Joint ventures cover a wide range of co-operative or coordinative agreements between companies. A joint venture is often associated with the formation of a company. Acquisition of joint control over an existing solely-controlled company would also qualify as a joint venture transaction.
The key characteristic of a joint venture is the joint control of a business venture by two or more independent firms. Joint ventures may be established for the purposes of cooperating on the basis of production, research & development or joint purchase, among other things. Joint ventures can be categorized as (i) full-function joint ventures and (ii) non-full-function joint ventures. Further explanation on the types of joint venture can be found under sections “Full-function JV(s)” and “Non-full-function JV(s)”.
Under Turkish competition law, the competitive assessment of joint ventures is at a crossroads between merger control and cartel regulation. Depending on the full-function character of the operation, a joint venture can be subject to either merger control or a general antitrust assessment.
If a joint venture is found to be a full-function joint venture, it will constitute a concentration under Article 7 of Law No. 4054 on the Protection of Competition (the “Competition Law”) and will thus be subject to merger control within the scope of Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Board, if the applicable turnover thresholds are met. In the case that the joint venture is considered to be non-full-function, it would be subject to an Article 4 test to see if it has an anti-competitive purpose or effect. Depending on circumstances, non-full-function joint ventures may or may not violate Article 4, which regulates anti-competitive agreements, decisions and concerted practices. If all of the individual exemption conditions are satisfied, a cooperative and/or coordinative non-full-function joint venture may benefit from the exemption regime.
For a joint venture to qualify as full-function and 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 operate on the market on a lasting basis and (iii) it must be autonomous and financially/operationally independent from its parents:
- 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 a 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 condition, 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.).
In case any of these elements is not present, the joint venture would not qualify as full-function and be subject to an Article 4 test.
Please also see the “merger control notification form” for further information.