CRITIC OF TURKISH COMPETITION LAW
IN THE LIGHT OF
EU MERGER REGULATION
Prof. Dr. H. Ercüment Erdem
Galatasaray University Faculty of Law
Yeditepe University-UNCTAD
İstanbul Turkey
31 August-01 August 2006
INDEX
INTRODUCTION ...................................................................................................................... 3
I. BRIEF HISTORY AND LEGAL BACKGROUND OF MERGER CONTROL .................. 3
A. IN THE FRAME OF EU COMPETITION LAW ................................................................... 3
B. IN THE FRAME OF TURKISH COMPETITON LAW .......................................................... 5
II. MAIN FEATURES OF THE AMEDMENTS BROUGHT BY THE NEW MERGER
REGULATION .......................................................................................................................... 6
A. SUBSTANTIAL AMENDMENTS ........................................................................................... 7
1. Definition of “Concentration” ................................................................................................ 7
2. The SIEC Test -“Significant Impediment to Effective Competition” ................................... 7
3. Ancillary Restraints .............................................................................................................. 12
B. PROCEDURAL AMENDMENTS ........................................................................................ 13
1. Notifications ......................................................................................................................... 13
a. Prior Notification of Concentrations .................................................................................... 13
b. Pre- Notification Referral ..................................................................................................... 13
c. Referral After the Notification ............................................................................................. 14
2. More Flexible Time Frames ................................................................................................. 14
3. Investigative Tools ............................................................................................................... 14
4. Penalties for infringement .................................................................................................... 15
a. Suspension of deadlines ....................................................................................................... 15
b. Fines ..................................................................................................................................... 15
III. BRIEF CRITIC OF THE TURKISH MERGER LEGISLATION .................................... 16
IV. SUGGESTIONS ................................................................................................................ 16
2
INTRODUCTION
Competition law is ensemble of rules adopted for foundation and maintenance of free
competition in the market. Its context varies from one country to another, depending on
particular needs of the country, its regional and international aspirations and obligations. In
this speech we seek to analyze the Turkish Competition Law and its approximation with EU
law in the light of the recent developments in M&A Legislation.
I. BRIEF HISTORY AND LEGAL BACKGROUND OF MERGER CONTROL
A. IN THE FRAME OF EU COMPETITION LAW
The Rome Treaty did not contain any provisions which are directly applicable to mergers and
acquisitions. The Commissions and Court of Justice attempted to utilize Articles 81 and 82 for
the merger control issues, but these provisions were not satisfactory. Thus, in 1989 Council
Regulation No: 4064/89 on the Control of Concentrations Between Undertakings (herein after
referred to as “Old Merger Regulation”) has been adopted and came into effect in 1990.
Although it was known as the Merger Regulation, within its text, rather then the terms of
“mergers and acquisitions”, the term “concentration” was used.
Old Merger Regulation was accepted by the member states as a result of long struggle. At
first, when the draft of a merger regulation was submitted in 1973, major oppositions were
raised by the member states. However, in order to fill the gap which occurred as a result of the
lack of legislation, Commission and Court of Justice started to develop precedents. Finally,
the member states acknowledged that in order for the common market to function properly,
there was a need for the community–wide merger control rules1.
The Old Merger Regulation aimed to preserve and develop effective competition within the
common market. In this frame, the concept of concentration was perceived in a broad context
and Community Legislation was to have a supremacy over the national competition
legislations. A pre-notification system was established and Commission was determined as
*
I would like to thank S. Begum Taner Huntürk for her valuable work during the preparation of this paper.
1
Erdem, Ercüment, “Recent Developments Brought by the Council Regulation No: 4064/89 on the Control
of Concentrations Between Undertakings”, Recent Developments on Turkish Competition Law Symposium
II, 2004, p.19.
3
the competent authority.2 Only the concentrations, which are not compatible with the basic
principles of common market and which restrict and impede competition are prohibited.
The principles which constitute the “heart” of the Old Merger Regulation are;3

An application field bound with thresholds

The absolute competence of the Commission/ one stop shop principle

The non-application of Article 81 and 82 of the Rome Treaty- The provisions of
the merger regulation would be directly applied,

Compatibility Criteria – Regarding the determination of whether a concentration is
compatible with the common market, the compatibility criteria are not driven from the
dominant position or the extent of the balance sheets, unlike the previous drafts.

