Turkey: The Concept Of Undertaking Under Turkish Law

Last Updated: 4 October 2011
Article by Cigdem Bal, LLM

The concept of undertaking is crucial as it determines the extent to which specific competition law provisions apply, a major example being the evaluation to be made under Article 4 of the Competition Act regarding agreements, concerted practices and decisions limiting competition. For an evaluation to be made under Article 4 of the Competition Act, there must be plurality of actors. In other words, there should be at least two different undertakings, the activities of which may be considered to be in breach of the said article.

I. The Concept of Undertaking and Related Terms

The concept of undertaking is important within the context of the application of specific competition rules and provisions. The scope of application may vary depending on the nature of the undertaking. Therefore, the definition of undertaking provided by the relevant laws and the implementation of this definition by the relevant authorities, whether national or international, matters significantly.

Law on Protection of Competition no. 4054 ("Competition Act") (Rekabetin Korunması Hakkında Kanun) defines undertakings as natural and legal persons who produce, market and sell goods or services in the market, and units which can take decisions independently and constitute an economic unit.

The wording of the above article places the emphasis on whether an economic unit is established. Therefore merely taking into account the legal status of a unit is not sufficient for the purposes of the concept. In fact, one may conclude from certain decisions by the Competition Board ("Board") of the Turkish Competition Authority that the Board considers an undertaking as a general concept rather than something determined by its legal status alone.

The concept of undertaking is especially crucial in the evaluation of conspiracies between undertakings and the determination of dominant position as per Article 4 and Article 7 of the Competition Act. In addition to evaluations made under Article 4 and Article 7 of the Competition Act, the concept of undertaking is also involved in monitoring mergers and acquisitions. In fact, merger and acquisition transactions conducted between different legal entities in the same undertaking are not subject to competition law provisions and rules.

Following from the definition, the factors to be taken into account while determining whether two different entities form a single undertaking are control, economic unity and family ties.

2.1 Economic Unity

The principle of economic unity was adopted in the definition of undertaking in the Competition Act. According to the principle, a subsidiary is taken into account with its related parent company/companies. A legally independent undertaking with economic activities and another undertaking which has control over its decision-making mechanism may together be regarded as a single economic unit and considered a single undertaking for the purposes of competition rules and provisions. Thus, even if several units are operating under different legal forms, they may be taken into account as a single undertaking.

2.2 Control

For the purposes of Communiqué no. 2010/4 on Mergers and Acquisitions Requiring the Authorization of the Competition Board ("Communiqué no. 2010/4") (2010/4 Sayılı Rekabet Kurulundan İzin Alınması Gereken Birleşme ve Devralmalar Hakkında Tebliğ) control may be affected by rights, contracts or any other means which, either separately or in combination, in fact or by law, grant the ability to decisively influence an undertaking. Such influence may be exercised through an ownership right or an operative right of use on all or part of the assets of an undertaking, or by rights or contracts which provide decisive influence on the structure or decisions of the bodies of an undertaking.

According to the European Court of Justice ("ECJ") in AEG Telefunken AG v. Commission [1983] ECR 3151, [1984] 3 CMLR 325, where a parent company has a majority of the shares of its subsidiary, the subsidiary is not independent and the parent company may exercise decisive influence over it. The ECJ considers several factors regarding control of a company in addition to share-holding, such as whether the parent company is able to control the board of directors of the subsidiary, the amount of profit acquired by the parent company, and whether the subsidiary complies with directions given by the parent company on matters such as marketing and investment.

The definition of control affects the concept of undertaking since a unit with economic activities is considered an undertaking if able to make decisions independently. Therefore, whether it is possible to confer control to an undertaking in the context of the abovementioned conditions will be scrutinized to draw the scope of the application of competition law rules and practices.

2.3 Family Ties

Family ties between undertakings alone may be considered sufficient for those undertakings to be considered a single entity. This is because, according to Section 3 of the Commission Notice on the Concept of Concentration under Council Regulation (EEC) No. 4064/89 on the Control of Concentrations between Undertakings ("Commission Notice"), family ties alone may be considered a factor for determining control.

It is stated in Section 3 of the Commission Notice that the control is nevertheless acquired by persons or undertakings which are the holders of the rights or are entitled to rights conferring control. This section further provides that there may be exceptional situations where the formal holder of a controlling interest differs from the person or undertaking having the actual power to exercise the rights resulting from this interest. A related example is given in which an undertaking uses another person or undertaking for the acquisition of a controlling interest and exercises the rights through this person or undertaking, even though the latter is formally the holder of the rights. Following from this example, the situation is seen as one in which the control is acquired by the undertaking that is behind the operation and in actuality has the power to control the target undertaking. The type of evidence needed to establish this type of indirect control was specified as factors such as the source of financing or family ties.

Even if it does not directly regulate the concept of undertaking or the term control, Block Exemption Communiqué on Vertical Agreements no. 2002/2 ("Communiqué no. 2002/2") (2003/3 ve 2007/2 sayılı Rekabet Kurulu Tebliğleri ile Değişik, Dikey Anlaşmalara İlişkin Grup Muafiyeti Tebliği Tebliğ No: 2002/2) illustrates the importance of family ties in the context of competition law in Article 5, which regulates non-compete obligations imposed on the purchaser.

A non-compete obligation imposed on the purchaser is limited to a maximum period of five (5) years. However, there is an exception to this limit if the ownership of the facility to be used by the purchaser while continuing its activities based on the agreement belongs to the provider together with the land or under a right to build over, which has been secured from third persons not connected with the purchaser. According to the wording of the article, family ties alone may prevent the application of the exception to the duration of the non-compete obligation.

