A. Legislation and Authority
1- What is the merger/acquisition legislation?
Turkish regulatory framework for merger control consists of:
– Law No. 4054 on Protection of Competition (“Law”)
– Communiqué No. 2010/4 on Mergers and Acquisitions Calling for the Authorization of the Competition Board (“Merger Communiqué”)
– Communiqué on Increasing the Threshold of the Administrative Fine Set Forth in the First Section of Article 16 of the Law No. 4054 on Protection of Competition, to Apply until 31/12/2022 (“Communique No. 2022/1”)
– Guidelines on Cases Considered as a Merger or an Acquisition and the Concept of Control (“Guideline”)
– The Communiqué Amending Communiqué No. 2010/4 (“Communiqué No. 2022/2”)
– Guidelines on Remedies That are Acceptable in Merger/Acquisition Transactions (“Remedy Guidelines”).
– Guidelines On Undertakings Concerned, Turnover and Ancillary Restraints in Mergers and Acquisitions (“Guidelines on Ancillary Restraints”)
– Communiqué No. 2010/3 on Regulation of Right to Access File and Protection of Commercial Secrets (“Communiqué No. 2010/3”)
2- Who is the relevant authority?
Turkish merger control regime is executed by the Turkish Competition Authority (“TCA”) in Ankara.
3- Are there any recent material changes?
According to Communiqué No. 2022/1, the threshold of the administrative fine set forth in Article 16(1) of the Law has been determined as TRY 47.409 to be valid from 1/1/2022 to 31/12/2022.
In addition, the Merger Communiqué has been recently amended due to recent inflationary pressures and fluctuations of the exchange rate. In this respect, Communiqué No. 2022/2 published in the Official Gazette dated 4 March 2022 and numbered 31768 amended the following provisions of the Merger Communiqué which shall take effect on 4 May 2022.
– TCA last updated the turnover thresholds for merger/acquisition filings in 2012, despite it aims to review only large-scale acquisitions, mergers, and joint ventures. By 2021, these turnover thresholds, which remained relatively low due to Turkish liras depreciation in recent months, increased as per Communiqué No. 2022/2 (see below 7 for amended thresholds).
– Communiqué No. 2022/2 has also introduced a new merger control regime for technology enterprises (teknoloji teşebbüsleri). Technology enterprises are defined in Communiqué No. 2022/2 as: (i) digital platforms, (ii) software and gaming software, (iii) financial technologies, (iv) biotechnology, (v) pharmacology, (vi) agricultural chemicals, and (vii) health technologies. According to the second paragraph of Article 2 of Communiqué No. 2022/2, the threshold of TRY 250 million will not be applied for the acquisition of technology enterprises operating in the Turkish geographical market, conducting R&D, or providing services to users in Turkey. As a result of exempting technology enterprises from the use of local turnover thresholds, these enterprises have become almost categorically notifiable in Turkey.
– TCA also harmonized the turnover calculation of financial institutions with the amendments by other public institutions and independent administrative authorities in the relevant legislation. Accordingly, Communiqué No. 2022/2 excludes the term “participation banks” and refers to the term “banks” in general, which covers all legal forms of banks.
– Article 10(2) of the Merger Communiqué was amended, according to the amendment, an optional “e-devlet” platform has been added for the acquisition filings to be submitted to the TCA.
– In order to harmonize the secondary legislation with Law, Article 13 of the Merger Communiqué is amended and the wording of “one or more undertakings with a view to creating a dominant position” has been replaced with “in particular creating a dominant position”.
– The notification form, which is an annex to Communiqué No. 2010/4 has been amended as well. With this amendment, TCA aims to detail the requested information and ensure that the notifications are submitted to the TCA in full.
B. Notifiable Transactions
4- Which types of transactions trigger notification obligations?
Turkish merger control regime opted for a pre-merger notification and approval system. In this system, a transaction that meets certain criteria has to be reported to TCA before it is consummated and a transaction falling below the criteria will be considered de minimis and thus will not be subject to merger filing.
