Turkey: Turkish Competition Law Practitioners Welcome the Draft Communiqué on Mergers and Acquisitions

Last Updated: 2 November 2010
Article by Neşe Taşdemir Önder and Filiz Toprak Esin

In November 2007, the Turkish Competition Authority (the "TCA") declared that a new communiqué on mergers and acquisitions was on its agenda. It took the Authority more than two years to publish the first draft of the communiqué (the "Draft Communiqué") on its official website. In February 2010, the TCA invited stakeholders to participate to the public consultation process. This article aims to provide an overview of the highlights of this long-awaited draft communiqué. The authors have worked on the version distributed in the meeting of the Competition Association on May 7, 2010.

Definition of a Concentration – Joint Ventures

The current Communiqué defines among concentrations the creation of joint ventures which perform as an autonomous economic entity possessing labor and assets to achieve their functions, and which do not have as their object or effect the restriction of competition between the undertakings party to the joint venture, or between these undertakings and the joint venture. The coordination of competitive behavior is no longer relevant to the definition of a concentration but whether the joint venture is full – function in the proposed system. The Draft Communiqué defines as a concentration the creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity and leaves the issue of coordination to substantive analysis under the Draft Communiqué.

Notification Thresholds Regime

The current Communiqué on Mergers and Acquisitions (numbered 1/1997 as amended) requiring a pre-merger notification to and approval of the Competition Board (the "Communiqué 1/1997") foresees a twofold threshold system for transactions to be notified; namely the market share threshold and the turnover threshold. Concentrations have to be notified to the TCA for clearance, where the total relevant product market share in the Turkish market of the undertakings concerned exceeds 25 % of the relevant product market or where the combined aggregate turnover of the parties in the relevant market in Turkey exceeds TL 25 million (approximately EUR 13 million as of 18.06.2010). However, because Turkey stands out as one of the few countries where the market share threshold is still applicable, the Draft Communiqué looks only for the turnover threshold. According to Article 7 of the Draft Communiqué, if the parties' combined aggregate turnover in Turkey exceed TL 100 million (approximately EUR 52 million as of 18.06.2010) and the aggregate Turkish turnover of each of at least two of the parties exceeds TL 20 million (approximately EUR 10.41 million as of 18.06.2010) ; the transaction must be notified. Although it is hard to predict as to whether the figures of TL 20 million and TL 100 million figures will prove realistic, the new threshold system has generally been welcomed by stakeholders.

Commitments

According to Article 14 of the Draft Communiqué, the undertakings concerned may give commitments in order to eliminate competition concerns identified under Article 7 of the Act on the Protection of Competition No 4054 on the creation or strengthening of dominant position. This possibility to modify a concentration is commonly described as "remedies" in European Union legislation. As the scope of the article of the Draft Communiqué is limited, intention has been expressed by TCA officials for publication of detailed guidelines similar to the EU Commission notice Remedies.

Notification Form and Process

The notification form has also been revised to a great extent. The proposed notification form requires more detailed information than the existing form.

One of the most useful developments in that regard is the intention of adoption of a notification system similar to the "short form notification" applied by the EU Commission. In cases where (i) a party acquires sole control of an undertaking over which it already has joint control or (ii) there is no affected market or (iii) the aggregate market shares of the parties in a horizontal relationships is less than 20 %, at least one of the parties' market share is less than 25 % in vertical relationships on an affected market; undertakings concerned are not required to fill in the full form. However, the TCA reserves its right to request the parties to submit the full form if it appears that the above cited conditions for using the short form are not met, or, exceptionally, where they are met, the TCA determines, nonetheless, that a full notification form is necessary for an adequate investigation of possible competition concerns.

Another important change is the requirement of submission of an electronic copy of the notification file along with two sets of hardcopies; unlike the Communiqué 1/1997 requiring the submission of 3 sets of hardcopy documents without an electronic version.

Other Changes

The Draft Communiqué and the draft notification form provide for definitions which the current legislation does not entail. One of the most controversial concepts i.e. the concept of "affected markets" has also been defined in the draft notification form as a relevant product market in which the parties have vertical or horizontal overlapping activities.

One of the remarkable changes foreseen in the Draft Communiqué is the consideration of the concept of "efficiencies" in the assessment of the TCA of a concentration. Accordingly when making a notification, a dominant undertaking must establish efficiencies in order to prove that there is no abuse of dominant position on the relevant product market.

Another new concept introduced by the Draft Communiqué is the announcement of the notified transaction on the official website of the TCA including party information and their field of activity. The summary of the transaction published must be drafted so that it contains no confidential information or business secrets.

In relation to the documents to be submitted, in the current regime, the final agreement on the transaction must be submitted for the notification to be deemed officially made. The Draft Communiqué changes this requirement and adds that the agreement does not need to be final. However, where there is a substantial change of the agreement at a later stage, parties must resubmit the final version.

Conclusion

With the proposed amendments to the Communiqué 1997/1 and the notification form, the TCA aims to achieve more legal certainty, meet the needs of a more dynamic competition and eliminate deficiencies of the current system. Given similarities with the European Union legislation, the Draft Communiqué will have simplified notification requirements and procedure for both international and local actors. Although the proposed changes constitute a major step forward for Turkey's merger control regime, the Communiqué if enacted must be supported by guidelines setting out the general principles especially applicable to remedies and conditional clearance decisions.

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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Authors
Neşe Taşdemir Önder
Filiz Toprak Esin
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