Turkey: Merger Control Comparative Guide

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1 Legal and enforcement framework

1.1 Which legislative and regulatory provisions govern merger control in your jurisdiction?

The relevant legislation on merger control is the Law on Protection of Competition 4054 dated 13 December 1994 and the communiqués published by the Turkish Competition Authority. In particular, Article 7 of Law 4054 governs mergers and acquisitions.

Article 7 of Law 4054 authorises the Competition Board to regulate, through communiqués, which mergers and acquisitions should be notified in order to be valid. Further to this provision, as of 1 January 2011, Communiqué 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board replaced Communiqué 1997/1 on Mergers and Acquisitions Requiring the Approval of the Competition Board as the primary instrument for assessing merger cases in Turkey. Communiqué 2010/4 sets forth the types of mergers and acquisitions that are subject to the Competition Board's review and approval, introducing some significant changes to the Turkish merger control regime.

1.2 Do any special regimes apply in specific sectors (eg, national security, essential public services)?

Along with the general items to be taken into account in calculating the total turnover of the parties to the transaction, Article 9 of Communiqué 2010/4 sets forth specific methods of turnover calculation for financial institutions. Such special methods of calculation apply to banks, financial leasing companies, factoring companies, insurance companies and similar.

The Banking Law 5411 provides that Articles 7, 10 and 11 of Law 4054 shall not apply if the sectoral share of the total assets of the banks involved in the merger or acquisition does not exceed 20%.

The notification process differs for privatisation tenders. With regard to privatisation tenders, Communiqué 1998/4 of the Competition Board was replaced with a new Communiqué on the Procedures and Principles to be Pursued in Pre-notifications and Authorisation Applications to be filed with the Turkish Competition Authority in order for Acquisitions via Privatisation to Become Legally Valid. According to Communiqué 2013/2, it is mandatory to file a pre-notification before the public announcement of tender and seek the opinion of the Competition Board if the turnover of the undertaking or the value of the asset or service production unit to be privatised exceeds TL 30 million. The communiqué states that in order for acquisitions to become legally valid through privatisation, which requires pre-notification of the Turkish Competition Authority, the approval of the Competition Board is also mandatory. The application should be filed by all winning bidders after the tender, but before the Privatisation Administration's decision on the final acquisition.

1.3 Which body is responsible for enforcing the merger control regime? What powers does it have?

The national body responsible for enforcing Law 4054 in Turkey is the Turkish Competition Authority, a legal entity with administrative and financial autonomy. The Competition Authority consists of the Competition Board, the presidency and main service units. As the competent body of the Competition Authority, the Competition Board is responsible for, among other things, reviewing and resolving on M&A notifications. The Competition Board consists of seven members and is seated in Ankara.

The main service units consist of:

  • five supervision and enforcement departments:
    • a decisions department;
    • an economic analyses and research department;
    • an information management department;
    • an external relations, training and competition advocacy department; and
    • a strategy development, regulation and budget department; and
  • an on-the-spot inspection support division.

Each supervision and enforcement department has its own ‘sectoral' job description.

The Competition Authority can send written information requests to the parties involved in the merger or acquisition, any other party relating to the transaction and third parties such as competitors, customers and suppliers, and can thus conduct an extensive market investigation within the specified legal timeframe (with possible extensions). Article 15 of Law 4054 authorises the Competition Board to conduct on-site investigations in order to carry out the duties assigned to it by Law 4054.

2 Definitions and scope of application

2.1 What types of transactions are subject to the merger control regime?

It is a typical dominance test. Under Article 7 of Law 4054 and Article 13 of Communiqué 2010/4, mergers and acquisitions that do not create or strengthen a dominant position and do not significantly impede effective competition in a relevant product market within the whole or part of Turkey shall be cleared by the Competition Board. Accordingly, Article 5 of Communiqué 2010/4 defines the scope of notifiable transactions as follows:

  • the merger of two or more undertakings; and
  • the acquisition of, or the acquisition of direct or indirect control over, all or part of one or more undertakings by one or more undertakings or persons that currently control at least one undertaking, through the purchase of assets or all or part of its shares, through an agreement or through another instrument.

Pursuant to Article 6 of Communiqué 2010/4, the following transactions do not fall within the scope of Article 7 of Law 4054 and therefore are not subject to the approval of the Competition Board:

  • intra-group transactions and other transactions that do not lead to a change in control;
  • temporary possession of securities for resale purposes by undertakings whose normal activities are to conduct transactions in such securities for their own account or for the account of others, provided that the voting rights attached to such securities are not exercised in a way that affects the competition policies of the undertaking issuing the securities;
  • acquisitions by public institutions or organisations further to the order of law, for reasons such as liquidation, winding up, insolvency, cessation of payments, concordat or privatisation; and
  • acquisition by inheritance, as provided for in Article 5 of Communiqué 2010/4.

