Under Turkish competition law, joint ventures that do not meet all the criteria stated under section “Full-function Joint Ventures”, are titled as non-full-function joint ventures. For a joint venture to constitute a concentration, the operation must fulfil a set of requirements: (i) it must be under the joint control of its parent companies, (ii) it must function on the market on a lasting basis and (iii) it must be autonomous, financially/operationally independent from its parents. In the case that any of these elements is not present, the joint venture would be a non-full-function one. Non-full-function joint ventures may be considered an agreement leading to co-operation/coordination.
- Joint control
The company must be under the joint control of two or more parent companies. Joint control is a situation in which two or more companies have the possibility of exercising decisive influence on another company.
- Operating on the market on a lasting basis
The joint venture must be intended to operate on the market on a lasting basis. Therefore, a joint venture established only to last long enough for the realization of a temporary project cannot constitute a concentration. However, the fact that the parent companies have envisaged that the joint venture will be dissolved, should they enter into a disagreement or the venture fail, does not systematically prevent the latter from qualifying as a concentration. If there is no “dissolution provision” in case of failure, the joint venture will fulfil the long-lasting criteria, if its duration is long enough to bring about a change in the structure of the companies.
- Autonomy from the parent companies
The company must be financially and operationally independent, with sufficient resources and manpower. It must be able to fulfill all the functions of an autonomous economic entity. The joint venture is full function if it possesses the necessary resources to function independently on the market and, in particular, all the structural elements that are necessary for entities to function on a stand-alone basis (human resources, budget, commercial responsibility, assets, etc.).
The joint ventures that do not satisfy the foregoing conditions do not constitute a concentration. They are not subject to Turkish merger control.
Non-full-function joint ventures are assessed under the restrictive agreements theory as they can be a means for the parent companies to coordinate their behavior on the market, either between themselves, or with the joint venture itself. A joint venture is not in itself a restriction of competition, but it may be contrary to Article 4 of Law No. 4054 on the Protection of Competition (the “Competition Law”). In its competitive assessment, the Turkish Competition Board would analyze whether the parent companies are setting up mechanisms that have the same object or effect as restrictive agreements to fix prices or allocate markets and customers. Depending on circumstances, a non-full-function joint venture may be viewed as a coordinative or cooperative joint venture and fall under the Article 4 prohibition.
Even coordinative and/or cooperative joint ventures may benefit from individual exemption, if all the conditions laid down under Article 5 of the Competition Law are satisfied. Further information on the exemption regime can be found under section “Exemption”.
Due to its non-full-function character, the joint venture cannot benefit from an ex ante clearance before it is implemented. Thus, the companies may also make their own competitive assessment of the operation without applying for individual exemption for ensuring legal certainty.