Category: Turkiye

Paksoy, working with Arnold & Porter, has advised the Republic of Turkey on its Rule 144A / RegulationS USD 3 billion issuance of lease certificates (Sukuk). The Ciftci Attorney Partnership and Clifford Chance have advised joint lead managers Citibank, the Dubai Islamic Bank, HSBC, and Kuwait Finance House.

The lease certificates are due in 2027 at 7.25%. According to Arnold & Porter, the lease certificates were “structured to comply with Shariah law.”

“This is the Republic of Turkey’s largest single Sukuk issuance to date, which attracted a total demand over three times the actual issue size,” Clifford Chance informed. “Over 200 investors attended the Sukuk issuance, with 66% operating in the Middle East, 12% in the US, 12% in the UK, 5% in other European countries, 4% in Turkey, and 1% in Asia.”

The Paksoy team was led by Partner Sera Somay and included Senior Associate Merve Kurdak and Associate Muhammed Tosun.

The Ciftci Attorney Partnership team was led by Partner Sait Eryilmaz and included Associates Ali Can Altiparmak and Zana Oztarhan.

The Clifford Chance team was led by Dubai-based Partner Qudeer Latif and included Counsel Ahmed Choudhry and Associate Salma Mowlid and London-based Partner John Connolly and Associates Rachel Sumption and Sydney Sawyier.

The Arnold & Porter team was led by Partners Christopher Peterson and Jeremy Willcocks and included Associates Brady Randall and Kardia Leung.

Turunc has advised Bogazici Ventures on its investment in hyper-casual game developer NDG Studio.

NDG Studio is a game development studio based in Turkey. Bogazici Ventures invests in start-up and seed-stage technology companies.

Turunc’s team included Managing Partner Kerem Turunc, Attorneys Gozde Kiran, Beste Ergul, and Selay Turgut, and Associate Canberk Taze.

Turkish Commercial Code No. 6102 (“TCC”) sets forth that in accordance with the articles of association or by changing the articles of association, general assembly of shareholders of a joint stock company may decide to issue dividend right certificates in favor of the owners, creditors or those related to the company for a similar reason. In this article, we will focus on the purpose and types of dividend right certificates within the framework of Article 348, 502 and 503 of the TCC.

TYPES OF DIVIDEND RIGHT CERTIFICATES

There are 3 (three) types of dividend right certificates as founder’s dividend right certificates, ordinary dividend right certificates and participation dividend right certificates. As per Article 502 of the TCC, dividend right certificates, including those issued for the founders, may be issued in form of promissory or bearer.

Founder’s dividend right certificates are the certificates issued to be given to the founders in return for the effort they spent while establishing the company. These certificates can only be issued if it is written in the articles of association of the company. In other words, the founder’s dividend right certificates cannot be issued after the establishment of the company and/or by amending the company’s articles of association.

RIGHTS GRANTED TO HOLDERS OF THE CERTIFICATES

Shareholders of joint stock companies may decide to issue dividend right certificates, provided that it is written in their articles of association.

According to Article 503 of the TCC, dividend right certificates in joint stock companies are securities that do not represent the share but grant certain rights to its owner. In other words, dividend right certificates do not give their holders any shareholding rights, but as per the mentioned article, give the rights to participate in the net profit, to receive the amount remaining as a result of the liquidation, or the right to purchase the newly issued shares.

Unlike share certificates, dividend right certificate does not give its owner the right to vote in the general assembly of the company. In addition, such owners do not have the right to object to the general assembly and the decisions of the general assembly, and they cannot benefit from the shareholding rights. Such owners also cannot intervene in the management of the company, and they do not have any right to demand unless the company makes a profit or a liquidation surplus arises or new shares are issued by increasing the capital.

Pursuant to Article 348 of the TCC, the payments to be made to the owners of dividend right certificates can be made as a maximum of one tenth of the remaining from distributable profit after the reserve fund stipulated in the law and 5% (five percent) dividend for the shareholders has been segregated. In addition, again according to the mentioned article, if there is a profit that can be distributed, even if the company has decided not to distribute the profit, the founder’s dividend rights certificate owners receive the dividends stipulated in the articles of association.

Joint stock company shareholders cannot cancel or change usufruct rights attached to the certificates by changing the articles of association without obtaining the approval of the beneficial owners. Dividend right certificates expire with the dissolution of the company. There are certain exceptions to this rule. For instance as per Article 348/2 of the TCC, joint stock companies may cancel the dividend right certificates that they have issued, without paying any price before offering their shares to the public; otherwise, the dividend right certificates are automatically deemed invalid.

