1 What is the merger/acquisition legislation?
Turkish regulatory framework for merger control consists of:
- Law No. 4054 on Protection of Competition ("Law"); and
- Communiqué No. 2010/4 on Mergers and Acquisitions Calling for the Authorization of the Competition Board ("Merger Communiqué").
2 Who is the relevant authority?
Turkish merger control regime is executed by the Turkish Competition Authority ("TCA") in Ankara, Turkey.
3 Are there any recent material changes?
Merger Communiqué has been amended by Communiqué No. 2017/2
- repealing Article 7(2) of the Merger Communiqué, which revoked TCA's obligation to review notification thresholds biannually;
- permitting ex post notification of transactions leading to transfer of control, if conducted on stock exchanges and involving multiple sellers (conditional on prompt notification and refrain from exercise of voting rights without Board granted exemption); and
- extending from two years to three years, the period over which multiple transactions between the same parties or multiple transactions conducted in the same relevant product market by an undertaking constitute a single transaction with regard to turnover calculations relevant to the merger control framework.
Turkish merger control regime opted for a pre-merger mandatory notification system. In this system, a transaction that meets certain criteria has to be reported to the competition authority before it is consummated and a transaction falling below the criteria will be considered de minimis and thus will not be subject to merger filing.
4 Which types of transactions trigger notification obligations?
Article 7 of the Law prohibits merger or acquisition transactions which establish or reinforce a dominant position resulting in significant reduction in competition in the market for some good or service in part or whole Turkey. The Article grants TCA authority to regulate which type of mergers and acquisitions should solicit the Competition Board's approval. TCA characterises such transactions in the Merger Communiqué´.
Articles 5(1) and 5(3) of the Merger Communiqué´ defines the cases considered as a merger or an acquisition. Accordingly, the following transactions will be considered as mergers and acquisitions, provided there is a permanent change in control:
- A merger of two or more undertakings;
- The acquisition of direct or indirect control over all or part of one or more undertakings by one or more undertakings or persons who currently control at least one undertaking through
- the purchase of shares or assets,
- a contract or
- any other means.
- Formation of a joint venture that will fulfill all functionalities of an independent economic entity.
Under the European Union Merger Regime, concentration is defined as "a merger of two or more previously independent undertakings (or parts of undertakings) or the acquisition of direct or indirect control of the whole or parts of another undertaking, which brings a durable change in the structure of the undertakings concerned". The cases defined as a merger or acquisition by TCA is in line with this definition.
For the parties to a merger or an acquisition to file notification with the Competition Board, the Board requires the satisfaction of the aforementioned definitions and meet the applicable turnover thresholds.
5 How is permanent change of control defined?
The definition of control under Turkish merger control regime is similar to that adopted under Article 3 of Regulation 139/2004 (EC Merger Regulation). Under Article 5(2) of the Merger Communiqué, control of an undertaking may be acquired through rights, contracts or other instruments, which, separately or jointly, allow de facto or de jure, possibility of exercising decisive influence over an undertaking.
In the wording of the Merger Communiqué, instruments that confer such powers can be:
- Instruments granting ownership or operating rights over all or part of the assets of an undertaking; and
- Those rights and contracts granting decisive influence over the structure or decisions of the bodies of an undertaking. The same Article 5(2) also reads that control may be acquired de jure and de facto. When the right holders or those persons or undertakings are empowered to exercise such rights in accordance with a contract, there is de jure control. Whereas, the same persons who, while lacking such rights and powers, have in practice power to exercise such rights, there is de facto control. Therefore, when outright legal control is not acquired (e.g. through the acquisition of shares with the majority of the voting rights), then the Competition Board will consider whether the acquirer can still exercise de facto control over the undertaking through special rights attached to shares or contained in shareholder agreements, board representation, ownership and use of assets and related commercial issues. Consequently, in the case of de facto control, there is no precise shareholding or other test for decisive influence and each case is decided on its facts.
