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Merger Control Trends in Turkey

Merger Control Trends in Turkey

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Despite uncertainty due to the pandemic, the pace of merger activity in Turkey has not decreased and merger control is still one of the Turkish Competition Authority’s (TCA) key enforcement areas. The Law on Protection of Competition (Competition Law) amendment in June 2020 was a milestone for merger control in Turkey as it changed the substantive test for assessment of mergers. Below are some observations regarding the adoption of the new test and the TCA’s recent approach to merger control and remedies.

Adoption of the SIEC Test

The substantive test for the assessment of mergers changed from the dominance test to the significantly impeding effective competition (SIEC) test. To block a transaction under the dominance test, the TCA was required to prove that the transaction would lead to the creation or strengthening of a dominant position. Under the SIEC test, proving a dominant position would not be a legal precondition for blocking a transaction, and the transactions that could harm competition without creating a dominant position could also be blocked. Therefore, the adoption of the SIEC test allows the TCA to make a more thorough assessment of the anticompetitive effects of proposed transactions, in terms of both unilateral and coordinated effects.

Shortly after the SIEC test’s adoption, its effects were observed in the TCA’s decisional practice. In March 2021, the TCA announced the first decision (dated August 13, 2020, and numbered 20-37/523-231) to block a transaction after the adoption of the SIEC test. The decision does not include any assessment of dominance but analyzes the characteristics of the relevant markets and the potential anticompetitive effects on the upstream and downstream markets. The decision demonstrates that the TCA’s focus moved to a more effects-based approach from a dominance-oriented analysis, and stricter merger control enforcement is on the horizon.     

The TCA’s Approach to Merger Remedies

The TCA’s approach to merger remedies has also evolved during recent years. The prominent trends in remedies are the alignment with the European Commission’s decisions and the rise in behavioral remedies. 

The TCA’s recent approach regarding multi-jurisdictional transactions that are notified before the European Commission is to wait for the European Commission’s final decision on remedies and to apply the same remedies to the transaction as accepted by the European Commission. Moreover, the TCA does not require any monitoring obligations that are specific to Turkey for the application of these remedies. This approach prevents duplicity and is practical and effective both for the TCA and the transaction parties.

It should also be noted that the TCA assesses the transactions’ effects in Turkey and may require the parties to submit remedies specific to the local market. In the Fiat/Peugeot merger decision dated December 30, 2020, and numbered 20-57/794-354, the TCA concluded that the transaction as notified would lead to coordinated effects in Turkey, since a direct competitor of the target company is jointly controlled by the purchaser’s ultimate shareholder and there is a structural link between these parties, due to a common directorate. As a result, the remedies submitted before the European Commission were insufficient for the TCA, and the transaction parties submitted additional remedies that directly addressed concerns related to the local market.

Behavioral remedies became a popular tool to eliminate competitive concerns raised by a transaction and to obtain the TCA’s approval. Even though the TCA’s guidelines on remedies explicitly state that structural remedies are more efficient and preferable when compared to behavioral remedies, the TCA’s recent decisions imply a more permissive approach towards behavioral remedies.

In 2021, three transactions were cleared with behavioral remedies. These behavioral remedies mostly addressed vertical concerns and included obligations, such as to not discriminate among buyers in the downstream market, not refusing to deal, and not imposing exclusivity on buyers. However, in some cases, horizontal concerns, such as the dissemination of competitively sensitive information, are addressed with obligations to end interlocking directorates.

By Neyzar Unubol, Head of Competition, and Ali Tuncsav, Associate, Kolcuoglu Demirkan Kocakli

This Article was originally published in Issue 8.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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