CONCLUSION

Dividend right certificates in joint stock companies are regulated separately from the share certificates and unlike the share certificates, as per the TCC, these certificates do not give their holders any shareholding rights such as the right to attend the general assembly or the right to vote, but as per the TCC, give rights to participate in the net profit, to receive the amount remaining as a result of the liquidation, or the right to purchase the newly issued shares.

By Gonenc Gurkaynak, Partner, Nazli Nil Yukaruc, Partner, and Nisa Aybuke Eroglu, Associate, ELIG Gürkaynak Attorneys-at-Law

Akol Law has advised DAP Real Estate Development and Garanti BBVA Securities on DAP Yapi’s initial public offering on the Borsa Istanbul Market.

Founded in 1981, DAP Real Estate Development is an Istanbul-headquartered company, specializing in the construction of residences, offices, trade and business centers, holiday resorts, hotels, schools, and private hospitals.

Garanti BBVA subsidiary Garanti BBVA Securities is an Istanbul-headquartered brokerage house specializing in corporate finance, research, capital markets brokerage activities, and private equity investments.

The Akol Law team included Partners Omer Gokhan Ozmen and Gunes Yalcin, Counsel Handan Bacioglu, Senior Associate Murat Ayyildiz, Associate Buse Tuncel, and Legal Intern Elbruz Dincer.

Succession is essentially the passing of the legator’s personal assets during their lifetime to the estate, subject to joint ownership upon the legator’s death, and then to individual heirs. Prior to the death of the legator, the legator preserves all of their property rights, while the future heirs do not attain heirdom, let alone any rights on legator’s property. The titles of legator and heir are gained only upon the death of a person, and from then on, the heirs are entitled to the inheritance. For this reason, the most contentious aspects of inheritance law are succession, which is the transfer of the inheritance and possible interventions to the heirs’ inheritance shares.

Succession and interventions to the inheritance share via testamentary dispositions and legal remedies against them will be examined in this article.

I. What Happens During and Following the Opening of the Will? Who is Notified of the Will?

Following the death of the legator, the institution keeping the will, or the person who comes across the will among the legator’s possessions, must immediately deliver it to the civil magistrate. The magistrate is then required to open the will within one month of receiving it. To open the will, the magistrate determines a date, and this date is notified to the heirs and other interested parties whose addresses are known. On the designated day, the will is opened in the presence of the heirs and interested parties. Afterwards, the magistrate keeps the open will in a secure location.

Since the opening and reading of the will is not an uncontested proceeding, it is essential to ensure the complete formation of the court, by including every relevant person as a party to the proceedings. This requirement can prolong the opening the will, especially when there are a large or indeterminable number of heirs.

In addition, the magistrate serves a certified copy of the relevant parts of the will to the beneficiaries. Afterwards, beneficiaries have one month from the date of notification to raise any objections. Provided that no one objects within this time frame, the person in whose favor the testamentary disposition is made receives an official document stating that they are an heir or a beneficiary of the will. Opening of the will is completed after the determination of all beneficiaries.

II. Who is the Executor of the Will?

The “executor of the will” is a person appointed by the legator with a testamentary disposition or by the court at the request of the heirs to exercise the will in accordance with the legator’s wishes. The executor’s responsibilities include preparing the heir list, collecting the estate’s receivables, paying the debts, representing the estate in lawsuits and proceedings, and managing the estate.

III. When and How Does the Inheritance Share Pass to The Heirs?

With the death of the legator, the entirety of the estate including all of the assets and liabilities as a whole passes to the heirs. The partnership of the heirs on the estate is in the form of joint ownership.

IV. How Does Succession Work with Regard to Company Shares?

The answer to this question varies according to the type of company. In a joint stock corporation [in Turkish: anonim şirket], the property rights arising from share ownership are immediately transferred to the heir, while the right to participate in the general assembly and voting rights can only be used with corporate approval. While the corporation cannot rely on share transfer restrictions against heirs, it may nevertheless avoid approving the transfer by requesting to purchase the shares transferred through succession for their actual value.

