1. Which transactions are subject to notification to the Turkish Competition Authority under the Turkish merger regime?
The Communiqué No. 2010/4 on Mergers and Acquisitions Requiring Authorization of the Competition Authority (“Communiqué No. 2010/4”), entered into force on 01 January 2011, sets out the types of mergers and acquisitions that require notification the Turkish Competition Authority (“the TCA”) for permission and legal validity.
Article 5 of Communiqué No. 2010/4 defines the following transactions as a merger or acquisition:
A merger or acquisition shall arise where a change in control on a lasting basis results from
- A merger of two or more undertakings,
- The acquisition of direct or indirect control by one or more undertakings or one or more persons already controlling at least one undertaking, by means of the purchase of assets or securities or contracts or other means, of the whole or parts of one or more other undertakings,
- A joint venture that performs all the functions of an autonomous economic entity on a lasting basis.
The type of transaction referred to above must be notified to the Competition Board provided that the notification thresholds are met. Pursuant to Article 7 of Communiqué No. 2010/4, transactions have to be notified to the TCA for clearance, where:
- The aggregate turnover in Turkey of the parties to the transaction exceeds TL 100 million (approximately EUR 23,9 million as of September 2017) and the Turkish turnover of each of at least two of the parties to the transaction exceeds TL 30 million (approximately EUR 7,16 million as of September 2017); or
- The Turkish turnover of at least one of the parties to the transaction in mergers and of the business asset or affair in takeovers exceeds TL 30 million (approximately EUR 7,16 million as of September 2017) and the worldwide turnover of at least one of the other parties exceeds TL 500 million (approximately EUR 119 million as of September 2017)
2. How is the turnover calculated within the scope of Communiqué No. 2010/4?
Turnover comprises the net sales achieved in the fiscal year preceding the date of notification, in accordance with a uniform scheme of accounts. In addition, where there is no possibility of determining the turnover comprising the net sales achieved in the fiscal year preceding the notification, the net sales achieved as of the end of the fiscal year closest to the date of the notification shall be taken into account. Turnover generated by sales between the persons or economic units defined under Article 8(1), which is provided below, is not included in the calculation of the turnover. Article 8(6) of the Communiqué provides that when calculating turnover with respect to a foreign currency, the average buying rate in the relevant fiscal year according to the Turkish Central Bank shall be taken into account.
Pursuant to paragraph 1 of Article 8 of Communiqué No. 2010/4, the turnover of an undertaking concerned shall be calculated by consideration of the turnover of the following:
(a) The undertaking concerned, (undertaking concerned refers to the merging parties in the case of mergers, and the acquirer or the persons or economic units subject to acquisition in case of acquisitions)
(b) Undertakings concerned with respect to which statements above the parties have the following rights or powers:
- direct or indirect ownership of more than half of the capital or business assets;
- power to exercise more than half the voting rights; or
- power to appoint more than half the members of the undertaking’s management board, auditory board or the representing members or
- power of administration of the business;
(c) Person or economic units that have the rights or powers listed in (b) over the undertakings concerned;
(d) Person or economic units that have the rights or powers listed in (b) over undertakings in paragraph (c); and
(e) Person or economic units that enjoy the rights and powers in (b) on undertakings listed between (a) – (d).
Other issues that should be taken into account for the calculation of turnover are as follows:
- Article 8(3) provides that where the undertakings concerned jointly have the rights or powers listed in Article 8(1)(b) above, in calculating the turnover of those undertakings, the relevant turnover shall be apportioned equally.
- Article 8(4) provides that where the undertakings concerned jointly enjoy rights in the administration of a joint venture, turnover of this joint venture shall be apportioned equally amongst each right owner.
- Where the concentration consists of the acquisition of parts, whether or not constituted as legal entities, of one or more undertakings, only the turnover relating to the parts which are the subject of the concentration shall be taken into account with regard to the transferor. Any two or more transactions executed between the same persons or undertakings occurring in the meaning of the first sentence within a three year period in the same relevant product market shall be treated as a single concentration for the purposes of calculating the thresholds.
3. Is the notification filed subject to any fees?
No filing fees are required for the notification.
4. Are the parties to a merger or acquisition required to submit the final version of the agreement?
Parties to mergers or acquisitions are required to submit the form annexed to Communiqué No. 2010/4 and the documents listed under Article 11 of the form. The notification form annexed to Communiqué No. 2010/4 requires the submission of the final or the current version of the agreement regarding the transaction. Therefore, Parties to transactions do not have to submit to the TCA the final version of the agreement with the notification form. The regulations do not specify the particular stage at which an agreement would fulfill the definition of “current version of an agreement”, but it may be accepted as the version closest to the final version of the agreement that will not require any substantial changes.
5. How does the decision process work?
According to Article 10 the Act, upon the preliminary examination conducted within 15 days of the date of notification, the Competition Board shall render a decision on the notified transaction. Should the notification have incomplete information or documents, the experts may require completion of such information. The application is deemed to be filed once all required information has been completed upon which the 15 day examination period officially starts.
Pursuant to Article 10(2) of the Act, if the Competition Board does not respond to or does not take any action on the notification, the transaction is deemed to have been cleared and acquired legal validity thirty (30) days from the date of notification. The examination period referred to in the first paragraph may extend in practice, due to the aforementioned thirty (30) days period and additional information and document requirements by case handlers.