Applicability to both public and private enterprises

Participation of the member states in the decision making process- referral to
member states or liaison with the authorities of member states

Protecting legitimate interests of member states- Member States may take
appropriate measures to protect legitimate interests other than those taken into
consideration by the Old Merger Regulation and compatible with the general principles and
other provisions of Community law. Public security, plurality of the media and prudential
rules shall be regarded as legitimate interests within this context.
Any other public interest must be communicated to the Commission by the Member State
concerned and shall be recognized by the Commission after an assessment of its
compatibility with the general principles and other provisions of Community law before the
measures referred to above may be taken.

Reciprocity – undertakings should have comparable treatment in the non-member
states.
Old Merger Regulation envisages shared competences. The basic concept is “community
dimension”. All concentrations with a community dimension would be under the control of
the Commissions and concentrations, which do not reach the community dimension, would be
subject to the merger control of member states. Commission shall only be competent to deal
with transactions which do not have a community dimension, if a member states requires so
and under the conditions set forth in the Old Merger Regulation4.
2
3
4
Tekinalp, Ünal/Tekinalp, Gülören; Avrupa Birliği Hukuku (European Union Law), 2. Bası Istanbul 200o, p.
465.
Zachmann, Jacque; Le controle communautaire des concentrations, Paris, 1994, p. 5-7.
Mercier, Pierre/Mach, Olivier/Gilliéron, Hubert/ Affolter, Simon; Grands principle du droit de la
concurrence , droit communautaire, droit Suisse, Bal, Geneva, Munich, Brussels 1999, p. 554.
4
In the course of time, Old Merger Regulation started to become insufficient for the control of
concentrations. The insufficiency of the Old Merger Regulation became apparent especially
when a concentration does not have a community dimension, however when it concerns more
than one member state. In such a case, the transaction had to be notified separately to each
member state and approval each member states’ competent authority had to be obtained.
Thus, Old Merger Regulation was amended by the Council Regulation No 1310/97. However,
this amendment could not sort out the problems in the functioning.
Even after the amendment, referral mechanism to member states was not functioning properly
and Commission could not work efficiently due to the over-loading. Thus the concepts of
“one-stop shop” and “community dimension” had to be re-defined and the control mechanism
had to be revised. In 2001, Green Paper on the Review of Council Regulation No: 4064/89
(herein after referred to as “Green Paper”) was published and under the mentioned Green
Paper all the insufficiencies were listed and a need for reform had been set forth.
Therefore, the Council Regulation No: 139/2004 of 20 January 2004 on the control of
concentrations between undertakings (herein after referred to as “New Merger Regulation”)
has been adopted.
B. IN THE FRAME OF TURKISH COMPETITON LAW
Turkish Competition Law is based on Article 167/I of the Turkish Constitution which
regulates the prevention of monopolization and cartelization. Thereby, the Constitution seeks
the construction and prevention of a competitive market.
By these means, Act on Protection of Competition (herein after referred to as “Act”) has been
adopted and entered into force on December 13, 1994, which has been amended several times.
The Act is deeply influenced by EC Competition Regulations. Moreover, European Court of
Justice and European Commissions decisions are evaluated as precedents under Turkish
Competition Law, since it was enacted as a final stage of Turkey’s negotiation of Customs
Union Agreement with EU as an effort for harmonization of its competition law with EC
competition law.
The aims of the Act is to prevent agreements, decisions and practices destroying or restricting
competition, the abuse of dominant position, to control the concentrations and to preserve
competition within Turkey by preparing secondary legislation.
Leading and most important aim of the Act is protection of competitive conjuncture or free
competition. Consequently, liberty of commerce, entrance in the relevant market and
productivity, utilization and effective distribution of the country’s resources are provided.
5
Article 7 of the Act regulates the mergers and acquisitions as follows
“Merger of two or more undertakings, aimed at creating a dominant
position or strengthening their dominant position, as a result of which,
competition is significantly impeded in any market for goods or services
within the whole or a part of the country, or acquisition, except
acquisition by way of inheritance, by any undertaking or person, of
another undertaking, either by acquisition of its assets or all or a part of
