Miran Legal

Attorney

06.12.2022

Mergers Through Privatization

Acquisition of an undertaking by a person or another undertaking through privatization is a merger and acquisition in accordance with LPC art.7. Therefore, mergers and acquisitions that are considered illegal and invalid as specified in Article 7 will also be applied to said mergers through privatization.

 

Privatization transactions are carried out by the Privatization Administration (PA). In addition, the legislation to which privatization transactions are subject is the Privatization Law No. 4046. LPC, on the other hand, is a law that was later removed from the Privatization Law. Therefore, the Privatization Law including provisions on protecting of competition will not lead to a change in the fact that the provisions of the LPC will be applied to a concrete event. In fact, it will strengthen the situation in question even more. As a matter of fact, following the emergence of various hesitations in the doctrine on the existence of a parallel regulation with articles 4 to 6 of the LPC in Article 16 of the Privatization Law, which was amended on 3/7/2005, the consultative opinion was taken by the Council of State.

 

It is stated in a decision of the State of Council 1. Department, dated 14.07.1995 that; “That the Law No. 4054 on the Protection of Competition(a general law that reorganizes the field of competition protection and subsequently entered into force), has implicitly revoked article 16 of the Law No. 4046 on the Regulation of Privatization Practices(which previously made regulations the same field), and therefore the provisions of LPC No. 4054 should also be applied to organizations that have been privatized as a result of privatization practices”

 

The procedural provisions of mergers and acquisitions through privatization have been formed by various communiqués issued by the Competition Board. Today, said provisions and principles have been regulated by Communiqué No. 2013/2 on Procedures and Principles to be Followed in Prior Notification to the Competition Authority and Application for Permission  in order for Acquisitions through Privatization to Gain Legal Validity, published in the official gazette No.28622, dated 18 April 2013.

 

In accordance with Article 2 of the Communiqué No. 2013/2, all acquisitions of all or part of the partnership interest or other rights and means of an undertaking in a way that will change the undertaking’s control or affect decision-making bodies, or all acquisition of units intended for the production of goods or services through Privatization is subject to this Communiqué’s provisions. Cases that are an exception to this rule and are not covered by the Communiqué are listed in paragraph 2 of article 2:

a) Assignments to public institutions or organizations, including local administrations, as well as educational institutions with a public legal entity, 

b) Transfer of real estate not intended for the production of goods or services, 

c) Sales in foreign capital markets, 

d) Public offering, 

e) Block sales involving a delayed public offering of maximum 3 years, without prejudice to the provisions of the legislation on capital markets, 

f) Assignments to employees, 

g) Sales by special order that do not lead to a change normally and/or with the control of the undertaking on the stock market, 

h) Sales to securities investment funds and/or securities investment associations, 

i) Cases of share assignments that do not lead to a change in the control of the undertaking are not covered by the Communique.

 

A two-stage process has been determined in terms of an undertaking or undertakings acquired through privatization that fall under the scope of the Communique. The Competition Board will first give an opinion before the privatization is put up for auction. After the auction is made, permission will be given about the undertakings that have made the most increases. Permission from the Competition Board is required in order for acquisition transactions to gain legal validity. Therefore, the existence of a process consisting of two stages, namely opinion and permission, is obvious. This process has also been approved by the Council of State.

 

1. Prior Notification

At the prior notification stage, which is the first stage of the process, the Privatization Administration will notify the Competition Board about the privatization that it plans to do before the auction. The Competition Board will examine the market in all its details and give an opinion regarding the privatization in question. If there is a situation that requires conditions to be set in relation to privatization; then the Board will specify the relevant conditions and the conditions will be included in the auction specification. The conditions to be set at this stage must be related to the market. Because at this stage, the undertakings that will participate in the auction are not yet clear. For this reason, it will not be fair to set conditions for undertakings. For this reason, the Board has the means to determine objective conditions that will be valid for undertakings.

 

In accordance with Article 3 of the Communique No. 2013/2, if the revenue of the unit for the production of goods or services or undertaking that is intended for privatization exceeds 30 million Turkish Liras, it is mandatory to obtain the opinion of the Board by conducting a prior notification process. The opinion of the Competition Board is valid for 3 years, unless stated otherwise in the opinion in question. Regarding the auctions to be issued after the end of this time period, it is mandatory to obtain the opinion of the Competition Board again within the framework of the principles mentioned above. In case of a change in the privatization method, the opinion of the Board will be taken again.

 

2. Permission

Article 5 of the Communique No. 2013/2 regulates privatizations that are subject to permission. According to the article, it is mandatory to obtain permission from the Competition Board in order for the privatization and acquisition transactions, which are required to be notified to the Competition Authority in advance, to gain legal validity.

 

In Article 6 of the Communique, the procedure which the permission is subject to is regulated. The application for permission to the Competition Authority is made after the conclusion of the auction process and before the decision of the Supreme Council of Privatization on the final assignment of the unit to be privatized. The Head of the Privatization Administration shall transmit the information and documents received by them regarding all undertakings or associations of undertakings bidding for the auction to the Competition Authority without waiting for the conclusion of the auction. This issue is important for the Competition Board to have information about undertakings and to conduct a detailed and healthy examination.

 

CONCLUSION

LPC is implemented on undertakings. The provisions of the LPC will be implemented in relation to mergers and acquisitions through privatizations carried out by the privatization administration. The acts carried out by the state using its sovereignity are outside the scope of the LPC. The privatization process will be examined by the Competition Board in accordance with market conditions and Competition Law principles. The Competition Board conducts this review in two stages: opinion and permission. In this article, information on the basis and procedure of the process within the framework of the LPC and the Communiqué No. 2013/2 has been given.