As a result of its preliminary examination, the TCA can either
- Prohibit the transaction
- Clear or clear it subject to remedies and conditions or
- Decide to further investigate the transaction.
In case of the latter, the TCA serves to the concerned parties its preliminary objections to the transaction and that the transaction is pending and shall not be put in force until a final decision is rendered. The investigation shall be completed within six (6) months which can be extended once for a period of up a further six months, if found necessary by the TCA.
6. What are the consequences for the failure to notify a transaction?
According to Article 11 of the Act where a transaction subject to notification has not been notified with the Competition Board, the board may start an ex officio examination once it has been informed of the transaction. As result of the examination:
If the Competition Board concludes that the transaction does not create or strengthen the dominant position of the undertakings concerned, as a result of which competition would have been substantially lessened in any market for goods or services within the whole or a part of the country, it will clear the transaction. However, the parties will be fined for failure to notify.
Pursuant to Article 16 of the Act, in case of a failure to notify the parties to the transaction or association of undertakings or their members, will be fined by one thousandth (1‰) of their Turkish annual gross revenue in the preceding fiscal year, and if this cannot be calculated, gross revenue in the closest fiscal year to the decision determined by the TCA. In the case of a merger the fine is imposed on both parties concerned, whereas for acquisitions the acquirer would be fined for failure to notify.
Article 10 of Communiqué No. 2010/4 explicitly states that if agreements are notified after realization of the transaction, penalties are applicable, realization referring to realization of a change in control.
Where the Competition Board finds that the transaction does raise competition concerns according to Article 7 of the Act, in addition to administrative fines, it can decide to require those concerned to abandon the transaction, to dissolve all de facto situations contrary to the law; if possible, and in accordance with the terms and duration to be determined by the Competition Board, to return to the former owners any shares or assets acquired, or if not possible, to assign and transfer those to third parties; to ensure that the acquiring persons in no way participate in the management of undertakings acquired during the period until these are assigned to their former owners or third parties, and to take any other measures deemed necessary.
7. Does the TCA have the authority to on – site examinations? What would be the scope of such an examination?
Pursuant to Article 15 of the Act and Article 15 of the Communiqué No 2010/4, the TCA is entitled to conduct on – site examinations. The officials of the Competition Authority can exercise the following powers during their examination where necessary:
- Examine the books and all kinds of documents of undertakings and obtain copies where necessary
- Require oral or written explanations on specific subjects,
- Examine all kinds of assets of the relevant undertaking.
8. Are the notifications and TCA decisions published?
Pursuant to Article 53 of the Act, the TCA shall announce its decisions on its website without disclosing trade secrets of the parties. Article 12 of the new Communiqué provides that as soon as a notification has been made to the Competition Authority information on the notification with respect to the undertakings concerned and their fields of activity will be published at the web site. Therefore the notification form requires the parties to provide summary information on the nature of the transaction, the affected markets and the fields of activities of the undertakings without referring to business secrets.
9. Are there any regulations exempting agreements containing anti-competitive clauses either individually or as a group from the application of the Competition Act?
The exemption regime in Turkish competition law contains block exemptions and individual exemptions.
Where the cumulative conditions below are satisfied, it may be decided for the agreements containing anti-competitive restrictions to be individually exempted from the application of Article 4 of the Competition Act:
(a) contribution to improving the production or distribution of goods or to promoting technical or economic progress,
(b) allowing consumers a fair share of the resulting benefit,
(c) not eliminating competition in the relevant market substantially, and
(d) not imposing on the undertakings concerned restrictions which are not indispensable to the attainment of the objectives listed in subparagraphs (a) and (b).
Further, the Competition Board may provide for group exemptions for certain types of agreements from the application of Article 4 of the Competition Act by virtue of communiqués. In this respect, the communiqués for group exemptions published so far by the Board are as follows:
- Block Exemption Communiqué for Vertical Agreements (no.2002/2), as amended by the Communiqués No. 2003/3 and 2007/2
- Block Exemption Communiqué for Vertical Agreements Concerning in the Motor Vehicles Sector (No. 2017/3)
- Block Exemption Communiqué on Research and Development Agreements (No. 2016/5)
- Block Exemption Communiqué on Specialisation Agreements (No. 2013/3)
- Block Exemption Communiqué in Relation to the Insurance Sector (No. 2008/3)
- Block Exemption Communiqué on Technology Transfer Agreements (No. 2008/2)
10. Do anti-competitive agreements and decisions need to be notified to the Competition Board?
There is no requirement for anti-competitive agreements to be notified to the Competition Board.
Anti-competitive agreements and decisions which fall within the scope of one of the block exemption communiqués published by the Competition Board benefit from the block exemption without notification, leaving no need for a notification to the Board.
As regards agreements and decisions that fall outside the scope of the block exemption communiqués, the undertaking or association of undertakings concerned should make a self-assessment on whether or not the agreement(s) concerned satisfies the cumulative conditions for an individual exemption, taking into account the block exemption communiqués, the guidelines issued by the Competition Board and previous decisions of the Competition Board. In other words, there is no requirement for notification for these agreements either. However, for the purposes of legal certainty, undertakings and associations of undertakings may apply to the Competition Board for an individual exemption.