its partnership shares, or of other means which confer it/him the power to
hold a managerial right, is illegal and prohibited.
The Board shall declare, via communiqués to be issued by it, the types of
mergers and acquisitions which have to be notified to the Board and for
which permission has to be obtained, in order them to become legally
valid.”
In line with the Old Merger Regulation and on the basis of the Act, Communiqué No: 1997/1
on mergers and acquisitions (herein after referred to as “Communiqué”) had been adopted.
Pursuant to the Communiqué, mergers and acquisitions are subject to a priori control. Joint
ventures are also covered by this Communiqué. However, only concentrations where total
market shares of the undertakings exceed 25 % of the relevant product market, or even though
they do not exceed this rate, their total turnovers exceed 25 million NTL are subject to the
control of the CB.
II. MAIN FEATURES OF THE AMEDMENTS BROUGHT BY THE NEW MERGER
REGULATION
The New Merger Regulation tries to realize a reform in the control of concentrations at the
EU level. Therefore, it includes many substantial and procedural amendments amongst them,
some are essential and others are ancillary. Because of the time limitation in our speech, I will
only mention some of the amendments which I find very important and/or should have
reflections in the Turkish Competition Legislation.
6
A. SUBSTANTIAL AMENDMENTS
1. Definition of “Concentration”
Change of control on a lasting basis. The concentrations were defined under Article 3 of
the Old Merger Regulation5. The previous definition has been amended by the New Merger
Regulation in a way that to include the condition “change of control on a lasting basis”.
Even though, the above referred condition was not mentioned in the Old Merger Regulation in
a written form, it was always taken into account during the evaluation of a transaction to
determine whether it constitutes a concentration under the meaning of the Old Merger
Regulation, or not.
In the Article 3.2 of the Old Merger Regulation, condition of performing on a lasting basis
was only regulated to cover limited transactions;
“The creation of a joint venture performing on a long lasting basis all
functions of an autonomous economic entity, shall constitute a
concentration within the meaning of paragraph 1(b).”
Change of control on a lasting basis takes its pale in Article 3.4 in the New Merger Regulation
and now it is applicable to all concentration transactions.
Treating Closely Connected Transactions As A Single Transaction. Paragraph 20 of the
Preamble to the New Merger Regulation states that it is more appropriate to treat, as a single
concentration, transactions that are closely connected in a way that they are linked by condition
or take the form of series of transactions in securities taking place within a reasonably short
period of time.
2. The SIEC Test -“Significant Impediment to Effective Competition”
A New Methodology. Green Paper has discussed the effectiveness of the substantive test
which was stipulated under Article 2 of the Old Merger Regulation. In this discussion two
different opinions were raised. The first opinion is regarding the creation of an oligopoly by a
5
For detailed info on definition of concentrations, please see Erdem, H. Ercüment; Türk ve Avrupa
Toplulukları Rekabet Hukukunda Birleşme ve Devralmalar (Mergers and Acquisitions in Turkish and EC
Competition Law), Istanbul 2003, p. 187-188; Tekinalp/Tekinalp, AB Hukuku (EU Law) , p.464; Aslan, İ.
Yılmaz; Avrupa Topluluğu Rekabet Hukuku ( EC Competition Law), Ankara, 1992, p.265; Güven, Pelin;
Türk Rekabet Hukuku (Turkish Competition Law, Ankara 2003, p. 103; Bellamy, Christopher/Child ,
Graham; European Community Law of Competition, 5th Ed., London 2001, p.363; Jones, Allison/Sufrin,
Barbara; EC Competition Law- Texts, Cases, Materials, Oxford- New York, 2001, p.699.
7
concentration. If the oligopoly raises the prices by using its effect on the market, does this
situation qualify the criterion under the substantive test? The second opinion emphasizes the
importance of interpretation of the substantive test’s criteria.
Court of Justice has stated under the Gencor/Commission
decision6 that if many small
undertakings merge and create an oligopoly and if no undertaking is bigger or stronger than the
others, in such a case the substantive test would not be sufficient to appraise the effects of such
a merger.
The “substantive test” was the essence and basis of existence of the Old Merger Regulation.
The criterion of the substantive test, in order to determine if a transaction is a concentration or
not, was the “evaluation of dominant position”. In the course time, by the precedents of the
Commission, this criterion started to be also applied to the “common dominance” or
“duopolies”7 or “oligopolies”8 or “collective dominance”.
However, Court of Justice annulled some of the important decisions of the Commission and
