Answer ... It is a typical dominance test. Under Article 7 of Law 4054 and Article 13 of Communiqué 2010/4, mergers and acquisitions that do not create or strengthen a dominant position and do not significantly impede effective competition in a relevant product market within the whole or part of Turkey shall be cleared by the Competition Board. Accordingly, Article 5 of Communiqué 2010/4 defines the scope of notifiable transactions as follows:
- the merger of two or more undertakings; and
- the acquisition of, or the acquisition of direct or indirect control over, all or part of one or more undertakings by one or more undertakings or persons that currently control at least one undertaking, through the purchase of assets or all or part of its shares, through an agreement or through another instrument.
Pursuant to Article 6 of Communiqué 2010/4, the following transactions do not fall within the scope of Article 7 of Law 4054 and therefore are not subject to the approval of the Competition Board:
- intra-group transactions and other transactions that do not lead to a change in control;
- temporary possession of securities for resale purposes by undertakings whose normal activities are to conduct transactions in such securities for their own account or for the account of others, provided that the voting rights attached to such securities are not exercised in a way that affects the competition policies of the undertaking issuing the securities;
- acquisitions by public institutions or organisations further to the order of law, for reasons such as liquidation, winding up, insolvency, cessation of payments, concordat or privatisation; and
- acquisition by inheritance, as provided for in Article 5 of Communiqué 2010/4.
In addition, Article 2 of Communiqué 2017/2 has modified Article 8(5) of Communiqué 2010/4. Together with this amendment, the Competition Board can now consider transactions realised by the same undertaking concerned in the same relevant product market within a three-year period as a single transaction; this is likewise the case for two transactions carried out between the same persons or parties within a three-year period. Lastly, Article 3 of Communique 2017/2 introduced a new paragraph to Article 10 of Communique 2010/4, which provides an exemption for transactions in which control is acquired from different sellers through serial transactions on the stock exchange. Such transactions may be notified to the Competition Board after their execution, provided that:
- the transaction is notified to the Competition Board without delay; and
- the voting rights connected to the acquired securities are not exercised, in the absence of an exception granted by Competition Board decision, in order to preserve the full value of the investments.
This new provision is similar to Article 7(2) of the EU Merger Regulation. Although there was previously no similar specific statutory rule to this effect in Turkey, the case law of the Competition Board shed light on the matter.
Answer ... Communiqué 2010/4 and the Guideline on the Concept of Control provide a definition of ‘control’ which is similar to the definition of this term in Article 3 of the EU Merger Regulation (139/2004). Article 5(2) of Communiqué 2010/4 stipulates the following:
Control can be constituted by rights, agreements or any other means which, either separately or jointly, de facto or de jure, confer the possibility of exercising decisive influence on an undertaking. These rights or agreements are instruments which confer decisive influence; in particular, by ownership or right to use all or part of the assets of an undertaking, or by rights or agreements which confer decisive influence on the composition or decisions of the organs of an undertaking.
Pursuant to the presumption regulated under Article 5(2) of Communiqué 2010/4, control shall be deemed acquired by persons or undertakings that are the holders of the rights or entitled to the rights under the agreements concerned; or, while not being the holders of the rights or entitled to the rights under such agreements, that have de facto power to exercise those rights.
In short, much like the EU regime, under Law 4054, mergers and acquisitions resulting in a change of control are subject to the approval of the Competition Board. ‘Control’ is understood to be the right to exercise decisive influence over day-to-day management or long-term strategic business decisions, and can be exercised de jure or de facto. Thus, minority and other interests that do not lead to a change of control do not trigger the filing requirement. However, if minority interests acquired are granted certain veto rights that may influence management of the company (eg, privileged shares conferring management powers), then the nature of control may be deemed as changed (eg, a change from sole to joint control) and the transaction may be subject to filing.
Answer ... The acquisition of a minority shareholding may be covered by the merger control regime if and to the extent that it leads to a change in the control structure of the target entity. In other words, if minority interests acquired are granted certain veto rights that may influence the management of the company (eg, privileged shares conferring management powers), then the nature of control may be deemed as changed (from sole to joint control) and the transaction may be subject to filing. As specified under the Guideline on the Concept of Control, such veto rights must relate to strategic decisions on business policy and must go beyond ordinary ‘minority rights’ - that is, the veto rights normally accorded to minority shareholders to protect their financial interests.