In addition, Article 2 of Communiqué 2017/2 has modified Article 8(5) of Communiqué 2010/4. Together with this amendment, the Competition Board can now consider transactions realised by the same undertaking concerned in the same relevant product market within a three-year period as a single transaction; this is likewise the case for two transactions carried out between the same persons or parties within a three-year period. Lastly, Article 3 of Communique 2017/2 introduced a new paragraph to Article 10 of Communique 2010/4, which provides an exemption for transactions in which control is acquired from different sellers through serial transactions on the stock exchange. Such transactions may be notified to the Competition Board after their execution, provided that:

  • the transaction is notified to the Competition Board without delay; and
  • the voting rights connected to the acquired securities are not exercised, in the absence of an exception granted by Competition Board decision, in order to preserve the full value of the investments.

This new provision is similar to Article 7(2) of the EU Merger Regulation. Although there was previously no similar specific statutory rule to this effect in Turkey, the case law of the Competition Board shed light on the matter.

2.2 How is ‘control' defined in the applicable laws and regulations?

Communiqué 2010/4 and the Guideline on the Concept of Control provide a definition of ‘control' which is similar to the definition of this term in Article 3 of the EU Merger Regulation (139/2004). Article 5(2) of Communiqué 2010/4 stipulates the following:

Control can be constituted by rights, agreements or any other means which, either separately or jointly, de facto or de jure, confer the possibility of exercising decisive influence on an undertaking. These rights or agreements are instruments which confer decisive influence; in particular, by ownership or right to use all or part of the assets of an undertaking, or by rights or agreements which confer decisive influence on the composition or decisions of the organs of an undertaking.

Pursuant to the presumption regulated under Article 5(2) of Communiqué 2010/4, control shall be deemed acquired by persons or undertakings that are the holders of the rights or entitled to the rights under the agreements concerned; or, while not being the holders of the rights or entitled to the rights under such agreements, that have de facto power to exercise those rights.

In short, much like the EU regime, under Law 4054, mergers and acquisitions resulting in a change of control are subject to the approval of the Competition Board. ‘Control' is understood to be the right to exercise decisive influence over day-to-day management or long-term strategic business decisions, and can be exercised de jure or de facto. Thus, minority and other interests that do not lead to a change of control do not trigger the filing requirement. However, if minority interests acquired are granted certain veto rights that may influence management of the company (eg, privileged shares conferring management powers), then the nature of control may be deemed as changed (eg, a change from sole to joint control) and the transaction may be subject to filing.

2.3 Is the acquisition of minority interests covered by the merger control regime, and if so, in what circumstances?

The acquisition of a minority shareholding may be covered by the merger control regime if and to the extent that it leads to a change in the control structure of the target entity. In other words, if minority interests acquired are granted certain veto rights that may influence the management of the company (eg, privileged shares conferring management powers), then the nature of control may be deemed as changed (from sole to joint control) and the transaction may be subject to filing. As specified under the Guideline on the Concept of Control, such veto rights must relate to strategic decisions on business policy and must go beyond ordinary ‘minority rights' - that is, the veto rights normally accorded to minority shareholders to protect their financial interests.

2.4 Are joint ventures covered by the merger control regime, and if so, in what circumstances?

According to Article 5(3) of Communiqué 2010/4, joint ventures are also subject to notification to, and approval of, the Competition Board. Article 5(3) stipulates that joint ventures that permanently meet all functions of an independent economic entity are deemed notifiable if the merger control thresholds are met. Article 13/III of Communiqué 2010/4 provides that the Competition Board will carry out an individual exemption review of notified joint ventures that emerge as an independent economic unit on a lasting basis, but that have as their object or effect the restriction of competition between the parties or between the parties and the joint venture itself. The wording of the standard notification form also allows for such a review.

The Competition Board evaluates joint venture notifications according to two criteria:

  • the existence of joint control in the joint venture; and
  • the joint venture being an independent economic entity (ie, having adequate capital and labour, and an indefinite duration).

In recent years the Competition Board has consistently applied the ‘full-functioning' test in determining whether a joint venture is an independent economic entity. If the transaction is found to bring about a full-function joint venture in view of the two criteria mentioned above, the standard dominance test is applied. Additionally, under the merger control regime, a specific section in the notification form aims to collect information to assess whether the joint venture will lead to coordination. Article 13/III of Communiqué 2010/4 provides that the Competition Board will carry out an individual exemption review of notified joint ventures that emerge as an independent economic unit on a lasting basis, but that have as their object or effect the restriction of competition between the parties or between the parties and the joint venture itself. The wording of the standard notification form also allows for such a review.