Article 7 of the Law prohibits mergers or acquisitions that result in a significant reduction in competition in a good or service market in part or all of Turkey. The Article grants TCA to regulate which type of mergers and acquisitions should solicit TCA’s approval. TCA characterizes such transactions in the Merger Communiqué.
Articles 5(1) and 5(3) of the Merger Communiqué define the cases considered as a merger or an acquisition. Accordingly, the following transactions will be considered as mergers and acquisitions, provided there is a permanent change in control (either sole or joint control):
i. A merger of two or more undertakings
ii. The acquisition of direct or indirect control over all or part of one or more undertakings by one or more undertakings or persons who currently control at least one undertaking through
– the purchase of shares or assets,
– a contract or
– any other means.
iii. Formation of a joint venture that will fulfill all functionalities of an independent economic entity.
Concentrations resulting in a permanent change in control (either sole or joint control) are subject to the approval of TCA, provided that they exceed the applicable thresholds.
Under the European Union Merger Regime, concentration is defined as “a merger of two or more previously independent undertakings (or parts of undertakings) or the acquisition of direct or indirect control of the whole or parts of another undertaking, which brings a durable change in the structure of the undertakings concerned”. The cases defined as a merger or acquisition by TCA is in line with this definition.
For the parties to a merger or an acquisition to file a notification with TCA, TCA requires the satisfaction of the aforementioned definitions and meets the applicable turnover thresholds.
5- How is permanent change of control defined?
The definition of control under the Turkish merger control regime is similar to that adopted under Article 3 of Regulation 139/2004 (“EC Merger Regulation”). Under Article 5(2) of the Merger Communiqué, control of an undertaking may be acquired through rights, contracts, or other instruments, which, separately or jointly, allow de facto or de jure, possibility of exercising decisive influence over an undertaking.
In the wording of the Merger Communiqué, instruments that confer such powers can be:
– Instruments granting ownership or operating rights over all or part of the assets of an undertaking; and
– Those rights and contracts granting decisive influence over the structure or decisions of the bodies of an undertaking.
The same Article 5(2) also reads that control may be acquired de jure and de facto. When the right holders or those persons or undertakings are empowered to exercise such rights in accordance with a contract, there is de jure control. Whereas the same persons who, while lacking such rights and powers, have in practice the power to exercise such rights, there is de facto control. Therefore, when outright legal control is not acquired (e.g. through the acquisition of shares with the majority of the voting rights), then TCA will consider whether the acquirer can still exercise de facto control over the undertaking through special rights attached to shares or contained in shareholder agreements, board representation, ownership and use of assets and related commercial issues. Consequently, in the case of de facto control, there is no precise shareholding or other test for decisive influence, and each case is decided on its facts.
Given that Article 7 of the Law only covers transactions resulting in a lasting/permanent change in control, under the assumption that only such transactions would lead to a lasting change in the market structure, TCA requires the change of control to be permanent. However, TCA in the Guideline notes that agreements made for a definite period of time may lead to a lasting change of control if they can be renewed. Similarly, if the period envisaged for the agreement is sufficiently long to lead to a lasting change in the control of undertakings concerned, then the transaction may fall within the scope of Article 7 of the Law, even if the agreement has a clear expiry date.
So, only the concentrations that result in a permanent de jure or de facto change of control are subject to TCA’s approval, provided that they exceed the applicable thresholds as explained below.
6- Would the acquisition of a minority share be notifiable?
It follows that acquisition of minority shares, so long as they do not confer control, is not subject to notification. However, shareholders’ agreements of such acquisitions or master agreements of joint ventures should be carefully reviewed as to whether there are any provisions that may confer control to the minority shareholder.
Minority shares together with specific rights attached to those shares may confer de jure sole control. Also, preferential shares to which special rights enabling to determine strategic decisions such as the power to appoint more than half of the members of the company board may confer a sole control. Where the minority shareholders have rights, which allow them to veto essential decisions or strategic behaviors of the undertakings concerned, there can be a joint control enjoyed by them.
