Full-Function Joint Ventures under Turkish Merger Control Regime

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 very similar manner to the EU law. There are essentially two criteria for a joint venture to qualify as a concentration subject to merger control: (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, and
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, which prohibits restrictive agreements. Accordingly, a joint venture must not have the object or effect of restricting competition between the parties and itself.

For more information on full-function joint ventures 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.