{"id":5747,"date":"2025-03-11T17:24:23","date_gmt":"2025-03-11T14:24:23","guid":{"rendered":"https:\/\/www.berkerberker.com\/concentration-in-the-energy-sector-of-turkey\/"},"modified":"2025-03-11T17:24:23","modified_gmt":"2025-03-11T14:24:23","slug":"concentration-in-the-energy-sector-of-turkey","status":"publish","type":"post","link":"https:\/\/www.berkerberker.com\/en\/concentration-in-the-energy-sector-of-turkey\/","title":{"rendered":"Concentration in the Energy Sector of Turkey"},"content":{"rendered":"

Authors: Atty. Ahmet Berker <\/a>& Atty. Deniz Nalbant<\/a><\/em><\/strong><\/p>\n

Introduction<\/strong><\/h4>\n

The electricity market is a sector of strategic importance and one that requires meticulous regulation from a competition law perspective. Concentration transactions are subject to certain limitations under Turkish Law No. 4054 on the Protection of Competition (\u201cCompetition Law\u201d) and related communiqu\u00e9s to ensure that consumers receive the best possible service while maintaining the market’s competitive structure.<\/p>\n

Pursuant to Article 7 of the Competition Law, enterprises are prohibited from creating a dominant position or strengthening their existing dominance through mergers and acquisitions. In this regard, merger and acquisition transactions in the electricity sector are scrutinized by the Turkish Competition Board (\u201cBoard\u201d) to determine whether they significantly reduce competition.<\/p>\n

This article examines the concept of concentration in the electricity sector within the framework of the Board\u2019s decisions on mergers and acquisitions. In particular, the Bo\u011fazi\u00e7i Elektrik and \u00c7aml\u0131bel Elektrik decisions will be analyzed to assess how such transactions are evaluated from a competition law perspective.<\/p>\n

1. Concentration<\/strong><\/h4>\n

Article 7 of the Competition Law imposes various restrictions on mergers and acquisitions. According to the provision, it is unlawful and prohibited for one or more enterprises to merge or acquire another enterprise\u2019s assets, shares, or controlling rights (except through inheritance) if such a transaction creates or strengthens a dominant position and significantly reduces competition in a market covering all or part of the country.<\/p>\n

Article 5\/1(b) of the Communiqu\u00e9 No. 2010\/4 defines a transaction resulting in concentration as follows:<\/p>\n

\u201cThe acquisition of direct or indirect control of all or part of one or more enterprises through the purchase of shares or assets, agreements, or other means by one or more enterprises or one or more persons already controlling at least one enterprise.\u201d<\/em><\/p>\n

In one of its decisions, the Board assessed that the transaction resulted in a vertical integration<\/strong> between electricity distribution and retail sales services[1]. However, it concluded that this type of vertical integration would not have any anti-competitive effects. The Board determined that the overlap between the activities of the enterprises did not lead to a significant concentration, and therefore, the acquisition was approved.<\/p>\n

Another type of concentration transaction under merger and acquisition rules is the formation of a joint venture<\/strong>[2]. Article 5\/3 of Communiqu\u00e9 No. 2010\/4 stipulates that creating a joint venture that permanently performs all the functions of an independent economic entity also qualifies as an acquisition. There are three fundamental conditions for the formation of a joint venture:<\/p>\n

    \n
  1. Joint control<\/strong>: The joint venture must be jointly controlled by at least two enterprises, ensuring that it does not act with an independent will and that no single entity has exclusive decision-making authority.<\/li>\n
  2. Independent economic entity<\/strong>: The joint venture must have its own resources and organization.<\/li>\n
  3. Independent business function<\/strong>: The joint venture must be capable of permanently performing all the functions of an independent enterprise in the market. The commercial relationship between the joint venture and the parent enterprise is also considered when assessing this criterion.<\/li>\n<\/ol>\n

    If the parent enterprises are active in the same market as the joint venture or upstream\/downstream markets, the transaction shall also be examined under Article 4 of the Competition Law[3].<\/p>\n

    Another common issue in joint ventures is non-compete agreements<\/strong>. Such agreements, which may be considered anti-competitive under Article 4, can be regarded as ancillary restraints necessary for the joint venture\u2019s operation and may not necessarily constitute a violation of the law[4].<\/p>\n

    2. Turkish Competition Board Decisions in the Electricity Sector<\/strong><\/h4>\n

    The Board has issued numerous decisions on mergers and acquisitions in the electricity sector. Transactions related to the privatization process are particularly noteworthy. Below are analyses of some key decisions by the Board:<\/p>\n

    2.1. Bo\u011fazi\u00e7i Elektrik Decision[5]<\/strong><\/h5>\n

    This decision is significant in terms of the nature of the bidders, market definition, and determining the dominance threshold<\/strong>. The Privatization Administration applied to the Board regarding the privatization of distribution companies through share transfers. The Board evaluated the privatization of Bo\u011fazi\u00e7i Elektrik Da\u011f\u0131t\u0131m A.\u015e., Gediz Elektrik Da\u011f\u0131t\u0131m A.\u015e., Trakya Elektrik Da\u011f\u0131t\u0131m A.\u015e., and Dicle Elektrik Da\u011f\u0131t\u0131m A.\u015e.<\/strong> through block sales and made the following assessments:[6]<\/p>\n