by these Court of Justice decisions some of the problems arising out of the insufficiency of the
legal framework for the control of concentrations and the interpretation of the these rules by
the Commission, have been put forward9.
In the Old Merger Regulation it was stated that concentrations creating or strengthening a
dominant position are incompatible with the common market. However, in the Article 2/3 of
the New Merger Regulation, there is a new criterion which is introduced; “a concentration
which would significantly impede effective competition, in the common market or in a
substantial part of it, in particular as a result of the creation or strengthening of a dominant
position, shall be declared incompatible with the common market ”. Thus, the important
criterion in this new test is the “significantly impeding the effective competition”, not the
creation or strengthening of a dominant position. However, it is also stated that the creation or
strengthening of a dominant position still has a particular importance.
It is stated in the paragraph 25 of the New Merger Regulations’ Preamble that many
oligopolistic markets exhibit a healthy degree of competition. However, under certain
6
7
8
9
Court of Justice’s Genchor/Commission decision dated 25.03.1999, OJ 1997, L11, p.30.
Commission’s Kali + Salz /Mdk/ Treuhand decision dated 14.12.1993, OJ 21.07.1994, L 186, p.3; In the
Kali + Salz/MdK/Treuhand decision, Court stated that since usually the creation or strengthening of a
dominant position causes impediment or distortion against the competition, the burden of proof should be
on the undertaking alleging that there is no causal relation between the distortion of competition and the
concentration transaction. Gencor/Lonrho decision dated 24.04. 1996, OJ 14.01.10097, L 11, p.30.
Commission’s Airtours/ First Choice decision dated 22.09.1999, OJ 2000, L 93, p.1
Kulaksızoğlu, Şebnem; 139/04 Sayılı Yeni EC Birleşme Tüzüğü Kapsamında Birleşmelerin
Değerlendirilmesi (Evaluation of Mergers in the Context of the New EC Merger Regulation No 139/2004),
Rekabet Dergisi Sayı: 17 Ocak- Şubat- Mart 2004, p. 85.
8
circumstances, concentrations involving the elimination of important competitive constraints
that the merging parties had exerted upon each other, as well as a reduction of competitive
pressure on the remaining competitors result in a significant impediment to effective
competition, even if there is no coordination between the members of the oligopoly. The
Commission or the Court of Justice did not interpreted the Old Merger Regulation as
requiring concentrations giving rise to such non- coordinated effects to be declared
incompatible with the common market. Therefore, in the interests of legal certainty, it should
be made clear that the new Merger Regulation permits effective control of all such
concentrations by providing that any concentration which would significantly impede
effective competition, in the common market or in the substantial part of it should be declared
incompatible with the common market.
Commission’s Recent Decisions. Recent Commission decisions rather then looking for
dominant position, often seek directly to identify whether the horizontal effects of the merger
entail competitive harm that rises to the level of significantly impeding effective competition.
By this way, the analyses focuses less on the static issue of market shares, but rather on
whether the merger will allow the merging parties to significantly raise prices post merger 10.
This is in fact the methodology underlying the Commission’s Horizontal Merger Guidelines,11
which use the term dominance only sparingly. Today’s terminology speaks instead of noncoordinated (unilateral) effects and coordinated effects.
The majority of the recent cases focus on the issue whether the horizontal overlap brought
about by merger would trigger unilateral (non-coordinated) effects, which may but need not
include the creation or strengthening of a dominant position.
In Bertelsmann/Springer JV decision12, Commission approved without remedies the creation
of a rotogravure printing joint venture between German media companies Bertelsmann AG
and Axel Springer AG.
The acquisition by US health care group Johnson & Johnson, of its competitor Guidant, a US
company specializing in cardiovascular medical products, was cleared out subject to the
conditions13. Both Johnson & Johnson and Guidant are world leaders, in the development,
10
11
12
13
Weitbrecht, Andreas; “EU Merger Control in 2005- An Overview”, E.C.L.R., Issue 2, 2006, p.44,
www.lw.com/resources/publications/-pdf/pub1518_1.pdf.
Guidelines on the Assesment of Horizontal Mergers Under the Council Regulation on the Controle of
Concentrations Between Undertakings, OJ 2004, C 31/03, p.5.
Commission’s Bertelsmann/Springer/JV decision dated 03.05.2005 and numbered COMP/M. 3178,
http://ec.europa.eu/comm/competition/mergers/cases/
Commission’s Johnson & Johnson/Guidant decision dated 25 Aug 2005 and numbered COMP/M.3687.
9
