Merger of Two or More Undertakings or Acquisition of Another: Obligation to Notify the Competition Board
1. Introduction
Mergers and acquisitions (M&A) are one of the most important tools for growth strategies in the business world. However, in Turkey, such transactions are subject to the supervision of the Competition Authority to protect competition . Law No. 4054 on the Protection of Competition and the related Communiqué No. 2010/4 regulate which mergers and acquisitions must be reported to the Competition Authority , which threshold values are taken into consideration, and how the approval process works.
Many CEOs and investors focus on the financial and commercial aspects of a transaction, neglecting the competition law dimension . However, a breach of the notification obligation carries the risk of administrative fines amounting to millions of Turkish Lira and the transaction being deemed invalid. Therefore, conducting a legal compliance analysis from the very beginning of the merger and acquisition process is vital.
2. What are Mergers and Acquisitions?
A mergeris the process of bringing together two or more undertakings into a single economic entity. This typically involves:
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By establishing a new company,
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This happens through one existing company acquiring another.
An acquisition is when one undertaking purchases all or part of the shares or assets of another undertaking in a way that allows it to gain control. "control" not only a majority stake but also all rights affecting the power to make managerial decisions .
A change of control thateliminates a company's ability to make independent decisions falls under the scrutiny of the Competition Board.
3. Legal Basis for Notification to the Competition Board
The fundamental basis of the notification obligation:
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Law No. 4054 on the Protection of Competition
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Article 7: Mergers and acquisitions that significantly reduce competition are prohibited.
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Communiqué No. 2010/4 on Mergers and Acquisitions Requiring Permission from the Competition Board
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It regulates the notifiable transactions, threshold values, and procedure.
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4. Criteria for Being Subject to Notification: Threshold Values
Based on the threshold values updated in 2022, notification to the Competition Board is mandatory if a transaction meets at least one of the following criteria:
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In terms of turnover in Türkiye:
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If the combined turnover of the parties to the transaction in Turkey exceeds 750 million TL , and at least two parties individually have turnovers exceeding 250 million TL in Turkey.
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In terms of the target company's market strength:
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If the turnover of the acquired undertaking or a part thereof in Türkiye exceeds 250 million TL, and the turnover of the other party in Türkiye exceeds 750 million TL.
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Note: Special revenue calculations may apply to digital platforms, technology companies, and data-intensive sectors .
5. How Does the Notification Process Work?
5.1 Preparation
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The nature of the process and the change in control are analyzed.
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The parties' turnover in Turkey and worldwide is calculated.
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The relevant market definition is provided.
5.2 Preparing the Notification Form
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The Merger and Acquisition Notification Form, available on the Competition Authority's website, must be completed.
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The parties' trade registry information, fields of activity, market shares, competitors, suppliers, and customers are specified.
5.3 Board Review
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Preliminary review period: Within 30 days, the Board will either approve the transaction or proceed to in-depth review (Stage 2).
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Second stage review: This can take up to 6 months and involves a detailed competitive analysis.
6. Approval Criteria and Prohibition Cases
The Competition Board asks the following questions to approve the transaction:
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Does the transaction create a dominant position in the relevant market?
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If there is a dominant position, does this significantly restrict competition?
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Will barriers to market entry increase?
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Will consumer welfare be negatively affected?
If the answers to these questions are negative, the Board may approve the transaction unconditionally or with commitments; otherwise, it may prohibit it.
7. What happens if no notification is given?
Failure to comply with the notification requirement will result in:
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Administrative fine : A fine equal to 0.1% of the parties' gross turnover for the previous fiscal year will be imposed.
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The transaction is considered invalid.
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The Competition Board may order the transaction to be reversed or the parties to separate.
8. Strategic Recommendations for CEOs
8.1 Early Legal Compliance Analysis
Establishing competition law at the beginning of the M&A process allows for the determination of whether threshold values have been exceeded.
8.2 Pay Attention to Market Share Calculations
The board considers not only revenue but also market share and market structure. Misrepresentation results in serious penalties.
8.3 Coordination in International Transactions
In multinational mergers, a simultaneous notification plan should be prepared with competition authorities in both Turkey and other countries.
8.4 Commitment Mechanism
To address competition concerns structural (company split, asset transfer) or behavioral (abandoning certain practices) commitments may be offered.
9. Case Study: Merger of Two Retail Chains
Two major retail chains operating in Türkiye wanted to merge in a way that would allow them to control 60% of the market.
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The parties' turnovers exceeded the threshold values, thus an obligation to report .
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The Board approved the merger on the grounds that it would significantly reduce competition, but the following conditions be met :
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The closure of some stores,
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Amendments to supplier contracts,
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Increasing transparency in pricing policies.
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This example demonstrates that Board approval may be possible in exchange for strategic compromises
10. Conclusion
Mergers and acquisitions offer attractive opportunities for companies to achieve their growth objectives, but ignoring competition law hurdles carries significant risks. The obligation to notify the Competition Authority is not merely a legal formality, but key to the validity of the transaction . The key message for CEOs and investors:
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Legal analysis at an early stage,
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Accurate sales figures,
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Transparent reporting and
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When necessary, commitment strategies can help you complete your merger and acquisition process smoothly.
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