Merger Control in Türkiye – 1/6: What is the applicable legislation and who is the enforcer?

Merger Control in Türkiye – 1: What is the applicable legislation and who is the enforcer?

The main legislation in Turkish competition law is the Law No. 4054 on the Protection of Competition (the “Law No. 4054”)[1].  The enforcer administrative body of competition law in Türkiye is the Turkish Competition Authority (the “TCA” or the “Authority”) and specifically, its decision-making body, the Turkish Competition Board (the “TCB” or the “Board”).

Article 7 – “Mergers or Acquisitions”

The primary provision of the Law No. 4054 covering merger control is Article 7[2]. It adopts the significant impediment of effective competition (i.e. the SIEC) test[3] and reads as follows:

“It is illegal and prohibited for one or more undertakings to merge, or for an undertaking or a person to acquire – except by inheritance – assets, or all or part of the partnership shares, of or instruments conferring executive rights over another undertaking, where these would result in a significant lessening of effective competition within a market for goods or services in the entirety or a portion of the country, particularly in the form of creating or strengthening a dominant position.

The Board shall declare, via communiqués to be issued by it, the types of mergers and acquisitions which are required to be notified to the Board and for which permission has to be obtained, in order for them to become legally valid.”

Whereas Article 7 provides the main ground of Turkish merger control regime, the Law No. 4054 handles different aspects of merger control through several provisions. We provide brief information below on some of the key provisions of the Law No. 4054 applicable to merger control.

Article 10 – “Notification of Mergers and Acquisitions to the Board”

Article 10 of the Law No. 4054 provides for the time frame of the TCA’s review process. Article 10 also stipulates that transactions shall be subject to merger control prior to closing as it clearly refers to the standstill obligation along with potential sanctions in cases of failure to notify (i.e. gun jumping). This means that a notifiable transaction that has not been approved by the TCB before closing shall be deemed null and void in terms of Turkish law. Furthermore, Article 10 provides legal ground for the ‘implicit approval’ in which the transaction is deemed to have been approved in case the TCA does not react within 30 days as of the notification date. The full text of Article 10 of the Law No. 4054 reads as follows:

“As of the date the Board is notified of any merger or acquisition agreements falling under Article 7, the Board is obliged to perform a preliminary examination within fifteen days and either authorize the merger or acquisition, or, if it decides to put the transaction through final examination, to duly notify, with its preliminary objection letter, those concerned of the fact that the merger or acquisition is suspended and cannot be put into effect until the final decision, together with any other measures deemed necessary. In this case, the provisions of Articles 40 to 59 of this Law shall be applicable. 

Where the Board does not respond to or take any action concerning the application for a merger or acquisition within due time, the relevant merger or acquisition agreements shall take effect and become legally valid after 30 days as of the date of the notification.”

Article 11- “Failure to notify mergers and acquisitions to the Board”

Failure to notify mergers and acquisitions to the Board is addressed under Article 11 of the Law No. 4054. The relevant provision provides that the TCB, after being aware of such transaction, shall initiate an examination ex officio and accordingly, it either decides to approve or ban the transaction, in addition to imposition of administrative monetary fines for such failure to notify. Article 11 of the Law No. 4054 reads as follows:

“Where a merger and acquisition transaction whose notification to the Board is compulsory is not notified to the Board, the Board shall put the merger or acquisition through an examination ex officio, when it becomes aware of the transaction in any way. As a result of the examination:

a) In case it decides that the merger or acquisition does not fall under the first paragraph of Article 7, it allows the merger or acquisition but imposes fines on those concerned due to their failure to notify.

b) In case it finds that the merger or acquisition falls under the first paragraph of Article 7, it decides that, in addition to the fines to be imposed, the merger or acquisition transaction must be terminated; that all de facto situations committed contrary to the law must be eliminated; that any shares or assets acquired must be returned, if possible, to their former owners, within those terms and duration as determined by the Board, or if not possible, these must be assigned and transferred to third parties; that the acquiring persons may by no means participate in the management of undertakings acquired until these are assigned to their former owners or third parties; and that other measures deemed necessary by it must be taken.”

Article 16 – “Administrative Monetary Fine”

Although there are some other sanctions, Article 16 provides for three main types of administrative monetary fines that are applicable within the context of merger control regime. First, Article 16/3 sets forth that, in case a transaction that is prohibited under Article 7 is realized in the absence of a TCB approval, the undertakings may face an administrative monetary fine up to 10% (ten percent) of their annual gross revenues (i.e. turnovers). Second, the failure to notify is the subject of a separate administrative monetary fine of 0.1% (one in thousand) of the undertakings’ annual gross revenues. Third, provision of false or misleading information or document in authorization applications for mergers and acquisitions is also sanctioned with an administrative monetary fine of 0.1% (one in thousand) of the annual gross revenue.

The full texts of the relevant provisions are provided below:

Article 16/1(a)(b) : “In cases where;

a) Any false or misleading information or document is provided in exemption and negative clearance applications and in authorization applications for mergers and acquisitions,

b) Mergers and acquisitions that are subject to authorization are realized without the authorization of the Board, (…)

the Board shall impose on natural and legal persons having the nature of an undertaking and on associations of undertakings or members of such associations, an administrative fine by one in thousand of annual gross revenues of undertakings and associations of undertakings or members of such associations which generate by the end of the financial year preceding the decision, or -if it would not be possible to calculate it- which generate by the end of the financial year closest to the date of the decision and which would be determined by the Board for those mentioned in sub-paragraphs (a) and (b)” (…).

Article 16/3: “To those who commit any behaviour prohibited in Articles 4, 6 and 7 of this Law, an administrative monetary fine shall be imposed up to ten percent of annual gross revenues of undertakings and associations of undertakings or members of such associations to be imposed a penalty, generated by the end of the financial year preceding the decision, or -if it would not be possible to calculate it- generated by the end of the financial year closest to the date of the decision and which would be determined by the Board.”

In addition to the noteworthy provisions of the Law No. 4054 above, the TCA’s secondary legislation, i.e. the communiqués and guidelines, provides legal clarity in terms of what to do and how to do in terms of Turkish merger control regime. The main items of the TCA’s secondary legislation tackling merger control are as follows:

• Communiqué No. 2010/4 on the Mergers and Acquisitions Calling for the Authorization of the Competition Board
• Communiqué No. 2013/2 on the Procedures and Principles to be Pursued in Pre-Notifications and Authorization Applications to be Filed with the Competition Authority in Order for Acquisitions via Privatization to Become Legally Valid
• Guidelines on Undertakings Concerned, Turnover and Ancillary Restraints in Mergers and Acquisitions
• Guidelines on Cases Considered as a Merger or an Acquisition and the Concept of Control
• Guidelines on the Assessment of Horizontal Mergers and Acquisitions
• Guidelines on the Assessment of non-Horizontal Mergers and Acquisitions
• Guidelines on Remedies that are Acceptable by the Turkish Competition Authority in Merger/Acquisition Transactions
• Guidelines on the Definition of Relevant Market

[1] For the English translation of the full text of the Law No. 4054 is provided at the TCA’s website click here.

[2] In line with the fact that the Turkish competition law is based on the EU competition law, Article 7 of the Law No. 4054 is a reflection of Article 2(2) and 2(3) of the EU’s Council Regulation No. 139/2004 on the control of concentrations between undertakings (i.e. the EC Merger Regulation).

[3] Prior to the amendments on the Law No. 4054 dated 16.06.2020, the main test applicable under Turkish competition law to merger control was the dominance test, which provided that a transaction can be prohibited only if it creates or strengthens a dominant position.