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Turkish Merger Control Regime
Trends and and Recent Precedents in Turkey
This document contains a summary of the current status as of 2021 and contemporary developments in Turkish merger control regime, and it is not prepared as legal advice to clients. Should you need legal advice on these matters, ELIG Gurkaynak Attorneys-at-Law gladly remains at your disposal.
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Substantive Analysisof the Board (SIEC Test and Remedy Procedures) 24 (i). SIEC test 25 (ii). Board’s Power to Apply Behavioural and Structural Remedies for
Anti-competitive Conduct 25 7. The Assessment of Gun-Jumping and the Board’s Precedents 28 (i). General Overview 28 (ii). Assessment of Gun-Jumping 29 8. Suspension Requirement and the Sanctions for its Violation 31 (i). Monetary Sanctions 31 (ii). Legal Sanctions 33 (iii). Statute of limitation 35 (iv). Other Recent Cases in Turkey 35 9. JV Transactions with No Local Nexus 34 36 10. Submission of Misleading Information to the Authority and its Sanctions 39
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(I)Notification Requirements & Procedures in Turkish Merger Control Regime
1. Legislation
• The relevant legislation on merger control is the Law No. 4054 on the Protection of Competition No. 4054 (“Law No. 4054”) and Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board (“Communiqué No. 2010/4”). Article of 7 Law No. 4054 authorizes the Turkish Competition Board (“Board”) to determine, through its communiqués, which mergers and acquisitions should be notified to the Turkish Competition Authority (“Authority”) to gain validity.
• Recently, Law No. 7246 on the Amendment to Law No. 4054 on the Protection of Competition was published in the Official Gazette and entered into force on 24 June 2020.
• In general, the Turkish merger control rules, methodology and principles are akin to -if not the same as- the EU rules. Accordingly, Communiqué No.2010/4 is closely modelled on the Council Regulation (EC) No 139/2004 (“ECMR”).
• Communiqué No. 2010/4 defines the scope of notifiable transactions as follows:
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According to paragraph 5 of the Guidelines on Cases Considered as a Merger or Acquisition and the Concept of Control (“Control Guidelines”) which is closely modelled after Paragraph 9 of Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No. 139/2004 on the control of concentrations between undertakings (“Consolidated Jurisdictional Notice”), under the Turkish merger control regime, a merger occurs in one of these instances:
(1) two or more independent undertakings amalgamate into a new undertaking by terminating their individual legal entities, or
(2) an undertaking is merged into another undertaking entirely, with only one of the undertakings surviving as an entity, or
(3) where the combining of the activities of previously independent undertakings results in the creation of a single economic unit, although the undertakings do not amalgamate into a single legal entity.
Recent merger transactions approved by the Board are as follows: Nippon/Sanyo,1 Alacer Gold/SSR Mining2 and NSSTC/NS-Stainless.3
Acquisition: The acquisition of direct or indirect control over all or part of one or more undertakings, by one or more undertakings, or by one or more persons who currently control at least one undertaking, through the purchase of shares or assets, through a contract or via any other means are considered an acquisition (Article 5(1)(b) of Communique No. 2010/4 and the Control Guidelines).4
Under the Turkish merger control regime, full-function joint venture transactions are deemed as acquisitions (Article 5(3) of Communique 2010/4). In cases where a full-function JV is formed each transaction party would be deemed as the acquiring party.
1 Nippon/Sanyo (06.02.2020,20-08/91-56)
2 Alacer Gold/SSR Mining (10.09.2020, 20-41/568-253).
3 NSSTC/NS-Stainless (03.09.2020, 20-40/548-245).
4 Article 5(1)(a) of Communique No. 2010/4, which provides the definition of merger, is akin to Article 3(1)(a) of the EC Merger Regulation, while Article 5(1)(b), which provides the definition of an acquisition, is akin to Article 3(1)(b) of the EC Merger Regulation
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Under the Turkish merger control regime, a transaction is notifiable in Turkey if one of the alternative turnover thresholds stated under Article 7(1) of the Communiqué No. 2010/4 is triggered: 5 6
(a) The aggregate Turkish turnover of the transaction parties exceeding TL 100 million (approx. EUR 12.4 million or USD 14.2 million) and the Turkish turnover of at least two of the transaction parties each exceeding TL 30 million (approx. EUR 3.7 million or USD 4.2 million), OR
(b) (i) The Turkish turnover of the transferred assets or businesses in acquisitions exceeding TL 30 million (approx. EUR 3.7 million or USD 4.2 million), and the worldwide turnover of at least one of the other parties to the transaction exceeds TL 500 million (approx. EUR 62.4 million or USD 71.3 million), or (ii) the Turkish turnover of any of the parties in mergers exceeding TL 30 million (approx. EUR 3.7 million or USD 4.2 million), and the worldwide turnover of at least one of the other parties to the transaction exceeds TL 500 million (approx. EUR 62.4 million or USD 71.3 million).
The turnover threshold tests provided under Article 7(1)(b) are two separate tests; Article 7(1)(b)(i) is applicable only in case of acquisition transactions (as well as joint ventures) while Article 7(1)(b)(ii) is applicable only in case of merger transactions.
Communique No.2010/4 does not seek the existence of an ‘affected market’ in assessing whether a transaction triggers a notification requirement; foreign-to-foreign transactions (cases where the relevant undertakings do not have any physical presence in Turkey) are also caught if they exceed the turnover thresholds.
5 The approximate amounts in EUR for 2020 financial year are converted using the exchange rate EUR 1= TRY 8.01 in accordance with the applicable Central Bank of the Republic of Turkey average buying rate for 2020 financial year (i.e. 01.01.2020 – 31.12.2020).
6 The approximate amounts in USD for 2020 financial year are converted using the exchange rate USD 1= TRY 7.01 in accordance with the applicable Central Bank of the Republic of Turkey average buying rate for 2020 financial year (i.e. 01.01.2020 – 31.12.2020).
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➢ 220 merger control cases were reviewed between January – December 2020.
➢ 1 transaction was conditionally approved.
➢ 1 transaction was rejected.
➢ 62 decisions were concerned with joint ventures.
➢ It is seen that out of 220 transactions, 150 transactions, corresponding to approximately 68%, concern acquisitions, and 62 transactions corresponding to approximately 28% concern the establishment of joint ventures while 8 transactions corresponding to approximately 4% concern mergers. The Board approved 190 transactions unconditionally. Only 28 of the 220 transactions were decided to be either outside of the scope of Article 7 of Law No. 4054 or not notifiable. Mergers and acquisitions are focused on the following sectors: (i) chemicals and mining, (ii) automotive and vehicles (iii) machinery industry, (iv) banking, capital market, (iv) infrastructure services, (v) information technologies, (vi) food industry, (vii) logistics and construction sectors
(II) The Trends and Approaches under Turkish Merger Control Regime
2. The Concept of Control and Joint Ventures under Turkish Merger Control Regime
(i). Concept of Control
Under the Turkish merger control regime,
• “control” is understood to be the right to exercise decisive influence on strategic business decisions; and it can be exercised de jure or de facto. Control may take the form of sole or joint control over an undertaking.
The Board’s approach to voting and negative control rights is very similar to, if not the same as the European Commission’s (“Commission”) position. For there to be a change in a target’s control structure, the voting and/or veto rights should be sufficient to enable the
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buyer to exercise decisive influence on the strategic business behaviour of the target. Such rights must be related to strategic decisions on the target’s business policy, and they must go beyond the usual “minority rights,” i.e., the veto rights normally accorded to minority shareholders to protect their financial interests. The ability to exercise decisive influence on the day-to-day management of the target is not a requisite. What matters is whether the voting and/or veto rights afford the buyer to decisively influence the target’s important strategic business decisions.
