The Turkish Competition Authority’s Arsem / Kars Çimento Decision

A. Introduction

The Turkish Competition Authority ("TCA") recently published its reasoned decision concerning the acquisition of Kars Çimento Sanayi ve Ticaret AŞ ("Kars Çimento") by Arsem Madencilik Enerji Sanayi ve Ticaret AŞ ("Arsem"). The decision followed a Phase II review and resulted in conditional clearance subject to package of behavioural commitments.

The decision is noteworthy because the TCA identified substantial horizontal and vertical competition concerns arising from the transaction. In certain geographic areas, the combined market share of the parties reached approximately 85 to 95 percent. The TCA eventually concluded that the transaction would significantly impede effective competition under Article 7 of Law No. 4054.

The case handlers reached the same conclusion as regards the competitive effects of the transaction but differed from the Turkish Competition Board ("TCB") on the appropriate outcome. Their recommendation was to reject the behavioural commitments offered by Arsem on the ground that they would not effectively address the competition concerns and, consequently, to prohibit the transaction. The TCB nevertheless decided to clear the transaction subject to commitments.

This difference is important for understanding the decision. A transaction producing market shares in the range of 85 to 95 percent could reasonably have been expected to result in prohibition even if it generated certain economic or social benefits. The TCB chose a different route.

The decision considers investment, productive efficiency, exports, employment, regional development and other economic and social benefits expected from the transaction alongside the competition concerns. The commitments then play a central role in reconciling these considerations. Some of them seek to control the exercise of market power following the transaction. Others seek to ensure that the economic and social benefits relied upon in the assessment are materialized.

In this respect, Arsem / Kars Çimento provides an important indication of how the TCB may approach the relationship between traditional merger control and broader economic and social policy considerations. It also raises a more fundamental question regarding the role of remedies. Where competition and other policy objectives point in different directions, can behavioural commitments be used to regulate the conduct of the merged undertaking in a manner that seeks to reproduce some of the outcomes that competition would otherwise be expected to deliver?

B. Background of the Transaction

The transaction concerned the acquisition of Kars Çimento by Arsem. Kars Çimento operates a cement plant located approximately 10 kilometres from the city of Kars and produces grey cement and clinker. It supplies the domestic market and also exports products to Georgia and Nakhchivan. Arsem was established for the purposes of the transaction and is controlled by the Uçar family, which also controls Arkoz Madencilik Enerji Sanayi ve Ticaret AŞ ("Arkoz"). Arkoz operates a cement plant in Ağrı.

The transaction was notified to the TCA in June 2025. During its review, the TCA obtained information from the parties, competitors, customers and industry participants. Several complaints raising competition concerns were also submitted to the TCA. Following its preliminary assessment, the TCB decided on 25 September 2025 to initiate a Phase II review.

The competitive assessment principally concerned grey cement and clinker. The transaction also gave rise to vertical relationships between grey cement and clinker and between grey cement and aerated concrete.

C. The TCA's Competitive Assessment

C.1. Horizontal concerns in grey cement

The main competition concerns arose in the grey cement market. The geographic dimension was particularly important because cement is economically difficult to transport over long distances. Transportation costs therefore limit the competitive constraint that more distant cement plants can exercise. The TCA considered different geographic methodologies. Its analysis showed particularly high levels of concentration around Kars, Ağrı and Iğdır. In the areas calculated on the basis of a 150 kilometre radius and the TCA's 10 percent sales criterion, the parties' combined market shares reached approximately 85 to 95 percent.

The concentration indicators pointed in the same direction. The TCA calculated post-transaction HHI levels of approximately 8,621, with an increase exceeding 4,000 points. The TCA also observed that competing suppliers had relatively low market shares or limited available capacity.

The TCA did not consider entry or buyer power sufficient to address these concerns. Entry into cement production requires substantial investment and time. Customers also had limited ability to switch suppliers because transportation costs significantly reduced the number of economically viable alternatives.

Against this background, the competition concerns were substantial. This is worth emphasising because the decision should not be understood as a case in which relatively limited competition concerns were outweighed by broader policy considerations. The transaction was capable of creating a market structure close to monopoly in certain geographic areas. The TCB's ultimate decision is therefore particularly significant precisely because the counterfactual of prohibition was a realistic, and arguably conventional, outcome of the competitive assessment.

C.2. Clinker and vertical concerns

The TCA reached a different conclusion regarding the horizontal overlap in clinker. Both parties mainly used the clinker they produced internally for cement production and their merchant sales were limited. The TCA therefore did not expect the transaction to significantly impede effective competition horizontally in clinker. Clinker nevertheless gave rise to a vertical concern. Given the very high shares that the merged undertaking would hold in cement, the TCA considered whether competing cement producers could face restrictions in obtaining clinker.

