The New Communiqué No. 2010/4 on Mergers and Acquisitions Subject to the Approval of the Turkish Competition Board is published on October 7th, 2010, and it brings a new Turkish merger control regime into the Turkish competition law system. Set forth below is a list of the 10 fundamental changes brought with the new merger control regime, which will be in effect as of the 1st of January 2011. The list below does not contain an exhaustive counting of all revisions made with the new legislation, and it contains only a brief introductory discussion on selected ten issues of high interest.
1. Article 5 regulates that conditional transactions and closely-related transactions realized over a short period of time by way of expedited exchange of securities are treated as a single transaction. In this respect Article 8 brings about a new regime for calculating turnover for successive transactions, according to which multiple transactions between the same undertakings realized over a period of two years are deemed as a single transaction in terms of turnover calculation.
2. As per Article 13, cooperative joint ventures will also be subject to a merger control notification and analysis on top of an individual exemption analysis, if warranted.
3. New and only turnover-based thresholds are brought in Article 7. Most importantly, except for joint ventures, if it does not lead to an affected market in Turkey, a transaction will not be notifiable to the Turkish Competition Authority. Affected markets are found when there are markets "with a possibility to be impacted by" the transaction, and (1) where two or more of the parties have commercial activities in the same product market (horizontal relationship), or (2) where at least one of the parties is engaged in commercial activities in markets which are upstream or downstream from the product market of the other party (vertical relationship). If there is an "affected market", the transaction will be reviewed for notifiability under the thresholds: In that case, if the total turnover of the parties to a concentration in Turkey exceeds TL 100 million1 and the respective turnovers of at least two of the parties individually exceed TL 30 million,2 OR the worldwide turnover of one of the parties exceeds TL 500 million3 and the Turkish turnover of at least one of the other parties to the concentration exceeds TL 5 million,4 then the transaction will be subject to the Board's permission.
To that end, the era of notifying transactions with no horizontal overlap and no vertical integration potential is coming to an end as of the end of year 2010. Furthermore, it will no longer be necessary to define the relevant product market properly in order to engage in a notifiability analysis in Turkey, as the market share threshold will be abolished by year end, and the alternative turnover threshold will not be sought in the relevant product market (i.e. total Turkish turnovers and total worldwide turnovers will be the determining factor, as explained above).
4. Under Article 10, a transaction is deemed to be "realized (i.e. closed) on the date when the change in control occurs. It remains to be seen if this provision will be interpreted by the Competition Authority in a way that provides the parties to a notification to carve out the Turkish jurisdiction with a hold separate agreement. This has consistently been rejected by the Turkish Competition Board so far, arguing that a closing is sufficient for the suspension violation fine to be imposed, and that a further analysis of whether change in control actually took effect in Turkey is unwarranted.
5. The Competition Authority will publish the notified transactions on its official website with only the names of the parties, and their areas of commercial activity. To that end, once notified to the Turkish Competition Authority, the "existence" of a transaction will no longer be a confidential matter.
6. Another important change in the Turkish merger control regime is brought about with Article 13. The Board's approval decision will be deemed to also cover only the directly related and necessary extent of restraints in competition brought by the concentration (e.g. non-compete, non-solicitation, confidentiality, etc.) This will allow the parties to engage in self-assessment, and the Board will not have to devote a separate part of its decision to the ancillary status of all restraints brought with the transaction anymore.
7. Article 13 is significant in the sense that efficiencies are openly recognized and discussed. The wording of the provision allows us to infer that efficiencies will be taken into consideration in favor of approving the transaction only to the extent they demonstrably serve consumer welfare maximization objectives, and that the total welfare maximization benefits will not lead to a dramatic impact unless it trickles down specifically to consumers.
8. Article 14 regulates the possibility that the parties might provide commitments to remedy substantive competition law issues of a concentration under Article 7 of the Law on Protection of Competition (Law No. 4054). Strategic thinking at the time of filing is somewhat discouraged through an explicit language confirming that the review periods would start only after the filing is made. This is already the current situation in practice, but now it is explicitly stated. The Board is now explicitly given the right to secure certain conditions and obligations to ensure the proper performance of commitments.
9. The notification form itself is also revised. In parallel with the new notion that only transactions with a relevant nexus to the Turkish jurisdiction will be notified anyway, there is an increase in information requested, including data with respect to supply and demand structure, imports, potential competition, expected efficiencies, etc.
There is now a short-form notification (without a fast-track procedure) if: (i) a transition from joint control to full control is at stake; and (iii) the total of the parties' respective market shares is less than 20% in horizontally affected markets and one party's market share is less than 25% in vertically affected markets.
10. The new notification form no longer insists on "signed copies of the agreement leading to the notified concentration". This is a much welcome change allowing the parties to file before the transaction document is signed. While this will save very valuable time, and certainly consists an improvement over the currently applicable regime, there remains a risk that the Board might still refuse to act on memoranda of undertaking or letters of intent, since the new provision refers to the "current version of the agreement".
Footnotes
1. Approximately EUR 50.838 million according to the free market exchange rates of October 2010
2. Approximately EUR 15.251 million according to the free market exchange rates of October 2010
3. Approximately EUR 254.194 million according to the free market exchange rates of October 2010
4. Approximately EUR 2.541 million according to the free market exchange rates of October 2010
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.
