How did BMW, Daimler, Ford and VW “jump the gun” in Turkey?
December 2020 – The Turkish Competition Board has recently given its approval to the unnotified transaction concerning the establishment of a joint venture (i.e., IONITY Holding GmbH & Co.KG (“IONITY”)) by Bayerische Motoren Werke Aktiengesellschaft (“BMW”), Daimler AG (“Daimler”), Ford Motor Company (”Ford”), and Dr. Ing. h.c. F. Porsche Aktiengesellschaft (“Porsche”), stressing that the transaction does not significantly impede effective competition under Article 7 of Law No. 4054 on the Protection of Competition (“Law No. 4054”). However, the Board has imposed administrative monetary fines on the parent undertakings of IONITY for closing the transaction before obtaining the Board’s approval.
IONITY was established in 2017 as a joint venture controlled jointly by BMW, Daimler, Ford, and Porsche to operate within the borders of European Economic Area to establish, operate and provide maintenance of high-power charging infrastructure for electric vehicles in order to facilitate long-distance travel. The transaction was notified to and approved by the European Commission. The Board became aware of the joint venture transaction concerning the establishment of IONITY through a new merger control notification filed on behalf of Hyundai and KIA, in which the companies request that some of IONITY shares jointly controlled by BMW, Daimler, Ford and Porsche, be taken over by Hyundai Motor Group (“HMG”) through Hyundai and KIA.
With respect to the effect doctrine of Turkish competition law —which concerns the territorial applicability of Turkish legislation to conduct that affects Turkish markets— the initial shareholders of IONITY (i.e., BMW, Daimler, Ford, and Porsche) stated that the joint venture will only be active within the European Economic Area, and thus will not have any activities that might affect the Turkish market. Correspondingly, as per the wording of Article 2 of Law No. 4054, which sets out the scope of the law, the parties were of the view that the transaction was not subject to the mandatory merger control filing before the Turkish Competition Authority. However, the Board’s case law shows that the legal consequences of a violation of the suspension requirement in Turkish competition law are also applicable to foreign-to-foreign transactions, and thus the fact that the joint venture does not operate in Turkey, or have any local nexus in Turkey, does not alter the Board’s conclusion regarding the violation of the suspension requirement.
Applicable turnover thresholds under Turkish merger control regime
Under the Turkish merger control regime, a transaction is notifiable so long as one of the applicable alternative turnover thresholds set out in Article 7 of Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Board (“Communiqué No. 2010/4”) is exceeded.
In this respect, if:
(a) the aggregate Turkish turnover figure of the transaction parties exceeds TL 100 million (approx. EUR 15.7 million and USD 17.6 million) and the Turkish turnover of at least two of the transaction parties each exceeds TL 30 million (approx. EUR 4.7 million and USD 5.2 million), or
(b) (i) the Turkish turnover figure of the transferred assets or businesses in acquisitions exceeds TL 30 million and the worldwide turnover of at least one of the other parties to the transaction exceeds TL 500 million (approx. EUR 78.7 million and USD 88.1 million), or (ii) the Turkish turnover figure of any of the parties in mergers exceeds TL 30 million and the worldwide turnover of at least one of the other parties to the transaction exceeds TL 500 million, the transaction would be subject to the approval of the Turkish Competition Board to gain legal validity.
Undertakings concerned and parties to the transaction
Pursuant to paragraph 12 of the Guidelines on Mergers and Acquisitions Transactions and the Concept of Control, controlling shareholders in Turkish legislation are deemed as the undertakings concerned in the event a new joint venture is created. In this respect; BMW, Daimler, Ford, and Porsche are the undertakings concerned within the scope of the transaction in which the parties failed to notify. Furthermore, as per Article 5(3) of Communiqué No. 2010/4, the creation of a full-function joint venture is an acquisition transaction. In such transactions, each transaction party is considered to be an acquirer. To that end, BMW, Daimler, Ford, and Volkswagen Aktiengesellschaft (“VW”), which ultimately controls Porsche, are considered as the transaction parties within the scope of the acquisition of joint control of IONITY in 2017.
Under Turkish competition law there is an explicit suspension requirement that requires the parties to mergers and acquisitions (including the establishment of joint ventures) to suspend implementation of the transaction until they receive the approval of the Turkish Competition Board. The Turkish merger control regime classifies the implementation of a notifiable transaction (i.e., closing) before obtaining the approval of the Board as “gun-jumping” as regulated under Article 11 of Law No. 4054. Article 16 of the same law states that if the parties to a notifiable transaction violate the suspension requirement, a turnover-based monetary fine based on the annual Turkish turnover generated in the financial year preceding the date of the fining decision at a rate of 0.1% will be imposed on each of the transaction parties. In light of the foregoing, the Board recently imposed administrative monetary fines on BMW, Daimler, Ford and VW for failing to comply with the suspension requirement.
Under Turkish merger control regime, a transaction is subject to the approval of the Board, if the parties to the transaction generate Turkish turnover and such turnover exceeds one of the alternative thresholds provided under Article 7 of Communiqué No. 2010/4, regardless of whether the contemplated transaction would have any effects on the Turkish market. Considering that the establishment of IONITY constitutes an acquisition transaction, in accordance with Article 16(1)(b) of Law No. 4054 the Board imposed administrative monetary fines on the acquirers of joint control. In this respect BMW, Daimler, Ford, and VW, as the owner of Porsche (i.e., the parent companies of IONITY), were respectively imposed administrative fines in the amount of 0.1% of their annual Turkish turnover generated in their 2019 fiscal years for violating the suspension requirement.
 Under Article 7 of Law No. 4054, a notifiable transaction that is not announced to and approved by the Board is legally invalid.
 European Commission’s decision dated 27.04.2017 and numbered M.8376.
 The Board’s DSG European Investment decision, dated 05.09.2013 and numbered 13-50/717-304; Ajans Press/Inter Press decision, dated 21.10.2010 and numbered 10-66/1402-523; Fairless-Simsmetal decision, dated 16.09.2009 and numbered 09-42/1057-269; Kansai/Akzo Nobel decision, dated 05.08.2009 and numbered 09-34/791-194.
 The amounts in EUR are converted at the exchange rate EUR 1 = TL 6.35, whereas the amounts in USD are converted at the exchange rate USD 1 = TL 5.67 in accordance with the applicable Turkish Central Bank average buying rate for the time period 1 January 2019-31 December 2019.