production and sale of medical devices used to treat both heart and peripheral vascular
diseases. The parties were required to divest a number of overlapping businesses.
In the takeover of VA Tech by Siemens, Commission analyzed an enormous number of
markets for electrical industrial products14. The merger was cleared subject to the condition
that Siemens divest VA Tech’s hydro power business and cuts its links to metal plant builder
SMS Demag.
Commission cleared the proposed acquisition of Gilette by Procter and Gamble in Phase I,
subject to the divestiture of Procter and Gamble’s battery toothbrush business. 15 The merger
will create one of the world’s largest consumer goods producers, with a combined turnover of
around 50 billion €.
Commission also approved in Phase I the acquisition by Pernod Ricard SA of Allied Domecq
Plc 16 subject to conditions. In a related transaction, some of Allied Domecq brands and assets
were acquired by Fortune brands.17 The Commission concluded that the transaction would
give rise to the creation or strengthening of a dominant position as the merged entity would
have a particular strong position in a number of national markets, in particular in the Scotch
and Irish whisky categories.
In the Lufthansa /Swiss decision, Commission authorized the acquisition of the principal
airline in Switzerland by the principal airline in Germany18. The package of remedies is
similar to the ones adopted in previous airlines cases. It includes behavioral undertakings as
well as undertakings by the Swiss and German aviation authorities that they would refrain
from regulating prices on long haul routes.
In a number of cases Commission found not only significant unilateral effects but also a risk
of coordinated effects, requiring remedies in some of these cases.
Commission cleared in Phase I the planned acquisition of Royal P&O Nedlloyd by AP
Møller19, subject to the conditions, resulting in the world’s largest shipping company which
deploys over 800 container vessels with a world wide turn over around € 28 billion.
14
15
16
17
18
19
Commission’s Siemens/VA Tech decision dated
13.07.2005 and numbered COMP/M. 3653,
http://ec.europa.eu/comm/competition/mergers/cases/.
Commission’s Procter and Gamble/Gillette decision dated 15.07.2005 and numbered COMP/M. 3732,
http://ec.europa.eu/comm/competition/mergers/cases/.
Commission’s Pernod Ricard /Allied Domecq decision dated June 24, 2005 and numbered COMP/M. 3779,
http://ec.europa.eu/comm/competition/mergers/cases/.
Commission’s Fortune Brands/Allied Domecq decision dated June 10, 2205 andnumbered Comp/M. 3813,
http://ec.europa.eu/comm/competition/mergers/cases/.
Commission’s Lufthansa /Swiss decision dated July 4, 2005and numbered COMP/M. 3770,
http://ec.europa.eu/comm/competition/mergers/cases/.
Commission’s Maersk/PONL decision dated July 29, 2005 and numbered COMP/M. 3829,
http://ec.europa.eu/comm/competition/mergers/cases/.
10
Commission analyzed 11 container shipping trade lines to and from Europe for potential anticompetitive effects. The proposed transaction would in particular create links between Maersk
and other conferences and consortia in which Royal P&O Nedlloyd is a member. Approval of
the transaction was conditioned on the withdrawal of Royal P&O Nedlloyd from these
conferences and consortia, thus severing ties that link competitors.
Conglomerate effects of mergers arise if the merging companies are active in separate but
related markets20. In the recent Commission decisions, it seems like conglomerate aspects did
not play a major role and were reviewed, in particular as to portfolio effects, resulting from
the strengthening of portfolio brands.
In Procter and Gamble /Gillette case21, Commission also examined the potential conglomerate
effects arising out of the parties’ significant portfolio of brands and their large market shares
in numerous product markets, where their activities do not overlap. The inquiry focused on
the possibility that competitors’ products could be unfairly excluded to the detriment of end
consumers and on potential competition problems from bundled products, rebates and
promotions. However, Commission held that even post-merger, parties would still face
significant competition from other suppliers of branded products with comparable product
portfolio and that the buyer power even of smaller retailers, was sufficient to counterbalance
any portfolio effects.
Like wise, in Pernod Ricard/Allied Domecq case22 the Commission held that the enlarged
portfolio of new entity was unlikely to have a significant negative effect on competition, most
importantly because of strong competition from Diaego. The latter is generally considered to
be the market leader in the alcoholic beverages industry and the transaction is widely seen as
enhancing Pernod Ricard’s ability to compete against Diaego. Owing to the second fiddle
market position, Commission found no evidence that new entity was likely to engage in anticompetitive practices.
Similarity to SLC Test.