2.5 Are foreign-to-foreign transactions covered by the merger control regime, and if so, in what circumstances?

Foreign-to-foreign mergers are caught under Law 4054 to the extent that they affect the relevant markets within the territory of Turkey. Mere sales into Turkey may trigger the notification requirement to the extent that the thresholds are met. Article 2 of Law 4054 sets out the ‘effects' criterion: that is, whether the undertakings concerned affect goods and services markets in Turkey. Even if the undertakings concerned have no local subsidiaries, branches, sales outlets or similar in Turkey, the transaction may still be subject to the Turkish competition legislation if the goods or services of such undertakings are sold in Turkey and thus have effects on the relevant Turkish market.

Additionally, the foreign-to-foreign nature of the transaction does not prevent the imposition of an administrative monetary fine (for violation of either the suspension requirement or Article 7), in and of itself. In case of failure to notify (ie, closing before clearance), foreign-to-foreign mergers are caught under Law 4054 to the extent that they affect the relevant markets within the territory of Turkey.

As an example, in Simsmetal/Fairless (09-42/1057-269, 16 September 2009), in which both parties were exporters into Turkey, the Competition Board imposed an administrative monetary fine on acquirer Simsmetal East LLC under the first paragraph of Article 16 of the Competition Law, totalling 0.1% of its gross revenue generated in fiscal year 2009, because the transaction closed before the Competition Board's approval had been obtained. Similarly, Longsheng (11-33/723-226, 2 June 2011), Flir Systems Holding/Raymarine PLC (10-44/762-246, 17 June 2010) and CVRD Canada Inc (10-49/949-332, 8 July 2010) are instances in which the Competition Board imposed a turnover-based monetary fine based on violation of the suspension requirement in a foreign-to-foreign transaction.

2.6 What are the jurisdictional thresholds that trigger the obligation to notify? How are these thresholds calculated?

Communiqué 2012/3 on the Amendment of Communique/4 on the Mergers and Acquisitions Subject to the Approval of the Competition Board amended the turnover thresholds that a given merger or acquisition must exceed in order to be subject to notification for the purposes of the Turkish merger control regime. Following the enactment of the amendments, the thresholds under Article 7 are as follows:

  • The aggregate Turkish turnover of the transacting parties exceeds TL 100 million and the Turkish turnover of at least two of the transacting parties each exceeds TL 30 million; or
  • Either:
    • in acquisitions, the value of the transferred Turkish assets or businesses exceeds TL 30 million (Article 7(b)(i)); or
    • in mergers, the Turkish turnover of any of the merging parties exceeds TL 30 million and the worldwide turnover of at least one other party to the transaction exceeds TL 500 million (Article 7(b)(ii)).

As seen above, the tests set out under Article 7(b) include two separate tests. Article 7(b)(i) applies only to acquisitions (and joint ventures), while Article 7(b)(ii) applies only to mergers.

Where the transaction does not meet the thresholds set out above, the transaction will not be deemed notifiable.

In addition, the Competition Authority recently introduced Communiqué 2017/2 Amending Communiqué 2010/4 on Mergers and Acquisitions Requiring the Approval of the Board. One of the amendments introduced is the removal of Article 7(2) of Communiqué 2010/4, which stated that "The thresholds…are re-determined by the Board biannually". Thus, the Competition Board is no longer required to review the turnover thresholds for concentrations every two years.

2.7 Are any types of transactions exempt from the merger control regime?

No. Additionally, there is no de minimis exception or other exceptions under the Turkish merger control regime.

3 Notification

3.1 Is notification voluntary or mandatory? If mandatory, are there any exceptions where notification is not required?

If the jurisdictional turnover thresholds set out in Communiqué 2010/4, are exceeded, then notification is mandatory, except for certain types of mergers in the banking sector. In this regard, the Banking Law 5411 provides that Articles 7, 10 and 11 of Law 4054 shall not apply where the sectoral share of the total assets of the banks involved in the merger or acquisition does not exceed 20%.

The competition legislation includes no special regulations applicable to foreign investments.

3.2 Is there an opportunity or requirement to discuss a planned transaction with the authority, informally and in confidence, in advance of formal notification?

Transactions are notified to the Competition Authority formally, by filling out the notification form provided as an annex to Communique 2010/4. There is no protocol against informing the Competition Authority prior to formal submission of the notification form, but the Competition Authority will only take into consideration the formal submissions and meetings thereafter.

3.3 Who is responsible for filing the notification?

In principle, under the merger control regime, a filing can be made by either party to the transaction or jointly. In case of filing by either party, the filing party should notify the other party of the filing.

However, the acquirer(s) in case of an acquisition and both merging parties in case of a merger share responsibility for ensuring that notification has been duly filed. Pursuant to Article 16 of Law 4054, if the parties to a notifiable transaction violate the suspension requirement, a turnover-based monetary fine (based on the local turnover generated in the financial year preceding the date of the fining decision, at a rate of 0.1%) will be imposed on the incumbent firms (ie, the acquirer(s) in the case of an acquisition and both merging parties in the case of a merger).

3.4 Are there any filing fees, and if so, what are they?

No filing fee or other charges apply in Turkish merger control proceedings.

