1 MERGERS AND ACQUISITIONS IN TURKEY: COMPETITION LAW ASPECTS Ece Gürsoy One Fleet PlaceLevent Cad. Alt Zeren Sokak London EC4M 7WSNo 7/ Levent Istanbul T: +44 (0) T: F: +44 (0) F: E:

2 LEGAL FRAMEWORK FOR FOREIGN INVESTMENT IN TURKEY Investor friendly Foreign Direct Investment Law A new FDI climate with reduced red tape No FDI-related screening for investment approval, share transfer and no minimum capital requirements A policy shift from ex-ante control to ex-post monitoring to improve the investor-friendly climate

3 RECENT REFORMS - REGULATORY AUTHORITIES Energy Market Regulatory Authority Capital Markets Board Telecommunications Authority Tobacco, Tobacco Products and Alcoholic Beverages Market Regulation Authority Sugar Authority Competition Authority

4 TURKISH MERGER REGULATION

5 It is modelled on EC Merger Regulation It requires mandatory pre-notification prior to completion Fines and invalidation of the transaction for failing to notify or implementing deal without clearance Needs to be considered at the outset because waste of time/resources if deal will be blocked

6 STATISTICS In 2006,186 mergers or acquisitions were filed with the Turkish Competition Board 51 were considered out of scope 110 were cleared, 61 of which were foreign-to-foreign 25 were granted conditional clearance None rejected

7 TURKISH MERGER REGULATION Applies to: merger of two or more previously independent undertakings; wherever there is a change of control, therefore it applies to acquisition of sole control, significant minority holdings e.g. share purchases – not just 100% but any shareholding that gives decisive influence; and joint ventures.

8 JURISDICTIONAL THRESHOLDS Merger control issues arise if: the combined turnovers of the undertakings concerned exceed TRY25 million (~ £10.5 million) in a given relevant product market; OR the combined market shares of the undertakings involved in the merger or acquisition exceeds 25% of the relevant product market. No substantive overlap is required.

9 FOREIGN-TO-FOREIGN MERGERS Foreign-to-foreign mergers fall within the scope of the Turkish merger control regime provided that they affect the relevant markets within Turkey. Merely sales into Turkey may trigger notification necessity.

10 SUBSTANTIVE TEST The ‘Dominance Test’: when a merger creates or strengthen a dominant position and significantly impedes effective competition in a relevant product market within the whole or part of Turkey. Extent of competition, legal or financial barriers to entry, market power of the parties and their competitors, relative strengths of suppliers and customers in relevant market informs decision to block/clear.

11 TIMETABLE NotificationNo set deadline for notification, but should be made preferably 30 days prior to the closing. Phase I15 to 30 calendar days. The Board tends to use 30 days, unless it stops the clock by requesting additional information and/or documentation. Most notifications obtain a decision within 30 to 45 days from the notification. Phase IIExtremely exceptional cases 6 months to 12 months.

12 PENALTIES The completion or implementation of any merger without the Board’s approval shall not be legally valid or binding Turnover based monetary fines Fines up to 10% of turnover generated in the preceding financial year – which cannot be less than TRY6,864 (~ £2.825) Fixed monetary fines Fines for failing to notify: TRY1,716 (~ £707) Fines on board members: 10% of the fixed monetary fines

13 APPLICATION LOGISTICS No filing fees. ‘Form 2’ is filing document – similar to Form CO of the EC. Form 2 should be prepared in Turkish. Significant amount of legal and financial/market information to be provided. Turkish translation of the executed agreement should be attached to the Form 2.

14 JUDICIAL REVIEW Final decisions of the Competition Board can be submitted to judicial review before the Council of State by filing an appeal case within 60 days upon receipt by the parties of the justified decision.

15 COOPERATION WITH THE EUROPEAN COMMISSION No direct effect of EC competition law provisions The Turkish competition law is deeply influenced by EC competition provisions The Board where applicable generally refers to European Commission’s practices and decisions.

16 TURKISH MERGER REGULATION IN A NUTSHELL Concentrations that create or strengthen a dominant position as a result of which the competition will be significantly impeded are prohibited Notification thresholds are either TRY25 million (~ £10.5 million) or 25% market share Concentration test based on change of control 30-days review period. Any request for additional information or document stops the clock Notification should be made with Form 2 Turkish translation of the executed agreement should be attached Foreign-to-foreign mergers are also under the jurisdiction of the Competition Board if the parties have business activities in Turkey Most merger transactions are cleared by a Phase I decision with or without remedies.

17 MERGERS AND ACQUISITIONS IN TURKEY: COMPETITION LAW ASPECTS LONDON CHAMBER OF COMMERCE AND INDUSTRY – Ece Gürsoy One Fleet PlaceLevent Cad. Alt Zeren Sokak London EC4M 7WSNo 7/ Levent Istanbul T: +44 (0) T: F: +44 (0) F: E: