Article 7 of Law No. 4054 on the Protection of Competition (the “Competition Law”) prohibits mergers and acquisitions that (i) create or strengthen a dominant position, and (ii) result in significant lessening of competition in a market for goods or services. Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Board and Article 7 of the Competition Law identify the mergers and acquisitions that are subject to the approval of the Turkish Competition Board (the “Board”) in order to become legally valid.

Mergers and acquisitions between companies operating in the same relevant product markets are defined as horizontal concentrations. Horizontal concentrations produce an impact on the structure of the affected market(s) in that they diminish the number of competitors.

Depending on circumstances, they may or may not produce a significant anti-competitive effect. In cases where, for instance, small and relatively inefficient businesses merge their businesses to be able to more effectively compete against the sector leader, a horizontal concentration may be beneficial to the competitive process. By doing so, small businesses may be able to combine their products/services, create synergies and benefit from greater market shares. The same conclusion would apply to many other alternative scenarios, such as when companies, for instance, bring together complementary products, thereby enabling the combined company to offer a wider product range. Similarly, a merger between two different companies that focus on different segments of a market may facilitate the combined company to diversify its activities and enter new markets.

The Board assesses the competitive effects of horizontal concentrations by comparing pre-merger competitive conditions with those that are expected to occur after the transaction. The assessment mainly entails two phases: (i) defining the relevant product and geographic markets, and (ii) assessing the effects of the merger on competition. The main purpose of defining the relevant market is to identify companies that can exercise competitive pressure on each other. The effect test aims to determine whether the transaction creates or strengthens a dominant position in the relevant market.

Horizontal concentrations are an important topic of competition law enforcement as they have the potential to decrease competition by creating or strengthening a dominant position. Consumers benefit from efficient competition in several ways such as lower prices, high quality products and a broader range of products/services. As a result of a horizontal concentration, the merged entity may be able to (i) profitably increase prices, (ii) reduce output, choice or quality of goods or services or (iii) diminish or delay innovations. Anticompetitive effects of horizontal mergers can generally occur in two main ways:

  1. In terms of unilateral effects, creating or strengthening a dominant position as a result of eliminating important competitive pressure on one or more companies (single dominant position)
  2. In terms of bilateral effects, facilitating coordination between companies (joint dominant position).

In reviewing a horizontal concentration, the Board would also consider many other factors such as “countervailing buyer power”, “entry barriers” and “possible efficiency gains”. In exceptional circumstances, the failing firm defense may also be taken into account.

Please also see the “merger control notification form” for further information.