The Turkish Competition Board (the "TCB") amended Communiqué No: 2010/4 Concerning Mergers and Acquisitions Calling for the Authorization of the Competition Board (Turkish Merger Communiqué) as of February 1st 2013. Since the Turkish Merger Communiqué is the main piece of legislation governing the review process of the merger and acquisition transactions that are subject to the authorization of the Turkish Competition Board (the "TCB"), the amendments are prone to cause some noteworthy changes in the Turkish merger review process, especially for multinationals who have operations in Turkey.
The recent amendment brought two substantial changes into the merger control system of the TCB. First, the turnover thresholds for notification requirements have been changed. The new thresholds that set the boundaries of notification requirements read as follows:
- The total turnovers of transaction parties in Turkey exceed one 100 million TRL (approximately USD 56 million), and turnovers of at least two of the transaction parties in Turkey each exceed 30 million TRL (approximately USD 17 million); or
- With respect to acquisition transactions, the assets or the operations that are subject to the acquisition, in merger transactions, at least one of the transaction parties has a turnover in Turkey exceeding TRL 30 million, and the global turnover of at least one of the remaining transaction parties exceeds TRL 500 million (approximately USD 280 million).
Item (b) of the thresholds originally read as a "global turnover of one of the transaction parties exceeds TL 500 million, and at least one of the remaining transaction parties has a turnover in Turkey exceeding TL 5 million." The newest amendment raises the TRL 5 Million threshold to TRL 30 Million, and also identifies the party whose turnover must exceed this amount.
Later, on April 30th, 2013, the Turkish Competition Authority issued an amended version of its "Guidelines on Undertakings Concerned, Turnovers and Ancillary Restraints in Mergers and Acquisitions" in order to clarify the interpretation, and some applications of the Amended Merger Communique. In light of the Guidelines and in recent practice, the following issues stand out.
Applied to international acquisition transactions, the TCB effectively raised the threshold for the domestic nexus of international acquisitions, and also states where to find this amount. Previously, any party of an international acquisition transaction could have exceeded the turnover thresholds to trigger notification of the transaction. As of February 1st of 2013, the economic size of the target (of an acquisition transaction) will only be measured against the lower threshold, which is now TRL 30 Million. The economic size of the acquirer must still exceed TRL 500 Million to make the relevant transaction subject to the TCB's approval.
By the interpretation of the Amended Merger Communique, the Turkish Competition Authority (the "TCA") made a distinction between transactions that establish a new joint venture ("Greenfield JV"), as well as transactions that convert an existing undertaking into a joint venture (a "Conversion JV"). Previously, The TCB did not distinguish between both types of JV's in terms of notification requirements, and the consolidated turnovers (Turkish and worldwide) of parent companies were measured against both thresholds. Henceforth, Greenfield JV's will be subject to the first threshold, only. In other words, a transaction that creates a new joint venture will be subject to the approval of the TCB, if at least two of the jointly controlling parent undertakings have Turkish turnovers higher than 30 Million TL, and the sum of their turnovers in Turkey exceed 100 Million TL. On the other hand, the approval requirement of Conversion JV's will be assessed against both thresholds, (a) and (b), above. The application of the first threshold to the Conversion JV's is similar to the example of Greenfield JV's. However, the second threshold applies to Conversion JV's with a subtle change. A Conversion JV will be subject to the approval of the TCB if the turnover that is to be assigned to the entity, which is being converted into a joint venture, exceeds 30 Million TL, and the worldwide turnover of the acquirer (or one of the acquirers) exceeds 500 Million TL. Overall, it can be said that the TCA streamlined the assessment of Greenfield JV's at the expense of Conversion JV's.
The second change that has been introduced into the merger control system is the abolishment of the affected market exception. Previously, the parties were relieved of the requirement to notify (except in the case of joint ventures) even if the thresholds were exceeded if there were no affected markets in the transaction. However, with the latest amendment, overlapping amongst the commercial activities of the transaction parties will no longer be taken into consideration when assessing the notification requirement. Despite the fact that this seems to widen the scope of the notification requirement, since it abolishes a notification exemption, in fact, the recent amendment only streamlines the assessment of the notification requirement. This is true largely due to the inapplicability of the affected market exception, in practice. The concept of an "affected market" has been defined using such a wide scope that there is almost no reasonable transaction that would satisfy the conditions of that exception. Nevertheless, the abolition of the affected market exemption made it clear that the multinationals with operations in Turkey must be more careful in their assessments with regard to their merger and acquisition transactions, even outside of Turkey. With these recent changes, it became clearer that in an acquisition whereby an investment fund acquires a business line of, or a company belonging to, a multinational group that has operations in Turkey will be subject to the approval of the TCB, so long as the acquiring investment fund and the multinational meet the thresholds laid down in (a) above, no matter in which jurisdiction the transaction occurs, and also without any regard to the size of the target company or business.
Another noteworthy development in the Turkish Merger Control is the issuance of the draft Guidelines on the Definition of Concentration and the Concept of Control (the "Draft Guidelines") by the TCA. The TCA and the TCB have followed the European example in the Merger Control in the past. This is evident in the decisions of the TCB. Not surprisingly, the guidelines are structured on the example of the Commission Consolidated Jurisdictional Notice. With the Draft Guidelines, the TCA is taking a step forward and binding itself by the interpretation of basic terminology. This may not change the implementation of the Law, in general, but it definitely increases transparency, whereby it also would endorse the consistency of decision-making in Turkish Merger Controls.
Generally, the tension between establishing a merger control system that addresses local needs and maintaining consistency with international examples still drives the changes in the Turkish Merger Control legislation.
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