7- What are the applicable thresholds for notifiable mergers and acquisitions?
TCA aims to review only large-scale acquisitions, mergers, and joint ventures. The thresholds are set out in the Merger Communiqué, as amended by Communiqué No. 2022/2. As of the entry into force of Communiqué No. 2022/2, mergers and acquisitions that exceed the following thresholds will be subject to the notification:
– The aggregate turnovers of the transaction parties in the Turkish market exceed TRY 750 million and turnovers of at least two of the transaction parties separately exceed TRY 250 million in Turkey, or
– The Turkish turnover of the transferred asset(s) or businesses subject to acquisition in acquisitions, and at least one of the parties in mergers exceeds TRY 250 million, and the worldwide turnover of at least one of the other parties to the transaction exceeds TRY 3 billion.
It is also stated in the Merger Communiqué that even though the thresholds are exceeded, transactions carried out without permission from TCA cannot be legally valid.
See 11 for the methodology used to calculate turnover.
8- Are there circumstances in which transactions falling below these thresholds may be investigated?
TCA argues that a turnover threshold system creates legal certainty for undertakings and is therefore preferable to a market share threshold system. Accordingly, market shares of the parties to the transaction will not be considered in the analysis of notification requirements.
As an exception pursuant to Article 2(2) of the Communiqué No. 2022/2 the turnover threshold of TRY 250 million shall not be applicable in the acquisition of technology enterprises if they are (i) operating in the Turkish geographical market, (ii) conducting R&D, or (iii) providing services to users in Turkey. In this case, it is notifiable to TCA that the acquisition of technology enterprises, even though the transaction falling below the thresholds.
Therefore, except the acquisition of technology enterprises, there are no circumstances in which transactions falling below the thresholds may still be investigated under Article 7 of the Law.
9- Which types of joint ventures require authorization?
Under Article 5(3) of the Merger Communiqué, joint ventures may also be subject to notification to and approval of TCA. Article 5(3) reads that formation of a joint venture which would “permanently fulfil” all of the functions of an “independent economic entity” will constitute an acquisition transaction falling within the scope of the Merger Communiqué. The relevant parties of the transaction are the parents of the joint venture and not the joint venture itself, as the latter has no turnover.
TCA in its decisions related to the joint venture notifications, considers the satisfaction of two criteria:
1. Is there an undertaking that is jointly controlled by the transaction parties? and
2. Does the joint venture constitute a fully-functioning (tam işlevsel) independent/autonomous economic entity?
Thus considered an acquisition transaction, the creation of a “full-function” joint venture is caught by TCA if the relevant turnover thresholds are exceeded. Revenues accorded to any assets that may be transferred from a parent to the joint venture will be considered part of the revenue of that parent.
Consequently, if the joint venture is not full-function and takes the form of a partnership formalized by legal structure to a large extent dependent on its parents, such as strategic alliances and cooperative joint ventures, then such joint ventures will not be notified. However, TCA may review such joint ventures ex-post, in light of Article 4 of the Law. In this context, the parent companies creating a joint venture should determine whether their joint venture is compatible with competition law rules. However, TCA may review the joint venture agreement ex officio or upon the request of the parties and determine whether the restrictive provisions are in compliance with competition law rules.
10- Are there any exempt transactions not requiring notification?
Article 6 of the Merger Communiqué provides for a list of transactions that do not require authorization from TCA. Accordingly, the exempt transactions are:
(i) Intra-group transactions and other transactions which do not lead to a change in control;
(ii) In case of undertaking 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;
(iii) 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; and
(iv) Occurrence of the situations listed in Article 5 of Merger Communiqué ́ as a result of inheritance.
11- How will turnover be calculated?