3.5 What information must be provided in the notification? What supporting documents must be provided?

Communiqué 2010/4 introduced a much more complex notification form, which is similar to Form CO of the European Commission. One hard copy and one electronic copy of the merger notification form must be submitted to the Competition Board. The notification form itself is revised from Communiqué 1997/1; in parallel with the new concept that only transactions with a relevant nexus to Turkey need be notified, there has been an increase in the information requested, including data with respect to supply and demand structures, imports, potential competition and expected efficiencies.

In terms of formalities and supporting documents, the parties are required to submit the signed or latest version of the transaction document, along with a sworn Turkish translation. Moreover, signed, notarised and apostilled powers of attorney are required in order to represent notifying parties before the Competition Authority. The signed, notarised and apostilled power of attorney requires local legalisation by a notary public in Turkey (relating to notarisation of the sworn Turkish translation of the executed, notarised and apostilled power of attorney).

The parties to the transaction must also submit officially approved documents (ie, approved balance sheets) showing their latest accounts. In addition, where applicable, for Turkish subsidiaries and/or affiliated entities of the parties, the latest certified balance sheets and/or profit and loss statements (as approved by the relevant tax office in Turkey) should be submitted along with the merger control filing.

Finally, the parties are also required to submit their organisational (corporate structure) charts or a list of subsidiaries, showing each person or economic entity that is directly or indirectly controlled by the parties. No formal requirements apply in this regard.

For the sake of completeness, it is not required to submit the certification of incorporation and articles of association as annexes to the merger control filing.

All supporting documents should be submitted together with the notification form; otherwise, the notification form will be incomplete and the notification will be deemed filed only once such information has been completed upon the Competition Board's subsequent request. Further, any written request by the Competition Board for missing information or documents resets the clock and the review period begins again from day one once the responses and documents have been received.

3.6 Is there a deadline for filing the notification?

There is no specific deadline for filing the notification. However, under the Turkish merger control regime, closing a notifiable transaction before Competition Board approval has been obtained constitutes a violation of the suspension requirement (ie, a standstill obligation), as regulated under Article 11 of Law 4054. Therefore, the parties must obtain the Competition Board's approval before closing the transaction. According to Article 16 of the Competition Law, failure to do so can trigger monetary fines and legal status risks.

3.7 Can a transaction be notified prior to signing a definitive agreement?

It is possible to notify a transaction based on a draft version of the transaction agreement instead of a signed agreement. It is also possible to submit the notification form under the memorandum of understanding, letter of intent, term sheet or similar.

3.8 Are the parties required to delay closing of the transaction until clearance is granted?

Due to the standstill obligation, the parties must obtain the Competition Board's approval before closing the transaction. According to Article 16 of the Competition Law, failure to do so can trigger monetary fines and legal status risks.

3.9 Will the notification be publicly announced by the authority? If so, how will commercially sensitive information be protected?

Communiqué 2010/4 introduced a mechanism through which the Competition Authority publishes notified transactions on its official website (www.rekabet.gov.tr), stating only the names of the undertakings concerned and their areas of commercial activity. Therefore, once a transaction has been notified to the Competition Authority, its existence is no longer confidential. However, confidential information that the parties provide as part of the filing process is protected.

The main legislation that regulates the protection of commercial information is Communiqué 2010/3 on Regulation of Right to Access to File and Protection of Commercial Secrets. Under Communiqué 2010/3, the undertakings are required to identify information or documents deemed as commercial secrets and justify the reasons for the same. To this end, undertakings must request confidentiality from the Competition Board in writing and justify the reasons for the confidential nature of the information or documents that are requested to be treated as commercial secrets. While the Competition Board can also evaluate information or documents ex officio, the general rule is that information or documents that are not requested to be treated as confidential are accepted as not confidential. The reasoned decisions of the Competition Board are published on the website of the Competition Authority once confidential business information has been redacted.

Moreover, under Article 25 of Law 4054, the Competition Board and Competition Authority personnel are bound by a legal obligation not to disclose any trade secrets or confidential information to which they are privy during their service.

4 Review process

4.1 What is the review process and what is the timetable for that process?

A notification is deemed filed once it has been received in complete form by the Competition Authority. If the information requested in the notification form is incorrect or incomplete, the notification is deemed filed on the date on which such information is completed or corrected.

The Competition Board, upon its preliminary review (ie, Phase I), will decide either to approve the transaction or to investigate it further (ie, Phase II).

The Competition Board will notify the parties of the outcome within 30 days of submission of a complete filing. There is an implied approval mechanism whereby tacit approval is assumed if the Competition Board has not responded within 30 calendar days of submission of a complete filing. In practice, the Competition Board almost always responds within this period by either sending a written request for information or – very rarely – by issuing a final decision.

The Competition Authority can send written information requests to the parties, any other party relating to the transaction and third parties such as competitors, customers and suppliers.

