Acquisition of Joint Control under Turkish Merger Control Regime

Pursuant to the Guidelines on Cases Considered as a Merger or an Acquisition and the Concept of Control (Control Guidelines), joint control exists where two or more undertakings or persons have the possibility of exercising decisive influence over another undertaking. The main feature of joint control materialises when two or more parent companies have the right to reject strategic decisions and to create a deadlock situation in the decision process. The Control Guidelines provide the following definition with respect to the concept of decisive influence: The power to block actions which determine the strategic commercial behaviour of an undertaking. Accordingly, if the minority shareholders retain veto rights for the decisions which are essential for the strategic commercial behaviour, then the joint control would occur in terms of that joint venture. While the veto rights that allow decisive influence over strategic decisions and business policies could effectively grant joint control, the veto rights of minority shareholders that protect the financial interests of the investors (i.e., changes in the master agreement of the joint venture, increase or decrease in the capital or liquidation) would not do so. The Control Guidelines exemplify the veto rights that confer joint control as follows: decisions such as the budget, the business plan, major investments or the appointment of senior management. Importantly, it is not relevant whether or not the acquirer of joint control would, in fact, exercise its decisive influence. Accordingly, it is sufficient that such a right simply exists.

Article 5 of Communiqué No. 2010/4 Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board defines joint ventures in a similar manner to the EU law. There are essentially two criteria for a joint venture to qualify as a concentration subject to merger control in general: (i) full functionality, i.e., the joint venture being established as an independent economic entity, on a lasting basis (having adequate capital, labour and an indefinite duration), and (ii) the existence of joint control in the joint venture. To that end, in order to be deemed “fully functional”, a joint venture should:

1. have sufficient resources to operate independently
2. undertake activities beyond the one specific function for the parents
3. be independent of the parent companies in its sale and purchase activities
4. be operating on a lasting basis.

Overall, based on both the legislation and the Turkish Competition Board’s (Board) established jurisprudence, greenfield joint ventures that do not fulfil the above criteria of full functionality are not subject to a mandatory merger control filing. However, the full functionality criteria may not be required for non-greenfield joint ventures, which would still necessitate a mandatory merger control notification for such transactions. Furthermore, non-full-function joint ventures may fall under Article 4 of Law No. 4054 on the Protection of Competition (Law No. 4054), which prohibits restrictive agreements.

For more information on the acquisition of joint control under Turkish merger control regime, please feel free to reach out to ELIG Gurkaynak at +90 212 327 1724 or through gonenc.gurkaynak@elig.com.