Under Article 8 of the Merger Communiqué, in the calculation of the turnover of each party, the turnovers of the following will be taken into account:
1. Turnover of the undertaking concerned,
2. Turnovers of the persons or economic units in which the undertaking concerned,
– Holds more than half of the capital or commercial asserts, or
– Holds the power to exercise more than half of the voting rights, or
– Holds the power to appoint more than half of the members of the board of supervisors, board of directors or the bodies authorized to represent the undertaking, or
– Holds the power to manage operations,
3. Turnovers of the persons or economic units which hold the rights and powers listed in (2) above over the undertaking concerned;
4. Turnovers of the persons or economic units over which those listed in (3) hold the rights and powers listed in (2); and
5. Turnovers of the persons or economic units over which those listed in (1-4) jointly hold the rights and powers listed in (2).
Pursuant to Article 8(6) of the Merger Communiqué, turnover will consist of the net sales generated as of the end of the financial year preceding the date of the notification, or if this cannot be calculated, then the net sales generated as of the end of the financial year closest to the date of notification.
In the calculation of the turnover, the turnovers of persons or economic units listed in Article 8(1) generated from sales made to each other will not be taken into account.
With respect to the turnovers of the financial institutions i.e. banks; financial leasing and factoring companies; intermediary institutions and portfolio management companies; insurance, reassurance and pension companies, TCA provided a separate calculation method under Article 9 of the Merger Communiqué.
Turnover generated in foreign currencies will be converted to TRY at the average buying rate of the Central Bank of Turkey for the year in which it was generated.
12- What are the notification requirements for mergers and acquisitions? Is filing mandatory?
Under the Turkish merger control regime, notification is mandatory once the transaction falls within the ambit of the Merger Communiqué (see 4 above) and the thresholds are exceeded (see 7 above). There are no general exceptions, such as a de minimis exception, and the Merger Communiqué empowers TCA to fine undertakings that fail to notify.
Notifications must be made to TCA. Sector-specific units within TCA, which have integrated merger control competence, will review the notifications.
The notification form is similar to Form CO of the European Commission. The notification form can be submitted to TCA by physical delivery, by e-mail, or it is possible to submit it via the “e-devlet” platform according to Communiqué No. 2022/2.
Some additional documents that must be submitted to TCA are:
– The executed or current copies of the transaction agreements and other documents, and their sworn Turkish translations, in case they are not executed in the Turkish language. It is also possible to report a transaction on the basis of a close-to-final draft of the agreement, rather than a signed agreement.
– Annual reports, including balance sheets of the parties and approved by official authorities.
– If available, market research reports for the relevant market.
– If a commitment is to be proposed in relation to transaction, a signed commitment text that covers it in detail.
– Documents showing that the notifying person is authorized.
Communiqué No. 2022/2 also introduced a new notification form. The new notification form requires transaction parties to provide detailed market information in cases where there are affected markets in Turkey, irrespective of market shares held by the parties in such markets, i.e., TCA removed the 20% (for horizontal mergers) and 25% (for non-horizontal mergers) market share thresholds which require a mandatory “long form” notification. Hence, when Communiqué No. 2022/2 enters into force, all filings that may lead to affect markets will require a comprehensively “long-form” notification even if the parties’ market shares are very low.
On the other hand, according to paragraph 2 of the preamble of the new notification form, the transaction parties may fill out a “short-form” notification only in the following two cases: (i) the transaction is related to the transition from joint to sole control or (ii) there is no affected market in Turkey.
Nevertheless, when a short form is submitted, TCA may still demand that a standard (“long-form”) notification be submitted, for transactions which are later discovered not to satisfy these conditions or exceptionally for the purposes of complete evaluation. In this case, the notification will be considered incomplete until the standard notification is filed and accordingly the application timeline for the evaluation by TCA will be started from the filing date of the standard notification.
13- Are there any deadlines for filing? Who is responsible for filing? Are there any filing fees?
The Merger Communiqué does not set forth any specific deadline for filing notification. However, it is recommended that file the transaction at least forty-five (45) calendar days before closing, since under Article 10 of the Merger Communiqué, a transaction is deemed closed on the date when the change of control occurs.