      \n
    • In its assessments regarding competition law, the Board stated that\u00a0market share\u00a0<\/strong>is a key indicator in determining dominance.\u00a0Generally, transactions leading to market shares of 40% or higher <\/strong>have the potential to create dominance.<\/li>\n
    • Due to factors such as product homogeneity, similar cost structures, and market transparency<\/strong> in the electricity market, a concentration ratio below 40% may still be sufficient to create dominance.<\/li>\n
    • In this case, the Board set the dominance threshold at 30%<\/strong> and allowed transactions slightly exceeding this threshold. However, transactions involving a concentration of 31% or higher <\/strong>were not approved.<\/li>\n<\/ul>\n
      2.2. \u00c7aml\u0131bel Elektrik Decision[7]<\/strong><\/h5>\n

      This decision is crucial for understanding how the Board assesses joint ventures in the electricity market. The case involved the transfer of shares in \u00c7aml\u0131bel Elektrik Da\u011f\u0131t\u0131m A.\u015e.<\/strong> to the joint venture \u00c7aml\u0131 Enerji Da\u011f\u0131t\u0131m ve Perakende Sat\u0131\u015f Hizmetleri A.\u015e.<\/strong> In its decision, the Board made the following evaluations:<\/p>\n

        \n
      • The joint venture may be considered a concentration transaction if the parent enterprises completely exit the market.<\/li>\n
      • The non-compete obligations<\/strong> imposed on the parties during the joint venture\u2019s operation were considered necessary ancillary restraints<\/strong> and not regarded as anti-competitive collusion.<\/li>\n<\/ul>\n

        These two decisions by the Board illustrate how merger and acquisition transactions in the electricity sector are evaluated under competition law. They also highlight the importance of factors such as market dominance and concentration levels<\/strong>, particularly in the privatization processes.<\/p>\n

        Conclusion<\/strong><\/h4>\n

        The electricity market is subject to special scrutiny under competition law due to its high concentration ratios and naturally monopolistic characteristics. When assessing mergers and acquisitions, the Board considers the potential creation or strengthening of dominance in the market.<\/p>\n

        When making decisions, the Board evaluates key factors such as market share, vertical integration, joint ventures, and non-compete agreements<\/strong>. Given that privatization processes may increase market concentration, such transactions are examined with particular diligence.<\/p>\n

        The Bo\u011fazi\u00e7i Elektrik and \u00c7aml\u0131bel Elektrik decisions provide essential examples of how dominance, concentration thresholds, and joint ventures are assessed. Companies operating in the electricity sector must ensure compliance with competition law and consider potential competition risks during mergers and acquisitions.<\/p>\n

        In conclusion, mergers and acquisitions in the electricity market play a critical role in the strategic growth of companies and in preserving competition and protecting consumer welfare. The Board\u2019s decisions serve as an essential guideline for market participants and will continue to shape future transactions.<\/p>\n

        If you would like to know more on this matter or require legal assistance, please contact Berker Berker Law Firm via info@berkerberker.com<\/strong> or any other contact information listed on our website.<\/em><\/p>\n

         <\/p>\n

        FOOTNOTES<\/strong><\/h5>\n

        [1] Turkish Competition Board, Decision No. 17-02\/15-6, dated 11.01.2017.<\/p>\n

        [2] A joint venture is established through an agreement between at least two persons or businesses to form a new entity with an independent existence and organization jointly controlled for a specific economic purpose.<\/p>\n

        [3] In its Migros decision<\/strong> (Decision No. 99-26\/230-138, dated 27.05.1999), the Board permitted a joint venture between two hypermarkets only when one of the parties exited the market<\/strong>.<\/p>\n

        [4] Turkish Competition Board, Decision No. 03-28\/342-143, dated 01.05.2003.<\/p>\n

        [5] Turkish Competition Board, Decision No. 10-78\/1645-609, dated 16.12.2010.<\/p>\n

        [6] The distribution companies examined were Trakya EDA\u015e<\/strong> (Edirne, K\u0131rklareli, Tekirda\u011f), Bo\u011fazi\u00e7i EDA\u015e<\/strong> (Istanbul European Side), Gediz EDA\u015e<\/strong> (Izmir, Manisa), and Dicle EDA\u015e<\/strong> (\u015eanl\u0131urfa, Batman, Diyarbak\u0131r, Siirt, Mardin, \u015e\u0131rnak).<\/p>\n

        [7] Turkish Competition Board, Decision No. 10-56\/1069-398, dated 26.08.2010.<\/p>\n

         <\/p>\n","protected":false},"excerpt":{"rendered":"

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