➢ Sole control: Sole control is the case where one undertaking alone has decisive influence on an undertaking. In general, there are two situations in which an undertaking is deemed to have sole control. First, the undertaking that has sole control enjoys the right to determine the strategic commercial decisions of the other undertaking. This right is generally achieved by the acquisition of the majority of the voting rights in a company. Second, sole control exists where only one shareholder is able to veto strategic decisions in an undertaking, but this shareholder does not have the power on their own to take such decisions (negative sole control).
➢ Joint control: Joint control exists where two or more undertakings or persons have the possibility of exercising decisive influence over another undertaking.
• To qualify as a concentration subject to merger control, a joint venture must be of a full- function character and satisfy the following criteria: (i) existence of joint control in the joint venture, (ii) the joint venture being an independent economic entity, and (iii) established on a lasting basis (i.e., having adequate capital, labour, and an indefinite duration).
• Decisive influence means the power to block actions that determine the strategic commercial behaviour of an undertaking. In case of joint control over an undertaking, two or more parent companies may reject the proposed strategic decisions and thus can create a deadlock situation on the decision-making procedure. The ability to create a deadlock, for instance, by a refusal to attend the board meeting where the quorum requires a certain
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member to be present at the meeting, could be considered as joint control within the meaning of Turkish merger control regime. 7
Sole Control
In Marubeni/Temsa8 , which concerns Marubeni`s acquisition of sole control over Temsa, an entity previously controlled jointly by Marubeni and Sabancı, the Board determined that, following the transaction, Marubeni would hold the majority shares of Temsa while Sabancı would hold minority shareholding. In this regard, even though Sabancı would still be able to appoint a certain number of members to Temsa’s Board of Directors, given that (i) the members appointed by Marubeni could approve the Board decisions without the attendance or approval of the Sabancı appointed members, in other words, Sabancı did not have the ability to create a deadlock, and (ii) Sabancı did not have any veto rights on the strategic business decisions of Temsa, the Board decided that Temsa would be solely controlled by Marubeni, post-transaction.
Joint Control
In TFS/Mitsui9 , which concerns the establishment of a joint venture between Toyota Motor Corporation’s subsidiary Toyota Financial Services Corporation (“TFS”) and Mitsui & Co. Ltd, the Board indicated that:
(i) The green-field JV will have 5 board members. TFS and Mitsui will each have the right to nominate 3 officers and 2 officers, respectively,
(ii) Both parents are entitled to appoint senior executives (TFS will appoint and dismiss the Chief Executive Officer, the Deputy Chief Executive Officer, and the Chief Financial Officer. Mitsui will appoint and dismiss the Chief Operations Officer and the Deputy Chief Operations Officer),
(iii) Decisions concerning the annual business plans and major changes in the annual business plans of the greenfield JV will be subject to both parents’ approval, and,
(iv) Both parties have the opportunity to create a deadlock by not consenting to such matters, and accordingly, decided that the newly established entity will be under the joint control of its parents TFS and Mitsui.
7 Luxottica/Alaluf-New Age (22.4.2010, 10-33/507-184).
8 Marubeni/Temsa (27.06.2019, 19-23/356-161).
9 TFS/Mitsui (05.03.2020, 20-13/166-85).
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(ii). Full-Functionality
• The following elements should be considered:
i. Sufficient resources including finance, staff, and assets to operate independently: A joint venture should have adequate capital and labour to operate independently.
ii. Activities that go beyond handling one specific function for the parents: A joint venture is not deemed to have full-function if it is established to take over only one specific function within the parent companies’ activities, without its own access to or presence in the market.
iii. Independence from the parents in sale and purchase activities: For example, JVs limited to R&D, production, or the distribution and/or sales of their parent companies’ products are not deemed “independent.” However, the fact that a joint venture makes use of the distribution network, or outlets of one or more of its parent companies, normally will not prevent it from being considered as full-function, as long as the parent companies act only as agents of the joint venture.
iv. Operations on a lasting basis. Long duration.
• In case the nature of the JV turns out to be non-full-functional: while the non-full function JVs are not bound by a mandatory merger control filing, they may still fall under Article 4 of Law No. 4054, which prohibits restrictive agreements. A joint venture must not have the object or effect of restricting competition between the parties and itself. The parties have the ability to do a self-assessment individual exemption test, which is set out under Article 5 of Law No. 4054, on whether the JV meets the conditions of individual exemption. The parties do not have a positive duty to notify the transaction for individual exemption, but it is an option granted to them.
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In DSM/Evonik10 , the transaction concerns the formation of a joint venture between Koninklijke DSM N.V. and Evonik Industries AG.
➢ The Board stated that the JV will be jointly controlled by DSM and Evonik. However, in terms of being an independent economic entity, the Board concluded that although the JV will have its own production plant, it is considered that this plant will be used only by the parent companies and the JV will be commercializing the products produced only by the parent companies. Therefore, it is concluded that while the JV cannot be evaluated under Article 7 of Law No. 4054 it should, however, be considered as a horizontal cooperation agreement.
➢ Accordingly, the Board deemed that as DSM and Evonik are competitors in the animal feed market in general and they have sales in vertical markets, the JV can thus be evaluated as a restrictive agreement under Article 4. Within the scope of its assessment under Article 5, the Board indicated that (i) the JV’s product will contribute to technical and economic development, (ii) the JV’s product will be a more efficient substitute for fish oil; therefore the consumer will benefit from the horizontal cooperation agreement, (iii) competition will not be eliminated in a significant part of the relevant market, and (iv) competition will not be restricted more than necessary considering that a newly developed product will be launched and the product range will be provided. Therefore, the Board granted an individual exemption to the relevant cooperation.
➢ Notwithstanding the above, the Commission has approved the creation of a joint venture by Evonik and DSM. The Commission concluded that the proposed transaction would raise no competition concerns because the expected activities and turnover of the joint venture in the EEA are limited. The transaction was examined under the simplified merger review procedure.
10DSM/Evonik (26.10.2017, 17-35/573-248)
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3. Ancillary Restraints
• Ancillary restraints could consist of non-compete or non-solicit clauses (imposed usually only on the seller and rarely on both parties) which are directly related to the concentration, and which are necessary for the implementation of the transaction and the full achievement of the efficiencies expected from the concentration.
• The Board’s approval of the transaction will also cover those restraints that are directly related and necessary to enforce the transaction (Article 13(5) of Communiqué No. 2010/4). Therefore, the ancillary restraints will be covered to the extent that their nature, subject-matter, geographic scope and duration are limited to what is necessary to fully achieve the efficiencies expected from the concentration.
• General rules on ancillary restraints are defined in the Guidelines on Undertakings Concerned, Turnover and Ancillary Restraints in Mergers and Acquisitions (“Guidelines on Undertakings Concerned”). The parties make a self-assessment as to whether a certain restriction could be deemed as ancillary. In the event that the transaction contains uncommon restraints that have not been included in the Guideline on Undertakings Concerned and the Board’s precedents, the Board may review the restraints upon the parties’ request, and if the ancillary restrictions are not compliant with the merger control regulation, assess them in accordance with Article 4 of Law No. 4054.
• A restriction such as a non-competition obligation should be (i) directly related and necessary to the concentration, (ii) restrictive only for the parties, and (iii) proportionate. As a result, for instance, it may be said that a restriction will be viewed as ancillary as long as its nature, geographic scope, subject matter and duration is limited to only what is necessary to protect the legitimate interests of the parties entering into the notified transaction.
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• As a rule, non-competition obligations must be limited to those goods and services, and the geographical area, that the economic unit to be acquired is active in before the transaction.
