Turkish Competition Authority (the "TCA") introduced certain amendments in relation to Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board on 24 February 2017.
With the amendments introduced under the new Communiqué No. 2017/2,
- Article 7(2) of the Communiqué relating to exemption for lack of affected market has been repealed.
- Article 8(5) of the Communiqué regarding the definition of the scope of "single transactions" has been amended; and
- A new provision concerning security purchases made in the stock exchange through serial transactions as Article 10(6) has been included in the Communiqué
TCA's Review Requirement of Notification Thresholds Repealed
Initially, the first limb of amendment repealed the mandatory biannual review of the notification thresholds by TCA. As known by the competition practitioners, Turkish Competition Law regime opted for a pre-merger mandatory notification system. In this system, a transaction that meets certain criteria has to be reported to the competition authority before it is consummated and a transaction falling below the criteria will be considered de minimis and thus will not be subject to merger filing. In practice, TCA have reviewed but not revised the notification thresholds regularly in every two years. The last time TCA revised notification thresholds was the end of 2012 with the Communiqué No. 2012/3. The main reason behind this is that TCA prefers the "catching net" created by the notification threshold to be rather wide in order to avoid that a transaction with a potential anti-competitive impact might escape notification thus scrutiny by TCA. Once a merger has received a clearance from TCA, it has almost no authority to review it unlike that of the U.S. Federal Trade Commission ("U.S. FTC") under section 7 of the Clayton Act, which allows the U.S. agencies to revisit mergers with no limitation in time if they can demonstrate that the transaction may have substantially lessened the competition. So the thresholds set forth in Article 7 of the Communiqué No.2010/4 remained as follows:
- Total turnovers of the transaction parties in Turkey exceed 100 million TL, and turnovers of at least two of the transaction parties in Turkey each exceed 30 million TL, or
- Global turnover of one of the transaction parties exceeds 500 million TL, and at least one of the remaining transaction parties has turnover in Turkey exceeding 30 million TL
Given that the turnover thresholds have not been revised by TCA over the last four years, it makes sense to strike it out of this Communiqué. As per our conversation with the experts of TCA, the turnover thresholds are not expected to change at least for the rest of this year.
Scope of Serial Transactions Rule Expanded
Secondly, TCA revised the provision in relation to "creeping acquisitions" or "serial transactions". Rules on serial transactions aim to avoid that by structuring a large transaction in smaller deals companies may circumvent merger review. TCA expanded the scope of "serial transactions" for the calculation of notification thresholds. Previously, two or more transactions carried out between the same persons or parties within a period of two years were considered as a single transaction. With the amendment introduced, the time period for calculation has been expanded from two to three years and the same persons or parties has been replaced with "the same persons or parties or by the same undertaking in the same relevant product market". Previously, two year time period was similar to the one adopted under Section 27(6) of the 2002 Enterprise Act. Theoretically speaking the introduction of three year time period will allow TCA to subsequently review more of transactions, which have already been consummated. However, in practice its impact on the workload of TCA would be deemed negligible. We are of the opinion that instead of tweaking this "aggregation model" adopted, introduction of "sectorial method" where serial transactions are used to acquire market power in certain industries e.g. electricity generation market, would be better to combat against anti-competitive creeping acquisitions.
New Rule Introduced in Relation to Acquisition of Control of Listed Companies
Lastly, TCA inserted an additional provision concerning the acquisition of control for stock exchange transactions. Accordingly, the new provision reads that "in case control is acquired as a result of security purchases made from different seller in the stock exchange through serial transactions, the transaction may be notified to the Board after its execution, provided the following conditions are met:
- The transaction should be notified to the Board without delay; and
- Voting rights connected to the acquired securities are not exercised, or are only exercised based on an exception to be granted by a Board decision in order to ensure the preservation of the full value of the investments
TCA also reserved the right to introduce terms and obligations on the parties to the transaction in its exception decision in order to ensure effective competition conditions. This provision is similar to the one introduced under Section 801.13 Hart-Scott-Rodino Act of 1976 ("HSR Act") in the US. However, instead of adopting the "size of transaction" and "size of persons" tests under the HSR Act, the TCA put forth a simpler change of control criteria for the implementation of this new rule. Please also note that TCA did not introduce any notification or waiting period requirements for its implementation.
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