Overview
As a requirement of the free market economy, legal systems include regulations aimed at enabling market actors to engage in economic activities freely and easily. However, the unrestricted conduct of economic activities and the absence of necessary regulations in legal systems may lead to weaker market actors suffering economic harm due to the practices of stronger competitors. Dominant players may use their positions to reduce their competitors’ market shares, increase their own market shares, and even force competitors out of the market. Consequently, these practices may harm consumers in the long run.
To prevent such practices, laws regulating and controlling competition in markets were introduced in the United States with the 1890 Sherman Anti-Trust Act in the 19th century. Later, these regulations, known as competition law, became part of the Continental European legal system, which also influenced Türkiye’s legal framework.
As a reflection of these regulations, mergers and acquisitions between companies, which may unfairly disrupt market balances, have also been included in competition law regulations. In Türkiye, the Law No. 4054 on the Protection of Competition (“Law“) were enacted in 1994, and the Competition Board (“Board“), established in 1997, is the authorized body for approving mergers or acquisitions that meet certain criteria, whether they occur in Türkiye or have a significant impact on competition in Türkiye.
Legislation
Article 2 of the Law, which regulates its scope, states that the supervision of all legal transactions and practices that significantly reduce competition, including mergers and acquisitions, is the duty and responsibility of the Board.
Article 7 of the Law prohibits mergers and acquisitions that prevent or significantly reduce competition. Article 8 stipulates that the Board may issue a negative clearance certificate for mergers or acquisitions that do not violate the Law. Article 10 regulates the examination of notified mergers or acquisitions, and Article 11 outlines the sanctions applicable if mergers or acquisitions requiring notification are not reported.
Not all mergers and acquisitions affect competition, so not all require notification to the Board. Article 7, Paragraph 2 of the Law states that the types of mergers and acquisitions requiring notification to the Board will be regulated by a communiqué. In this context, the Communiqué on Mergers and Acquisitions Requiring the Approval of the Competition Board (Communiqué No: 2010/4) (“Communiqué“) was issued.
Which Mergers or Acquisitions Require Approval?
The Communiqué systematically distinguishes between mergers and acquisitions. It first lists the cases that are considered mergers and acquisitions and those that are not, and then identifies which of the cases considered mergers and acquisitions require approval. Therefore, no notification to the Board is required for cases not considered mergers and acquisitions or for mergers and acquisitions that do not require approval.
In the case of a merger or acquisition subject to approval, pursuant to the Article 10 of the Communiqué, notification to the Board may be made by the parties jointly or by any of the parties or their authorized representatives. The notifying party has an obligation to inform the other party of the notification. If a joint application is made, it must be done with a single form. In the practice, in case of merger, a joint notification is made, and in case of acquisition, a notification is made by the transferee.
The most important consequence of the obligation to apply to the Board for mergers or acquisitions is that the transaction is considered null and void until the Board’s approval is issued. In other words; a merger or acquisition transaction will not be legally valid without the approval of the Board.
a) Cases Not Considered Mergers and Acquisitions
The following transactions are not considered mergers and acquisitions under the Communiqué, and no approval from the Board is required for these transactions:
• Intra-group transactions that do not result in a change of control,
• Transactions by entities whose ordinary activities involve trading securities for their own account or on behalf of others, provided that the voting rights arising from these securities are not used in a way that affects the competition policies of the issuing entity,
• Acquisition of control by a public institution or organization due to liquidation, dissolution, insolvency, suspension of payments, concordat, privatization, or similar reasons,
• Any of the mergers and acquisitions listed below occurring through inheritance.
b) Cases Considered Mergers and Acquisitions
The following transactions are considered mergers and acquisitions under the Communiqué but are not directly subject to the Board’s approval unless they meet the criteria specified in the Communiqué:
• A merger of two or more enterprises resulting in a permanent change in control,
• The acquisition of direct or indirect control, shares, or assets of one or more enterprises, in whole or in part, through purchase, contract, or other means, by one or more enterprises or individuals already controlling at least one enterprise.
The term “control” here is broadly defined and includes rights, contracts, or other means that enable the exercise of decisive influence over an enterprise, either de facto or de jure. Specifically, ownership or usable rights over all or part of an enterprise’s assets, rights, or contracts that provide decisive influence over the formation of an enterprise’s organs or decisions are considered control instruments.
Joint ventures commonly seen in large-scale public tenders are considered mergers and acquisitions under the Communiqué if they permanently perform all functions of an independent economic entity. Each enterprise forming the joint venture is considered an acquirer.