Any written request by the Competition Authority for missing information will cut the review period, which will then restart from day one as of the date on which the responses are received.

If a notification leads to an investigation (Phase II), a full investigation will be launched. This takes about six months, which may be extended for an additional six months if necessary.

4.2 Are there any formal or informal ways of accelerating the timetable for review? Can the authority suspend the timetable for review?

Aside from close follow-up with the case handlers reviewing the transaction, the parties have no available means of speeding up the review process. The Competition Authority may extend the timeline by sending requests for information; however, there is no provision within Law 4054 for the Competition Authority to suspend the review period.

4.3 Is there a simplified review process? If so, in what circumstances will it apply?

Neither Law 4054 nor Communiqué 2010/4 foresees a ‘fast-track' or simplified review procedure to speed up the clearance process.

4.4 To what extent will the authority cooperate with its counterparts in other jurisdictions during the review process?

The Competition Authority is empowered to contact certain regulatory authorities around the world, including the European Commission, to exchange information. In this respect, Article 43 of Decision 1/95 of the EC-Turkey Association Council authorises the Competition Authority to notify and request the European Commission (Directorate-General of Competition) to apply relevant measures if the Competition Board believes that transactions realised in the EU territory will adversely affect competition in Turkey. This provision grants reciprocal rights and obligations to the parties, and the European Commission thus has the Competition Authority to request the Competition Board to apply relevant measures to restore competition in relevant markets.

Moreover, the research department of the Competition Authority periodically consults with relevant domestic and foreign institutions and organisations. The European Commission has been reluctant to share any evidence or arguments with the Competition Authority in a few cases where the Competition Authority explicitly requested them.

The Competition Authority also cooperates internationally with several antitrust authorities in other jurisdictions and develops training programmes for cooperation purposes. In recent years, programmes have been organised for:

  • board members of the Pakistani Competition Authority;
  • top managers of the National Agency of the Kyrgyz Republic for Anti-monopoly Policy and Development of Competition;
  • members of the Mongolian Agency for Fair Competition and Consumer Protection; and
  • board members of the Competition Authority of the Turkish Republic of Northern Cyprus.

Similar programmes have also been developed in cooperation with:

  • the Azerbaijan State Service for Anti-monopoly Policy and Consumer Rights Protection;
  • the State Committee of the Republic of Uzbekistan on De-monopolisation; and
  • the Ukrainian Anti-Monopoly Committee.

These programmes were developed under bilateral cooperation agreements.

4.5 What information-gathering powers does the authority have during the review process?

The Competition Authority may send written information requests to the parties and any other party relating to the transaction, or may conduct comprehensive market research by requesting information from third parties such as competitors, customers and suppliers within the specified legal timeframe, with possible extensions. The provision of false or misleading information could result in monetary fines pursuant to Article 16 of Law 4054.

Law 4054 provides extensive powers to the Competition Authority in relation to dawn raids. Judicial authorisation will be obtained by the Competition Board only if the target undertaking refuses to allow the dawn raid, which will also result in a fine. While the Competition Law states that employees may be compelled to provide oral testimony, case handlers do allow a delay in responding as long as there is quick written follow-up correspondence. Therefore, in practice, employees can avoid responding on issues that are uncertain to them, provided that a written response is submitted within a mutually agreed timeframe. Computer records are fully examined by the Competition Authority, including deleted items.

Officials conducting on-site investigations must possess a deed of authorisation from the Competition Board. The deed of authorisation must specify the subject matter and purpose of the investigation. Officials are not entitled to exercise their investigative powers (eg, copying records or recording statements by company staff) in relation to matters that do not fall within the scope of the investigation, as set out in the deed of authorisation.

Only Competition Authority staff may participate in on-site inspections. They have no duty to wait for a lawyer to arrive. That said, they may sometimes agree to wait for a short while for a lawyer to arrive, but may impose certain conditions in this regard (eg, that files be sealed or email communications disrupted).

4.6 Is there an opportunity for third parties to participate in the review process?

Pursuant to Article 15 of Communiqué 2010/4, the Competition Board may request information from third parties, including customers, competitors and suppliers of the parties, and other persons related to the merger or acquisition. According to Article 11(2) of Communiqué 2010/4, if the Competition Authority is required by law to request another public authority's opinion, this will cut the review period, which will restart anew from day one once the opinion has been received. Third parties, including customers and competitors of the parties, and other persons related to the merger or acquisition may participate in a hearing held by the Competition Board during the investigation, provided that they prove their legitimate interest.

Although this is not common practice, the Competition Authority may even invite the views of third parties on a transaction that clearly raises no competition issues. There is no specific provision requiring that market testing be carried out in the merger control filing process.

