implicit agreement sufficient to prove a cartel, and does not require a written agreement.
9. Evaluation and Conclusion
Cartels are the most severe violations of competition law that undermine the functioning of a free market economy. They directly reduce consumer welfare, raise prices, lower quality, and hinder innovation. In Turkish competition law, cartels are strictly prohibited by Law No. 4054, and severe penalties are stipulated.
Today, competition authorities are also playing an active role in combating new types of cartels, particularly those emerging in the digital economy. Collusion in labor markets, algorithmic pricing, and platform cartels are considered among the new types of violations.
In conclusion, cartel prohibition is indispensable from both a legal and economic perspective. The effective supervision of the Competition Authority, as well as leniency and settlement mechanisms, emerge as important tools in the fight against cartels.
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