In the broadest sense, privatization is the transfer of the ownership and management of economic production units from the public sector to the private sector.
In the privatization of natural monopolies and/or legal monopolies, it is important to ensure the existence of efficient competition post-transaction. A well-designed privatization may serve to increase both the income from the privatization and the functionality of the market mechanism through the protection of competitive conditions within the relevant market.
Privatization transactions are governed by article 7 of Law No. 4054 on the Protection of Competition (the “Competition Law”), titled "Mergers and Acquisitions". In consideration of the separate legal process applicable to privatizations as well as in light of the decisive effect of privatizations on the competitive structure of the relevant markets, the Board issued a separate communiqué, which is applicable simultaneously with and in addition to the general merger control communiqué: the Communiqué No. 2013/2 on the Procedures and Principles to be Pursued in Pre-Notifications and Authorization Applications to be Filed with the Competition Authority in order for Acquisitions via Privatization to Become Legally Valid (“Communiqué No. 2013/2”), which was issued to regulate the principles and procedures to be followed in privatizations.
Under the Communiqué No. 2013/2, the merger control review of privatization transactions is composed of two stages: (i) the pre-notification stage and (ii) the authorization stage. Before the tender specifications are announced to the public, pre-notification must be made before the Turkish Competition Authority (“the Authority”). During the pre-notification stage, the Turkish Competition Board (“the Board”) evaluates the potential results of the privatization within the relevant market and the status of any legal and de facto concessions that might be held by the target company. Then, it prepares its report, which would serve as a basis for the tender specifications document. Basically, this report forms the phase in which the Authority lays out its recommendations concerning what can be done to ensure a more competitive market.
According to Communiqué No. 2013/2, it is necessary to make a pre-notification to the Authority before tender conditions are announced to the public, if the entity being privatized has a market share over 20%, generated a turnover exceeding 30 million Turkish Lira (approximately EUR 5.2 million and USD 6.2 million), or enjoys statutory or de facto privileges not accorded to private firms in the relevant market. This pre-notification stage applies before the tender is announced to the public, so that the Board can provide its views. The Board’s views may be taken as a basis in the preparation of the tender documents.
In the case of a public offer, filing can be performed at a stage where the documentation at hand adequately proves the irreversible intention to finalize the contemplated transaction.
At the authorization stage, the authorization application of the Privatization Administration is submitted to the Authority in the form of independent files for each bidder to be presented by the Privatization Administration to the High Board of Privatization. These applications are also included in the draft decision of the Privatization High Board. At this stage, the acquisition is reviewed on the basis of general merger control rules and principles.