Answer ... According to Article 5(3) of Communiqué 2010/4, joint ventures are also subject to notification to, and approval of, the Competition Board. Article 5(3) stipulates that joint ventures that permanently meet all functions of an independent economic entity are deemed notifiable if the merger control thresholds are met. Article 13/III of Communiqué 2010/4 provides that the Competition Board will carry out an individual exemption review of notified joint ventures that emerge as an independent economic unit on a lasting basis, but that have as their object or effect the restriction of competition between the parties or between the parties and the joint venture itself. The wording of the standard notification form also allows for such a review.
The Competition Board evaluates joint venture notifications according to two criteria:
- the existence of joint control in the joint venture; and
- the joint venture being an independent economic entity (ie, having adequate capital and labour, and an indefinite duration).
In recent years the Competition Board has consistently applied the ‘full-functioning’ test in determining whether a joint venture is an independent economic entity. If the transaction is found to bring about a full-function joint venture in view of the two criteria mentioned above, the standard dominance test is applied. Additionally, under the merger control regime, a specific section in the notification form aims to collect information to assess whether the joint venture will lead to coordination. Article 13/III of Communiqué 2010/4 provides that the Competition Board will carry out an individual exemption review of notified joint ventures that emerge as an independent economic unit on a lasting basis, but that have as their object or effect the restriction of competition between the parties or between the parties and the joint venture itself. The wording of the standard notification form also allows for such a review.
Answer ... Foreign-to-foreign mergers are caught under Law 4054 to the extent that they affect the relevant markets within the territory of Turkey. Mere sales into Turkey may trigger the notification requirement to the extent that the thresholds are met. Article 2 of Law 4054 sets out the ‘effects’ criterion: that is, whether the undertakings concerned affect goods and services markets in Turkey. Even if the undertakings concerned have no local subsidiaries, branches, sales outlets or similar in Turkey, the transaction may still be subject to the Turkish competition legislation if the goods or services of such undertakings are sold in Turkey and thus have effects on the relevant Turkish market.
Additionally, the foreign-to-foreign nature of the transaction does not prevent the imposition of an administrative monetary fine (for violation of either the suspension requirement or Article 7), in and of itself. In case of failure to notify (ie, closing before clearance), foreign-to-foreign mergers are caught under Law 4054 to the extent that they affect the relevant markets within the territory of Turkey.
As an example, in Simsmetal/Fairless (09-42/1057-269, 16 September 2009), in which both parties were exporters into Turkey, the Competition Board imposed an administrative monetary fine on acquirer Simsmetal East LLC under the first paragraph of Article 16 of the Competition Law, totalling 0.1% of its gross revenue generated in fiscal year 2009, because the transaction closed before the Competition Board’s approval had been obtained. Similarly, Longsheng (11-33/723-226, 2 June 2011), Flir Systems Holding/Raymarine PLC (10-44/762-246, 17 June 2010) and CVRD Canada Inc (10-49/949-332, 8 July 2010) are instances in which the Competition Board imposed a turnover-based monetary fine based on violation of the suspension requirement in a foreign-to-foreign transaction.
Answer ... Communiqué 2012/3 on the Amendment of Communique/4 on the Mergers and Acquisitions Subject to the Approval of the Competition Board amended the turnover thresholds that a given merger or acquisition must exceed in order to be subject to notification for the purposes of the Turkish merger control regime. Following the enactment of the amendments, the thresholds under Article 7 are as follows:
- The aggregate Turkish turnover of the transacting parties exceeds TL 100 million and the Turkish turnover of at least two of the transacting parties each exceeds TL 30 million; or
- in acquisitions, the value of the transferred Turkish assets or businesses exceeds TL 30 million (Article 7(b)(i)); or
- in mergers, the Turkish turnover of any of the merging parties exceeds TL 30 million and the worldwide turnover of at least one other party to the transaction exceeds TL 500 million (Article 7(b)(ii)).
As seen above, the tests set out under Article 7(b) include two separate tests. Article 7(b)(i) applies only to acquisitions (and joint ventures), while Article 7(b)(ii) applies only to mergers.
Where the transaction does not meet the thresholds set out above, the transaction will not be deemed notifiable.
In addition, the Competition Authority recently introduced Communiqué 2017/2 Amending Communiqué 2010/4 on Mergers and Acquisitions Requiring the Approval of the Board. One of the amendments introduced is the removal of Article 7(2) of Communiqué 2010/4, which stated that “The thresholds…are re-determined by the Board biannually”. Thus, the Competition Board is no longer required to review the turnover thresholds for concentrations every two years.
Answer ... No. Additionally, there is no de minimis exception or other exceptions under the Turkish merger control regime.