The first half of 2011 has been very busy in Turkish competition law circles. First, the New Communiqué No 2010/4 on Mergers and Acquisitions Subject to the Approval of the Turkish Competition Board entered into force on January 1 2011 and changed the Turkish merger-control regime from top to bottom.
The Competition Board has also become increasingly active in enforcing competition law by launching and concluding investigations and preparing reports in various sectors. In the first half of 2011, the Board rendered its most anticipated decisions on three of the largest investigations conducted to date, which included some of the highest fines that have ever been imposed.
The new regime
New Communiqué No 2010/4 was published on October 7 2010, and brought a new 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 came into effect as of January 1 2011. This list is not exhaustive, and contains only a brief introductory discussion on selected issues of high interest.
i) Article 5 regulates that conditional transactions and closely-related transactions realised 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 realised over a period of two years are deemed as a single transaction in terms of turnover calculation.
ii) 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.
iii) New and only turnover-based thresholds are brought in with 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 (a) where two or more of the parties have commercial activities in the same product market (horizontal relationship), or (b) 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 TL100 million ($61 million) and the respective turnovers of at least two of the parties individually exceed TL30 million, or the worldwide turnover of one of the parties exceeds TL500 million and the Turkish turnover of at least one of the other parties to the concentration exceeds TL5 million, 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 came to an end as of the end of 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 (total Turkish turnovers and total worldwide turnovers will be the determining factor, as explained above).
iv) Under Article 10, a transaction is deemed to be "realised" (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.
v) 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 Authority, the existence of a transaction will no longer be a confidential matter.
vi) Another important change in the Turkish merger-control regime is brought about with Article 13. The Board's approval decision will be deemed also to cover only the directly related and necessary extent of restraints in competition brought by the concentration (for example non-compete, non-solicitation or confidentiality). 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.
vii) Article 13 is significant in the sense that efficiencies are openly recognised and discussed. From the wording of the provision, it can be inferred that efficiencies will be taken into consideration in favour of approving the transaction only to the extent they demonstrably serve consumer welfare maximisation objectives, and that the total welfare maximisation benefits will not lead to a dramatic impact unless they trickle down specifically to consumers.
viii) 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 explicit language confirming that the review periods would start only after the filing is made. This is already the situation in practice, but it is now explicitly stated. The Board is now clearly given the right to secure certain conditions and obligations to ensure the proper performance of commitments.
ix) The notification form itself has also been 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, and so on.
There is now a short-form notification (without a fast-track procedure) if: (a) a transition from joint control to full control is at stake; and (b) 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.
x) 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.
Fining decisions
The Turkish Competition Board recently concluded its investigations in the Turkish motor vehicle, banking and GSM sectors. It imposed record fines against the investigated undertakings in these investigations.
The Competition Authority commenced its investigation against 23 undertakings active in the passenger car and light commercial vehicle sectors in September 2009, in order to determine whether the investigated undertakings had violated the Competition Law by way of an agreement or concerted practices. It was alleged that the investigated undertakings discussed future pricing policies, stock data, sales targets and sales strategies.
The Board decided that the investigated undertakings violated Article 4 of the Competition Law (akin to Article 101 of the Treaty on the Functioning of the European Union) and imposed fines against 15 of the undertakings. The fines totalled approximately TL277 million. This is by far the largest that ever imposed by the Board. ELIG Attorneys-at-Law represented Mercedes-Benz Türk in this matter, an entity receiving the lowest percentage fine with 0.3% at the end of the investigation.
Once the reasoned decision is issued, it is expected to have a groundbreaking impact on the principles of information exchange and the proof standards concerning restrictive agreements, when alleged together with allegations of systematic exchange of sensitive competitive data.
The Board has also recently concluded its investigation in the Turkish banking sector. Following its investigation, which commenced in the summer of 2009, regarding a gentlemen's agreement between eight Turkish banks in the salary promotion sector, the Board decided that the investigated banks had violated the Competition Law by way of an agreement and imposed fines of approximately TL72 million.
The decision also bears importance from another point of view. Although the reasoned decision is not yet published, it is understood that the Board based its fining decision on the portion of the turnovers of the investigated banks that were generated in the relevant market. While in the majority of its precedents the Board based its fining decisions on the total Turkish turnovers of the investigated undertakings, the reasons behind the Board splitting from this path will be revealed once the reasoned decision is published.
ELIG Attorneys-at-Law represented Finansbank in this matter; the bank received the lowest percentage fine with 0.3% at the end of the investigation. Once the reasoned decision is issued, it is expected to result in a significant toolkit for interpretation on the interface between the unfair trade practice (unfair competition) rules of the Turkish Commercial Law, and relevant provisions of the Turkish competition law such as Law No 4054 on the Protection of Competition.
Finally, the Board rendered its decision regarding Turkcell Iletisim Hizmetleri, Turkey's largest GSM operator. The Board had launched an investigation against Turkcell in November 2010 in order to determine whether Turkcell's practices towards its distributors and dealers in the GSM market violated Articles 4 and 6 of the Competition Law.
The Board decided that Turkcell was enjoying a dominant position in the GSM services market. Claims regarding Turkcell setting the resale prices of its distributors and dealers were rejected by the Board. However, it decided that Turkcell's practices with respect to standardising the decoration, signboards and sales of dealers through vertical agreements and verbal communications prevented the sale of the products of alternative undertakings.
Thus, Turkcell was found as abusing its dominant position by the Board and imposed a record high fine of TL91.1 million (1.125% of the company's turnover in 2010) . Turkcell's fine is now the highest fine ever imposed by the Board against a single undertaking, and amounts to about €40 million. The Board also ordered Turkcell to cease the anti-competitive practices and amend its vertical agreements to comply with the Competition Law.
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