• The decisional practice of the Board and the Guidelines recognize that while non- competition obligations that do not exceed 3 years11 in terms of their duration are generally accepted as reasonable, a non-compete provision which is binding on the JV parents during the life of the joint venture is also seen as proportionate in terms of scope. In its general decisional practice, the Board has deemed that post-term non-compete obligations of two years are proportionate; therefore, constitute an ancillary restraint.12
BBVA/Garanti Bankası13 concerned the partial acquisition of the shares of Doğuş Holding A.Ş. and Şahenk Family in Garanti Bank, corresponding to 14.89% of the capital, by Banco Bilbao Vizcaya Argentaria S.A, one of the existing shareholders. The Board analysed the non-compete obligation in terms of the conditions of the ancillary restraints and held that the non-compete obligation in this case is proportionate, considering that:
(i) The non-compete obligation on both parties is directly related to the transaction,
since Doğuş Holding has significant know-how regarding the Turkish banking
system and especially with respect to Garanti Bank, and
(ii) The non-compete obligation is restricted to only those activities Garanti Bank had engaged in prior to the transaction, in Turkey, and only applicable to the parties to the shareholders` agreement.
Although the specific duration of the non-compete obligation has been redacted in the reasoned decision, the Board held that the duration is less than three years, in any case. Therefore, the Board concluded that the non-compete obligation would be considered as an ancillary restraint.
11 However, it may be possible to accept non-competition obligations with a duration longer than three years under the framework of ancillary restraints, in case the customer tie-in lasts longer, or the nature of the know-how transferred necessitates a longer period, provided that the extent required by the specific case at hand is not exceeded.
12 BBVA/Garanti Bankası (19.02.2015, 15-08/106-43); Ajinomoto (05.12.2013, 13-69/932-393); Maspex-Tat (26.12.2013, 13-72/1013-431) ; LF Invest (27.10.2010, 10-67/1423-539); Alarm Systems (23.12.2009, 09- 60/1477-393); Ekol (09.12.2009, 09-58/1406-368); Fayat (11.2.2009, 09-06/119-36); Enfes Gıda (06.08.2009, 09-35/889-212); Efes Etap (19.08.2009, 09-47/1161-295)
13 BBVA/Garanti Bankası (19.02.2015, 15-08/106-43).
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4. Review Periods of the Authority
• Law No. 4054 provides no specific deadline for filing.
• The notification is deemed filed when received in complete form by the Authority. If the information requested in the notification form is incorrect or incomplete, the notification is deemed to have been filed on the date which such information is completed or corrected.
• The Board, upon its preliminary review (i.e., Phase I), will decide either to approve or to investigate the transaction further (i.e., Phase II).
• The Board notifies the parties of the outcome within 30 days following a complete filing. There is also an implied approval mechanism, where if the Board does not respond within 30 calendar days upon a complete filing, it is deemed as a tacit approval. In practice, the Board almost always responds within the 30-calendar-day period by either sending a written request for information, or –very rarely – by rendering its decision within the original 30- calendar-day period.
• The Authority may send written information requests to the parties of the transaction, any other entities related to the transaction, or third parties such as competitors, customers or suppliers.
• Any written request by the Authority for missing information will halt the review period and restart the 30-calendar-day period from Day 1, commencing on the date which the responses are submitted.
• If a notification leads to an investigation (Phase II), it transforms into a fully-fledged investigation. The investigation (Phase II) takes about six months and, if deemed necessary, it may be extended only once for an additional period of up to six months.
• For a standard no-issue filing, ELIG Gürkaynak is almost always able to obtain a decision within about 45 calendar days of Phase I filing, due to our close follow-up of our filings with the Authority.
5. Phase-II Review of the Authority: Remedies in light of the Board’s precedents
Upon its Phase-I review of the notification, the Board may decide to either approve or investigate the transaction further i.e., proceed to Phase-II. In practice, only exceptional
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cases require a Phase-II review. The Board may decide to further scrutinize a transaction and thus initiate the Phase-II review, if it decides that there are concerns that the transaction may significantly impede effective competition in the market, or create and/or strengthen dominant position.
• As per Article 10 of Law No. 4054, a merger/acquisition transaction notified to the Board is suspended and cannot be put into practice until the final decision is taken. That being said, for a transaction to be subject to a Phase-II examination process does not mean that the transaction would not be authorized.
In the first half of 2019, the Board conditionally approved two transactions, Harris/L3 Technologies 14 and Nidec/Embraco 15, subject to certain remedies proposed by the parties to the relevant transactions.
In 2020, five transactions were taken to Phase-II:
➢ The Board initiated a Phase-II Review 16 regarding the transaction concerning the acquisition of sole control over Europa Multipurpose Terminals S.P.A. The Board has not concluded the relevant investigation, it is still ongoing.
➢ The Board initiated a Phase-II Review 17regarding the transaction concerning the acquisition of sole control over Eaton Corporation’s hydraulic branch by Danfoss A/S. The Board has not concluded the relevant investigation, it is still ongoing.
➢ The Board initiated a Phase-II Review 18 regarding the transaction concerning the acquisition of sole control over Kümaş Manyezit Sanayi A.Ş. by RHI Magnesita GmbH via Radex Vetriebsgesellschaft m.b.H from Yıldız Holding A.Ş. and Gözde
14 Harris/L3 Technologies (20.06.2019, 19-22/327-145).
15 Nidec/Embraco (18.04.2019, 19-16/231-103).
16 Europa/DFDS (10.12.2020, 20-53/745-M).
17 Eaton/Danfoss (12.11.2020, 20-49/671-M).
18 Kümaş Manyezit (06.02.2020, 20-08/89-M).
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Girişim Sermayesi Yatırım Ortaklığı A.Ş. The Board has not concluded the relevant investigation, it is still ongoing.
➢ The Board initiated a Phase-II Review19 regarding the application concerning the combination of two automotive companies Fiat Chrysler Automobiles N.V. and Peugeot S.A., through the merger of Peugeot S.A. into Fiat Chrysler Automobiles N.V.
The short form decision20 indicates that the notified transaction would not result in the significant impediment of effective competition in the markets for (i) the manufacturing and sales of passenger cars and (ii) light commercial vehicles between 3.5-6 tonnes gross weight. However, pursuant to Article 7 of Law No. 4054, the notified transaction would result in the significant impediment of effective competition in the market for manufacturing and sales of light commercial vehicles up to 3.5 tonnes gross weight.
The transaction has been approved within the scope of the commitments submitted to the Authority by Fiat and the commitments by Koç Holding A.Ş. The reasoned decision has not been published yet.
➢ The Board initiated a Phase-II Review regarding the transaction concerning the acquisition of sole control over Gülçiçek Kimya ve Uçan Yağlar Sanayi ve Ticaret A.Ş. by Fragar (Europe) SA.
The unconditional approval decision21 rendered in this regard is prominent in the sense that even though the combination of the undertakings in question would give rise to a significant market power in Turkey, the Board cleared the transaction by taking into account the parties’ and their competitors’ Turkish and global market shares and the
19 Peugeot/Fiat (17.07.2020, 20-34/441-M).
20 Peugeot/Fiat (30.12.2020, 20-57/794-354).
21 Gülçiçek/Fragar (25.06.2020, 20-31/388-174).
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competitive dynamics of the markets both globally and in Turkey.
The Board determined that the parties’ activities (i) horizontally overlap with respect to the sales and production of fragrances, and (ii) vertically overlap with respect to the sales and production of fragrance and aromatic chemicals.
In terms of the assessment on other players within the market, the Board found that there are many global competitors who are active in the Turkish markets via imports. Therefore, the Board decided that these players and the global market conditions should also be taken into consideration. Thereby, upon its assessment these dynamics, the Board found that the parties’ competitors hold a significant market power in Turkey. The Board has also assessed that the “aroma chemicals” product used as an input for the perfume market where Gülçiçek operates globally and in Turkey, is sold to customers in Turkey by Firmenich through its affiliate.
Ultimately, the Board decided that the transaction would not give rise to anticompetitive effects due to (i) the dynamic nature of the market, (ii) the homogenous structure of the retail level, (iii) the lack of or very limited entry barriers, (iv) the existence of and the switching ease between local and global suppliers, and (v) the level of countervailing buyer power. Therefore, the Board unconditionally cleared the transaction within the scope of Phase-II review.
