The Law on the Protection of Competition ("Law") aims to prevent all kinds of legal transactions and behaviors such as agreements, transactions, mergers, acquisitions, decisions and practices that prevent, restrict or limit competition between undertakings operating within the borders of the Republic of Turkey or affecting the goods and services markets operating within the borders of the Republic of Turkey.

Even though mergers and acquisitions between undertakings may lead to situations such as price reduction or quality increase in a way to favor the consumer, mergers and acquisitions may also lead to a dominant position of the undertakings and a decrease in effective competition in the market. For this reason, pursuant to Article 7 of the Law, "It is illegal and prohibited for one or more undertakings to merge, or for an undertaking or a person to acquire – except by inheritance – assets, or all or part of the partnership shares, or instruments conferring executive rights over another undertaking, where these would result in a significant lessening of effective competition within a market for goods or services in the entirety or a portion of the country, particularly in the form of creating or strengthening a dominant position". This article prohibits mergers or acquisitions that may lead to a decrease in competition by strengthening the dominant position or creating a dominant position.

In addition, for mergers and acquisitions between undertakings that exceed certain thresholds to become valid, an application should be obtained from the Competition Board ("Board"). The procedures and principles regarding the application for the Board's authorization are regulated by the Communiqué Concerning Mergers and Acquisitions Calling for the Authorization of the Competition Board numbered 2010/4 ("Communiqué").

Articles 5 and 6 of the Communiqué regulate the mergers and acquisitions that are and are not considered as mergers and acquisitions, leaving no doubt on the subject. Accordingly, in the event of at least one of the following, provided that such merger or acquisition is likely to result in a permanent change in control: (i) merger of two or more undertakings; or (ii) acquisition of the direct or indirect control of all or part of one or more undertakings by one or more undertakings or by one or more persons who currently control at least one undertaking, through the acquisition of shares or assets, by contract or otherwise, this transaction shall be considered as a merger or acquisition transaction under the Law.

As stated in the Communiqué, the following situations shall not be considered as mergers and acquisitions under the Law and shall not be subject to the authorization of the Board:

  1. Intra-group transactions and other transactions which do not lead to a change in control,
  2. In case of undertakings whose ordinary operations involve transactions with securities on their own behalf or on behalf of others; temporarily holding on to securities purchased for resale purposes, provided that the voting rights from those securities are not used to affect the competitive policies of the undertaking which issued the securities in question,
  3. Acquisition of control by a public institution or organization by operation of law and due to divestment, dissolution, insolvency, suspension of payment, bankruptcy, privatization or a similar reason,
  4. Occurrence of the situations listed in Article 5 of this Communiqué as a result of inheritance.

Even if the transaction is considered as a merger or acquisition transaction as stated in Article 5 of the Communiqué, certain thresholds have been introduced in the Communiqué for the transactions requiring authorization from the Board, and it is regulated that the mergers and acquisitions above these thresholds should obtain authorization from the Board. Pursuant to the amendment to the Communiqué published in the Official Gazette dated 04.03.2022 and numbered 31768, the turnover thresholds for the transactions that require the Board's authorization have been increased and accordingly, the Board's authorization should be obtained for mergers and acquisitions exceeding the following thresholds:

  1. The total Turkish turnover of the parties to the transaction exceeding seven hundred and fifty million Turkish Lira and the Turkish turnover of at least two of the parties to the transaction above two hundred and fifty million Turkish Lira each, or
  2. In takeover transactions, the endorsement of the asset or activity subject to the transfer, and in merger transactions, the endorsement of the Turkish turnover of at least one of the transaction parties exceeding two hundred and fifty million Turkish Lira and the global turnover of at least one of the other transaction parties exceeding three billion Turkish Lira.

In addition, with the regulation made in the Communiqué, in transactions related to the acquisition of technology enterprises operating in the Turkish geographical market or having R&D activities or providing services to users in Turkey; It is regulated that two hundred and fifty million Turkish Lira thresholds should not be sought and an exception has been made to the above rule for technology enterprises. By adding the definition of technology company to the Communiqué for the first time, it is aimed that mergers and acquisitions of any amount in the technology sector shall be subject to the Board's review and unfair competition in the sector shall be prevented. In fact, as stated in the Board's Annual Report for the year 2021, the technology sector was among the top five sectors that were examined for competition violations in 2021, and the ratio of applications from the food, machinery industry, information technologies and platform services, healthcare services, and chemical and mining sectors within the competition violation files is approximately 58%. In this report, it is also stated that in the information technologies and platform services sector, the Board decided on 8 cases which violated the law in 2021 and fined a total of 296.2 million Turkish Lira in administrative fines. In addition, the Mergers and Acquisitions View Report for the year 2021, also prepared by the Board, clearly shows that the number of mergers and acquisitions in the technology sector has increased.

As stated in the Board's Annual Report for the year 2021, the sectors with the highest number of investigations made are chemicals, mining, technology, food industry and machinery industry as of 2019. According to the report, it is also stated that in each year of the last five years, the Board has examined the most mergers and acquisitions files, and 309 of the 405 final decisions in 2021 were related to mergers and acquisitions. In the Mergers and Acquisitions View Report for the year 2021, it was stated that 118 of these transactions notified to the Board were among the companies established under the laws of the Republic of Turkey, while 173 of them were related to foreign mergers and acquisitions happened in abroad and that the total transaction value of 309 applications was approximately 48 billion Turkish Lira. Accordingly, it should be noted that approximately 76% of the files concluded by the Board in 2021 are related to mergers and acquisitions. Comparing this number with the previous year, the Board took the final decision regarding 220 mergers and acquisitions files in 2020. In this context, it is stated in the report that the biggest change in 2021 was in the number of final decisions regarding mergers and acquisitions.

It is important to note that upon the application of the relevant parties regarding the mergers and acquisitions made at the above thresholds, the Board shall not authorize mergers or acquisitions that result in a significant reduction of effective competition in the whole or part of the country, including the creation of a dominant position or the strengthening of an existing dominant position. For a merger or acquisition transaction subject to authorization to be legally valid, the Board should decide explicitly or implicitly as stated in the Communiqué. If these transactions are carried out without the authorization of the Board, administrative fines shall be applied to each of the parties in merger transactions and to the transferee in acquisition transactions.

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.