4.7 In cross-border transactions, is a local carve-out possible to avoid delaying closing while the review is ongoing?

There is no normative regulation allowing or disallowing carve-out arrangements. However, carve-out arrangements have previously been rejected by the Competition Board (eg, Total SA, 06-92/1186-355, 20 December 2006; and CVR Inc Inco Limited, 07-11/71-23, 7 February 2007), which has argued that closing is in itself sufficient for the imposition of a suspension violation fine, and that further analysis of whether a change in control actually took effect in Turkey is unwarranted. The wording of the Competition Board's reasoned decisions does not analyse the merits of carve-out arrangements, but rather takes the position that the notion of a carve-out is unconvincing. Therefore, measures such as carve-outs and hold separate agreements will not circumvent the filing requirement and cannot be recommended as safe early closing mechanisms recognised by the Competition Board. Finally, the Turkish merger control rules do not provide for the possibility of derogation from the suspension obligation.

However, none of the cases cited in this regard points to the establishment of de facto precedent concerning a Competition Board -accepted derogation from the suspension obligation, due to the exceptional characteristics of the cited cases.

4.8 What substantive test will the authority apply in reviewing the transaction? Does this test vary depending on sector?

The substantive test is a typical dominance test. Under Article 7 of Law 4054 and Article 13 of Communiqué 2010/4, mergers and acquisitions which do not create or strengthen a dominant position and do not significantly impede effective competition in a relevant product market within the whole or part of Turkey will be cleared by the Competition Board.

Article 3 of the Competition Law defines a ‘dominant position' as "any position enjoyed in a certain market by one or more undertakings by virtue of which, those undertakings have the power to act independently from their competitors and purchasers in determining economic parameters such as the amount of production, distribution, price and supply". However, the substantive test is a two-prong test and a merger or acquisition can be blocked only when the concentration not only creates or strengthens a dominant position, but also significantly impedes competition in the whole territory of Turkey or in a substantial part thereof.

The test does not vary by sector.

4.9 Does a different substantive test apply to joint ventures?

In addition to the dominance test explained in question 4.8, the Competition Authority also examines whether a joint venture would result in coordination within a given market. Article 13/III of Communiqué 2010/4 provides that the Competition Board will carry out an individual exemption review of notified joint ventures that emerge as an independent economic unit on a lasting basis, but that have as their object or effect the restriction of competition between the parties or between the parties and the joint venture itself. The wording of the standard notification form also allows for such a review.

4.10 What theories of harm will the authority consider when reviewing the transaction? Will the authority consider any non-competition related issues (eg, labour or social issues)?

Unilateral effects are the predominant criterion in the Competition Authority's assessment of mergers and acquisitions in Turkey. That said, in a couple of exceptional recent cases the Competition Board discussed the coordinated effects under a ‘joint dominance test' and rejected the transactions on those grounds (eg, Ladik, 05-86/1188-340, 20 December 2005). These cases related to the sale of certain cement factories by the Savings Deposit Insurance Fund. The Competition Board evaluated the coordinated effects of the mergers under a joint dominance test and blocked the transactions on the grounds that the transactions would lead to joint dominance in the relevant market. The Competition Board took note of factors such as:

  • structural links between the undertakings in the market;
  • past coordinative behaviour;
  • entry barriers;
  • transparency of the market; and
  • the structure of demand.

It concluded that certain factory sales would result in the establishment of joint dominance by certain players in the market, thus significantly lessening competition. Regarding one such decision, which was appealed before the Council of State, the Council of State mentioned in its ruling, among other things, that Law 4054 prohibits only single dominance and therefore stayed execution of the decision by the Competition Board, which was based on collective dominance.

No transaction has yet been blocked on the grounds of vertical foreclosure or conglomerate effects. However, a few decisions discuss those theories of harm. For example, one recent decision in this respect was the Competition Board's Luxottica/Essilor decision (18-36/585-286, 1 October 2018). The Competition Board examined the conglomerate effects that the transaction might have with respect to the lens and optical frames markets and possible bundling applications.

Although no transaction has yet been blocked on the grounds of vertical foreclosure or conglomerate effects, in Toyota/Vive (17-12/143-63, 6 April 2017), the Competition Board outlined the main factors that should be considered in evaluating conglomerate concentrations. The decision is significant as the first time the Competition Board has focused on conglomerate effects, even though conglomerate effects were an important issue in the European Union in 2017 (eg, Qualcomm/NXP and Bayer/Monsanto). The transaction concerned Toyota's acquisition of sole control over Vive BV. While the parties to the transaction submitted that no market would be affected, since their activities did not horizontally or vertically overlap in Turkey, the Competition Board decided that the transaction would lead to a conglomerate concentration, given that the parties' activities were complementary and substitutive. Accordingly, the Competition Board asserted that competitors could be foreclosed from the market through unilateral conduct in the form of tying, bundling and other exclusionary behaviour; and that in addition to the parties' market shares, their incentive and ability to foreclose the market should be considered in assessing the existence of conglomerate effects. The Competition Board ultimately decided that the market shares of the parties and the structures of the two relevant product markets would not give the parties the necessary market power and ability to foreclose the market, and unconditionally approved the transaction.