The transaction was submitted to the Authority for approval at the end of 2019. The complete review period took approximately 5 months.
➢ In 2021, the Board initiated another Phase-II Review regarding the transaction concerning the acquisition of sole control over Willis Towers Watson Public Limited Company by Aon plc which is still ongoing at the time of writing of these notes.
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With respect to conditional approvals:
In Nidec/Embraco22, the transaction concerns the acquisition of sole control over the refrigeration compressor business of Whirlpool Corporation (namely, Embraco) by Nidec.
Within the scope of its Phase-I review, the Board considered that the transaction would affect various markets in Turkey in which competition law concerns could realistically arise, and thus, decided to initiate a Phase-II review, similar to the Commission.
The Board decided that the transaction resulted in horizontal overlaps in the markets for the sale of (i) hermetic reciprocating household refrigeration compressors, and (ii) hermetic reciprocating light commercial refrigeration compressors; and vertical overlaps in (i) the sale of refrigeration compressors for use in light commercial appliances as the upstream market, and (ii) the sale of condensing units as the downstream market.
(i) With regard to the household refrigeration compressors, the Board took into account the market shares of the parties and their competitors within the last three years. The Board set forth that the transaction would not raise any competition law concerns in the market for household refrigeration compressors, given that the aggregate market shares of the parties were relatively low, and their market shares had not changed significantly in recent years.
(ii) In terms of refrigeration compressors for use in light commercial appliances, considering the parties’ market shares within the last 3 years, the Board indicated that the transaction did raise competition law concerns.
(iii) With respect to the vertically affected markets, the Board took into consideration the parties’ market shares between 2013 and 2017, while further pointing out that, in terms of the market for the sale of condensing units, the highest level of market share was achieved in 2013 and, there was only a limited amount of sales in the Turkish market as of 2017.
22 Nidec/Embraco (18.04.2019, 19-16/231-103).
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In terms of the potential competition law concerns regarding the horizontal and vertical overlaps, the Board evaluated the Turkey-specific effects of the commitments that had been submitted before the Commission. Within the scope of the commitment, Nidec offered to divest its refrigeration compressor business for both household and light commercial applications.
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The transaction was approved pursuant to the commitment package submitted to the Commission about the divestment of Nidec’s own light commercial compressor and household compressor businesses, as the Board concluded that the relevant commitments would eliminate the horizontal and vertical overlaps in Turkey.
The transaction was submitted before the Authority on August 9, 2018. The complete review period took approximately 8 months.
In Luxottica/Essilor23 the Board initiated a Phase-II review regarding the merger of Luxottica Group S.p.A. and Essilor International S.A. The parties proposed structural and behavioural remedies to the Authority in order to address horizontal and conglomerate effects of the transaction. There were horizontal overlaps in the wholesale of branded sunglasses market and in the wholesale of branded prescription optical frames market. In this regard:
(i) In the wholesale of branded sunglasses market, Luxottica was deemed to hold a dominant position; whereas Essilor, through its subsidiary Merve Optik, was listed as the second player in the market. In this regard, the combined entity would have the highest market share in the relevant market.
(ii) With respect to the market structure (a) Luxottica’s Ray-Ban brand was the product with the highest market share, (b) the countervailing buyer power within the relevant market did not amount to a level where the purchasers would exercise a competitive pressure on the combined entity, and (c) the entry of a market player who would assert significant competitive pressure on the combined entity did not seem possible in the near future.
(iii) The combined entity, on its own, was deemed to meet the majority of an opticians’ needs. The Board deemed that this would correspond to a significant portfolio power.
23Luxottica/Essilor (18-36/585-286, 01.10.2018).
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(iv)
In addition, the Board determined that any potential tying or bundling practices to be implemented by the combined entity would give rise to significant competition law concerns.
In order to resolve the competitive concerns anticipated by the Board, the parties proposed structural and behavioural remedies, which included the following;
(i)
As a structural remedy, the parties proposed to divest Merve Optik in order to eliminate horizontal overlap in the markets concerned. The Board noted that the divestiture of Merve Optik would eliminate horizontal overlaps in the relevant markets, and therefore, the transaction would not lead to the creation or strengthening of a dominant position in the affected markets.
(ii)
In terms of behavioural remedies, it was proposed that (i) the parties and the combined entity would not implement tied sales of ophthalmic lenses, optical frames and sunglasses to opticians in Turkey, and (ii) the parties and the combined entity would not apply any contractual or de facto exclusivity provisions which prohibit or restrict the opticians from purchasing from their competitors. Although the Board noted that the combined entity guaranteed that it would not engage in any practices to restrict competition, it rejected the proposed remedy of the parties which stated that upon a request of the optician(s), the parties would be permitted to engage in tied sales and conditionally approved the transaction.
The application regarding transaction was submitted to the records of the Authority on May 22, 2017. The complete review period (Phase-I + Phase-II) took approximately 16 months.
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The Board also reviewed the Bayer/Monsato24 transaction regarding the acquisition of sole control over Monsanto Company by Bayer Aktiengesellschaft. The Board considered that the transaction may result in the creation or strengthening of Bayer’s dominant position and thus, may significantly impede effective competition in the relevant market; therefore initiated a Phase-II review. In its assessment, Board considered various parameters in addition to the market shares of the parties and their competitors such as the number of their competitors, entry barriers, vertical integration, technological advantages, financial power, and economies of scale, as well as intellectual property rights, and brand loyalty.
(i)
In terms of the horizontally affected cotton seeds market; the Board indicated that the transaction might raise competition law concerns, considering the parties’ aggregate market share, as well as the limited number of competitors and their market shares within the last three years.
(ii)
Regarding the vertically affected markets, the Board indicated that Bayer would attain a vertically integrated position by way of acquiring Monsanto which is a significant player that is active in the downstream market and scrutinized the potential competition law concerns that might arise in each vertically related market.
In terms of the potential competition law concerns regarding the horizontal overlaps as well as the vertically related markets, the Board evaluated the Turkey-specific effects of the commitments that were submitted before the Commission. To that end, the Board indicated that the relevant structural remedies eliminated all of the Turkey-specific horizontal and vertical competition law concerns raised by the Authority during the Phase-II review. Accordingly, the Board granted approval to the transaction on the condition that the remedies submitted to Commission will be implemented.
The remedies approved by the Commission include divestiture of (i) Bayer’s entire vegetable seeds business; (ii) Bayer’s entire broad acre seeds and traits business including its R&D organization, subject to limited carve outs; (iii) a number of Bayer non-selective herbicide assets, in particular Bayer's global glufosinate business assets and three lines of research; (iv)
24Bayer/Monsanto (08.05.2018, 18-14/261-126).
21
a number of Bayer nematicidal seed treatment assets and product (sold under the Poncho, VOTiVO, COPeO and ILeVO brands); and (v) Bayer’s global digital agriculture assets and products (subject to a temporary licence back from BASF to Bayer).
The transaction was submitted to the Authority for approval on February 2, 2017. The complete review period took approximately 15 months.
In Arkas/Mardaş25 the transaction concerned the acquisition of Mardaş Marmara Deniz İşletmeciliği A.Ş. that is conducting its activities in the Ambarlı Port, by Limar Liman ve Gemi İşletmeleri A.Ş. controlled by Arkas Holding.
➢
The Board found that (i) the level of concentration in the container handling services market, (ii) the existence of strong competitors and (iii) the expected capacity increases in the nearby ports (along with new entrants) meant that no single undertaking could hold a dominant position in the market. That being said, the Board noted that the transaction could lead to creation of collective dominance bearing in mind that (i) Arkas Group’s partner in Marport, MSC was also active in the Northwest Marmara sub-region through Asyaport (Tekirdağ), (ii) three of the four ports in the Northwest Marmara sub-region would be controlled by shareholders of Marport (collective market share reaching 81.2% in the Northwest Marmara sub-region and 51.9% in the Marmara region).
