Depending on the full-function character of the joint venture, a joint venture can be subject to merger control and to the approval of the Turkish Competition Board (the “Board”). Joint ventures fall within the scope of Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Board (“Communiqué No. 2010/4”) if they meet the requirements of a concentration set out under Article 2 of Communiqué No. 2010/4. In such cases, joint ventures are subject to notification to, and approval of, the Board. As per Article 5(3) of Communiqué No. 2010/4, in order to qualify a concentration as a full-function joint venture, firstly, (i) joint control must be established; secondly, (ii) the joint venture must perform on a lasting basis all the functions of an autonomous economic entity. If the joint venture satisfies the foregoing criteria, it will be a concentration within the meaning of Article 2 of Communiqué No. 2010/4. These criteria are further discussed below:
For a joint venture to constitute a concentration under Communiqué No. 2010/4, it must be jointly controlled. Joint control exists when two or more companies have the possibility of exercising decisive influence over another company, the joint venture. Decisive influence means the power to take or block actions which determine the strategic commercial behavior of a company. The basic criteria taken into account for finding decisive influence are as follows: (i) equal shareholdings of the parent companies, (ii) joint right to act and sign on behalf of joint venture for the parents, (iii) equal representation of the parents in the board and day-to-day management and (iv) joint liability for joint venture’s conduct. The essential feature of joint control is the possibility of a deadlock arising from the power of the parent companies to veto proposed strategic decisions, which effectively requires them to reach a common understanding in determining the commercial policy of the joint venture.
Independence and Long Lasting Criteria
In order to qualify as a concentration a joint venture must perform on a lasting basis all the functions of an autonomous economic entity. A joint venture will be full-function if it performs the functions normally carried out by a company operating in the same relevant market. To achieve this, a joint venture must:
- have management dedicated to its day-to-day operations and access to sufficient assets, personnel and financial resources in order to operate its business activity independently;
- have the ability to conduct its own commercial policy;
- have activities that go beyond one specific function for the parents;
- have no significant purchase or supply agreements between it and its parents undermining its independent character; and
- have access to sufficient resources including finance, staff, and assets to conduct its business activities on a lasting basis (generally interpreted as indefinite duration).
To sum up, a joint venture constitutes a full-function joint venture in the event that the conditions provided above are satisfied. If yes, it will constitute a concentration. If the thresholds are also met, it will be subject to merger control and to the approval of the Board.
Please also see the “merger control notification form” for further information.