As the scope of Law 4054 is limited to the assessment of competition in a given market, the Competition Board's assessment is limited to this and does not take account of labour or social issues.

5 Remedies

5.1 Can the parties negotiate remedies to address any competition concerns identified? If so, what types of remedies may be accepted?

The parties have the discretion to submit remedies, under the Guidelines on the Remedies that Would Be Permitted by the Turkish Competition Authority in the Mergers and Acquisitions. The parties can submit either behavioural or structural remedies. According to the Guidelines on Remedies, structural remedies take precedence over behavioural remedies, as they produce preferable and concrete results; however, in some cases the Competition Board has nonetheless accepted behavioural remedies.

The Competition Board will not impose remedies itself or revise the proposed remedies ex parte. If the Competition Board considers the submitted remedies insufficient, it may allow the parties to make further changes to them. If the remedies are still insufficient to resolve the competition concerns, the Competition Board will not grant clearance.

5.2 What are the procedural steps for negotiating and submitting remedies? Can remedies be proposed at any time throughout the review process?

The form and content of divestiture remedies vary significantly in practice. The Guidelines on Remedies set out all applicable procedural steps and conditions. The parties must submit detailed information as to how the remedies will be applied and how they will resolve the competition concerns.

The parties can submit to the Competition Board proposals for possible remedies during either the preliminary review (Phase I) or the investigation period (Phase II).

While the parties can submit remedies during Phase I, the notification is deemed filed only on the date of submission of the commitments. In any case, a signed version of the remedies containing detailed information on their context and a separate summary should be submitted to the Competition Authority. The Guidelines on Remedies also provide a form that lists the necessary information and documents to be submitted in relation to the remedies.

5.3 To what extent have remedies been imposed in foreign-to-foreign transactions?

In several cases the Competition Board has accepted remedies or commitments (eg, divestments) proposed to, or imposed by, the European Commission, as long as these would ease competition law concerns in Turkey (Agilent-Varian, 10-18/212-82, 18 February 2010; Maersk Line-HSDG, 17-15/210-89, 4 May 2017; Valeo/FTE Group, 17-35/560-244, 26 October 2017; Monsanto/Bayer, 18-14/261-126, 8 May 2018). Furthermore, the Competition Board accepted structural and behavioural remedies in granting conditional clearance to the merger of Luxottica and Essilor in 2018 (18-36/585-286, 1 October 2018).

6 Appeal

6.1 Can the parties appeal the authority's decision? If so, which decisions of the authority can be appealed (eg, all decisions or just the final decision) and what sort of appeal will the reviewing court or tribunal conduct (eg, will it be limited to errors of law or will it conduct a full review of all facts and evidence)?

Under Law 6352, administrative sanction decisions of the Competition Board can be submitted to the administrative courts in Ankara for judicial review by filing an appeal within 60 calendar days of receipt of the Competition Board's reasoned decision.

Under Article 27 of the Administrative Procedural Law, filing an administrative action for judicial review does not automatically stay execution of the decision. However, upon request by the plaintiff, the court may stay execution of the decision if this is likely to cause serious and irreparable damage and if the decision is highly likely to be against the law (ie, the showing of a prima facie case).

The judicial review period before the administrative court usually takes about eight to 12 months. After exhausting the litigation process before the administrative courts of Ankara, the final step in judicial review is to appeal the administrative court's decision before the regional courts within 30 calendar days of official service of the reasoned decision of the administrative court.

Since 20 July 2016, administrative litigation cases have been subject to judicial review before the newly established regional courts (appellate courts), which has created a three-level appellate court system consisting of administrative courts, regional courts (appellate courts) and the High State Court.

The regional courts will examine the case file on both procedural and substantive grounds, investigate the case file and make their decision considering the merits of the case. Their decisions are considered final. However, in exceptional circumstances laid down in Article 46 of the Administrative Procedure Law, a decision of the regional court may be subject to review by the High State Court and therefore will not be considered final. In such case the High State Court may decide to uphold or reverse the regional court's decision. If the decision is reversed, it will be remanded to the regional court, which in turn will issue a new decision to take account of the High State Court's decision.

Decisions of courts in private suits may be appealed to the Supreme Court of Appeals. The appeal process in private suits is governed by the general procedural laws and usually lasts 24 to 30 months.

6.2 Can third parties appeal the authority's decision, and if so, in what circumstances?

Third parties can challenge Competition Board decisions before the competent administrative courts if they can prove a legitimate interest.

7 Penalties and sanctions

7.1 If notification is mandatory, what sanctions may be imposed for failure to notify? In practice, does the relevant authority frequently impose sanctions for failure to notify?

