Answer ... Current merger control landscape: In 2022, the Competition Board reviewed 245 transactions in total, including:
- 209 mergers and acquisitions that were approved unconditionally; and
- two transactions that were approved conditionally.
There were no prohibited transactions in 2022.
Thirty-four of the deals were outside the scope of merger control (ie, they either did not meet the turnover thresholds or fell outside the scope of the merger control system due to a lack of change in control).
Generally, the Turkish Competition Authority (TCA) pays special attention to transactions in sectors where infringements of competition are frequently observed and the concentration level is high. Concentrations that concern strategic sectors – such as automotive, construction, telecommunications, infrastructure, information technologies and platform services and energy – are scrutinised particularly closely. The consolidated statistics on merger cases in 2022 show that transactions were most prevalent in the chemical and mining sector, with 36 notifications; followed by the IT and platform services sector, with 30 notifications.
To the extent that these decisions were also supported by concerns over high levels of concentration, it would be prudent to assume that the TCA will closely scrutinise transactions leading to a concentration in any market for construction materials.
The sector reports published annually by the TCA also indicate current concentration trends. The TCA published a sector inquiry on the hazelnut sector in 2018 and on the exhibition sector in 2019. The TCA also made the following publications on the following dates:
- 5 February 2021 – preliminary report on its sector inquiry on the fast-moving consumer goods sector;
- 7 May 2021 – preliminary report on its sector inquiry on e-marketplace platforms;
- 9 December 2021 – review report on financial technology in payment services;
- 11 March 2022 – final report on its review of the fresh vegetable and fruit sector; and
- 14 April 2022 – final report on its review of the e-marketplace platforms sector.
Legislative reforms: As the most recent legislative development, on 4 March 2022, the TCA published the Amendment Communiqué, introducing new regulations concerning the Turkish merger control regime which have fundamentally affected the notification analysis of merger transactions and merger control notifications submitted to the TCA.
Two of the most significant developments that have resulted from the Amendment Communiqué are:
- a threshold exemption for undertakings active in certain markets/sectors; and
- an increase in the applicable turnover thresholds for concentrations that require mandatory merger control filing before the TCA.
The increased turnover thresholds and the threshold exemption introduced by the Amendment Communiqué have altered the scope of transactions that are notifiable to the TCA. In this regard, concentrations relating to the fields of digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agricultural chemicals and health technologies are expected to be more closely scrutinised by the TCA (see question 1.2).
In addition, a proposal for an amendment to Law 4054 was approved by the Grand National Assembly of Turkey on 17 June 2020. The Amendment Law, which was published in the Official Gazette and entered into force on 24 June 2020, essentially:
- clarified certain provisions in Law 4054 which had previously led to a degree of legal uncertainty in practice; and
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introduced new provisions, such as those on:
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- the ‘significant impediment of effective competition’ (SIEC) test for mergers and acquisitions;
- the de minimis principle for agreements;
- concerted practices and decisions of association of undertakings (except hard-core violations);
- behavioural and structural remedies for anti-competitive conduct;
- commitments and settlement mechanisms;
- the powers of the TCA in on-site inspections; and
- the self-assessment procedure in the individual exemption mechanism.
Those amendments which directly relate to merger control are:
- the SIEC test; and
- the Competition Board’s powers to apply behavioural and structural remedies for anti-competitive conduct.
Furthermore, the Competition Board has enacted secondary legislation through:
- the Communiqué on the Commitments to be Offered in Preliminary Inquiries and Investigations Concerning Agreements, Concerted Practices and Decisions Restricting Competition and Abuse of Dominant Position, published on 16 March 2021; and
- the Regulation on the Settlement Procedure Applicable in Investigations on Agreements, Concerted Practices and Decisions Restricting Competition and Abuses of Dominant Position, published on 15 July 2021.
The TCA also published its Guidelines on the Examination of Digital Data during On-site Inspections on 8 October 2020, which set forth general principles with respect to the examination, processing and storage of data and documents held on companies’ electronic media and information systems during on-site inspections.
Lastly, as per Communiqué 2021/3 on Agreements, Concerted Practices and Decisions and Practice of Associations of Undertakings That Do Not Significantly Restrict Competition, published in the Official Gazette on 16 March 2021, the de minimis principle will apply to the following agreements, which are not deemed to significantly restrict competition in the market:
- agreements between competing undertakings where the total market share of the parties to the agreement does not exceed 10% in any of the relevant markets affected by the agreement; and
- agreements between non-competing undertakings where the market share of each party does not exceed 15% in any of the relevant markets affected by the agreement.
Moreover, the de minimis principle does not apply to ‘naked and hardcore violations’ – that is:
- price fixing between competitors;
- allocation of customers, suppliers, regions or trade channels;
- restriction of supply amounts or imposition of quotas;
- collusive bidding in tenders;
- sharing of competitively sensitive information including future prices, output or sales amounts; and
- resale price maintenance between vertically related undertakings (ie, setting fixed or minimum resale price levels for purchasers).