In the Turkish merger control regime, it is prohibited to close a notifiable transaction before TCA’s approval. If a merger or an acquisition subject to clearance is closed before having an approval, the substantive nature of the concentration plays a significant role in determining the consequences. If TCA concludes that the transaction creates or strengthens a dominant position and significantly lessens competition in any relevant product market, the undertakings concerned (as well as their employees and managers that had a determining effect on the creation of the violation) are subject to more severe monetary fines and sanctions (see 19 for additional details).
The suspension requirement cannot be waived under any circumstances, as there is no specific regulation allowing or disallowing carve-out arrangements. Parties failing to notify TCA will be subject to the penalties for failure to comply (see 19 below).
Under the same Article, notification can be made jointly by the parties or separately by any of the parties or their authorized representatives. The notifying party will be required to inform the other relevant party concerning the situation. Joint notifications will be made with a single form.
Also, there is no filing fee in Turkey.
There is no pre-notification and formal or informal guidance in relation to filing notifications. But an exception to the pre-merger notification rule was introduced in Communiqué No. 2017/2 on the Amendment of the Communiqué No. 2010/4. According to the Article 10(6) of Communiqué, in case the control is obtained as a result of purchases of securities from various sellers through serial transactions in the stock market, it is possible to notify TCA after closing, provided:
(i) The notification is submitted to TCA without delay.
(ii) The acquirer does not exercise any voting rights attached to the securities in question (or does so only to maintain the full value of its investments based on a derogation which would be granted by TCA.
(iii) TCA may grant such derogation subject to conditions and obligations to ensure conditions of effective competition.
14- What remedies may be proposed to address competition concerns?
Parties may propose remedial commitments (şart/taahhüt) to address substantive concerns of decreased competition in the market following the transaction, which is prohibited under Article 7 of the Law. Remedies should maintain market competition or restore it to levels prior to the transaction (restitutio in integrum). Article 14 of the Merger Communiqué authorizes TCA to stipulate conditions and remedial obligations (yükümlülük) to ensure the fulfilment of said commitments.
TCA will not sua sponte impose remedies or amend submitted remedies; the parties to the transaction have the discretion to offer remedies to obtain clearance and may be allowed to amend their proposed remedies if not deemed sufficient. If remedies are still insufficient to address concerns, TCA will not grant clearance. When offering a remedy, the parties must provide application details and arguments on how competition concerns will be addressed. What remedies may be proposed, and applicable procedure, and conditions may be found in Remedy Guidelines.
TCA has previously accepted behavioral remedies, however, only exceptionally, observing in the Remedy Guidelines “certain negative characteristics they have such as the difficulty of monitoring the behaviors of undertakings, the likelihood of acting contrary to the gist of the remedy in a way not infringing on the written commitments, and possible prevention of behaviors that may in fact be pro-competitive”. Hence, structural remedies of varied form and content are more important in practice.
Parties may submit their remedy proposals to TCA in either Phase I or Phase II. If submitting in Phase I, the notification will be considered complete only on the date of the submission of the commitments.
In any case, a signed version of the commitments that include detailed contextual information sufficient to make an examination and a copy excluding business secrets but allowing third parties to analyze the workability and effectiveness of the remedy should be submitted to TCA. Remedy Guidelines include a form, listing the information and documents required for the submission of commitments.
If TCA concludes that the transaction will not violate Article 7 of the Law without implementing the proposed remedies, the transaction will be approved unconditionally.
15- How are restrictive provisions cleared?
According to Article 13(5) of the Merger Communiqué, any restraints that are directly related and necessary to the implementation of a transaction and achievement of expected efficiencies (ancillary restraints) will be cleared if the transaction itself is approved by TCA.
Previously, TCA assessed whether restraints were indeed ancillary, however, currently parties are to self-assess their restraints. Failure to comply with the ancillary restraints, the parties may face an investigation under Article 4 of the Law.