The new criterion is parallel to the “substantial lessening of
competition” test which is applied in USA23, UK and Ireland. Thus, by this new test, a global
criterion for the evaluation of mergers and acquisitions is tried to be establish and it is aimed
20
21
22
23
Weitbrecht, p. 47.
Commission’s Procter and Gamble/Gillette decision dated 15.07.2005 and numbered COMP/M. 3732,
http://ec.europa.eu/comm/competition/mergers/cases/.
Commission’s Pernod Ricard /Allied Domecq decision dated June 24, 2005 and numbered COMP/M. 3779,
http://ec.europa.eu/comm/competition/mergers/cases/.
Clayton Act, Section 7
11
that similar criteria are applied by the different competent authorities to multinational mergers
and acquisitions.24
3. Ancillary Restraints
Paragraph 25 of the Old Merger Regulation’s Preamble stated that the application of the
Old Merger Regulation included where the undertakings concerned accept restrictions
directly related and necessary to the implementation of the concentration. However,
Articles 6.1(b) and 8.2 of the Old Merger Regulation did not provide the sufficient legal
certainty25. Commission with its Notice on restrictions directly related and necessary to
concentrations numbered 2001/C 188/0326, defined the concept of “ancillary restraints”.
However, as it can be acknowledged from its name, this notice was just for the purposes for
announcement.
Court of First Instance, has discussed the necessity to evaluate the ancillary restraints while
examining a concentration in its decision of Lagardère/Canal+. Court decided that the
Commission is obliged to also decide on the ancillary restraints. The mentioned decision of
the Court envisages totally different provisions than the above referred Notice. Thus, in the
mentioned Notice, discretion was granted to the Commission whether or not to decide on
ancillary restraints.
Paragraph 21 of the New Merger Regulations’ Preamble states that, it should also apply
where the undertaking concerned accept restrictions directly related to, and necessary for
the implementation of the concentration. Commission decisions declaring concentrations
compatible with the common market in application of the New Merger Regulation should
automatically cover such restrictions without the Commission having to assess such
restrictions in individual cases. At the request of the undertaking concerned, Commission
should, in cases presenting new and unresolved questions giving rise to genuine
uncertainty, expressly assess whether or not any restrictions is directly related to and
necessary for the implementation of the concentration. A case presents a new or unresolved
question giving rise to genuine uncertainty if the question is not covered by the relevant
Notice in force or by a previous Commission decision which has been published.
24
25
26
Green Paper, Article. 106.
Erdem, H. Ercüment, “Rekabet Hukuku Açısından Birleşme ve Devralmalarda (Yoğunlaşmalarda) Yan
Sınırlamalar (In the Frame of Competition Law Ancillary Restraints Relating To Concentrations) ”,
Galatasaray Üniversitesi Hukuk Fakültesi Dergisi, Ocak 2002, Y.1, S.1 Prof. Dr. Kemal Oğuzman’a
Armağan, p.310-346.
Commission adopted a new notice on restrictions directly related and necessary to concentrations numbered
2005/C 56/03.
12
Under Articles 6.1(b), 8.1 and 8.2 of the New Merger Regulation, it is stated that a
Commission decision declaring a concentration compatible shall be deemed to cover
restrictions directly related and necessary to the implementation of the concentration. The
aim of this new provision is to simplify the procedures applied to concentrations.
Additionally, it is no more required to notify a concentration which is below the thresholds
and does not have a community dimension only because it includes ancillary restraints. On
05.03.2005 a new Commission Notice on Restrictions Directly Related and Necessary to
Concentrations numbered 2005/C 56/03 has been adopted. The new notice was opted for
the purposes of alignment to the New Merger Regulation.27
B. PROCEDURAL AMENDMENTS
1. Notifications
a. Notification Prior to A Binding Transaction
Under normal circumstances, concentration with a Community dimension defined in the
New Merger Regulation shall be notified to the Commission prior to implementation and
following to the conclusion of the agreement, the announcement of public bid or the
acquisition of a controlling interest.
However, the New Merger Regulation provides that notification can also be made where
the undertakings concerned demonstrate to the Commission a good faith intention to
conclude an agreement or in the case of a public bid, a bid where they have publicly
announced an intention to make such a bid, provided that the intended agreement or bid
would result in a concentration with a community dimension.
In this way, New Merger Regulation eliminated the unnecessary bureaucratic formalities
and granted an option to apply to the Commission even before enacting an agreement.
b. Pre- Notification Referral