Given that Article 7 of the Law only covers transactions resulting in a lasting/permanent change in control, under the assumption that only such transactions would lead to a lasting change in the market structure, the Board requires the change of control to be permanent. However, the Board in the Guidelines notes that agreements made for a definite period of time may lead to a lasting change of control if they can be renewed. Similarly, if the period envisaged for the agreement is sufficiently long to lead to a lasting change in the control of an undertakings concerned, then the transaction may fall within the scope of Article 7 of the Law, even if the agreement has a clear expiry date.
So, only the concentrations that result in a permanent de jure or de facto change of control are subject to the Competition Board's approval, provided that they exceed the applicable thresholds as explained below.
6 Would the acquisition of a minority share be notifiable?
It follows that acquisition of minority shares, so long as they do not confer control, are not subject to notification. However, shareholders agreements of such acquisitions or master agreements of joint ventures should be carefully reviewed as to whether there are any provisions which may confer control to the minority shareholder.
Minority shares together with specific rights attached to those shares may confer de jure sole control. Also, preferential shares to which special rights enabling to determine strategic decisions such as power to appoint more than half of the members of the company board, may confer a sole control. Where the minority shareholders have rights, which allow them to veto essential decisions or strategic behaviours of the undertakings concerned, there can be a joint control enjoyed by them.
7 What are the applicable thresholds for notifiable mergers and acquisitions?
TCA aims to review only large-scale acquisitions, mergers and joint ventures. The thresholds are set out in the Communiqué, as amended by Communiqué No. 2012/3. According to Article 7 of the Merger Communiqué, a transaction may be subject to the Competition Board's approval if either:
- Total turnovers of the transaction parties in the Turkish market exceed TRY100 million and turnovers of at least two of the transaction parties separately exceed TRY 30 million in Turkey.
- The Turkish turnover of the asset(s) or undertaking to be acquired or one of the parties to the merger exceeds TRY30 million, and the global turnover of at least one of the other parties to the transaction exceeds TRY500 million.
Prior to its repeal with Communiqué 2017/2, Article 7(2) of the Merger Communiqué obligated TCA to review the notification thresholds biannually. In practice, TCA reviewed but did not revise the notification thresholds since Communiqué No. 2012/3 and the Communiqué has been amended to reflect that stance. The main reason behind this is that TCA preferred the "catching net" created by the notification threshold to be rather wide in order to avoid that a transaction with a potential anti-competitive impact might escape notification.
See 11 for the methodology used to calculate turnover.
8 Are there circumstances in which transactions falling below these thresholds may be investigated?
Communiqué No. 2010/4 replaced the regime based on market share thresholds. The Competition Board argues that a turnover threshold system creates legal certainty for undertakings and is therefore preferable to a market share threshold system. Accordingly, market shares of the parties to the transaction will not be taken into account in the analysis of notification requirement.
As a result, there are no circumstances in which transactions falling below the thresholds may still be investigated under Article 7 of the Law.
9 Which types of joint ventures require authorization?
Under Article 5(3) of the Merger Communiqué, joint ventures (JVs) may also be subject to notification to and approval of the Competition Board. Article 5(3) reads that formation of a JV which would "permanently fulfil" all of the functions of an "independent economic entity" will constitute an acquisition transaction falling within the scope of the Merger Communiqué. The relevant parties are the parents of the JV and not the JV itself, as the latter has no turnover. The Competition Board in its decisions related to the JV notifications, considers the satisfaction of two criteria:
1. Is there an undertaking which is jointly controlled by the transaction parties?; and
2. Does the JV constitute a fully-functioning (tam işlevsel) independent/autonomous economic entity?
Thus considered an acquisition transaction, the creation of a "full-function" JV is caught by TCA if the relevant turnover thresholds are exceeded. Revenues accorded to any assets that may be transferred from a parent to the JV will be considered part of the revenue of that parent.
Consequently, if the JV is not full-function and takes the form of a partnership formalized by legal structure to a large extent dependent on its parents, such as strategic alliances and cooperative joint ventures, then such JVs will not be notified. However, TCA may review such JVs ex post, in light of Article 4 of the Law which prohibits anticompetitive agreements between undertakings. In this context, the parent companies creating a JV should determine whether their JV is compatible with competition law rules. However, TCA may review the JV agreement ex officio or upon the request of the parties and determine whether the restrictive provisions are in compliance with competition law rules.
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