INTRODUCTION
Any activities conducted by enterprises operating within or affecting the goods and services markets within the Republic of Türkiye are subject to specific constraints under Law No. 4054 on the Protection of Competition ("Law"), aimed at safeguarding competition and ensuring a fair competitive environment. Under Article 7 of the Law, certain mergers and acquisitions that could result in the creation or enhancement of a dominant market position, thereby significantly distorting or lessening competition, must be notified to and approved by the Competition Board ("Board") to be deemed valid. This article examines the legal framework surrounding the necessity of obtaining Board approval for mergers and acquisitions, addresses the implications of unauthorized transactions ("Gun Jumping"), delineates the criteria for determining Gun Jumping, and explores the legal remedies available to rectify such breaches.
A. MERGERS AND ACQUISITIONS REQUIRING APPROVAL UNDER TURKISH COMPETITION LAW
Pursuant to Article 7 of the Law, titled 'Merger or Acquisition,' transactions resulting in a permanent change of control will be deemed a merger or acquisition and will require the approval of the Board to be legally valid, provided that the other conditions specified in the Communiqué are met. Such transactions include: (i) the merger of two or more undertakings; (ii) the acquisition of direct or indirect control over all or part of one or more undertakings through the purchase of shares or assets, by contract, or by other means, by one or more undertakings or by one or more persons already controlling at least one undertaking; and (iii) the establishment of a joint venture that will perform all the functions of an independent economic entity on a lasting basis.
Sanctions for conducting mergers and acquisitions subject to approval under the Law without prior notification are outlined in Article 11 of the Law. If the transaction does not create a dominant position or significantly impede competition as defined in Article 7, it may still be approved, although a fine may be imposed for non-compliance with the notification requirement. If the transaction is found to contravene the Law, it will be annulled, all actions taken will be reversed, shares and assets will be returned to their original state, and an administrative fine will be imposed along with additional corrective measures.
B. THE CONCEPT OF GUN JUMPING
Conducting concentration transactions that require approval from the Board without prior notification or obtaining the Board's approval is referred to in foreign literature as 'Gun Jumping.' In competition law, Gun Jumping occurs when a merger or acquisition transaction, which is subject to the Board's approval under Article 7 of the Law and the Communiqué, is implemented without first notifying the Board or securing the necessary approval.
Determining the precise moment an infringement is deemed to have occurred is critical. In this regard, Gun Jumping may arise during contract negotiations, such as through interim restrictions. Examination of the Board's previous rulings and those from other jurisdictions reveals that establishing when a change in control occurs is key to determining when the concentration is considered effective. According to the Competition Authority's Guideline on Mergers and Acquisitions and the Concept of Control ("Guideline"), a change in control occurs when one firm gains direct or indirect dominance over another due to alterations in the management or decision-making bodies of a business..
In merger and acquisition processes, parties to the transaction often share critical and sensitive information from a competition law perspective, such as future business strategies, pricing, sales volumes, and details about senior executives and key personnel. In this context, if there is interference with the target company's information and documents during the due diligence phase, if there is intervention in the target company's operations through contract negotiations, or if interim restrictions are included in the share transfer and assignment agreements, it may be deemed that a change in control has occurred. Consequently, if the transaction is subject to approval under Article 7 of the Law, such actions could constitute Gun Jumping.
C. THE CRITERIA FOR GUN JUMPING
The Court of Justice of the European Union ("CJEU") has established the scope of Gun Jumping as an important criterion in determining whether actions taken prior to the closing of a transaction contribute to a change in control of the merger, as outlined in its decision concerning Ernst & Young ("EY")'s acquisition of KPMG's Danish subsidiary. This decision addressed whether KPMG violated its suspension obligations by terminating its agreement with KPMG International before obtaining competition clearance for its merger with EY. The CJEU clarified that the suspension obligation applies only to actions by the merging parties that "contribute, in whole or in part, de facto or de jure, to the change in control of the target business." The CJEU determined that any de facto or de jure intervention that contributes to the change in control of the target company falls within the scope of Gun Jumping. However, despite the connection and potential preparatory nature of KPMG's termination of its agreement with KPMG International to the merger, the CJEU did not classify this action as Gun Jumping on its own.
Another significant decision regarding the criteria for Gun Jumping is the European Commission ("Commission")'s ruling in the "Altice" case. In this decision, the Commission examined behaviors leading to a change in control and addressed activities aimed at preventing the target company from losing value, which are deemed necessary to protect the interests of the acquirer. The Commission evaluated the granting of veto rights to the acquirer and the restriction of independence in pricing policy as control-enhancing behaviors. Altice's extensive exercise of these powers led to the imposition of an administrative fine.
The Board's practice is exemplified by its decision dated 08.05.2003, with reference number 03-31/380-167. In this decision, it was determined that the merger between Superonline and Vestelnet was subject to the Board's approval and that the unauthorized signing of the "Infrastructure Sharing Agreement" constituted a violation under Article 7 of the Law. Administrative fines were imposed on the parties involved.
To summarize, under the aforementioned precedent decisions,
- The termination or modification of significant contracts by the merging parties before completing the merger and acquisition process,
- The acquiring company holding veto rights over the decisions of the target company during the merger process,
- The acquiring company having influence over the target company's marketing activities and information exchange policies,
- The acquiring company possessing extensive powers that restrict the target company's commercial independence,
- The acquiring company having broad oversight over the agreements and commitments made by the target company,
- The acquiring company interfering with the management of the target company even if the closing process has not occurred,
such actions could be deemed as constituting a change in control. However, it is important to note that, as in the decision regarding the merger between EY and KPMG, the mere presence of any of these factors does not necessarily indicate Gun Jumping. Each case will be assessed based on its specific circumstances and the state of the relevant competitive market.
D. CONCLUSION
Competition law plays a crucial role in ensuring fair competition in the markets and preventing anti-competitive effects. Under Article 7 of the Law, certain mergers and acquisitions must be notified to and approved by the Competition Board. Gun Jumping refers to the implementation of such concentration transactions without notifying or obtaining approval from the Board. An important criterion for detecting Gun Jumping is determining when a change in control occurs, which is essential for assessing the transaction's impact on competition. In this context, an infringement can occur not only with the closing of the transaction but also through information exchanges and actions during the period leading up to the closing. Consequently, thorough examination and approval of transactions by the Competition Board are vital for maintaining a transparent and fair business environment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.