January 9, 2013 3:59 pm
This article is provided to FT.com readers by PaRR (Policy and Regulatory Report)— a newly launched product of The Mergermarket Group providing proprietary intelligence and research on competition law and sector-specific regulatory changes around the world. www.parr-global.com
• Notification threshold for deals where only one party active in Turkey raised to EUR 13m
• Removal of ‘affected market test’ means greater legal certainty when assessing need to notify, lawyers say
• Uncertainty as to how new rules will apply to joint ventures
New Turkish merger notification rules, which include raising the notification thresholds for international deals, will help make national merger control proceedings more efficient, two Istanbul-based antitrust lawyers told PaRR.
However, the two lawyers disagreed on whether new guidelines proposed by the Turkish Competition Authority (TCA), which would set out how the TCA assesses mergers, would be a game-changer.
On 31 December 2012 the TCA published Communication 2012/3 announcing that as of 1 February 2012 it would increase the Turkish revenues threshold that triggered notification for certain deals from TRY 5m to TRY 30m (EUR 2m to EUR 13m).
Turkish notification rules erect two sets of thresholds under which merging parties must notify. Notification is required where merging parties have total revenues of TRY 100m, with at least two parties having Turkish revenues in excess of TRY 30m each, or where the worldwide turnover of one party exceeds TRY 500m and the Turkish revenues of the other party is greater than TRY 5m. An exception to these rules applies where the parties’ activities do not overlap, known as the affected market test.
According to a recent report published by Deloitte, merger volumes in Turkey have risen to the highest levels since 2008, with a record 259 deals with a value of EUR 21bn. Deal activity was almost equally split between domestic and foreign investors and, according to Deloitte, has the potential to increase further in 2013.
“We think this is a very good step,” said Derya Genc, counsel at Esin Attorney Partnership (Baker & McKenzie, Istanbul). As a result of the changes to the notification thresholds, the authority will be more effective in targeting mergers that have an impact on the Turkish market, she explained.
A recent consultation by the TCA on the notification thresholds recognised that, under the existing system, too many notifications were being made as merging parties with only a small presence in the country have been notifying.
Suleyman Cengiz, counsel at Hergüner Bilgen Özeke Attorney Partnership, agreed that the changes would generally render the merger review system more efficient.
Parties have been notifying transactions that should ordinarily fall outside of the scope of antitrust law, he said.
The changes also introduce greater fairness into the system, he added. “It looked like the competition authority favoured domestic transactions,” Cengiz said, because the applicable domestic revenue threshold for many international deals was TRY 5m, while the equivalent for domestic deals was TRY 30m. “But now all deals are assessed against the same scale,” he observed.
The lawyers also applauded the removal of the “affected market exception”, whereby parties had to self-assess whether the merger would actually affect competition and opt out of notification if no markets were affected.
This has introduced complicated and substantive issues into the initial assessment of whether to notify a deal and has caused uncertainty, Genc said.
Cengiz agreed that the affected market exception had caused confusion. “I have barely come across any deal that has not had to notify under the affected market test, since an affected market is defined so widely it catches almost all transactions,” he said.
Cengiz did fault the new communication insofar as it was not clear how the notification thresholds would apply to joint ventures (JVs), of which it makes no particular mention. However, he predicted that the TCA would most likely decide to pursue the approach it took in recent JV decisions, where it counted the revenues of the parent companies and of the entity to become the JV, where applicable.
The TCA will need to publish new guidelines on how it intends to assess turnover under the new rules, said Genc.
Merger assessment guidelines
The two lawyers disagreed, however, as to whether the TCA needed to publish guidelines setting out the criteria it uses to assess mergers.
The TCA put out two consultation papers proposing guidelines in relation to horizontal and vertical mergers in December. It proposed to publish the new guidelines in early 2013 if stakeholders thought they were necessary.
“So far lawyers are like blindfolded when trying to understand how the authority will assess a merger,” said Genc. “This is an issue especially with problematic mergers, as we have no idea what criteria the TCA will use and the authority has too much discretion. The authority doesn’t necessarily follow what it has done in the past”
But Cengiz disagreed that the TCA was unpredictable. “Generally the guidelines are welcome, but they don’t add so much,” he explained. “The competition authority follows the approaches taken by the EU and US competition authorities and the consultation is merely a written version of what they have been doing so far.”
Both lawyers argued that guidelines could see the authority applying the assessment criteria too mechanically, without taking into account sufficiently particular characteristics of each case. But in the consultation the TCA does acknowledge that, depending on the transaction, some of the criteria may not be relevant, said Genc.
For more information or to inquire about a trial please call Asia: +86-21-6886-3001 Europe: +44 -207-0106-384 Americas: +1 516.695.9447
Copyright The Financial Times Limited 2013. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.