➢
As for the vertical effects of the transaction, the Board found that the transaction could lead to input foreclosure with respect to container shipping line operations services (due to cross-shareholdings among undertakings). Particularly, the Board noted that the Mardaş port and the alternative ports (other than Kumport) would be controlled by Arkas Group (and its business partners) and access to these ports would be potentially restricted if Arkas Group decided to engage in discrimination against the competing container shipping line operators.
25 Arkas/Mardaş (08.05.2018, 18-14/267-129).
22
➢
In order to address the Board’s concerns, the parties submitted a remedy package comprised of behavioural remedies targeting both horizontal and vertical concerns. The commitments submitted include (i) operational unbundling, (ii) legal unbundling, (iii) not changing the trade terms, operations and certain services offered to current feeder and/or deep sea liner customers of Mardaş for a period of 36 months from the date of the Share Purchase Agreement, (iv) not amending Mardaş’s 2017 Standard Port Services Tariff for 12 months from the date of the Share Purchase Agreement and (v) following this 12 month period, determining new tariffs in light of competition in the market and avoiding excessive pricing; and, upon request, informing the Authority of these prices every 6 months.
➢
The Board decided to grant approval to the notified transaction by a majority vote, within the framework of the behavioural remedies submitted to the Authority.
➢
The transaction was submitted to the records of the Authority on February 14, 2017. The complete review period took approximately 15 months.
However, the 9th Administrative Court of Ankara first has ordered stay of execution of the Board’s decision on Arkas/Mardaş on the grounds that (i) the proposed behavioural remedies would not eliminate competitive concerns, (ii) no effective implementation and monitoring mechanism was adopted with respect to the remedy package, and (iii) the Board failed to provide adequate explanation on how these remedies would address concerns on the creation/strengthening of dominant position and coordination effects stemming from the transaction.26 Subsequently, the 9th Administrative Court of Ankara annulled the Board decision arguing that all the commitments are behavioural and behavioural commitments could only be accepted in cases where the behavioural commitments are as effective as structural commitments in eliminating competitive concerns and when there are no other equally effective structural commitments.
26 The Court’s decision dated 19.12.2018 and numbered E.2018/2277.
23
Additionally, it is also stated that the Board’s decision does not adequately explain how the commitments submitted to the said acquisition will positively affect the competitive concerns regarding the dominant position and cooperation and vertical limitation of competition post-transaction. Thus, it is decided that the commitments do not eliminate competitive concerns and there is no efficient application and monitoring mechanism for these commitments.
6. Recent Amendments Introduced to the Law No. 4054 and their Effects on the Substantive Analysis of the Board (SIEC Test and Remedy Procedures)
• After multiple rounds of draft revisions and failed enactment attempts over a span of several years, the proposal for an amendment to the Law No. 4054 has finally been approved by the Turkish parliament, namely the Grand National Assembly of Turkey, on June 17, 2020. Law No. 7246 on Amendments Concerning Law No. 4054 has been published in the Official Gazette and entered into force on June 24, 2020 (“Amendment Law”).
• The Amendment Law essentially:
o
clarifies certain mechanisms in Law No. 4054 which might have led to legal uncertainty in practice to a certain extent, and
o
introduces new mechanisms as to the selection of cases for the Authority to focus on, such as,
•
the de minimis principle for agreements, concerted practices or decisions of associations of undertakings (not applicable for hardcore violations)
•
the SIEC test for merger and acquisitions
o
outlines the behavioural and structural remedies for anti-competitive conduct
o
brings commitments and settlement mechanisms.
o
expands on the powers of the Authority regarding on-site inspections,
o
clarifies the self-assessment procedure in the individual exemption mechanism.
24
The amendments which directly relate to merger control are as follows:
(i). SIEC test
• In line with the EU law, the amendment replaces the dominance test with the “significant impediment of effective competition” (SIEC) test.
• The dominance test, which was previously adopted by the Board as the substantive test, suggests that the mergers and acquisitions which do not create or strengthen a dominant position and do not significantly impede effective competition in a relevant product market within the whole or part of Turkey, would be cleared by the Board.
• This amendment aims to allow a more reliable assessment for the unilateral and cooperation effects that might arise as a result of mergers or acquisitions. The Board will be able to prohibit not only those transactions that may result in creating a dominant position or strengthening an existing dominant position, but also those that can significantly impede effective competition.
• On the other hand, the SIEC test may also reduce over-enforcement as it focuses more on whether and how much the competition is impeded as a result of a transaction. Thus, pro- competitive mergers and acquisitions might benefit from the test even though a transaction leads to significant market power based on, for instance, major efficiencies. Likewise, dominant undertakings contemplating transactions with de minimis impact may also benefit from the new approach.
• As the amendments to Law No. 4054 have only recently come into force, although the Board has started to apply the relevant test in its decisions, it has not published detailed assessments pertaining to the implementation of SIEC test. Thus, it remains to be seen just how big a difference the newly introduced SIEC test will bring to merger control under the Turkish competition regime. The Authority’s forthcoming secondary legislation is also expected to shed some light on any practical concerns regarding the new mechanisms.
25
• The amendment grants the Board the power to order structural remedies for anti- competitive conduct infringing Articles 4, 6 and 7 of Law No. 4054, provided that behavioural remedies were applied first but failed.
• Both behavioural and structural remedies should be proportionate and necessary to end the infringement effectively.
• This amendment is in line with the EC Regulation No. 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, but takes a step further to provide assurance to undertakings that structural remedies for competition law infringements will only be applied when behavioural remedies have first been tried but proved to be ineffective.
• By clearly stating that the Board may impose structural remedies in its final decisions, an important amendment has been made to the tools of the Board against competition law violations. On the other hand, the undertakings are also given legal certainty by stipulating that structural remedies are exceptional, since they can be imposed only if behavioural remedies have failed.
• The Board will set out, in its final decision, the behaviours that the relevant undertaking or associations of undertakings must carry out or refrain from in order to re-establish competition. Law No. 4054 indicates that structural remedies can take the form of transfer of undertakings’ certain businesses, partnership shares or assets.
• If its final decision concludes that the behavioural remedies have failed, the Board will grant the relevant party/parties a time period to comply with structural remedies, which shall not be less than 6 months minimum, starting from the final decision.
• In addition, the term “failure” used within the Amendment Law brings a new obligation to the Board to test whether a certain behavioural remedy has worked or not, before moving on to a structural remedy.
26
• A curious point as to this remedy provision added to Article 9 is its potential implications with respect to Article 11 of Law No. 4054, which concerns the Board's power to impose remedies for gun-jumping cases in mergers (that results in an infringement of Article 7 concerning mandatory notification of mergers exceeding jurisdictional thresholds). Article 11 allows the Board to dissolve a notifiable merger that has been realized without the Board’s approval through several methods including divestitures, and there is no pre-condition of trying out behavioural remedies first. With the Amendment Law, however, Article 9 now introduces “first behavioural, then structural remedy” rule also for Article 7 violations. How the Board will reconcile these two provisions in practice remains to be seen.
• The Authority published the Draft Communiqué on Remedies for Preliminary Investigations and Investigations on Anticompetitive Agreements, Concerted Practices, Decisions and Abuse of Dominant Position on its website on November 27, 2020 and requested stakeholders’ opinions, suggestions, and evaluations on the published draft. The official communiqué was officially published and put into force recently, on March 16, 2021, and it remains to be seen how it will be implemented in practice (see, Havaş-MNG Investigation (10.12.2020, 20-53/746-334), Arslan Nakliyat Investigation (28.07.2020, 20-36/485-212)). This mechanism makes it possible for the undertakings and trade associations to offer commitments during an ongoing preliminary investigation or a full-fledged investigation process, to eliminate potential competition concerns under Articles 4 and 6 of Law No. 4054 that prohibit restrictive agreements and abuse of dominance. The main purpose of the commitment mechanism is to reduce the possible anti-competitive effects of a competition law violation and, at the same time, save time and costs for both the Authority and the investigated parties during the examination processes required for the determination of a violation.