A further vertical relationship existed between cement and aerated concrete because the Uçar family also controlled an aerated concrete producer. The TCA considered the risk more limited in this respect, although it still assessed the possibility of input foreclosure because cement constitutes an important input for aerated concrete. The overall competitive picture was therefore difficult to reconcile with unconditional clearance. The central question became whether the commitments offered by Arsem could provide an adequate response to these concerns.

D. The Commitment Package

An important aspect of the decision is the nature and breadth of the commitments accepted by the TCB. The case handlers considered that the behavioural commitments offered by Arsem would not effectively eliminate the competition concerns created by the transaction. They therefore recommended that the commitments be rejected and the transaction prohibited. The TCB did not follow this recommendation and considered the final commitment package sufficient to permit the transaction. This difference also illustrates the difficulty presented by the case. Behavioural commitments were being relied upon in a transaction producing exceptionally high levels of concentration. Their role therefore went beyond dealing with a relatively narrow concern surrounding the implementation of an otherwise unproblematic transaction.

D.1. Price, output and supply commitments

One of the most significant commitments concerns pricing. For the 2026 to 2030 period, increases in cement prices are limited by reference to the arithmetic average of the relevant consumer and producer price indices. The mechanism is intended to constrain the ability of the merged undertaking to increase prices following the transaction. The package also contains commitments relating to capacity utilisation and continuity of supply. Arsem committed to maintaining the utilisation rate of the plant at no less than 90 percent. The commitments further seek to ensure that domestic demand, particularly demand in Kars and Iğdır, continues to be met even where capacity problems arise. These obligations are significant from a merger control perspective. They do not alter the market structure created by the transaction. Instead, they seek to constrain how the undertaking resulting from that market structure may behave. Price, production and supply, which would ordinarily be disciplined by competitive pressure, become subject to rules contained in the remedy package.

D.2. Investment, efficiency and exports

A second group of commitments concerns investment and productive efficiency. Arsem committed to investments intended to modernise the Kars Çimento plant, increase production efficiency, reduce energy consumption and lower emissions. The decision also considers the expected extension of the production season and the resulting effects on efficiency. Exports constitute another element of the package. Arsem submitted increasing export targets, particularly concerning Georgia and the wider Caucasus region. These targets are accompanied by reporting obligations and are designed to operate without compromising domestic supply. The relevance attributed to these factors shows that the TCB's analysis was not confined to the immediate price effects of the transaction. Productive efficiency, capacity utilisation, international competitiveness and exports form part of the wider economic picture considered in the decision.

D.3. Distribution and non-discrimination

The commitments also regulate the relationship between the merged undertaking and its dealers and customers. Arsem committed to continue working with existing dealers on the same conditions and not to impose exclusivity, priority rights or similar restrictions. Changes to dealer agreements must be based on objective criteria. Commercial conditions including prices, maturity periods, discounts and transportation must similarly be based on objective criteria. The package also contains reporting obligations that allow the TCA to monitor the implementation of these rules.

These commitments seek to limit the ability of the merged undertaking to discriminate between customers or use its position to restrict access to cement. As with the pricing and supply commitments, they operate as continuing rules governing the commercial behaviour of the merged undertaking.

E. Regional Development and Employment

The commitments relating to employment and regional development are particularly relevant to understanding the broader policy dimension of the decision. Arsem committed to retain existing employees except where there are legitimate grounds for termination and to increase employment at the plant by 10 percent. The commitment identifies the areas in which additional employment will be created.

The TCB considered these commitments in terms of employment security and their contribution to the regional economy. The decision also refers to the expected increase in demand for transportation, spare parts, maintenance and other services, which may generate additional economic activity in the region.

The package further contains initiatives involving local authorities, chambers of industry and universities. These relate to regional development, education, local suppliers and employment opportunities.

The treatment of these considerations is important because they are difficult to characterise purely as responses to the competition concerns identified in the decision. An increase in employment, for example, does not itself replace the competitive constraint lost through a transaction producing market shares of up to 85 to 95 percent. This also distinguishes the approach in Arsem / Kars Çimento from the conventional treatment of efficiencies in merger control. The European Commission's Draft Merger Guidelines require efficiencies to be verifiable, merger-specific and beneficial to consumers. Although the Draft Guidelines recognise that certain efficiencies may generate benefits extending to society at large, their framework continues to focus on whether substantially the same consumers that suffer from the reduction in competition receive the relevant benefits. Employment creation and regional economic development are therefore conceptually different from conventional efficiencies that directly offset the competitive harm identified in the affected market. Their prominent role in Arsem / Kars Çimento reinforces the impression that the TCB was considering a broader set of policy objectives than efficiencies in the strict merger control sense.

