Mergers and Acquisitions

Article 7 of the Law on the Protection of Competition No. 4054 prohibits merger and acquisition transactions that may result in a significant reduction of competition in the market or that may create or strengthen a dominant position. Communiqué No. 2010/4, which defines the scope of these prohibitions and authorization mechanisms, together with the Turkish Competition Authority Guidelines that shed light on the implementation of this Communiqué, constitute the most critical legal foundations for preventing loss of rights in company mergers and share transfers.

1. Turnover Thresholds and the “Affected Market” Criterion in Notification Obligation

In order for a merger or acquisition transaction to become legally valid, it may be necessary to notify the Turkish Competition Board and obtain approval. However, this obligation depends on whether the turnover thresholds prescribed by law are exceeded and whether there is an overlap in the market.

Turnover Calculation Criteria

When calculating turnover thresholds, not only the turnover of the target company but also the cumulative turnover of the entire economic group directly or indirectly controlled by the relevant undertaking, through shareholding, voting rights or the majority power to appoint board members, is taken into account. However, in partial transfers, only the turnover belonging to the transferred business or division of the transferring party is considered.

Affected Market Exemption

Even if the turnover thresholds are exceeded, no notification obligation arises if there is no overlap between the activities of the parties within the borders of Türkiye. Such overlap may appear in two forms:

• Horizontal Relationship: At least two of the parties operate as direct competitors in the same product or service market.

• Vertical Relationship: One of the parties operates at the downstream stage, such as production or distribution, or at the upstream stage, such as raw materials or supply, of the market in which the other party operates.

2. The Concept of “Relevant Undertaking” According to the Structure of Control

Pursuant to Communiqué No. 2010/4, the “relevant undertaking” varies depending on the nature of the transaction. Conducting turnover and market share analyses based on the correct undertaking eliminates the risk of incorrect notification.

3. Ancillary Restraints: Validity and Limitation Conditions

Provisions included in merger and acquisition agreements that restrict the commercial freedom of the parties, such as non-compete obligations and non-solicitation commitments regarding customers or personnel, may be deemed automatically approved together with the main transaction. For this to be the case, the relevant provision must qualify as an “Ancillary Restraint”.

In order for a commercial restriction to be accepted as an ancillary restraint, it must satisfy the following two fundamental conditions together:

• Directly Related: It is not sufficient for the restriction merely to be agreed at the same time as the main transaction. It must aim to facilitate the transition to the new economic structure created by the concentration transaction and must be directly connected to the main transaction.

• Necessary: Without the relevant restriction, the implementation of the main transaction must become impossible, excessively costly or seriously uncertain.

Principle of Proportionality: The validity of ancillary restraints is limited, in terms of duration, geographical scope and product range, to the minimum level necessary to serve the purpose of the main transaction. If there is a less restrictive alternative that protects competition to the same extent, the more burdensome restriction may be deemed legally invalid.