A significant innovation brought by the New Merger Regulation is the effective distribution
of files between the Commission and national competent authorities for the control of
concentrations. In order to realize this aim, it has been envisaged that the referral
mechanism to be used more often and efficiently. Moreover, this new option granted the
undertakings a right to apply with a written petition requiring to refer the case to a member
27
For a detailed overview of this Notice, see Erdem, H.Ercument, “Rekabet Hukuku Açısından Birleşme ve
Devralmalarda (Yoğunlaşmalarda) Yan Sınırlamalar (In the Frame of Competition Law Ancillary Restraints
Relating To Concentrations) ”, Competition Authority, Thursday Conferences, 25.10.2004.
13
state. In the Old Merger Regulation, the right to request a referral was only granted to the
Commission and the member states.
Additionally, in cases where a concentration does not have Community dimension and
which is capable of being reviewed under the national competition laws of at least three
member states, the persons or undertakings may, before any notification to the competent
authorities, inform the Commission by means of a reasoned submission that the
concentration should be examined by the Commission.
The expansion of the one-stop-shop principle would have a key function during the
enlargement of the EU. The aim of this expansion is to enable concentrations to be
examined at the most appropriate level.
c. Referral After the Notification
In the Green Paper, it was stated that many problems arise out of the implementation of
Articles 9 and 22 of the Old Merger Regulation28.
Under the New Merger Regulation referral mechanisms to member states had been eased
and facilitated. Moreover, a new competence had been granted to the member states for
referral to the Commission.
2. More Flexible Time Frames
Pursuant to the Old Merger Regulation, the time schedule for the evaluation by the
Commission was regulated in a very tight way. Therefore, Commission had faced many
difficulties. In the New Merger Regulation, these difficulties have been taken into
consideration and thus a time frame, which is more flexible and time saving, tried to be
established.
3. Investigative Tools
New Merger Regulation Articles 11 to 13 describe the investigative powers of the
Commission either directly or through member states. These include compulsory process to
obtain answers to written questions and on-site inspection of books and records. Although
new investigative powers have been granted to the Commission, it is still not empowered as
the US agencies, to compel oral testimony under oath29, but it may make voluntary
28
29
Green Paper, Preamble, p. 19-25.
Parisi, John; A Simple Guide to the EC Merger Regulation of 2004, www.abanet.org/antitrust/source/-0105.html
14
interviews. Its powers to inspect the undertakings’ premises include the ability to seal
business premises and books and records.
4. Penalties for Infringement
a. Suspension of Deadlines
New Merger Regulation Article 10.4 allows the Commission to suspend the decision
deadlines, where parties do not timely comply with information requests or on-site
inspections. Commission already stopped the clock in its investigation of the
Schneider/Legrand case30 in 2002, an action that was upheld by the Court of First Instance.
b. Fines
The fixed amount of fines system in the Old Merger Regulation has been transformed to
relative fines system, where a percentage which will be calculated over the aggregate turn
over of undertakings, by Articles 14 and 15 of the New Merger Regulation.
New Merger Regulation Article 14.1 provides for imposition of fines of up to 1% of the
aggregate turnover of the undertakings concerned where they intentionally or negligently
supply incorrect or misleading information on the application form or other submissions;
supply incorrect or misleading information or refuse to give information or submit records
upon an request for information under Article 11. Pursuant to Article 15.1, Commission
may also impose periodic penalty payments of up to 5% of the average daily aggregate
turnover of the undertakings concerned per day for delays in providing incomplete and
correct information upon a request for information under Article 11 or for refusal to permit
an on-site investigation.
Article 14.2 provides for the imposition of fines of up to 10 percent of the aggregate
turnover of the undertakings concerned where they fail to notify a concentration prior to its
implementation; fail to comply with conditions of a Commission decision clearing a
merger; or consummate a merger in the face of a prohibition decision.
30
Court of First Instance’s Schneider v. Commission decision dated 22.10.2002 and numbered T-310/01,
http://ec.europa.eu/comm/competition/mergers/cases/.
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III. BRIEF CRITIC OF THE TURKISH MERGER LEGISLATION
The basic provision (Article 7) regulating the mergers and acquisitions under the Act, can be
criticized from different perspectives;