As explained in question 3.3, pursuant to Article 16 of Law 4054, if the parties to a notifiable transaction violate the suspension requirement, a turnover-based monetary fine based on the local turnover generated in the financial year preceding the date of the fining decision at a rate of 0.1% will be imposed on the incumbent firms (ie, the acquirer(s) in the case of an acquisition and both merging parties in the case of a merger).

A monetary fine imposed due to violation of the suspension requirement shall in no event be less than TL 26,027 (approximately €4,250) in 2019. The wording of Article 16 of Law 4054 does not give the Competition Board discretion as to whether to impose a monetary fine in case of violation of the suspension requirement. In other words, once a violation is detected, the monetary fine will be imposed automatically.

If, at the end of its review of a notifiable transaction that was not notified, the Competition Board decides that the transaction falls within the prohibition of Article 7 under the dominance test applicable in Turkey, the undertakings may be subject to fines of up to 10% of their turnover generated in the financial year preceding the date of the fining decision. Employees and managers of the undertakings concerned who had a determining impact on the violation may also be fined up to 5% of the fine imposed on the undertakings, as a result of implementing a problematic transaction without the Competition Board's approval.

In case of failure to notify, in addition to monetary sanctions, the Competition Board is authorised under Article 11(b) of Law 4054 to take all necessary measures to:

  • terminate the transaction;
  • remove all de facto legal consequences of every action that has been taken unlawfully;
  • return all shares and assets (if possible) to the places or persons that owned these shares or assets before the transaction or, if this is not possible, assign them to third parties, and forbid participation in control of these undertakings until such assignment takes place; and
  • take all other necessary measures it deems necessary.

Additionally, under Article 7 of Law 4054, a notifiable merger or acquisition which is not notified to and approved by the Competition Board is deemed legally invalid, with all the attendant legal consequences. Therefore, in such a situation the parties may be unable to enforce their rights under the agreement before the Turkish courts until the Competition Board has cleared the transaction. The Competition Board usually becomes aware that parties to a notifiable merger have failed to comply with the standstill obligation upon receiving a complaint or on an ex officio basis. The Competition Board has issued several fines for violation of the suspension requirement (eg, Tekno Ray, 12-08/224-55, 23 February 2012; Anayurt, 14-22/422-186, 25 June 2014; Fairless-Simsmetal, 09-42/1057-269, 16 September 2009; and Longsheng 11-33/723-226, 2 June 2011).

7.2 If there is a suspensory obligation, what sanctions may be imposed if the transaction closes while the review is ongoing?

Closing the transaction without the approval of the Competition Board will breach the suspension requirement, as explained in question 7.1.

7.3 How is compliance with conditions of approval and sanctions monitored? What sanctions may be imposed for failure to comply?

In terms of monitoring compliance with remedies submitted, there are no specific timeframes for filing with the Competition Authority. The remedies will include their own reporting/informing mechanisms, which will be approved or amended by the Competition Authority.

8 Trends and predictions

8.1 How would you describe the current merger control landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Several major merger control decisions concerning high-value transactions were issued in 2018.

Most significantly, the Competition Board issued its final decision in the Phase II review on the merger of Luxottica Group SpA and Essilor International SA (18-36/585-286, 1 October 2018). The board found that as the notified transaction would result in the creation or strengthening of a dominant position within the meaning of Article 7 of Law 4054, and would significantly impede competition in the market, it could not approve the transaction unconditionally. However, the transaction was conditionally approved based on the remedies submitted, which included structural commitments concerning the divestiture of Merve Optik Sanayi ve Ticaret Aª (under which the merged entity also undertook not to acquire the distribution rights of the brands subject to the licence agreement between Merve Optik Sanayi ve Ticaret Aª and Marcolin SpA) and behavioural commitments. The behavioural commitments will be re-evaluated by the Competition Board at the end of a three-year period.

A second key decision concerned Bayer Aktiengesellschaft's acquisition of sole control over Monsanto Company (18-14/261-126, 8 May 2018). The Competition Board considered that the transaction could create or strengthen Bayer's dominant position and could thus significantly impede effective competition in the relevant market, and thus decided to initiate a Phase II review in a decision of 15 May 2017. After Bayer committed to the European Commission to divest its global cotton seeds business and vegetable seeds business during the Phase II period, the Competition Board conditionally approved the transaction. It found that the transaction would no longer create or strengthen a dominant position and significantly impede competition, since the commitments submitted to the European Commission with regard to vegetable seeds, cotton seeds, corn seeds and insecticide seed dressings for corn would eliminate horizontal and vertical overlaps occurring in the relevant markets in Turkey.

9 Tips and traps

9.1 What are your top tips for smooth merger clearance and what potential sticking points would you highlight?

It is important that a transaction is not closed until the approval of the Competition Board has been obtained, in order to avoid monetary fines and legal status risks, as explained in question 7.1. Therefore, although the Competition Law sets no specific deadline for filing, in light of the 30-calendar-day review period, it is advisable to file the transaction at least 40 to 45 calendar days before closing.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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