The Turkish Competition Authority (the "TCA") reviews the merger control thresholds every two years. The next deadline for the TCA to confirm or revise the thresholds is scheduled for the beginning of 2017. The main purpose of the merger control thresholds revision is to align the merger control regime with the changing market/economic realities and decrease the workload of the TCA by way of excluding review of transactions that are unlikely to affect competition in the market, but at the same time make sure that all the problematic transactions are caught and carefully assessed. This is also positive for the business parties as it decreases the burden of complying with the merger control requirements in certain cases.
This article provides a brief overview of the currently applicable merger control thresholds under the Turkish law, analyzes potential amendment of current thresholds within the merger control regime in Turkey.
2. Currently applicable thresholds
As a rule, the Turkish law requires a prior notification to the TCA of M&A transactions, which involve a change of control on a lasting basis, if certain turnover thresholds are met. Article 7 of Communiqué No. 2010/4 on Mergers and Acquisitions Subject to the Approval of the Competition Board (the "Communiqué")1 sets out that a transaction is subject to the TCA's approval where:
- Total turnovers of the transaction parties in Turkey exceed TRY 100 million (approx. € 30 million2), and turnovers of at least two of the transaction parties in Turkey each exceed TRY 30 million (approx. € 9 million), or
- Turnover in Turkey for the acquired asset or operation in acquisition transactions, or for at least one of the transaction parties in merger transactions exceeds TRY 30 million (approx. € 9 million), and at least one of the other transaction parties has a global turnover exceeding TRY 500 million (approx. € 148 million).
The notification requirement is also applicable to foreign-to-foreign transactions to the extent that the mentioned thresholds are met.
The TCA analyzes the notified transactions and assesses their effects on the competition in the relevant market based on the dominance test. In this regard, the TCA evaluates whether the transaction in question (i) creates a dominant position in the relevant market and/or (i) strengthens an existing dominant position, because of which the competition in the relevant market could be significantly affected. Depending on the outcome of the analysis, the TCA decides to approve or reject the deal.
3. Anticipated 2017 amendments
As mentioned earlier, the TCA biannually revisits the merger control thresholds. Revisiting does not necessarily mean that the thresholds will be changed. It simply implies that the TCA will assess the thresholds in the light of its practice and market realities to make sure that the merger control regime is functioning well. Hence, the TCA may simply confirm the currently applicable thresholds, just as it did in February 2015. In any case, the revised or confirmed thresholds are expected to become effective in February 2017.
It should be emphasized that there is likelihood that a market share test will be introduced in addition to the turnover thresholds. This is due to a loophole discovered as a result of Decision No 15-29/421-118 ("Marina Decision").
On 9 July 2015, the TCA by a majority of votes took its Decision No 15-29/421-118 in relation to acquisition of 100% of shares of two marinas - Beta Marina Liman ve Çekek İşletmesi A.Ş. ("Beta Marina") and Pendik Turizm Marina Yat ve Çekek İşletmesi A.Ş. ("Pendik Marina") - by Setur Servis Turistik A.Ş ("Setur"). The TCA concluded that the transaction was subject to authorization under the Communiqué 2010/4 since it exceeded the turnover thresholds, but it rejected to approve it because it would lead to Setur acquiring a dominant position in the relevant market and therefore would significantly lessen competition in the market3. The issue here is related to the following:
- The transaction was subject to notification since the turnover thresholds were met based on the calculation of the turnover of both Pendik Marina and Beta Marina.
- Otherwise, if the Pendik Marina only was to be acquired, the turnover threshold would not be met since its turnover was below TRY 30 million. At the same time, the acquisition of Pendik Marina (leaving the Beta Marina aside) would nevertheless lead to a creation of a dominant position. Under such circumstances, the transaction with a dominance impact could not be caught by the merger control requirements due to the fact that turnover thresholds were not exceeded.
Realizing this problem, the TCA has been considering introducing the market share test in addition to the turnover thresholds with the view to ensuring that all problematic M&A transactions are subject to the merger control.
To some extent this is true that compared to the turnover thresholds, the market share threshold may be a better (although far from perfect) indicator of whether the transaction is likely to be problematic.
At the same time merger control regime based on the market share threshold may pose certain difficulties, uncertainty and additional cost both for the competition authority and the parties concerned. In fact international best practice documents, such as the ICN Recommended Practices4 and OECD Recommendation on merger review5, do not support the use of market share threshold in the merger control systems mainly due to those reasons which outweigh potential benefits of applying the market share threshold.
4. Concluding remarks
The merger control regime in Turkey is expected to undergo certain changes by January-February 2017. It is not yet clear whether the turnover thresholds will be confirmed or increased; just as it is yet to be seen whether the TCA, being 'inspired' by the Marina Decision and striving to take into account creeping transactions, will introduce the market share threshold in addition to the turnover thresholds - which may be viewed as contrary to global best practices and may create uncertainty for the parties concerned. Nevertheless, the overall expectations from the reform are quite positive – a general improvement of efficiency of the merger control procedures on the way to further compliance with the EU standards, all of which should eventually encourage foreign investments in the country.
2. 1 Euro = 3,4 TRY according to the exchange rate of the Central Bank of the Republic of Turkey as of 27.10.2016
3. The Competition Board decision dated 09.07.2015 and numbered 15-29/421-118
4. See 2008, ICN, SETTING NOTIFICATION THRESHOLDS FOR MERGER REVIEW http://www.internationalcompetitionnetwork.org/uploads/library/doc326.pdf
5. See 2005, OECD, Recommendation of the Council Concerning Merger Review, at http://www.oecd.org/document/59/0,3343,en_2649_37463_4599739_1_1_1_37463,00.html
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.