In the event of the death of a shareholder in a limited liability partnership [in Turkish: limited şirket], the transfer of the legator’s shares does not require a corporate approval. Upon death, all rights and debts arising from the share pass to the heirs upon the service of a certificate of inheritance, will or an inheritance contract. However, the company may instead opt to purchase the shares for their actual value.

V. How Are Foreign Assets Transferred?

Matters related to inheritance are subject to the national law of the deceased. Therefore, the inheritance of Turkish citizens is subject to the Turkish Civil Code. However, in terms of foreign assets, the formal conditions and regulations that may exist in the country where the assets/goods are located should be considered in the transfer of property and/or other real rights. This situation is not an exception to the principle of universal succession and does not prevent the heirs from acquiring the movable or immovable property in question upon the death of the legator.

VI. Can Someone Become a Member of the Board of Trustees of a Foundation Through Succession?

No, while the estate is made up of the entirety of the legator’s assets, only transferable private law relations are subject to succession. The rights strictly bound to the legator as a person are terminated with death. Since membership in the board of trustees of the foundation is also a right that is strictly bound to the person, it is not possible to inherit or transfer it with a testamentary disposition. As a result, if it is desired that this title be assumed by a person appointed by the legator upon their death, this is only possible with an alteration to the articles of foundation during the legator’s health.

VII. Are Heirs Liable for the Legator’s Tax Obligations?

Debts, as well as all rights and receivables in the legator’s inheritance, pass to the heirs in accordance with the principle of universal succession. In principle, the heirs are personally liable for these obligations. That is to say, heirs are personally liable for the entirety of the legator’s obligations regardless of their inheritance shares. Only after the fulfilment of an obligation can the heir request recourse from other heirs in accordance with their inheritance shares.

Nevertheless, there is an exception to this rule with regard to the legator’s tax obligations. In the event of death, tax obligations of the taxpayer will pass to their legal and appointed heirs who have not rejected the inheritance, in accordance with their inheritance shares. Therefore, unlike other obligations, heirs are only liable for tax obligations in proportion to their inheritance shares.

VIII. Do the Heirs Have the Right to Object to the Will and Inheritance Agreements [Testamentary Dispositions]?

The heirs may request the annulment of the disposition by filing an action for annulment against all or a part of the testamentary disposition due to reasons such as the incapacity or disability of the legator at the time of the disposition, the illegality and morality of the disposition, or its formal deficiencies.

IX. What Can an Heir Do If Their Statutory Entitlement is Violated by the Will?

An heir whose statutory entitlement is violated by the will [or inheritance contract] may request that the testamentary disposition be annulled or file a lawsuit for reduction. In practice, both of these claims are often made in a single case – for example, “I request the annulment of the will, and if my annulment request is denied, this time I request that the part of the will that infringes on my reserved share be reduced”.

X. What is the Action for Reduction? What Does Reduction Mean in Inheritance Law?

An action for reduction is a type of inheritance law case filed to prevent the violation of statutory entitlement and to ensure legality of the legator’s testamentary dispositions.

If the request for reduction is granted, the testamentary dispositions of the legator that violate the statutory entitlement may be reduced, and even some of their transactions inter vivos may be subject to reduction. If the statutory entitlement cannot be provided despite the testamentary disposition being reduced, transactions inter vivos in favor of heirs and third parties are reduced. If statutory entitlement still cannot be provided, testamentary dispositions and/or transactions inter vivos made in favor of public legal organizations, publicly beneficial associations, and foundations are reduced.

XI. What are the Most Common Reasons of Will Annulment?

In practice, the reason for the annulment most frequently asserted by heirs -especially by those whose statutory entitlement has been violated-, is that the legator was mentally incapable at the time the testamentary disposition was made since mental competence is the primary condition for a valid will.

XII. Can Heirs Object to the Legator’s Transactions Inter Vivos?

As the titles of heir and legator can only be assumed upon death or in cases similar to death determined in the law, while the legator is still alive, the heirs have no right to the legator’s property unless they have rights arising from other private law relationships.

As a result, future heirs have no power over the legator’s transactions inter vivos, as long as they are established in conformity with applicable law and contracts. If the heirs can prove that the transactions were conducted in order to devalue the estate, they can file an inheritor collusion case and request the annulment of the transaction.

XIII. Does the Surviving Spouse of the Legator Have a Right Arising from the Matrimonial Regime? What is the Relationship Between Inheritance and Matrimonial Regimes?

