The Turkish Competition Board challenges mergers that substantially reduce competition. However there is no established mechanism by which the Board can permit a merger on the condition that the undertakings commit to preserve or restore the competition that would be distorted as a result of the merger creating or strengthening a dominant position. Instead of prohibiting anticompetitive transactions straightaway, competition authorities may choose to negotiate with the merging parties and impose commitments as a condition to approve the merger. These commitments aim to restore conditions for effective competition in the relevant product market, which would be distorted as a result of the proposed merger creating or strengthening a dominant position. Such conditions and modifications have been described as remedies in European Community law. The remedies are divided into two basic forms: structural and behavioural remedies. Structural remedies generally involve asset divestitures by the merging parties or sale or licensing of assets; behavioural remedies usually entail injunctive provisions that would manage the merged firm's post-merger business conduct. With respect to the remedies, the European Commission has issued a notice giving guidelines on modifications to concentrations, in particular, commitments to modify a concentration.

In Turkey there is no regulation or written guideline that the Board should follow regarding the remedies in merger control cases. In Turkish competition law practice, conditional decisions are usually understood as remedies. From 1999 to the end of 2006, out of a total of 623 merger decisions, the Board permitted 41 mergers with conditions. The conditions imposed in these cases mostly related to non-compete and confidentiality clauses in the agreements rather than the remedies in the European Community sense.

EU approach

Looking at the past, it is safe to say that the Board has chosen to impose remedies in a limited number of merger cases. In one early case, the Board authorised the proposed acquisition, provided that other firms fulfilled the same conditions and were treated equally; it granted access to the distribution network that was the subject of the request. In another case concerning a global transaction, the Board granted conditional permission and decided that the market shares and prices of the products be reported to the Turkish Competition Authority at certain intervals for a period of two years. In both decisions, the Board authorised the proposed mergers with conditions; however the conditions did not involve a structural remedy that the party fulfil to restore competition in the European Community sense.

Other examples of conditional authorisations concern global transactions in which the Board followed the European Community approach directly. In the case concerning the acquisition of Gilette and its subsidiaries by Procter & Gamble, the Board's decision was in line with the European Community; it permitted the merger on the condition that the parties fulfil commitments that they made to the European Commission. In another case concerning the pharmaceutical sector, which was decided in line with the European Community, the Board permitted the merger on the condition that certain licenses be transferred, due to sole dominance concerns.

Accordingly, in current practice the Board mostly grants remedies in merger cases either in form of behavioural remedies or in line with the European Community approach. However with respect to the local transactions, the Board has made no significant decisions with conditions involving structural remedies.

Sugar-free gum

The Board recently rendered a decision in which it imposed a structural remedy on the parties in a local acquisition. The transaction relates to the sugar-free gum market, involving the acquisition of a number one player in the market by the third player.

As a condition to the permission, the third player, the acquirer, submitted a written notification to the Board containing commitments to transfer unconditionally the licence of the single brand it owned in one of the relevant markets; and to appoint an auditing expert to implement the licence transfer. The Board decided that only the "dominant position of the first player" was being transferred from the first player to the third; and this transfer did not strengthen its dominant position since the third player committed to transfer the licence of its single brand in the relevant market. The Board permitted the acquisition on the condition that the commitment was fulfilled. It delegated the appointment of the auditing expert to the president of the Competition Authority. The Board stated that if this condition were not complied with, the authorisation of the acquisition would be invalid.

In this case, the parties did not discuss the remedies in the notification form, but the remedies were proposed by the parties to the case handlers during the discussions and meetings after the notification was submitted, as there was a risk that the transaction would not gain permission at all due to the high market share of the combined entity after the acquisition. This kind of remedy including a structural commitment is the most significant example in a local transaction where the Board acted independently from the European Community. It is noteworthy that the Board accepted the proposal of the parties on the appointment of an auditing expert to ensure the successful and timely implementation of the commitment.

Since this Intergum decision, the Board has issued further decisions regarding remedies including structural commitments in global transactions. In a recent decision on a global transaction between an American and a French undertaking, which affected the Turkish market, regarding fibreglass consolidation activities, the Board decided that the transaction affected more than six different product markets; the possibility of dominance restricting competition occured in only one. The Board determined that the acquirer would have a monopoly after the acquisition in the "felt with infinite filament" market, an important proportion of which is produced in the acquirer's facility in Battice, Belgium. Consequently, as a condition to the permission, the Board decided to permit the acquisition on the condition that the target company transfer its facility and business in Battice, Belgium, to a third party undertaking not involved in the acquisition. During the Board's examination, the European Commission also finalised the permission process regarding the same transaction, and came to a similar conclusion as the Turkish Competition Board. The Commission also permitted the transaction on the condition that Battice, the Belgium facility and business, be transferred to a third party not involved in the acquisition.

Looking ahead

The recent decisions of the Board have paved the way for structural remedies in Turkish competition law practice. The new draft of the article regarding the control of concentrations in the Act on the Protection of Competition provides that the Board may authorise the concentration, clear it with conditions or commitment, or prohibit it. The new draft also provides that the opinion of the parties should be obtained before the Board renders a decision prohibiting a concentration or permitting it with a condition. It is expected that the draft articles will enter into force by the second half of 2008. It is further expected that new regulations and guidelines will be prepared to make the process of using remedies more transparent and to increase legal certainty.

Author biographies

Zeynep Ergun Özeren YükselKarkinKüçük Law Firm Zeynep Ergun Özeren is a partner in YükselKarkinKüçük Law Firm. She has extensive experience in the areas of mergers and acquisitions and competition law. She has also worked as in-house counsel of a leading cement company and as a specialist in EU affairs and competition law at Sabanc› Holding. Özeren received her LLM degree in EU Law from Université Libre de Bruxelles Institute d'Etudes Européennes in 1996 and a Law Diploma from Ankara University School of Law in 1993. She is a recipient of the Jean Monnet Scholarship and was a trainee at the Directorate General of Taxation and Customs Union of EU. She speaks fluent English and French. Ayse Nur Sanli YükselKarkinKüçük Law Firm Ayse Nur Sanli is an associate in YükselKark›nKüçük Law Firm. She focuses on mergers and acquisitions, energy and competition law, and project finance and arbitration. She received a Law Diploma from Galatasaray University School of Law. She also attended legal studies at Boston University School of Law and Vrije University, Amsterdam. She speaks fluent English and French.