Key Competition Board decisions: Several major merger control decisions on high-value transactions were issued in 2022.
One notable transaction concluded in 2022 was the Ferro/Prince Phase II review decision (Decision 22-10/144-59 of 24 February 2022). The transaction concerned the acquisition of sole control over Ferro by American Securities. Following the preliminary examination, the Competition Board decided to initiate a Phase II review in accordance with the first paragraph of Article 10 of Law 4054 based on concerns that the transaction could result in the significant impediment of effective competition in the market for glass coatings for white goods in Turkey.
The Competition Board defined the following product markets, in which competitive concerns were concentrated, and also defined as the affected markets:
- the porcelain enamel coatings market; and
- the glass coatings for white goods market
The Competition Board noted that the transaction would not cause competitive concerns in terms of coordination-inducing effects, considering that:
- the shares to be acquired by the merged entity as a result of the transaction in the porcelain enamel coatings market remained below the threshold set out in the Horizontal Guidelines;
- the increase in market share of the undertaking subject to the transaction would be limited in terms of volume and value;
- strong competition existed in the relevant markets;
- there were no significant barriers to entry to the market;
- there were no significant barriers to switching suppliers; and
- producers had sufficient capacity to meet the demand for porcelain enamel coatings.
The Competition Board also analysed the market shares in the market for glass coatings for white goods for 2020 and noted that the merging undertakings were among the five largest undertakings in the market. Therefore, the Competition Board noted that the possibility for undertakings to exert competitive pressure would be reduced following the merger between two of the five largest players in the market. The board observed that:
- the market in question had a concentrated structure even before the transaction;
- although there were also small suppliers in the market in addition to the five largest players, the parties to the transaction owned a large portion of the market; and
- after the notified transaction, the market share of an important rival undertaking would be eliminated and a market structure with four players and greater concentration would emerge.
Hence, the board concluded that this could lead to a significant restriction of competition in the market.
The merging parties had submitted commitments to the European Commission and the Competition Board concluded in summary that Prince would be divesting its porcelain enamel coating activities and the entire glass coatings business in Europe. Accordingly, the Competition Board ultimately conditionally approved the transaction subject to the implementation of these commitments, since they also removed the horizontal overlaps between the parties in the horizontally affected markets in Turkey.
In Vinmar/Arısan (Decision 22-10/155 of 24 February 2022), the Competition Board issued another eye-catching Phase II decision relating to non-compete and non-solicit clause assessments. The transaction concerned the acquisition of Arısan and Transol Arısan by Vinmar Group through Veser Kimya, which would have sole control over the target group. The board analysed the parties’ fields of activity and concluded that the following activities of Vinmar Group conducted in Turkey through its subsidiaries could overlap with the activities of the target group:
- cosmetic chemicals (including chemicals for personal care products);
- household chemicals (including detergents and cleaning chemicals);
- food chemicals;
- pharmaceutical chemicals (including veterinary chemicals and active ingredients); and
- the sale of lubricant chemicals.
However, the Competition Board found that the market shares of the parties in the markets with horizontal overlap were low.
Moreover, the agreement included four-year non-compete and non-solicit obligations, which the parties stated reflected their mutual agreement. The parties further stated that these aimed to ensure a smooth transition to the new company structure after the transaction, and that the economic benefits expected from the transaction could not be fully realised if the non-compete and non-solicit obligations had a shorter duration. The parties also stated that a high level of know-how would be transferred, and that the aim was to establish long-term commercial relationships with buyers in the specialty chemicals market.
All in all, the Competition Board approved the transaction on the condition that the duration of non-compete and non-solicit obligations was reduced to three years, taking into account the market structure, customer loyalty and know-how.
Lastly, in Alleghany/ Berkshire Hathaway (Decision 22-42/625-261 of 15 September 2022), the Competition Board clarified that undertakings with turnover generated abroad in exempt sectors will be considered to fall within the scope of the exception in terms of the merger control thresholds if they have any activities in Turkey. To that end, the board concluded that Alleghany Corporation operated in the field of ‘financial technologies’ pursuant to Communiqué 2010/4, as it develops software to manage the systems of reinsurance companies and sells these products to third parties. Accordingly, the turnover threshold requirement of TL 250 million set out in Communiqué 2010/4 did not apply to Alleghany Corporation.
In addition, the Competition Board noted that whether Alleghany Corporation operated in Turkey in the field of ‘financial technologies’ had no effect on the assessment of the non-application of the turnover threshold requirement of TL 250 million set forth in Communiqué 2010/4; any activity of Alleghany Corporation in Turkey would suffice for the non-application of the relevant requirement.
In this context, the Competition Board concluded that the turnover threshold requirement of TL 250 million set forth in Communiqué 2010/4 will not be considered while determining whether a merger or acquisition is subject to the authorisation of the Competition Board if the target entity operates in “digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agricultural chemicals and health technologies” in any geographical market in the world and conducts any activity in Turkey.