Law No. 4054 on the Protection of Competition (the "Competition Law") provides for a two-stage process for appraising mergers and acquisitions of which the Competition Board (the "Board") has been notified. At the end of the first stage (Phase I), the notified concentration is either approved or designated as a concern – i.e., it might result in the creation of a dominant position in the relevant market – and taken to the second stage (Phase II). Phase II involves an in-depth and thorough analysis of effects on competition. If the Board's concerns are not dispelled in Phase II, the Board can then prohibit the transaction and take any other measures it deems necessary.
However, not all chances for approval are exhausted once the Board declares its concerns in relation to a notified transaction. There is also a third mechanism for obtaining approval subject to certain conditions, and it can be used when the competition problems associated with the transaction can be cured by suitable remedies.
The legal grounds for the conditional clearance mechanism are found in Communiqué No. 1997/2 on Mergers and Acquisitions Subject to the Approval of the Competition Board (the "Communiqué"), although the Competition Law features no governing provisions. This naturally leads to a questioning of the Board's authority and the limits of its power in adopting conditional clearance decisions.1 Leaving aside this problem of legality (which will hopefully be resolved with the enactment of the draft law amending the Competition Law), practical lessons can be drawn from the considerable number of mergers and acquisitions cases conditionally approved by the Board.
In the majority of conditional clearance decisions to date, it is the Board itself that has dictated the conditions in a mandatory manner. It has been clearly declared in these decisions that any contravening action by the parties would result in the application of sanctions under the Competition Law (including monetary fines under Article 16). Conditional clearances granted in this fashion can be as undesirable as an outright prohibition because of the limited participation of the parties in the formation of the conditions.2
Although, in Phase II, parties have had the chance to discuss and propose applicable remedies relating to only a few conditional clearance decisions,3 we consider this a welcome opportunity for companies ready to undertake commitments to achieve compliance with the law while still preserving the economic rationale behind the concentration (i.e., maximizing efficiency). True, such participation is nowhere regulated in the Competition Law. However, the Board nowadays displays an open attitude toward the parties' requests to discuss the notified cases in line with the established practice of its counterparts in other jurisdictions.
Until today, the conditions imposed by the Board have concerned, inter alia: (i) divestiture of certain brands; (ii) transfer of business lines; (iii) limitation of business or production capacity; and (iv) behavioral remedies. Some of these remedies are the same as those already offered to and accepted by the European Commission, as the parties have merely committed to apply the same remedies within Turkish jurisdiction (see PG/Gillette Decision and Cookson/Foseco Decision below).
The below cases constitute perhaps the most useful examples for forming an understanding of applicable remedies under the Turkish merger control regime.
Greencastle Drinks / Amram Family Decision (07-67/836-314, 23 August 2007)
In relation to the acquisition of Intergum Gıda San. ve Tic. A.Ş., Dandy Sakız Şekerleme ve Tic. A.Ş., Intergum North America Inc., Falım Sakız San. ve Tic. A.Ş., and Dandy Sakız Şekerleme ve Tic. A.Ş. by Greencastle Drinks Ltd. (controlled by Cadbury Schweppes Plc.), the relevant product market designated as the "gum" market was subdivided into the "sugared gum," "sweetened gum" and "sugar-free gum" sectors. Because the Board considered that the dominant position of Kent Gıda Maddeleri San. ve Tic. A.Ş. ("Kent") would be strengthened in the "sugar-free gum" sector, it issued a conditional clearance to the transaction on the condition that Kent's Nazar brand license was divested to a third party.
MGS / Gıdasa Decision (08-12/130-46, 7 February 2008)
As a result of its review of the acquisition of 99.68% of the shares of GıdaSa Sabancı Gıda San. ve Tic. A.Ş. ("GıdaSa"), an affiliate of Sabancı Group, by Marmara Gıda Sanayi ve Tic. A.Ş. ("MGS"), the Board designated various product markets and concluded that the "margarine" and "liquid oil" markets needed to be further subdivided in accordance with supply and demand conditions. Accordingly, the Board subdivided the margarine market into margarines for "consumer" and "industrial" use. In its examinations, the Board spotted an economic relationship between Ülker Group, which is the biggest player in the market for margarine for industrial use, and Topbaş Family, which would be the ultimate acquirer of GıdaSa due to its control of MGS. It concluded that MGS would attain a dominant position in the market for margarine for industrial use. The Board cleared this transaction on the following conditions: (i) divestiture of certain licenses of commercial brands of MGS to other companies not connected to the economic integration between Topbaş Family and Ülker Group within one year; (ii) appointment of an inspector to follow up on this divestiture; and (iii) clearance to be obtained from the Board for the divestiture of the relevant brands.