Acceptable non-compete obligations
On sellers in acquisition transactions, non-compete obligations limited to geographies or markets for goods and services in which the entity to be acquired operated before the acquisition or limited to three years in term are generally considered acceptable according to the Guidelines on Ancillary Restraints. Non-compete obligations covering geographies where the seller has made significant investments to enter, or goods and services in late stages of development, or covering periods longer than three years when justified (due to customer tie-in or nature of transferred know-how) may also be accepted.
Acceptable non-solicitation and non-disclosure obligations
Obligations to prevent the seller in an acquisition transaction from employing hiring the employees or disclosing or using trade secrets of the undertaking to be acquired are generally considered acceptable according to the Guidelines on Ancillary Restraints. Obligations of confidentiality may be considered ancillary only if the relevant information remains confidential.
16- What are the applicable procedures and timetable for notifications?
Under Article 13(4) of the Merger Communiqué, TCA takes each filing into a preliminary review during which the transaction may be approved or brought under full investigation.
Accordingly, once the notification is submitted, rest of the procedure may continue as follows:
Preliminary Review (Phase I):
Under Article 10 of the Law, TCA is allowed fifteen (15) days to either authorize the transaction or decide to proceed with the investigation (Phase II), in which case the parties
must be duly notified, including its preliminary objections and any provisional measures it deems appropriate. The notification is deemed filed only when duly completed; if incorrect or incomplete, the notification is deemed filed only on the date when this information is completed. If at the end of thirty (30) days after the filing, TCA fails to notify the parties of its decision, the decision is deemed to be an implicit approval.
Investigation (Phase II):
If a notification is not approved in Phase I, it becomes subject to a full investigation. The concerned parties have the right to submit a written defense statement, which they may elect to waive. The parties are also allowed to propose remedies or amend any remedies proposed in Phase I. Under Article 43 of the Law, TCA is allowed up to six months, which can be extended once for an additional period of up to six months again, to complete Phase II from the date when an investigation is decided to be undertaken.
TCA may make requests in writing to the parties, other parties related to the transaction or third parties, including competitors, customers, and suppliers at any stage.
In case TCA solicits the opinion of another public authority in relation to the transaction, the evaluation period recommences on the date when the solicited opinion is lodged with TCA.
17- How are the filings assessed by TCA?
What is the substantive test used by TCA?
The applicable substantive test is the “significant impediment of effective competition” (SIEC) test recently introduced in Article 7 of the Law. Article 7 previously referred to a test of dominance under which transactions were deemed illegal only where they created or strengthened a dominant position in competition. The SIEC test is similar to that adopted in the EC Merger Regulation. Under this test, transactions that lead to a significant decrease in competition will be deemed illegal regardless of whether they create a dominant position or strengthen an existing dominant position. However, creating or strengthening a dominant position remains the most important factor that can lead to a significant impediment to effective competition.
How is dominant position defined?
Typically, TCA outlines the relevant geographic market and relevant product market and checks whether the undertaking concerned enjoys a dominant position in that market.
The concept of “dominant position” is defined in Article 3 of the Law. The Article defines a dominant position as the economic power enjoyed in a particular market by one or more undertakings to determine economic parameters such as price, supply, the amount of production, and distribution, by acting independently from their competitors and customers.
In the determination of a dominant position, the most important factor used by TCA is market power. TCA in its various decisions, emphasized that there is no clear cut-off percentage for market power however, it underlined that a market share not exceeding 40% implies a high likelihood that the undertaking concerned does not enjoy a dominant position. In order to calculate concentration levels, TCA uses four firm or five firm concentration ratios or other measures like Herfindahl-Hirschman Index (HHI).
In complex cases, where market share alone cannot be used as a clear indication of a dominant position, TCA relies on economic models i.e., sensitivity analysis typically measured by the rival’s price and quantity elasticity, evidencing that the undertaking concerned can or cannot behave independently to an appreciable extent.
What other factors are taken into account by TCA in the assessments?