This raises questions about the effect of family ties on the concept of undertaking, the connection between the extent of economic relations and the degree of family ties. One indication is Board Decision no. 01-39/391-100, which found that persons may constitute a single economic entity on the sole grounds of having the same surname. Moreover, in Board Decision no. 01-03/10-03, people with different surnames but associated with family ties were held within the same economic group as a single undertaking.

The implementations of the Board regarding the effect of family ties on determining an undertaking may raise concerns about the freedom of enterprise and whether it is being restricted by the applications of the Board.

The Board has discussed in its recent decision regarding the privatizations of Boğaziçi Elektrik Dağıtım A.Ş., Gediz Elektrik Dağıtım A.Ş., and Trakya Elektrik Dağıtım A.Ş., no. 10-78/1645-609 that the family ties between Mehmet Kazancı, MMEKA-Makine İthalat Pazarlama ve Ticaret A.Ş (which is partly controlled by Mehmet Kazancı) and Kazancı Group caused the said parties to be held as a single undertaking. As for considering the said parties as a single undertaking solely on the grounds of family ties, the Board has compared the freedom of enterprise, freedom of contract and freedom of competition with the principles regarding protecting competition.

Considering a real person and the family corporation of which the real person is a shareholder a single undertaking and subject to different evaluations under the Competition Act may be regarded as a restriction on the freedom of enterprise. The Board in this context has clarified the fact that a real person within a family corporation shall still be permitted to pursue independent activities within the freedom of enterprise. However, the Board also stated that restraining freedom of enterprise for acquisition transactions conducted by means of a unity of interests through family ties is considered a cause for competition law.

Another aspect the Board emphasized was the fact that a family member is not necessarily considered part of the family corporation economic unit. In a few exceptional cases, family members were considered separate undertakings despite their consanguinity. To demonstrate this, the Board referred to its Decision no. 09-49/1220-308, the parties of which were AGS Parafin Sanayi ve Ticaret A.Ş. ("AGS Parafin") and Mercan Kimya Sanayi ve Ticaret A.Ş. ("Mercan Kimya"), each controlled separately by two siblings. Considering these two undertakings separate and independent undertakings despite the consanguinity, the Board took into consideration several factors listed as follows;

  1. Detailed research conducted on the client undertakings of Mercan Kimya and AGS Parafin,
  2. Separate organizational structures of Mercan Kimya and AGS Parafin,
  3. Lack of unity of interests and economic relations between Mercan Kimya and AGS Parafin,
  4. Lack of mutual shareholders and/or directors within Mercan Kimya and AGS Parafin for the past five (5) years, and
  5. The admission by the complainant company that Mercan Kimya and AGS Parafin actually act competitively within the market.

In accordance with the decision of the Board concerning Mercan Kimya and AGS Parafin, it should be noted that an assessment as to whether a single undertaking or a separate undertaking is formed between persons linked as a family shall be conducted substantially, taking into account the timing, consequences and execution of the organization, rather than merely focusing on the formal aspects.

II. Undertakings within the Context of the Competition Act

The concept of undertaking is associated with the evaluations made under the Competition Act regarding (i) determination of the dominant position, (ii) agreements between undertakings and (iii) monitoring of merger and acquisition transactions.

Pursuant to Article 4 of the Competition Act, agreements and concerted practices between undertakings and decisions and practices of associations of undertakings which have as their object or effect or likely effect the prevention, distortion or restriction of competition directly or indirectly in a particular market for goods or services are illegal and prohibited. In accordance with the wording regarding agreements between undertakings in Article 4 of the Competition Act, the implementation of the concept of undertaking determines the scope of application of the article.

For the purposes of the Competition Act, agreements between parties who constitute an undertaking within an economic unit do not satisfy the "plurality of parties" principle. In fact, such agreements are regarded as agreements conducted within an undertaking itself. As a result, the agreements between parties who constitute an undertaking within the economic whole are not subject to Article 4 of the Competition Act.

Having mentioned the scope of Article 4 of the Competition Act along with the concept of undertaking, it should also be noted that the Board has held in some of its decisions that acquisition transactions conducted by parties as partnerships may be subject to evaluation under Article 4 of the Competition Act. In this context, the question arises as to in which cases joint ventures are regarded as agreements under Article 4 of the Competition Act and in which cases they are regarded as a concentration under Article 7 of the Competition Act. Following from the decisions of the Board in Uludağ Decision no. 10-56/1070-399 and in Çamlıbel Decision no. 10-56/1069-398, concentration causing joint ventures, in which the parties' activities and powers within the joint venture are conjoined, are subject to evaluation under Article 7 of the Competition Act. On the other hand, cooperation causing joint ventures, which provide the parties to the joint venture with cooperation and which are regarded as an agreement between undertakings, are subject to evaluation under Article 4 of the Competition Act.

In another decision, Board Decision no. 04-66/952 230, regarding the scope of application of the Competition Act, Oyak Holding A.Ş. ("Oyak Holding") and Tukaş Gıda Sanayi ve Ticaret A.Ş. ("Tukaş Gıda") were accused of acting together with the purpose of expelling Merko Gıda Sanayi ve Ticaret A.Ş. ("Merko Gıda") from the market. The Board held Oyak Holding and Tukaş Gıda were a single entity under Oyak Group and accordingly, not subject to an evaluation under Article 4 of the Competition Act as to whether the parties conducted concerted practices against Merko Gıda and the complaint was rejected.

The Board, while justifying its decision to consider Oyak Holding and Tukaş Gıda a single entity, emphasized the fact that Oyak Holding and Tukaş Gıda were controlled by the same entity, Oyak Group.

www.gsimeridian.com

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions