As expected, Turkish Competition Authority's Communiqué No. 1997/1 on Mergers and Acquisitions Subject to the Permission of the Competition Board has been replaced with Communiqué No. 2010/4 on Mergers and Acquisitions Calling for the Authorization of the Competition Board ("Communiqué No. 2010/4"). The purpose of Communiqué No. 2010/4 is to determine and announce those mergers and acquisitions that require notification of, and authorization by, the Competition Board to be legally valid pursuant to Article 7 of Law No. 4054 on the Protection of Competition (the "Competition Law"), as well as the procedures and principles for giving notice of such transactions.
The new Communiqué introduces many new criteria and significant changes. The five fundamental changes in the Communiqué are:
- The threshold system has changed;
- The notification form has been amended;
- There are changes regarding ancillary restraints;
- Commitment provisions have been revised; and
- The method for announcing mergers and acquisitions has changed.
Significant Amendments under the New Communiqué
1. Threshold System
Communiqué No. 2010/4 introduces a new system for determining which mergers or acquisitions are subject to authorization by the Competition Board. The old market share threshold is replaced with a two-stage turnover threshold. According to the new rule, if the total turnovers of the parties to the transaction in Turkey exceed 100 million TL, and the turnovers of at least two of the transacting parties in Turkey each exceed 30 million TL, OR the global turnover of one of the transacting parties exceeds 500 million TL, and at least one of the remaining transacting parties has a turnover in Turkey exceeding 5 million TL, the authorization of the Board is required for the transaction to have legal validity. However, except in cases of joint ventures, authorization of the Board is not required for transactions without any affected market, even if the thresholds are exceeded.
2. Notification Form
Within Communiqué No. 2010/4, a short-form / long-form distinction arises. Indeed, the information requested in Articles 6, 7 and 8 of the Notification Form is not required (i) if one of the transacting parties acquires full control over an undertaking in which it had joint control, or (ii) for any affected market within Turkey, and in terms of geographical markets, if the sum of the market shares of the transacting parties is less than 20% in horizontal relationships, and the market share of one of the transacting parties is less than 25% in vertical relationships, considering the affected markets in question. Therefore, if the said thresholds are not met for any affected market, either horizontally or vertically, a leaner notification may be submitted.
"Affected market" refers to the relevant product markets that might be affected by the transaction that are subject to notification, and where (i) two or more of the parties are commercially active in the same product market (horizontal relationship) or (ii) at least one of the parties is commercially active in the downstream or upstream market of any product market in which another party operates (vertical relationship). Detailed information, such as supply and demand structure, import conditions, market entry conditions, potential competition, and efficiency gains is required in Sections 6, 7 and 8 of the form.
3. Ancillary Restraints
In Communiqué No. 2010/4, it states that authorization granted by the Board concerning mergers and acquisitions also covers those limitations which are directly relevant to and required for the implementation of the transaction. The principle is that parties to a transaction must determine whether the limitations introduced by the merger or acquisition exceed this framework. This principle thus places the burden of responsibility on the parties in determining whether a restraint is ancillary. Therefore, even if – in its decision – the Competition Board does not conduct any analysis regarding ancillary restraints, it is accepted that these restraints are also covered by the related authorization.
4. Commitment Provisions
Undertakings may give commitments concerning a merger or acquisition in order to eliminate any competition issues that may arise under Article 7 of the Act. Such commitments must be capable of completely eliminating competitive problems. In its authorization decision, the Board may specify conditions and obligations aimed at ensuring that any such commitments are fulfilled.
According to the Guidelines on the Acceptable Remedies in Merger and Acquisition Transactions, there are a number of remedy types. These are ranked as: divestiture of a business unit, irrevocability of the divested business, transfer to a proper purchaser, remedies for gaining access, and remedies related to the change of exclusive agreements.
5. Announcement of Mergers and Acquisitions
Another change in Communiqué No. 2010/4 is in the announcement of mergers and acquisitions. The Authority announces mergers and acquisitions on its website, together with the relevant undertakings and their fields of operation. In this manner, mergers and acquisitions and Competition Board decisions related to these transactions are more transparent and accessible.
Conclusion
With the new Communiqué, a number of new concepts are introduced. These amendments intend to provide a better and more efficient implementation for both practitioners and transacting parties.
The turnover-based notification threshold introduced by Communiqué No. 2010/4 removes the uncertainties of the share-based threshold in the previous Communiqué and ensures legal certainty. In the absence of affected markets, authorization of the Board is not required even if the thresholds are exceeded, except in the case of joint ventures. However, it is hard to understand the reason for exempting joint ventures from this rule. Besides, it is essential to define joint ventures in the Communiqué in order that parties to transactions are able to make adequate assessments.
Although the new Communiqué provides better guidance to notifying parties, it also comes with a notification form that includes detailed data and requires much more expertise for filing. However, by removing the obligation to complete certain sections of the Notification Form for those mergers and acquisitions that are unlikely to be problematic for competition, a "leaner and meaner" notification has been provided for undertakings.
By stating that the Competition Board's approval will also cover ancillary restraints, it is clear that the parties should conduct a self-assessment as to whether or not a restraint is ancillary. It is also an important step for transacting parties to be able to provide commitments to eliminate competition issues. Although many efficient amendments are introduced by Communiqué No. 2010/4, a careful and rigorous approach should be adopted for the notification process.
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.