Article 13(1) of the Merger Communiqué, TCA will take into account the following factors in the assessment of mergers and acquisitions:
– Structure of the relevant market;
– Actual and potential competition among domestic and foreign-based undertakings;
– Status of the undertakings within the market, their economic and financial power, their alternative sources of suppliers and customers, their ability to access sources of supply;
– Barriers to entry into market; and
– Supply and demand trends, customer interests, activities benefiting the customers, and other issues.
Also, TCA can take into account efficiencies in reviewing a concentration provided they are verifiable. The main criterion in assessing efficiency gain claims is that consumers will not be in worse conditions as a result of the merger compared to pre-merger situation. To the extent that they operate as a beneficial factor in terms of better-quality production or marginal cost reductions in production or distribution, TCA considers the efficiency gains as a countervailing factor against anti-competitive effects.
Can the notifying parties invoke a failing firm defense before TCA?
TCA may also accept the failing firm defense. Failing firm means that even where an approval is not granted to the transaction, the level of competition will still decrease given that the undertaking not acquired will still exit the market due to financial difficulties. The basic requirement for this defense is to prove that competition would be decreased in the absence of the merger at least as the same extent as when the merger is allowed.
The Guideline on Horizontal Mergers and Acquisitions (in paragraph 119) states that merging parties invoking the failing firm defense should prove the satisfaction of the following three criteria:
1. The allegedly failing firm would in the near future be forced out of the market because of financial difficulties if not taken over by another undertaking;
2. There is no less anti-competitive alternative way than the merger under examination; and
3. If the merger is not cleared, assets of the allegedly failing firm would inevitably exit the market.
What is TCA’s position in relation to non-horizontal mergers and acquisitions?
Non-horizontal mergers usually mean vertical mergers which refer to transactions implemented between undertakings operating at different levels of the supply chain. TCA recognizes that when compared to horizontal mergers, non-horizontal mergers are (for several reasons e.g. elimination of double marginalization, decreasing transaction costs) generally less likely to significantly decrease competition by creating or strengthening a dominant position. It is for this reason that TCA, with certain reservations, sets a higher market share threshold of 25% (instead of 20%) for the presumption that the vertical merger’s negative effects on competition are not so significant.
However, TCA considers that non-horizontal mergers usually have two types of negative effects on competition which are (i) unilateral effects and (ii) coordinated effects. Unilateral effects basically emerge when non-horizontal mergers may cause foreclosure, which refers to instances where actual or potential rivals’ access to supplies (input foreclosure) or markets (customer foreclosure) is hampered or eliminated as a result of the merger. Coordinated effects refer to the case where undertakings operating without harmonizing their behavior before the merger, are significantly more likely, post-merger, to raise prices or reduce competition through coordination.
Consequently, in the assessment of non-horizontal mergers, TCA weighs the positive effects stemming from the efficiencies caused by the merger and the negative effects and comes up with a positive or negative clearance.
18- Can the notifying parties protect their confidential and commercially sensitive information disclosed during filing?
Confidentiality from public disclosure
TCA in practice effectively uses its official website and publishes decisions in relation to merger filings. The announcements usually contain the names of the parties and the area of commercial activity. Once the final reasoned decision relating to the notification is made by TCA, then the full text of the analysis and decision is published after confidential commercial information, that is requested to be kept secret, is redacted.
TCA under Article 53 of the Law is under the duty not to disclose commercially sensitive information provided as part of the filing. The last paragraph of the same reads that “decisions of the Board are published on the website of the Authority in such a way not to disclose the trade secrets of the parties.” With a view to ensuring that the commercially sensitive information is kept secret and not shared with the public once the final decision is announced, TCA published Communiqué No. 2010/3. Article 5 of Communiqué No. 2010/3 places the duty to submit a written confidentiality request to TCA on the parties and require them to justify their reasons as to why the information should not be disclosed.
Although, TCA may ex officio sanitize the published decision, the general rule is that the information or documents that are not requested to be treated as confidential are accepted as non-confidential. Therefore, the parties requesting confidentiality should determine the scope of information to be redacted.
