Turkey: A Revised Guideline On Undertakings Concerned, Turnover And Ancillary Restraints In Merger And Acquisitions Published By The Turkish Competition Authority

A very recent secondary legislation by the Turkish Competition Authority concerning the Turkish merger control regime further signals that modernization of the Turkish merger control regime will be one of the top priorities of the Turkish Competition Authority in 2013. The Competition Authority revised and published its Guideline on Undertakings Concerned Turnover and Ancillary Restraints in Merger and Acquisitions ("Guideline") with the aim of reflecting the changes that have been brought to the Turkish merger control regime.

The legislative activities of the Competition Authority for year 2013 began with the introduction of the Communique No. 2012/3 on the Amendment of Communique no. 2010/4 on the Mergers and Acquisitions Subject to the Approval of the Competition Board which came into effect as of February 1st, 2013 and amended the jurisdictional turnover thresholds. In this respect, the first alternative threshold provided by Communique No. 2010/4 concerning the turnover generated by the parties in Turkey has remained unchanged, whereas the Turkish turnover prong for the second alternative threshold has been raised from TRY 5 million to TRY 30 million and it is now sought on the basis of the transferred assets or businesses, not on the basis of any of the parties to the transaction. Furthermore, unlike the former era, the existence of an affected market is no longer sought in assessing whether a respective transaction triggers a mandatory merger control notification. In the old system under the Communiqué No. 2010/4, except for joint ventures, transactions that do not result in an affected market were not notifiable even if the thresholds sought for notification are exceeded.

In the light of above, the Turkish Competition Authority revised the Guidelines that has been enacted in first place to increase certainty and predictability for the application of the Communiqué No 2010/4 by making explanations about the concept of undertaking concerned and the calculation of turnover. The revisions made by the Competition Authority are limited with the reflections of the amendments provided by the Communique 2012/3. In this regard, the prominent aspects of the revisions are explained below.

First of all, the first paragraph under the section titled "Turnover" is harmonized with the applicable turnover thresholds and amended as follows:

"Pursuant to Article 7 of the Communique in cases where the aggregate Turkish turnovers of the transaction parties exceeds TL 100 million1 and the Turkish turnovers of at least two of the transaction parties each exceeds TL 30 million2, or the Turkish turnover of the assets or businesses subject to the acquisition in the case of acquisition transactions, or the Turkish turnover of at least one of the parties in the case of merger transactions, exceeds TL 30 million3, and the worldwide turnover of at least one of the other transaction parties exceeds TL 500 million4, the approval of the Competition Board is required for the validity of the respective transaction".

In addition, the phrases that require –regardless of whether the notifiability thresholds are met- the presence of an affected market to assess the notifiability of a transaction have been removed from the first paragraph. As the concept of "affected market" will no longer be used as a criterion in notifiability analyses, the Competition Authority has also eliminated the section titled "Affected Market" whereby detailed explanations were provided. It goes without saying that the concept of affected market would still have a place in substantive competitive assessment and preparation of the notification form. The only thing that remains to be seen and open to interpretation is whether the concept of affected market defined in the former Guideline would preserve its validity. The previous interpretation of the affected market concept has been also cited and used by the Competition Board ("the Board") through its precedents.

Previously, the only legislation that affected market is defined was the former Guideline besides the Turkish Competition Authority's sample notification form. According to the notification form, a market is deemed as being affected (i) where two or more of the parties have commercial activities in the same product market (horizontal relationship), or (ii) 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). That said, under the previous Guidelines and the decisional practice of the Board, even the presence of merely global potential horizontal or vertical overlaps were found sufficient to trigger a merger control filing requirement provided that one of the parties is active in Turkey. The previous Guidelines was read as; "... the fact that there is a relevant product market where the activities of the parties overlap horizontally or vertically fulfills the condition of the existence of an affected market provided that at least one party operates in Turkey". There are various decisions of the Board where it concluded that if the transaction could produce effects in Turkey even on a potential/theoretical basis regardless of whether one of the parties has presence or turnover in Turkey, merger control notification requirement would be triggered.

In the Board's recent Eurodrip decision (dated 11.10.2012, numbered 12-51/1474-504), the filing of which was handled by ELIG, the Board found the acquisition subject to notification based on the ground that there was a potential vertical overlap between the activities of one of the acquirer's subsidiaries in Australia and the activities of the target in Turkey. In Eksim Yapı (dated 16.05.2012, numbered 12-26/759-213), the Board stated that although the joint venture will be established and would be in operation outside of Turkey (in Kuwait), the Turkish market could be indirectly affected. To explain the indirect effect, the Board reasoned that the parties who are forming the joint venture have companies that are active in Turkey and the increase of their market power through the turnover generated from the joint venture in Kuwait would indirectly increase their power in Turkey. As such, the Board concluded that the transaction would indirectly affect the Turkish market and thus should be subject to approval of the Board. In addition, in its Ocean decision (dated 17.08.2011, numbered 11-45/1106-382), the Board found that in Turkey even if there is no current market for the field of activities of the joint venture (general power station configuration aimed toward parabolic gutter technology), with the potential development of such technologies in Turkey in the future, it could be argued that the Turkish market could potentially be affected by the notified transaction and therefore concluded that the transaction is subject to merger control regime.

That being said, as the section on affected market is removed from the Guideline, the sole source that provides an indicative definition is the sample notification form. As mentioned above, the wording of the definition solely addresses the actual horizontal and potential/actual vertical overlaps between the activities of the parties to transaction. Thus, the wording of the definition does not seem to extend to the potential/theoretical overlaps between Turkish activities and worldwide activities of the parties. Although the affected market will no longer be taken into account while assessing the notifiability of a given transaction, the notification form that has to be submitted to the Turkish Competition Authority is comprised of several sections that must be responded on the basis of affected market(s) such as "the mergers or acquisitions realized by the parties to transaction in the affected markets" or "sales value and sales amount data, together with the market shares, of the parties to the transaction in the affected markets". Therefore, unless a new legislation would be introduced by the Competition Authority which provides guidance on how the concept of affected market should be understood, whether the Competition Board would retain its broad approach towards the interpretation of the affected market would remain to be seen.

Footnotes

1 approximately € 44 million and US$ 56 million

2 approximately € 13 million and US$ 17 million,

3 approximately € 13 million and US$ 17 million

4 approximately € 217 million and US$ 279 million

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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