Article 7 of Law No. 4054 on the Protection of Competition (the “Competition Law”) prohibits mergers and acquisitions that (i) create or strengthen a dominant position, and (ii) result in a significant lessening of competition in a market for goods or services. Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Board and Article 7 of the Competition Law identify which mergers and acquisitions are subject to the approval of the Turkish Competition Board (the “Board”) for becoming legally valid.

Mergers and acquisitions between companies operating in different relevant product markets are defined as non-horizontal mergers and acquisitions. Non-horizontal mergers and acquisitions include (i) vertical mergers and acquisitions and (ii) conglomerate mergers and acquisitions:

Vertical Mergers and Acquisitions

Vertical mergers and acquisitions are transactions between companies operating at different levels of the supply chain of a product or service. In the assessment of such transactions, the Board distinguishes the downstream and upstream levels of the markets in which the parties operate. Companies active in the upstream market are assumed to provide input to the companies active downstream.

The existence of an actual supply relationship between the parties is not a must. A theoretical or potential vertical relationship is sufficient to infer the existence of a vertical concentration.

Conglomerate Mergers and Acquisitions

Conglomerate mergers are those implemented between companies having neither a horizontal nor a vertical relationship. The Board’s approach is to limit the review of conglomerate mergers to the transactions where (i) the parties produce complementary products (or products that are remotely substitutable), and (ii) the parties produce products in the same series. For example, in the healthcare services market, mergers between hospitals providing services in different branches of medicine can be considered conglomerate.

When compared to horizontal mergers/acquisitions; vertical and conglomerate mergers/acquisitions are considered as less likely to decrease competition. Unlike horizontal mergers/acquisitions, they do not lead to the direct elimination or reduction of competition between companies operating in the same relevant market. However, in some cases, companies in the upstream or downstream market may be significant potential competitors for each other.

Non-horizontal mergers may have two types of negative effects on competition. These are unilateral effects and coordinated effects.

Unilateral effects basically emerge when non-horizontal mergers cause foreclosure. In the Guidelines, the concept of foreclosure refers to instances where actual or potential rivals' access to supplies or markets is hampered or eliminated as a result of the merger, thereby reducing the competitors' ability and/or incentive to compete. As a result of such foreclosure, the merged company and, possibly, some of its competitors may be able to profitably increase the prices. Mergers that lead to market foreclosure that may result in price increases are accepted to create a dominant position or strengthen an existing one, thereby significantly reducing competition.

Coordinated effects refers to the case where companies which were operating without harmonizing their behavior before the merger, are significantly more likely, post-merger, to raise prices or reduce competition through coordination. If companies in the market were already operating in coordination before the merger, a merger transaction realized in the market will help maintain the existing coordination in an easier, more stable and more effective manner. It will be assumed that, as a result of a merger with coordinated effects, joint dominant position will be created or strengthened in the relevant markets, thereby significantly reducing competition.

Please also see the “merger control notification form” for further information.