• Additionally, in an effort to take one step further in harmonizing the Turkish Competition Law with the EU legislation, the Authority has introduced the settlement mechanism under Article 43 of Law No. 4054. The Authority has recently announced the draft regulation and initiated a public consultation process that accepted submissions until April 19, 2021. Although the current text is not final, it still provides an early guidance on what
to expect with regard to the Competition Authority’s implementation of the settlement mechanism.
27
• Finally, on 16 March, 2021, The Turkish Competition Authority published the Communique on Agreements, Concerted Practices, and Decisions of Associations of Undertakings that Do Not Appreciably Restrict Competition. With this communique under the de minimis standard, the Board may not launch investigations into agreements, concerted practices, and the decisions of associations of undertakings that do not appreciably restrict competition and do not fall within the scope of evident and hard core violations. These agreements are:
o
in cases of vertical agreements where the market share of each undertaking does not exceed 15%.
o
in cases of horizontal agreements among competitors where the combined market share of the undertakings does not exceed 10% in any affected market and,
7. The Assessment of Gun-Jumping and the Board’s Precedents
(i). General Overview
• There are not many precedents that provide clear guidelines on the issue of gun-jumping practices, particularly with respect to gun-jumping violations through pre-closing information exchanges.27 Nevertheless, the Board’s general stance shows its tendency to follow the Commission’s practices in matters.
• Turkish merger control regime adopts an ex-ante supervision and mandatory filing model based on turnover thresholds in line with the EU. Accordingly, it deems the closing of a notifiable transaction before obtaining the required approval of the Board (a requirement that is explicitly legislated by Articles 11 of Law No. 4054) as “gun-jumping” and a violation of the suspension requirement.
27 G. Gürkaynak and others, Gun-Jumping through Pre-Closing Information Exchanges in M&A Transactions and Alternative Safeguard Mechanisms, (2019), The Second Academic Gift Book of ELIG Gürkaynak Attorneys-at-Law on Selected Contemporary Competition Law Matters.
28
(ii). Assessment of Gun-Jumping
Pursuant to Article 10(7) of Communiqué No. 2010/4, in merger or acquisition transactions, the date of implementation is the date when the control is changed.
Moreover, the Board considers practices that support a de facto change in control such as (i) establishing joint marketing/working teams, (ii) providing trainings, (iii) initiating the integration process between companies, (iv) actions or recommendations on employees and managers, (v) exchanging commercially sensitive information, and (vi) any business activities that could enable the undertaking concerned to emerge in the market, as gun-jumping.28 Needless to say, these elements are not exhaustive, and the Board determines the existence of a gun-jumping on a case by case basis.
In Boyner/YKM29 , even though the decision did not include a concrete and written finding of a violation, the Board noted that administrative fines may be imposed in cases where a notifiable merger and acquisition is implemented without the Board’s clearance.
The Board evaluated whether the parties had actually implemented the transaction prior to clearance by analysing matters such as: (i) cancellation of orders of the target entity, (ii) integration of organizational structures between stores, (iii) obtaining of resumes of the other parties’ employees and executives, (iv) dismissal of other parties’ employees, (v) the target refraining from renting a store in an area where the acquirer and the target competed with each other because the acquirer undertaking was de facto included in the management of the target, and (vi) the acquirer informing shopping malls about the acquisition and requesting from them verbal commitments to change store signboards.
In this case however, the Board did not find any evidence that Boyner (i.e., the acquirer) had played a decisive role in YKM’s business decisions.
28 Boyner/YKM (20.09.2012, 12-44/1359-M); Cegedim/Ultima-Dendrite (26.08.2010, 10-56/1089-411); Ajans Press/PR Net (21.10.2010, 10-66/1402-523); Tekno Ray (23.02.2013, 12-08/224-55).
29 Boyner/YKM (20.09.2012, 12-44/1359-M)
29
In Ajans Press/PR Net30 , the transaction concerned the acquisition of sole control over PR Net Halkla İlişkiler Araştırma ve Değerlendirme Hizmetleri A.Ş. by Ajans Press Medya Takip Merkezi A.Ş. The Board found that Ajans Press had been controlling PR Net for a certain period of time before the share transfer. The Board listed the following factors as indicative of a de facto transfer of control to Ajans Press: (i) PR Net moved to the building where Ajans Press was seated, (ii) Ajans Press intervened in matters such as choosing PR Net’s telephone numbers and broadcast subscriptions, (iii) PR Net network worked within Ajans Press’ network, (iv) PR Net personnel had a meeting at a specific time upon the direction of the owner of Ajans Press, Mehmet Ali Özkan, (v) shared customer lists had been prepared and joint studies had been arranged, and (vi) production sources had been shared. Although the Board cleared the decision, it imposed a monetary fine to Ajans Press – Interpress economic unity, as the acquirer, since the control had been changed without the approval of the Board.
In Tekno Ray31 , the Board concluded that holding the right to exercise decisive influence over the day-to-day management or long-term strategic business decisions on a de jure or de facto basis, is sufficient to infer a change of control. Furthermore, the articles of association of the joint venture were published in the trade registry before the Board’s decision. The Board rejected the parties’ defence that the undertaking had not started its activities before the clearance and imposed a monetary fine of 0.1% of both parties’ Turkish turnover.
In Cegedim32 which concerns Cegedim`s acquisition of two undertakings, Ultima Bilgisayar ve İletişim Teknolojisi A.Ş. and Dendrite Turkey Inc., the Board highlighted that (i) vice chairman of Cegedim (the acquirer) has been appointed to the board of directors of Ultima (the target) and (ii) Cegedim’s 2008 interim annual report and the press review of April 2009 indicated that Ultima was purchased on August 2, 2008. The Board also noted the following facts as indicative: Cegedim’s (i) interference in Ultima’s invoicing procedures, (ii) review of the agreements of
30 Ajans Press/PR Net, (21.10.2010, 10-66/1402-523)
31 Tekno Ray (23.02.2012, 12-08/224-55).
32 Cegedim/Ultima-Dendrite (26.08.2010, 10-56/1089-411).
30
Ultima’s employees, (iii) collecting employee information and (iv) considering printing business cards for them. Accordingly, the Board considered that all these facts have led to the impression that the acquisition has been de facto realized before the closing and the Board’s decision being issued. Although the Board cleared the transactions, it also imposed separate monetary fines to Cegedim for the acquisitions of both Ultima and Dendrite.
8. Suspension Requirement and the Sanctions for its Violation
• Under Turkish merger control regime, there is an explicit suspension requirement (i.e., a transaction cannot be closed before obtaining the approval of the Board), which is set out under Article 11 of Law No. 4054 and Article 10(5) of Communique No. 2010/4.
• Regardless of whether the not-notified transaction would be approved or not by the Authority (always together with an administrative fine) at a later date, there is a true and imminent risk of legal status arising from the fact that a notifiable concentration is “invalid with all its legal consequences, unless and until it is approved by the Board” under Turkish law.
• If the parties to a notifiable transaction violate the suspension requirement (meaning, they (i) close a notifiable transaction without the approval of the Board or (ii) do not notify the notifiable transaction at all) and such violation of the suspension requirement is detected, the Authority is obliged to enforce the sanctions and legal consequences set forth under the Turkish merger control regime. In other words, the relevant legislation does not give the Authority any discretion other than following the procedural steps specified within the legislation. To that end, as also evident from its decisional practice, the Board imposed an administrative monetary fine in numerous cases so far, for either (i) closing the transaction prior to Board’s approval or (ii) not notifying the transaction at all. As such, imposition of a fine for violating the suspension requirement is a usual occurrence in the Turkish merger control regime.
