Mergers and acquisitions, which are frequently used by companies in their growth strategies on a global and national scale, directly affect not only the structure of the parties involved but also the competitive balance by leading to market concentration. For this reason, such transactions must be closely monitored by commercial, legal, and competition law.
In Turkey, the authority to conduct this oversight lies with the Competition Authority. Article 7 of the Law on the Protection of Competition No. 4054 (RG: 13.12.1994 / 22140) ("Law No. 4054") and the Communiqué No. 2010/4, which replaced the previous Communiqué No. 1997/1 as of January 1, 2011, was published in the Official Gazette dated October 7, 2010 and entered into force on January 1, 2011, pursuant to the Communique on Mergers and Acquisitions Requiring Approval from the Competition Board No. 2010/4 ("Communique"), mergers and acquisitions of certain characteristics and sizes are subject to notification to the Competition Authority, and the transaction only becomes valid with the approval of the Competition Board ("Board").
In this context, it is of great importance that the transactions in question are carried out in accordance with the relevant regulations in terms of their legal validity and the regularity of capital markets.
1. What are Mergers and Acquisitions?
The concepts of mergers and acquisitions are important structural changes in terms of both commercial law and competition law, and they entail different legal implications. A merger refers to two or more businesses legally and physically merging to form a new business or merging within an existing business, while an acquisition refers to one business directly or indirectly taking control of another business. Mergers and acquisitions that result in a permanent change in control are subject to supervision under Article 7 of Law No. 4054 and the relevant regulation issued pursuant thereto, as they may significantly reduce competition.
Pursuant to Article 7 of Law No. 4054.
"The merger of one or more undertakings, primarily with the aim of creating a dominant position or strengthening an existing dominant position, or the acquisition by any undertaking or person of all or part of the assets or shares of another undertaking, or of the right to manage, except in cases of inheritance, is unlawful and prohibited.
The Board shall announce in its circulars which types of mergers and acquisitions require notification to the Board and approval to be legally valid."
Pursuant to Article 5 of the Communiqué:
"(1) In a manner that will bring about a permanent change in control.
- The merger of two or more undertakings, or
- The direct or indirect acquisition of control, shares, or assets of one or more undertakings, either in whole or in part, through purchase, contract, or other means, by one or more undertakings or by one or more people who already control at least one undertaking,
shall be deemed a merger or acquisition under Article 7 of the Law."
Accordingly, transactions that exceed certain thresholds and create a permanent change in control must be reported to the Board and approved. In this way, the competitive effects of mergers and acquisitions on the market are assessed in advance and harm to competition is prevented.
2. Reporting Obligations and Turnover Thresholds
The notification obligation in merger and acquisition transactions is clearly regulated in Article 10 of Law No. 4054. Pursuant to Article 10 of Law No. 4054, mergers and acquisitions that exceed the thresholds determined by the Board in its communiqué and result in a permanent change of control must be notified by the Board prior to the transaction. This notification may be made jointly by the parties, by either party, or by their authorized representatives, and the party making the notification is obligated to inform the other party.
In addition, this notification must contain all requested information and documents fully and accurately, and those who make false or misleading statements in the notification form will be subject to administrative fines in accordance with Article 16 of Law No. 4054. Communication No. 2010/4 has been updated in terms of turnover thresholds by Communication No. 2022/2, published in the Official Gazette dated March 4, 2022, and numbered 31768. Within this scope, certain turnover criteria have been determined as notification thresholds in the Communication currently in force:
According to Article 7 of the Communiqué:
"
- If the total turnover of the parties to the transaction in Turkey exceeds 750 million TL and the turnover of at least one of them in Turkey exceeds 250 million TL; or
- If the turnover of the acquired undertaking in Turkey exceeds 250 million TL and the turnover of the acquiring party worldwide exceeds 3 billion TL,
the transaction must be reported to the Board and cannot become legally valid without its approval."
The 2024/2 Amendment Communiqué also introduced the concept of "technology undertakings" and imposed an additional notification requirement for transactions involving such entities.
Technology undertakings are defined to include companies or assets operating in the fields of digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agricultural chemicals, and health technologies.
According to the amendment, if a technology undertaking that operates in the Turkish market, conducts R&D activities in Turkey, or offers services to Turkish users is subject to an acquisition, the standard turnover thresholds (i.e., 250 million TRY) will not be required for the notification obligation to apply. Such transactions will automatically be subject to notification, thereby ensuring stricter scrutiny of mergers and acquisitions in the technology sector.
The calculation of turnover is covered in Articles 8 and 9 of the Communiqué.
If mergers and acquisitions are not reported, the Competition Board will investigate the transaction when it becomes aware of the merger or acquisition. If the transaction under review is found not to be in violation of the Communiqué because of the investigation, permission for the transaction is granted, but a penalty is imposed on the undertaking for failure to notify. If the transaction is found to be in violation of the Communiqué, the Board may take interim measures until a final decision is made on the transaction, if necessary. This situation clearly demonstrates the importance of the notification obligation and the Board's role in maintaining order in the market.
3. Approval Process in Mergers and Acquisitions
Article 10 of Law No. 4054 regulates in detail the Board's authority to grant permission for mergers and acquisitions and the examination process.
