Post-Closing Non-Compete Obligations under Turkish Merger Control Regime

The Turkish merger control regime allows for non-compete obligations to be imposed on parties involved in a transaction, provided these are ancillary and proportionate to the transaction in question. In certain circumstances, these non-compete obligations may be justified as post-transaction restrictions.

A restriction such as a non-compete obligation should be (i) directly related and necessary to the concentration, (ii) restrictive only for the parties, and (iii) proportionate. As a result, for instance, it may be said that a restriction will be viewed as ancillary as long as its nature, geographic scope, subject matter and duration are limited to what is necessary to protect the legitimate interests of the parties entering the notified transaction. Furthermore, as a rule, non-compete obligations must be limited to (i) those goods and services comprising the area of operations of the economic unit to be acquired before the transaction and (ii) the area of operations of the seller before the transaction. The decisional practice of the Board and the Guidelines on Undertakings Concerned, Turnover and Ancillary Restraints in Mergers and Acquisitions (Guidelines) recognise that non-compete obligations that do not exceed three (3) years in terms of their duration are generally accepted as reasonable, and a non-compete provision that is binding on the joint venture parents during the life of the joint venture is deemed proportionate in terms of scope.

That being said, under the framework of ancillary restraints, it may be possible to accept non-compete obligations longer than three years, in case the customer tie-in lasts longer, or it is required by the nature of the know-how transferred, provided that the scale required by the concrete case is not exceeded. In its general decisional practice, the Board has deemed that post-term non-compete obligations of two years were proportionate; therefore, they constituted ancillary restraints (e.g., BBVA/Garanti Bankası (19.02.2015; 15-08/106-43), Maspex-Tat (26.12.2013; 13-72/1013-431), Ajinomoto (05.12.2013; 13-69/932-393), LF Invest (27.10.2010; 10-67/1423-539)).

For more information on post-closing non-compete obligations 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.