(i). Monetary Sanctions
31
(a)
If the Board decides that the transaction is not within the scope of Article 7 of Law No. 4054, (or in other words, is not deemed problematic under the applicable SIEC test) a monetary fine of 0.1% of the acquirer’s Turkish turnover shall be imposed. The minimum amount of this fine is set at TRY 34,809 for 2021 and is revised annually. In the event of a merger, the fine is imposed on both parties; in the case of an acquisition, the fine imposed on acquirer. It should also be noted that the wording of Article 16 of Law No. 4054 does not give the Board any discretion on whether to impose a monetary fine in case of a violation of suspension requirement. In other words, once the Board detects the failure to notify, it will impose the monetary fine automatically.
(b)
If the Board decides that the transaction is within the scope of Article 7 of Law No. 4054, all undertakings concerned can be imposed a fine of up to 10% of their Turkish turnover. Members of the executive bodies and employees of the undertakings are subject to fines of up to 5% of the fine imposed on the undertaking. In such a case, in addition to the monetary sanctions, according to Article 11(b) of Law No. 4054, the Board is authorized to take all necessary measures to terminate the transaction, remove all de facto legal consequences of every action that has been taken unlawfully, return all shares and assets to their previous owners or locations before the transaction or, if such measure is not possible, assign these to third parties; and meanwhile to forbid participation in control of these undertakings until this assignment takes place and to take all other necessary measures.
• There are a number of examples in the Board’s decisional practice where fines were levied on undertakings for violations of the suspension requirement.33
33 (e.g. BMW/Daimler/Ford/Porsche/Ionity (28.07.2020, 20-36/483-211), Brookfield/JCI (30.04.2020, 20- 21/278-132), A-Tex/Labelon (06.12.2016, 16-42/693-311), Ersoy/Sesli (25.06.2014, 14-22/422-186), Electro World (05.09.2013, 13-50/717-304), Tekno İnşaat (23.02.2012, 12-08/224-55), Zhejiang/Kiri (02.06.2011, 11- 33/723-226), Ajans Press/PR Net (21.10.2010, 10-66/1402-523), Mesa Mesken/TOBB (26.08.2010, 10-56/1088- 408), CVRD Canada (08.07.2010, 10-49/949-332), Flir Systems Holding/ Raymarine (17.06.2010, 10-44/762- 246), Batıçim/Borares (27.05.2010, 10-38/641-217), TKS/Sarten (15.04.2010, 10-31/471-175), Kansai/Akzo Nobel (5.8.2009, 09-34/791-194), Kiler/Yimpaş (15.7.2009, 09-33/728-168), Verifone/Lipman (13.4.2009, 09-14/300-73), ), Fina/Turkon (14.01.2009, 09-02/19-12), Çallı/Turyağ (12.11.2008, 08-63/1048-407), Eastpharma Sarl/Deva (24.4.2007, 07-34/355-133), Harry’s/Fresh Cake/BNP (25.07.2007, 07-61/722-253), Doğuş Otomotiv/Katalonya (22.8.2007, 07-66/813-308), Total S.A./CEPSA (20.12.2006, 06-92/1186-355), Mauna/Tyco International (29.6.2006, 06-46/586-159), Konfrut/Dinter (15.12.2005, 05-84/1149-329), Doğan/Turkish Daily News (12.12.2000, 00-49/519-284).
32
• These transactions were not actually found problematic as a result of the Board’s review and accordingly, the incumbent parties were imposed a turnover-based monetary fine based on their Turkish turnover generated in the financial year preceding the date of the fining decision at a rate of 0.1%.
(ii). Legal Sanctions
The implementation of a notifiable transaction in Turkey is suspended until clearance is obtained from the Board. Therefore, a notifiable merger or an acquisition -by law- cannot be legally valid, and such notifiable transaction cannot be closed in Turkey until the approval of the Board. The parties would not able to enforce their rights under the transaction agreement(s) before Turkish courts, prior to the clearance of the transaction by the Board. The parties would be unable build on this transaction in Turkey in the future, either. If they were to engage in any official business with Turkish administration, this might also present a problem; and in any case, if they were to have a transaction in the future which has to be filed with the Authority, the Authority would halt the entire notification at that time, ask for a notification on the earlier transaction and review that matter first, issue the administrative monetary fine and the decision on the earlier transaction, and only then engage in working on the actually notified transaction that was originally presented to it.
In BMW/Daimler/Ford/Porsche/Ionity34 , the transaction concerned the establishment of a full- function joint venture in 201735 , which had no presence and/or activities in Turkey among four JV partners. The Authority became aware of that transaction within the scope of a notification made in 2020, with regards to another transaction that concerned the acquisition of joint control by a fifth JV partner alongside the existing JV partners. Eventually, although the Board approved both transactions unconditionally, it imposed administrative monetary fines on each of the four existing JV partners corresponding to 0.1% of their annual Turkish turnovers generated in the 2019 financial year, for the violation of the suspension requirement
34 BMW/Daimler/Ford/Porsche/Ionity (28.07.2020, 20-36/483-211)
35 2017 transaction (28.07.2020, 20-36/483-211).
33
Moreover, in Ersoy/Sesli/Anayurt36, the first transaction concerned the establishment of a joint venture, namely Anayurt, between certain real persons, while the second transaction concerned the acquisition of a part of Anayurt’s shares by another real person. The transaction parties only notified the second transaction on May 9, 2014 and the notified transaction was unconditionally approved by the Board on June 25, 2014. However, within the scope of its review of the second transaction, the Board detected that the first transaction was not notified to the Board despite being subject to a mandatory merger control filing before the Authority. The Board also unconditionally approved the first transaction and despite the parties arguing that the purpose of establishing Anayurt was merely the acquisition of Gölbaşı, which was notified to the Board along with the second transaction, however it was determined that this transaction was not subject to a mandatory merger control filing. The two transactions were executed by the same undertakings within the last two years and they were interdependent in such a way that one transaction could not be realized without the other, therefore these two transactions in fact constituted a single transaction; which was evident from the fact that Anayurt had not conducted any commercial activities since its establishment and its only expenditures were related to Gölbaşı. However, the Board did not accept these arguments and imposed separate administrative monetary fines based on the minimum fixed amount for the relevant year against the incumbent parties (i.e., parents of the JV) for the violation of suspension requirement regarding the first transaction.
36 Ersoy/Sesli/Anayurt (25.06.2014, 14-22/422-186 and 25.06.2014, 14-22/421-185).
34
(iii) Statute of limitation
• If the parties to a notifiable transaction violate the suspension requirement, the statute of limitation regarding the sanctions for infringements is 8 years pursuant to Article 20(3) of Law on Misdemeanours No. 5326.
• The Board vigorously follows M&A transactions in the local and international press and also closely follows the case practice of the Commission and other long established competition authorities.
(iv) Other Recent Cases in Turkey
• In Brookfield/Johnson Controls37 , the Board imposed two separate administrative fines on Brookfield Asset Management Inc. due to the findings that:
i.
Brookfield closed the acquisition of the power solutions business of Johnson Controls International without notifying the Board and obtaining its approval,
ii.
Brookfield submitted false and misleading information regarding its Turkish turnover.
In its assessment of the suspension requirement violation, the Board compared the closing and notification dates, and consequently found that Brookfield had notified the transaction on October 9, 2019 which was approximately 5 months after the closing date of April 30, 2019. The Board also pointed out that the contemplated transaction had been notified to the Commission and was unconditionally approved on February 14, 2019.
As a result, while the Board ultimately approved the transaction, it imposed an administrative monetary fine to Brookfield for gun-jumping at 0.1% of its annual turnover.
37 Brookfield/Johnson Controls (30.04.2020, 20-21/278-132).
35
Furthermore, the Board imposed a separate monetary fine due to the misleading information since the amount that Brookfield had provided as its Turkish turnover had overlooked the turnover of one of its subsidiaries that it has recently acquired.