Pursuant to Article 10 of Law No. 4054:
"Merger or acquisition agreements falling under the scope of Article 7 shall be notified to the Board, and within fifteen days of such notification, the Board shall conduct a preliminary review and decide either to approve the merger or acquisition or to refer the transaction to a final review. In the latter case, the Board shall notify the parties concerned in writing of its preliminary objection, stating that the transaction shall be suspended and may not be implemented until the Board issues its final decision. along with any other measures it deems necessary, to the parties concerned in accordance with the prescribed procedures. In such cases, the provisions of Articles 40 to 59 of this Law shall apply.
If the Board fails to respond to the application regarding the merger or acquisition within the prescribed timeframe or takes no action, the merger or acquisition agreements shall enter into force and acquire legal validity 30 days after the date of notification."
Notifications made to the Board by the parties to the transaction are evaluated within 30 calendar days during the preliminary review stage. If the Board does not issue a negative decision at the end of this period, the transaction is deemed to be approved, and the parties may continue with their transactions. However, in cases deemed necessary within the scope of the Board's discretionary authority, it is possible to extend this period by conducting an in-depth review of the transaction. Such an examination involves a comprehensive assessment of whether the transaction significantly affects the competitive environment.
The Board's decision dated September 14, 2023, and numbered 23-43/820-291 regarding Coca-Cola/Anadolu Etap constitutes an important example of the authorization and notification obligation in Turkey. When the Board identifies the risk of creating or strengthening a dominant position in the markets, it may exercise its authority to reject the approval. The approval process is not merely a legal requirement but is also considered a strategic tool for safeguarding market competition.
4. Sanctions
In the event of a breach of the above obligations, the Board has the authority to apply various sanctions after evaluating the content of the transaction. The most common sanctions are administrative fines imposed for breach of the notification obligation or completion of the transaction without obtaining permission (gun-jumping). Pursuant to Article 16 of Law No. 4054,
"Administrative fines of up to one thousandth (0.1%) of the relevant undertakings' turnover in Turkey in the previous fiscal year may be imposed for unauthorized mergers and acquisitions."
Fines are calculated based on the parties' annual gross revenues to the transaction and may vary depending on the severity of the violation.
The Board may not only impose monetary penalties but also take structural measures to eliminate the anti-competitive effects of the transaction if it is necessary. This may result in the transaction being declared partially or completely invalid. Except for transactions below the turnover thresholds specified in the Communique, in mergers and acquisitions carried out without notification, even if the transaction is subsequently approved, a monetary penalty remains unavoidable due to the failure to notify.
Pursuant to Article 11 of Law No. 4054:
"In cases where a merger or acquisition that is subject to mandatory notification has not been notified to the Board, the Board shall, upon becoming aware of the transaction in any manner, initiate an investigation into the merger or acquisition on its own initiative. As a result of the investigation.
If it determines that the merger or acquisition does not fall within the scope of the first paragraph of Article 7, it authorizes the merger or acquisition but imposes a monetary penalty on the parties for failing to notify the relevant authorities.
If it determines that the merger or acquisition falls within the scope of the first paragraph of Article 7, it shall order the termination of the merger or acquisition, along with a monetary penalty; the removal of all unlawful factual situations; the return of any shares or assets acquired, if possible, to their former owners, in accordance with the terms and conditions and within the timeframe determined by the Board; if this is not possible, their transfer and assignment to third parties; .the acquirers shall be prohibited from participating in the management of the acquired undertakings in any capacity. until such shares or assets are transferred to their former owners or third parties; and the Board shall decide on any other measures it deems necessary."
One of the decisions of the Board in Turkey on this matter, numbered 21-24/287-126 and dated May 6, 2021, concerns Brookfield/JCI. Although the merger had already been completed, the Board reviewed the transaction retrospectively and found that it did not distort competition but imposed a turnover-based fine on the undertaking for completing the transaction without notification. In this context, sanctions serve not only as a deterrent but also as a regulatory function. This ensures that undertakings are mindful of their obligations under competition law.
5. Gun-Jumping (Actual Completion of the Transaction Without Obtaining Approval)
In merger and acquisition transactions, compliance with the notification and approval obligations set forth in Articles 10 and 11 of Law No. 4054 is mandatory. In this context, the actual implementation of the transaction without notifying the Competition Board or obtaining its approval, commonly referred to as 'gun-jumping,' is a violation of competition law and has the potential to cause serious adverse effects on the competitive market. Article 11 of Law No. 4054 provides that administrative fines may be imposed for such violations and that the Board may impose sanctions up to and including the cancellation of the transaction in cases where it is necessary.
A similar approach is adopted in the international arena. In the European Commission's decision on Altice/Portugal Telecom (2018) the fact that the transaction was implemented without the approval of the Competition Board was considered "gun-jumping" and was met with serious sanctions. This decision is one of the most striking examples of the European level approach, based on the rationale that conducting a transaction without approval could harm competitive order, and it demonstrates that many countries share the same sensitivity in similar situations. This reaffirms that breaches of the notification and approval requirement carry significant legal consequences.
The imposition of sanctions for gun-jumping practices is a critical tool for ensuring compliance with competition law. This encourages businesses to act transparently and in accordance with the law during merger and acquisition processes, while also enabling market regulators to exercise effective oversight.
Notification and approval requirements for mergers and acquisitions are fundamental control mechanisms aimed at effectively protecting competition. In this context, it is imperative that businesses act in accordance with legal obligations, both for transaction security and for the sustainability of the competitive order. Therefore, timely and complete notification in merger and acquisition processes not only fulfills legal obligations but also contributes to the preservation of a sustainable competitive environment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