The text is not clear and understandable: It is hard to understand under which
circumstances a merger or acquisition transaction is prohibited. In my opinion, the
creation or strengthening of a dominant position is not sufficient, it should further be
examined if the competition is significantly impeded or not.

The sanction envisaged under the provision has not been set forth clearly. It is
nonsense to state that, a concentration creating or strengthening a dominant position,
as a result of which, competition is significantly impeded in any market for goods or
services within the whole or a part of the country, would be both illegal and
prohibited. It is natural that if a prohibited transaction is realized it would be illegal.

The change of control is not mentioned at all in the provision. However, the
Competition Board uses in its decisions this criterion as a main test to appraise the
existence of a concentration.

The joint ventures are not mentioned within the provision, as a type of a
concentration. Thus, a conflict arises between the Communiqué No 1997/1 and the
Act, since the Communiqué regulates the joint ventures, which is a transaction not
covered in the Act.

Some of the provisions regulated under the Communiqué should be included in the
Act. Particularly Communiqué Article 2 provisions should be covered by the Act.
Lastly, we must state that with the amendments introduced in 2005 and 2006, there is a
convergence to New Merger Regulation. The changes like the ones in clearance system and
the fines are progressive. However, there is a still along way to go. The essentials of the New
Merger Regulation should be adopted.
IV. SUGGESTIONS
With the amendments brought by the New Merger Regulation to the EC Merger legislation,
Article 7 of the Act became even more deficient and inharmonious with EU legislation. Thus,
our merger legislation should be revised. My suggestions are listed herein below:

The term “concentration” should be used rather than the terms “mergers and
acquisition. If we are to examine the Article 7 of the Act and Communiqué No
1997/1, we will find out that the term merger is used in a way that meaning the
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centralization of an economic power and its concentration in a specific central point.
This meaning is much wider than the merger’s technical meaning under the Turkish
Code of Commerce. Therefore, the terms mergers and acquisitions do not cover the
concept stipulated under the Article 7 of the Act and Communiqué No 1997/1. I have
to state that it would be more appropriate to use the term “concentration” for this
concept.

“Change of control on a lasting basis” criterion should be included. Under Turkish
Law, the concept of “control” in the frame of concentrations has only been mentioned
in the Communiqué No 1997/1. This provision has been found not very successful and
has been criticized by the scholars31. It is against the law making technique and also
dangerous to include a criterion by a Communiqué, when such criterion has not been
determined in the Act which is the basis for the mentioned Communiqué. On the other
hand, the Competition Board has always substantially put forward the concept of
control in its decisions. Therefore, I believe that it would be beneficial to explicitly
include concept of “change of control on a lasting basis” in the Act, in order for it be
compatible with the Communiqué No 1997/1 and Competition Board precedents.

The SIEC Test-“Significant Impediment to Effective Competition” should be
applied during assessment for the prohibition of concentrations. Article 7 of the
Act currently includes the criterion of “significantly impeding competition”. However,
the provision has a very confusing literal construction; therefore, many hesitations
arisen in the interpretation and application of the criterion together with the dominant
position assessment. Different opinions have been asserted32. If we are to take a look at
the historical development of the Competition Board decisions, in the first decisions
only dominant position assessment was made, later on the Board started to also pay
attention to the effects of the concentrations on competition. In my opinion, the test of
significantly impeding effective competition should be evaluated priory, and the
creation or strengthening of a dominant position, should be examined as a particular
example as to the level of significantly impeding effective competition.

A notice regarding the ancillary restraints should be adopted. Under Turkish Law,
ancillary restraints are not regulated under any written legislation. However,
Competition Board has defined ancillary restraints in the decisions as the any
competition restrictions that are (i) necessary to the implementation of the
31
32
Erdem, Birleşmeler ve Devralmalar (Mergers and Acquisitions), p. 288-299.
For the discussions please see Erdem, Birleşmeler ve Devralmalar (Mergers and Acquisitions), p. 114.
17
concentration, (ii) objective, (iii) reasonable and (iv) limited by an adequate time
frame. Competition Board is closely watching the progress in the EU law and tries to
fill this legislation gap with its decisions.
New developments in this field have been stated above. Thus, it would be beneficial
for the Competition Board to publish a notice on ancillary restraints.

Notification Prior to a Binding Transaction. It is advisable that the Act is amended
to provide the possibility of a notification prior to a binding transaction. A merger and
acquisition transaction is always very complicated, costly and time consuming. It is
always very frustrating for the parties to have conditional clearance or refusal of
clearance after the finalizing a very long transaction. This possibility will permit the
parties to negotiate the transaction in line with the feedbacks of Competition
Authority.

Administrative fines should be revised. Pursuant to the Act Article 16 and 17, both
periodical fines and other fines are calculated over fixed amounts. New Merger
Regulation diverges from the previous provisions which were in line with the
provisions of the Act and stipulated that the fines to be calculated over a percentage of
aggregate turn over of the undertaking which is party to the concentration transaction.
Thus, the Commission’s ability to apply fines has been strengthened.
Also, fixed fines system has some disadvantages. The fixed fines can be deemed too
high or too low depending on the currency fluctuations. Thus, the fines can be too
harsh or would not have any sanctional effects depending on the fluctuated conditions.
The new system overcomes these disadvantages. Therefore, I believe it would be
better to adopt a proportional fines system.
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