Doğan Gazetecilik / Vatan Decision (08-23/237-75, 10 March 2008)
In relation to the acquisition of Bağımsız Gazeteciler Yayıncılık A.Ş. and Kemer Yayıncılık ve Gazetecilik A.Ş. by Doğan Gazetecilik A.Ş. ("Doğan"), the Board concluded that Doğan's dominant position in the daily local political newspaper market would be strengthened as a result of the transaction. Therefore, the TCB granted a conditional clearance to the transaction stating that Vatan Gazetesi Brand, which is collectively composed of Bağımsız Gazeteciler Yayıncılık A.Ş. and Kemer Yayıncılık ve Gazetecilik A.Ş. subject to the acquisition, should be divested to other undertakings not connected to Doğan after being cleared from all its obligations and debts within two years after closure of the transaction. If Vatan Gazetesi Brand is not divested within the following two years, this transfer will be effected by way of a tender under the supervision of the Board. If the tender cannot be held, Doğan will not be able to use the name of Vatan Gazetesi in its periodical publications even though it would still own the brand and would only be able to sell the brand through the approval of the Board. The Board also obligated Doğan (i) to neither register nor use any brand names which include the name "Vatan" or which may be interpreted as being connected to Vatan, (ii) not to create competitive brands, and (iii) to preserve its current brands. The Board also stated that Doğan and Vatan were expected to actively compete afterwards in the relevant product market.
Procter & Gamble / Gillette Decision (05-55/836-228, 8 September 2005)
The Board deliberated over the product markets of toothpaste, manual toothbrushes and electric toothbrushes in the transaction concerning Procter & Gamble Company's acquisition of the Gillette Company, and concluded that the acquisition would significantly diminish active competition in the electric toothbrush market. Therefore, the Board decided that P&G Tüketim Malları San. ve Tic. A.Ş. should transfer its electric toothbrush business and also fulfill other commitments made to the European Commission.
Cookson / Foseco Decision (08-25/254-83, 20 March 2008)
In relation to the transaction on acquisition of the entire capital of Foseco Plc by Cookson Group Plc, the Board defined four different product markets. It concluded that competition in the iso-statically compressed product and sponge filter markets would weaken as the market share thresholds in these markets would be considerably exceeded. Therefore, the Board granted a clearance to the transaction on the conditions that (i) Foseco Plc transferred its iso-statically compressed product business, and (ii) Cookson Group Plc transferred its sponge filter business to third parties, as the parties had also undertaken as commitments to the European Commission.
Deutsche Lufthansa / Condor Decision (07-31/323-119, 11 April 2007)
Upon its examination of the acquisition of 50% of Güneş Express Havacılık A.Ş. ("Güneş") shares from Condor Flugdienst GmbH by Deutsche Lufthansa AG ("Lufthansa"), the Board concluded that Güneş's acquisition would be regarded as a cooperation agreement between Lufthansa and Türk Hava Yolları A.Ş., since both companies operated scheduled flights on certain routes, and these companies would jointly control Güneş upon consummation of the transaction. It therefore granted clearance on the condition that scheduled flights of the parties would be frozen for at least two years on the routes where high market shares were attained.
1. For a discussion on the limits of the Board's powers in relation to control of mergers and acquisitions, see AKSOY Nazlı, YAVUZ Şahin, "Birleşme ve Devralma İşlemlerinden Rekabet Kurulunun Denetim Yetkisinin Hukuki Niteliği ve Sınırları", Rekabet Dergisi 2009, Sayı 38, s.7 vd.
2. Doğan Group applied to the Council of State for a stay of execution and cancellation of the Board's decision to conditionally approve the acquisition of Vatan Gazetesi, arguing that the conditions stipulated therein were inapplicable and disproportionate.
3. See Intergum Decision, dated 4.12.2008 and numbered 08-69/1128-444, and Gıdasa Decision, dated 7.2.2008 and numbered 08-12/130-46.
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