F. Behavioural Remedies as a Form of Market Regulation

The combination of commitments accepted in Arsem / Kars Çimento creates an interesting parallel with economic regulation. The transaction results in substantial concentration in a regional market where entry is difficult and alternative suppliers exercise limited competitive pressure. Rather than preventing that concentration through prohibition or a structural solution, the TCB accepted a framework that regulates several dimensions of the merged undertaking's future conduct.

The pricing commitment constrains price increases. The capacity commitment requires a minimum level of utilisation. Supply obligations seek to preserve the availability of cement in the relevant region. Non-discrimination obligations govern relations with dealers and customers. Investment commitments concern the productive performance of the assets. Reporting requirements allow the TCA to monitor compliance with these obligations.

Taken together, these mechanisms resemble tools historically used in regulated markets. This comparison can be seen particularly clearly in sectors that moved from public monopolies towards private ownership and liberalisation. Telecommunications and energy provide useful examples. Where market structure did not immediately permit effective competition, regulation was used to constrain market power through rules relating to prices, access, non-discrimination, investment and supply. From this perspective, the decision can be understood as accepting regulation as a second-best mechanism in circumstances where the TCB considered that the wider benefits associated with the transaction should be preserved despite the loss of competition resulting from the concentration.

G. Balancing Competition with Economic and Social Policy Objectives

The broader significance of Arsem / Kars Çimento lies in the way the decision approaches the relationship between competition and other economic and social policy objectives.

The starting point remains Article 7 of Law No. 4054 and the significant impediment to effective competition test. The TCB conducted a conventional analysis of market shares, concentration, barriers to entry, capacity, customer alternatives and vertical foreclosure. That analysis produced serious concerns. The decision then goes further by considering productive efficiency, investment, exports, international competitiveness, employment and regional development as part of the overall assessment.

This creates a difficult policy question. At some level of concentration, the social and economic benefits of a transaction may reasonably be considered insufficient to justify allowing the loss of competition. A merger producing market shares of approximately 85 to 95 percent is an obvious case in which this question arises. Indeed, that was essentially the position taken by the case handlers. The TCB chose instead to attempt to reconcile the competing considerations through commitments.

The commitments operate in two directions. Price, supply, capacity and non-discrimination obligations seek to control the competitive consequences of the transaction. Investment, employment, export and regional development commitments seek to secure the broader benefits expected from it. The result is therefore more nuanced than simply allowing industrial policy considerations to prevail over competition law. The TCB accepted the concentration but sought to regulate its consequences and to make the expected wider benefits enforceable. Whether that balance proves sustainable is ultimately an empirical question.

H. Why This Decision Matters and Conclusion

Arsem / Kars Çimento may become an important reference point for the future relationship between merger control, industrial policy and economic regulation in Türkiye. The competitive assessment itself was relatively clear. The transaction resulted in exceptionally high concentration in certain geographic areas. Entry was difficult, customers had limited alternatives and the TCA identified horizontal and vertical concerns. The case handlers considered those concerns sufficiently serious to recommend prohibition despite the commitments offered by the notifying party. The TCB nevertheless chose conditional clearance.

In this respect, the decision illustrates a possible model for transactions in which competition policy and broader economic policy considerations pull in different directions. Instead of treating the choice as necessarily binary, the TCB used commitments to construct an intermediate solution.

The decision should not necessarily be read as establishing that sufficiently broad economic or social benefits can justify any degree of concentration. The facts of the case themselves show why such a proposition would be difficult to sustain. Rather, the decision demonstrates the TCB's willingness, at least in this case, to explore whether behavioural regulation can make it possible to preserve wider economic benefits while limiting the consequences of a substantial reduction in competition.

The five-year review will be particularly important in this respect. It may eventually allow an assessment of whether prices, output, investment, exports, employment and regional economic activity developed in the manner anticipated by the TCB and whether the behavioural framework provided an effective substitute for the competitive pressure lost through the transaction.

For that reason, Arsem / Kars Çimento may eventually provide something relatively rare in merger control. It may offer an opportunity to examine empirically whether regulation can operate as a workable second-best alternative when a transaction with significant economic and social policy benefits also produces serious competition concerns.

The longer-term significance of the decision will depend on whether this approach remains specific to the circumstances of Kars Çimento or develops into a broader feature of Turkish merger control. For the moment, however, the decision provides a clear indication that the TCB is prepared to consider regional development, employment, exports, productive efficiency and international competitiveness alongside traditional competition concerns and, where it considers this appropriate, to use behavioural commitments as the mechanism for managing the tension between them.

REFERENCE: Turkish Competition Authority, Arsem / Kars Cement, Decision No. 25-42/1035-591, 11 November 2025.