9. JV Transactions with No Local Nexus
• The Board’s precedents explicitly and consistently indicate that a JV transaction would be subject to merger control filing in Turkey whenever the jurisdictional turnover thresholds are exceeded, even in cases where the JV is not/will not be active in Turkey and will not have any effects in the near future (or perhaps ever) on Turkish markets. If, and to the extent the jurisdictional turnover thresholds are exceeded, the approval of the Board will be required before closing of the JV transaction.
• The legal consequences of a violation of the suspension requirement also apply to foreign-to-foreign transactions. In other words, when it comes to the violation of the suspension requirement, the Board does not treat these transactions differently in terms of sanctions.
Examples38: In Hyundai/Kia/BMW/Daimler/Porsche/Ford/Ionity, the Board has recently unconditionally approved the transaction concerning the acquisition of joint control over Ionity Holding which is a full-function joint venture established by 4 automotive companies in 2017. Ionity Holding never had any presence and/or activities in Turkey.
38 TFS/SMMAF (27.06.2019, 19-23/359-162); Leoni/Hengtong (21.02.2019, 19-08/93-38); Daimler/Volkswagen-MT Holding (07.02.2019, 19-06/61-25); DENSO/Aisin Seiki (17.1.2019, 19-04/32-13); GE/Rosneft (08.05.2018, 18-14/259-124); IBM/Maersk (15.03.2018, 18-08/138-68); Adient/Boeing (28.06.2018, 18-21/364-180); Daimler/Volkswagen-AutoGravity (07.09.2017, 17-28/463-202); NIPIgas/Technip/Linde/JV (19.07.2017, 17-23/366-159); ADPM/Vinci Airports/Astaldi (01.09.2015, 15-34/509-157); Angola LNG Limited (25.04.2012, 12-22/564-162); Galenica Ltd./Fresenius Medical (24.11.2011, 11-59/1515-540). Hyundai/Kia/BMW/Daimler/Porsche/Ford/Ionity (24.07.2020, 20-35/457-203).
36
The Authority became aware of that transaction concerning the establishment of Ionity Holding, which took place in 2017, within the scope of another notification made in 2020 with regards to another transaction that concerned the acquisition of joint control by another JV partner alongside the existing JV partners.
Eventually, the Board unconditionally approved the 2017 transaction and the 2020 transaction. That being said, although Ionity never had any presence and/or activities in Turkey, the Board imposed administrative monetary fines on each of the four existing JV partners corresponding to 0.1% of their annual Turkish turnovers in the 2019 financial years for the violation of suspension requirement.
Mitsubishi Corporation/Wallenius Wilhelmsen40 concerned the creation of a full-function joint venture for inland vehicle logistics services in Thailand which is not and is not expected to be active in Turkey following the consummation of the transaction. Although this full-function joint venture will solely combine the parties’ respective inland finished vehicle logistics businesses in the South-East Asia and the transaction will not result in any affected markets/overlaps in Turkey, the transaction was notified to the Authority and approved by the Board.
Generali/Union-Zaragoza Properties41 involved the acquisition of joint control over an existing joint venture in a transaction where the joint venture’s activities are limited solely to owning and managing a shopping mall, namely Puerto Venecia, and a few stand-alone shops located in Zaragoza, Spain. Thus, the joint venture did not have any Turkey-related activities and was not in a position to enter the Turkish market in the future. Nevertheless, the transaction was notified to the Authority and approved by the Board.
FSI/Snam-OLT Offshore42 involved an existing full-function joint venture which was active in the transformation of liquefied natural gas (LNG) back to its normal gaseous state, upon the conversion of an existing LNG carrier in the Italian city of Livorno into a floating regasification terminal. To that end, it was virtually impossible for the joint venture to enter
40 Mitsubishi Corporation/Wallenius Wilhelmsen (16.1.2020, 20-04/35-18).
41 Generali/Union-Zaragoza Properties (06.02.2020, 20-08/73-41).
42 FSI/Snam-OLT Offshore (09.01.2020, 20-03/18-8).
37
into the Turkish market in the future given that the entirety of its activities was based on an immobile carrier off the coast of Livorno. Nonetheless, the transaction still required a mandatory merger control filing before the Authority and approved by the Board.
In Labelon/A-Tex , which is a foreign-to-foreign transaction, the Board ultimately granted an unconditional approval to the transaction but also imposed a monetary fine amounting to 0.1% of Labelon’s 2015 Turkish turnover, since the parties did not notify the transaction. Although the parties claimed that they did not have the intention to rule out the requirement and they did not notice the thresholds are exceeded, the Board imposed the monetary fine.
In ADPM/Vinci Airports/Astaldi , which concerns the formation of a greenfield airport management JV regarding the management of Santiago Airport in Chile, the Board decided that the transaction is subject to merger control filing in Turkey because the jurisdictional turnover thresholds were exceeded by the parent companies even though the JV will not be operating in Turkey, and will execute all its economic activities on the management of Santiago Airport in Chile.
In Simsmetal/Fairless , where both parties were only exporters into Turkey, the Board imposed an administrative monetary fine on Simsmetal East LLC (i.e., the acquirer), totalling 0.1% of Simsmetal East LLC’s gross revenue generated in the fiscal year 2009, due to their closing the transaction before obtaining the approval of the Board.
Similarly, Longsheng , Flir Systems Holding/Raymarine PLC , CVRD Canada/Inco , are some of the Board’s other decisions, whereby the Board imposed a turnover-based monetary fine due to the violation of the suspension requirement in a foreign-to-foreign transaction.
43 Labelon/A-Tex (06.12.2016, 16-42/693-311).
44 ADPM/Vinci Airports/Astaldi (01.09.2015, 15-34/509-157).
45 Simsmetal/Fairless (16.09.2009, 09-42/1057-269).
46 Longsheng (02.06.2011, 11-33/723-226).
47 Flir Systems Holding/Raymarine PLC (17.06.2010, 10-44/762-246).
48 CVRD Canada/Inco (08.07.2010, 10-49/949-332).
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10. Submission of Misleading Information to the Authority and its Sanctions
As per Article 10(3) of Communiqué No. 2010/4, if any change occurs during the Authority's review of a transaction regarding the information submitted in the filing, the parties have a legal duty to inform the Board immediately. As a general rule, the parties are obliged to file correct and complete information with the Authority. If the information requested in the notification form is incorrect or incomplete, the notification is deemed to have been filed on the date when such information is completed following the Authority’s request for further data. In addition, the Board will impose a turnover-based monetary fine at 0.1% of the Turkish turnover generated in the financial year preceding the date of the decision (if this is not calculable, the turnover generated in the financial year closest to the date of the decision will be taken into account) on natural persons or legal entities which qualify as an undertaking or an association of undertakings, as well as the members of these associations, in cases where incorrect or misleading information is provided by the undertakings, or associations of undertakings in a notification.
In Brookfield/Johnson Controls , the Board imposed an administrative monetary fine of 0.1% of Brookfield`s annual turnover due to gun-jumping as per Article 16(b) of Law No. 4054. Furthermore, the Board imposed a separate monetary fine under Article 16(a) of Law No. 4054 due to misleading information, as Brookfield had omitted to include the turnover of one of its recently acquired subsidiaries when calculating its Turkish turnover.
In OMV Petrol , referring to Omya/Tuneks and Akzo/Rohm decisions, the Board emphasized that intention to mislead the Authority is not a requisite element for a violation of 16(a) of Law No. 4054 and imposed an administrative monetary fine.
49 Brookfield/Johnson Controls (30.04.2020, 20-21/278-132).
50 OMV Petrol (26.12.2013, 13-72/997-428).
51 Omya/Tuneks (18.09.2008, 08-54/847-338).
52 Akzo/Rohm (18.3.2010, 10-24/339-123).
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