Conditional transactions or closely related transactions involving securities within a short period are also considered a single merger or acquisition under the Communiqué.
c) Mergers and Acquisitions Requiring Approval
If a merger or acquisition meets one of the following criteria, it is subject to the Board’s approval:
• The total turnover of the transaction parties in Türkiye exceeds 750 million TL, and the individual turnovers of at least two parties in Türkiye each exceed 250 million TL,
• In acquisition transactions, the turnover of the asset or activity subject to the transaction in Türkiye exceeds 250 million TL, and the worldwide turnover of at least one of the other transaction parties exceeds 3 billion TL.
For transactions involving the acquisition of technology enterprises operating in the Turkish geographic market, conducting R&D activities, or providing services to users in Türkiye, the 250 million TL thresholds are not required. Therefore, if the other thresholds are exceeded, the transaction will be subject to the Board’s approval.
The Communiqué includes detailed regulations on how the relevant turnovers are calculated.
How Does the Board’s Approval Process Work for Mergers and Acquisitions?
In a merger or acquisition requiring approval, the approval must be obtained before the transaction is completed.
The notification to the Board is deemed to have been made on the date it is recorded in the Board’s records. The notification form and the information and annexes requested in its annex are available on the Board’s website. The Board may also request additional information and documents after receiving the application, as well as conduct on-site inspections. If the information in the notification form is incorrect, misleading, or incomplete, or if changes are made to this information, the notification is deemed to have been made on the date the information is completed or corrected. The Board announces notified mergers and acquisitions on its website, including the relevant enterprises and their fields of activity.
Within 15 days of the notification date, the Board conducts a preliminary review and either approves the merger or acquisition or decides to subject it to a final review. If the Board decides to conduct a final review, it notifies the parties that the transaction is suspended until a final resolution is made and cannot be closed, along with any other necessary measures.
The Board’s evaluation period varies between 45-60 days. If there is missing, incorrect or misleading information in the notification form, the period will start after these deficiencies are corrected. In other words, if there is missing, incorrect or misleading information in the notification form, the evaluation period will not start to run. The review period may be shortened if effective commitments are submitted by the parties during the final review.
When evaluating applications, the Board considers factors such as the structure of the relevant market, actual and potential competition from domestic and foreign enterprises, the market position of the enterprises, their economic and financial power, alternatives for finding suppliers and customers, access to supply sources, barriers to market entry, supply and demand trends, consumer interests, efficiency benefits for consumers, and other relevant factors. In its resolutions so far, the Board allows transactions, and exceptionally they do not. If the Board does not allow the transaction, an administrative lawsuit may be filed against the said resolution and if the Board’s resolution is found to be in accordance with the law as a result of the judicial review, all actions taken related to the transaction will be invalid.
Following the evaluation, the Board may approve the merger or acquisition, reject it, or approve it subject to certain commitments. These commitments are aimed at addressing potential competition issues arising from the merger or acquisition.
What are the Consequences of Failing to Obtain the Board’s Approval for Mergers and Acquisitions Requiring Approval?
As mentioned above, the Board’s approval must be obtained before completing a merger or acquisition that requires approval. For transactions requiring approval but not notified to the Board:
• If the Board becomes aware of the transaction, it may initiate an examination on its own. If it determines that the transaction does not significantly harm competition, it may approve the transaction but impose an administrative fine on the parties for failing to notify.
• If the Board determines that the transaction significantly harms competition, it may impose a fine and order the termination of the merger or acquisition, the elimination of all unlawfully created factual situations, the return of any acquired shares or assets to their previous owners (if possible), or their transfer to third parties if return is not possible. During this period, the acquirers may not participate in the management of the acquired enterprises, and the Board may impose other necessary measures.
The administrative fine is calculated as one-thousandth of the annual gross income of the enterprises or associations of enterprises, determined by the Board based on the financial year preceding the resolution or the closest financial year if the previous year’s income cannot be calculated. In the case of a merger, the fine is imposed on both parties; in the case of an acquisition, it is imposed on the acquirer.
Summary
Obtaining the Board’s approval for mergers and acquisitions requiring approval is a legal obligation. However, in practice, this obligation is often not fulfilled. Failure to comply with this obligation may result in significant administrative fines, and if the Board determines that the transaction significantly harms competition, it may order the reversal of the transaction. Therefore, to avoid irreversible damages, it is essential to obtain the Board’s approval.
Related persons
You can contact us for detailed information.