Duty of confidentiality of TCA members and staff
Article 25 of the Law prohibits the members and staff of TCA from disclosing and using the confidential information and trade secrets of undertakings learned during their time at TCA in their own or others’ interests. The duty to protect confidential information continues even after they have left their office.
19- What penalties may be imposed for violations of merger control rules?
The Law establishes two types of fines under Article 16 and 17. Article 16 specifies one-time fines for committing various wrongful acts, whereas Article 17 provides daily accumulating fines for ongoing violations. Mandatory minimum levels for the fines are adjusted annually for inflation. The Law does not provide any criminal penalties for competition related violations, and no such penalty exists elsewhere in Turkish law.
Implementation before clearance or when prohibited
A notifiable transaction is legally invalid unless its duly notified to and approved by TCA. If the transaction is implemented before clearance is obtained, under Article 16(1) of the Law TCA imposes a monetary fine equal to 0.1% of the turnover of the fiscal year preceding the fine (an annually determined minimum level applies, which is set at TRY 47.409 for 2022). If this amount cannot be calculated, the fine is based on the turnover of the nearest fiscal year. According to Article 16(1), administrative fines are imposed on each of the parties in merger transactions, and only on the transferee in acquisition transactions.
Under the same Article, in case the illegally implemented transaction creates or strengthens a dominant position and significantly impedes competition in a relevant product market in part or whole of Turkey (i.e., violates Article 7 of the Law), TCA may impose a fine of up to 10% of the annual turnover of the violator in the preceding fiscal year. If this amount cannot be calculated, the fine is based on the turnover of the nearest fiscal year.
Failure to notify correctly
If the information provided in the notification is incorrect or incomplete, the notification will be deemed filed only when the error or omission is remedied. For providing incorrect or misleading information in a notification, TCA may impose a monetary fine equal to 0.1% of the turnover of the fiscal year preceding the fine (an annually determined minimum level applies). In case this cannot be calculated, the fine is based on the turnover of the nearest fiscal year. This fine can be imposed upon natural and legal persons, the latter of which may be undertakings, associations of undertakings or members thereof.
Natural persons who are executives or employees of fined undertakings or associations of undertakings may be fined up to 5% of the fine imposed upon their organization. For mergers, merging parties and for acquisitions, the acquirer(s) will be liable.
Failure to comply
An approval will become invalid if a party fails to comply with a remedy. If the transaction is already closed, TCA may impose monetary fines under Article 16(1) of the Law, on grounds of implementation without approval (see above) and will reopen the investigation. Under Article 17 of the Law, in addition to above fines, for cases of
– failure to comply with preliminary injunctions or final decisions or remedial obligations (yükümlülük) imposed by TCA,
– failure to comply with remedial commitments (şart/taahhüt) made to TCA,
– failure to respond timely to requests of information or to provide requested documents,
– obstruction or prevention of spot inspections,
TCA may impose upon undertakings, associations of undertakings or members thereof periodic fines of 0.05% of the turnover of the fiscal year preceding the fine for each day of
noncompliance. In case this amount cannot be calculated, the fine is based on the turnover of the nearest fiscal year.
Challenging TCA Decisions
Parties to the transaction have the right to judicial review of TCA’s final decision. Following their reception of the TCA’s reasoned decision, the parties have sixty (60) days to file a lawsuit before administrative courts in Ankara, which have become the court of first instance for review of TCA decisions following Law 6352, in lieu of the Council of State. Council of State remains the appellate court for TCA decisions as the highest administrative court. TCA decisions subject to review include among others those that determine legal violations; assess fines; impose interim measures; issue or withdraw individual exemptions, block exemptions and negative clearances; and reject complaints. Third parties proving legitimate interest may challenge the TCA’s decisions before the administrative courts in Ankara. The judicial review process typically takes three to four years to complete. Most of the TCA’s decisions imposing significant fines have been appealed and most appeals raise both procedural and substantive issues.