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Legislation, triggers and thresholds
Legislation and authority
What legislation applies to the control of mergers?
The principal legislation on merger control is Law 4054 on Protection of Competition and Communiqué 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board. In particular, Article 7 of Law 4054 governs mergers and acquisitions.
Article 7 of Law 4054 authorises the Competition Board to regulate which transactions should be notified in order to be legally valid. Further to this provision, Communiqué 2010/4 is the primary instrument in assessing merger cases and sets out the types of transaction that are subject to the board’s review and approval.
In order to harmonise Turkish competition law with EU competition law, the authority has published the following guidelines:
- the Guideline on Cases Considered as Mergers and Acquisitions and the Concept of Control;
- the Guideline on the Assessment of Horizontal Mergers and Acquisitions;
- the Guideline on the Assessment of Non-horizontal Mergers and Acquisitions;
- the Guideline on Market Definition;
- the Guideline on Undertakings Concerned, Turnover and Ancillary Restrictions in Mergers and Acquisitions; and
- the Guideline on Remedies Acceptable in Mergers and Acquisitions.
What is the relevant authority?
The Competition Authority – a legal entity with administrative and financial autonomy – is responsible for enforcing Law 4054 on Protection of Competition in Turkey. The authority consists of the Competition Board, the presidency and main service units. As the competent body of the authority, the Competition Board is responsible for, among other things, reviewing and resolving M&A notifications. The board consists of seven members and is seated in Ankara.
The main service units of the authority consist of five different supervision and enforcement departments and the following units:
- the decisions department;
- the economic analyses and research department;
- the information management department;
- the external relations, training and competition advocacy department;
- the strategy development department;
- the regulation and budget department;
- the press department; and
- the cartel on-the-spot inspections support division.
There is a sectoral job definition for each supervision and enforcement department.
Transactions caught and thresholds
Under what circumstances is a transaction caught by the legislation?
According to Article 7 of Law 4054 on Protection of Competition and Article 13 of Communiqué 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board, mergers and acquisitions that do not create or strengthen a dominant position or significantly impede effective competition in a relevant product market within the or part of Turkey will be cleared by the Competition Board. Accordingly, Communiqué 2010/4 defines the scope of notifiable transactions in Article 5 as follows:
- a merger of two or more undertakings; or
- the acquisition of direct or indirect control over all or part of one or more undertakings by one or more undertakings or persons which currently control at least one undertaking through:
- the purchase of assets or some or all of its shares;
- an agreement; or
- another instrument.
Concentrations that result in a change of control on a lasting basis are subject to the board’s approval, provided that they exceed the applicable thresholds. Communiqué 2010/4 and the Guideline on Cases Considered as Mergers and Acquisitions and the Concept of Control provide a definition of ‘control’ which does not fall far from the definition included in Article 3 of Council Regulation 139/2004. According to Article 5(2) of Communiqué 2010/4, control can be constituted by rights, agreements or any other means which, either separately or jointly, de facto or de jure, confer the possibility of exercising decisive influence on an undertaking. These rights or agreements have decisive influence – in particular, in terms of ownership or the right to use all or part of the assets of an undertaking, or rights or agreements which confer decisive influence on the composition or decisions of the organs of an undertaking.
Pursuant to Article 6 of Communiqué 2010/4, the following transactions do not fall within the scope of Article 7, and are therefore exempt from board approval:
- intra-group transactions and other transactions that do not lead to a change in control;
- temporary possession of securities for resale purposes by undertakings whose normal activities involve conducting transactions with such securities for their own account or that of others, provided that the voting rights attached to such securities are not exercised in a way that affects the competition policies of the undertaking issuing the securities;
- acquisitions by public institutions or organisations further to the order of law, for reasons such as liquidation, winding-up, insolvency, cessation of payments, concordat or privatisation; and
- acquisition by inheritance, as provided by Article 5 of Communiqué 2010/4.
Do thresholds apply to determine when a transaction is caught by the legislation?
Under Article 7 of Communiqué 2010/4, a transaction is notifiable if one of the following turnover thresholds is met:
- the aggregate Turkish turnover of the transaction parties exceeds TRY100 million (approximately €29.9 million or $33 million) and the Turkish turnover of at least two of the transaction parties each exceeds TRY30 million (approximately €8.9 million or $9.9 million); or
- the Turkish turnover of the transferred assets or businesses in acquisitions exceeds TRY30 million (approximately €8.9 million or $9.9 million) and the worldwide turnover of at least one of the other parties to the transaction exceeds TRY500 million (approximately €149.7 million or $165.5 million); or
- the Turkish turnover of any of the parties exceeds TRY30 million (approximately €8.9 million or $9.9 million) and the worldwide turnover of at least one of the other parties to the transaction exceeds TRY500 million (approximately €149.7 million or $165.5 million).
Article 7(b)(ii) of Communiqué 2010/4 applies only to a merger transaction within the meaning of Article 5(1)(a) of Communiqué 2010/4.
Article (1) of Communiqué 2017/2 on the Amendment of Communiqué 2010/4 on the Mergers and Acquisitions Subject to the Approval of the Competition Board (Communique 2017/2), which was published in the Official Gazette on February 24 2017 and entered into force on the same day, abolished Article 7(2) of Communiqué 2010/4 which stated that “the thresholds set out in the first clause of this article are re-determined by the Board biannually”. With the abolishment of the relevant clause, the board no longer has the duty to re-establish turnover thresholds for concentration transactions every two years. To that end, there is no specific timeline for the review of the current turnover thresholds set forth by Article 7(1) of Communiqué 2010/4.
Moreover, Article 2 of Communiqué 2017/2 amended Article 8(5) of Communiqué 2010/4. The relevant article stated that:
“two or more transactions carried out between the same persons or parties within a period of two years shall be considered as a single transaction for the calculation of turnovers listed in Article 7 of this Communiqué”.
Communiqué 2017/2 amended Article 8(5) as follows:
“two or more transactions carried out between the same persons or parties or within the same relevant product market by the same undertaking concerned within a period of three years shall be considered as a single transaction for the calculation of turnovers listed in Article 7 of this Communiqué.”
The board will now evaluate the transactions realised by the same undertaking concerned in the same relevant product market within three years as a single transaction, as well as two transactions carried out between the same persons or parties within a three-year period.
Is it possible to seek informal guidance from the authority on a possible merger from either a jurisdictional or a substantive perspective?
No. There is no procedural mechanism through which the parties can engage in pre-notification consultation with the Competition Board. Therefore, parties must first submit the notification form and then engage in further discussions if required.
Are foreign-to-foreign mergers caught by the regime? Is a ‘local impact’ test applicable under the legislation?
Foreign-to-foreign mergers are covered by Law 4054 on Protection of Competition to the extent that they affect the relevant markets within the territory of Turkey. Regardless of the parties’ physical presence in Turkey, sales in Turkey may trigger the notification requirement to the extent that the turnover thresholds are met. Article 2 of Law 4054 sets out the effects criterion – that is, whether the undertakings concerned affect the goods and services markets in Turkey. Even if the undertakings concerned have no local subsidiaries, branches or sales outlets in Turkey, the transaction could still be subject to Turkish competition legislation if the goods or services of the participating undertakings are sold in Turkey and the transaction would thus affect the relevant Turkish market. In 2016, 107 transactions notified to the Turkish Competition Board were foreign-to-foreign transactions, which constitutes over half of the concentrations notified within 2016.
What types of joint venture are caught by the legislation?
The Turkish merger control rules applicable to joint ventures are akin to – if not the same as – the EU rules. Article 5 of Communiqué 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board defines a ‘joint venture’, which is close to the definition used in EU law.
In order to qualify as a concentration subject to merger control, a joint venture must be of a fully functional character and satisfy two criteria:
- joint control in the joint venture must exist; and
- the joint venture must be an independent economic entity established on a lasting basis (ie, having adequate capital, labour and an indefinite duration).
In addition, regardless of whether the joint venture is fully functional, the joint venture should not have as its object or effect the restriction of competition among the parties or between the parties and the joint venture itself within the meaning of Article 4 of Law 4054, which prohibits restrictive agreements. If the parent undertakings of a joint venture operate in the same market or a downstream, upstream or neighbouring market to the joint venture, it could lead to coordination between independent undertakings that restrict competition within the meaning of Article 4 of the law.
Further, if the joint venture turns out to be non-fully functional, while non-fully functional joint ventures are not subject to mandatory merger control filing, they may fall under Article 4 of Law 4054, which prohibits restrictive agreements. The parties can carry out a self-assessment individual exemption test, which is set out under Article 5 of Law 4054, to determine whether the joint venture meets the conditions of individual exemption (which are also very similar to, if not identical to, the EU regime). It is optional for parties to notify a transaction for individual exemption.
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