Since 2002, the matrimonial regime between spouses is the “participation in acquired property” regime [unless otherwise agreed]. Upon the legator’s death, the surviving spouse has the right to request their share from the liquidation of the regime from the estate. That is, the surviving spouse receives half of the difference in value between the assets they, and the legator, acquired during the marriage from the estate of the deceased spouse.

The remainder of the estate is then distributed among the heirs, including the surviving spouse, once the matrimonial regime is liquidated. In summary, if the marriage ends due to death, the property regime is liquidated first, followed by the distribution of the remaining estate. The right of inheritance and the spouse’s right arising from the matrimonial regime continue to exist independent from each other.

By Tarik Gueryuz, Partner, and Aziz Can Cengiz, Junior Attorney, Guleryuz & Partners

On January 19, 2022, Turkish Competition Authority (“Authority”) has published a highly anticipated decision of the Competition Board (“Board”) regarding the investigation against retail grocery chains and suppliers of such chains, active in the fields of retail food and cleaning products (“Investigation”). The Investigation involved leading global suppliers of food and cleaning products such as Henkel, Unilever, Nestle, Johnson & Johnson, Procter & Gamble and Nivea as well as almost all retailers active in fast moving consumer goods (“FMCG”) business in Turkey including but not limited to the major players such as BİM Birleşik Mağazalar A.Ş. (“BİM”), CarrefourSA Carrefour Sabancı Ticaret Merkezi A.Ş. (“Carrefour”), Migros Ticaret A.Ş. (“Migros”) and Yeni Mağazacılık A.Ş. (“A101”).

The Decision is of particular significance due to several reasons. First, the market coverage of the Investigation that the Decision is rendered upon is extensive, since almost all retail grocery chains as well as all major suppliers of FMCG food and cleaning products in Turkey were scrutinized. Second, the Decision deals with a rather rare conduct, namely, a hub & spoke cartel, which has been discussed in a limited number of Board decisions until now. Lastly, given that the Investigation has been initiated based on Authority’s observations following the COVID-19 pandemic that there has been supply constraints due to the pandemic as well as multiple complaints, the Decision signifies the approach that the Authority would adopt in times of supply and demand shocks affecting the domestic economy as a whole.

Interim Measure Decision

On the date when the Board has initiated the Investigation (i.e. May 7, 2020), the Board also adopted a decision to take an interim measure against the parties to the Investigation (“Interim Measure Decision”) as per article 9(4) of the Law No. 4054 on the Protection of Competition (“Law No. 4054”). According to the Interim Measure Decision, the Authority requested weekly reports on the price increases of food and cleaning products made by the parties to the investigation. Parties to the Investigation have submitted weekly data on price increases for approximately five months, up to the date that the Board rendered a decision to terminate the interim measure on October 22, 2020.

It is noteworthy to mention that the Board resorts to interim measures once in a blue moon, given that there have been a few instances that the Board adopted interim measure decisions up until now. Thus, one can draw the conclusion that the underlying reason for the Board’s preference to utilize interim measure mechanism is the legitimate reflex to take a pre-emptive stance against a potential collusion between FMCG retailers and suppliers that could feasibly affect a great portion of consumers in the market, given the turbulent supply and demand condition in the market due to COVID-19 pandemic.

Assessment and findings of the Board

The Decision basically deals with three distinct allegations, which are closely related in the sense that two of three conducts subject to such allegations relates to price fixing. That being said, in terms of such price fixing allegations, the Board scrutinizes whether there has been collusion in terms of pricing decisions, separately for retail level and supplier level. In the Decision the Board first elaborates on whether there has been collusion on retail pricing decisions of competing retail grocery chains, then deals with the allegation that Savola, a producer of edible oils has interfered with the retail prices of its customers and lastly proceeds with assessing whether there has been collusion in supplier level.

(a) Assessment regarding Collusion at Retail Level

The Board’s assessment regarding collusion at retail level is based on the evidences indicating that there has been direct and indirect communications between A101, BİM, Carrefour, Migros and Şok to coordinate the dates of price changes as well as the level of price increases. Upon the evaluation of the evidences falling within that scope, the Board indicated that A101, BİM, Carrefour, Migros and Şok maintained coordination in terms of pricing decisions via direct communications or by means of common suppliers. Additionally, the Board found that these retailers have exchanged competitively sensitive information on future prices, price change dates, seasonal activities and special offers.

Moreover, the Board also indicated that these retailers employed a mechanism to interfere with any undertaking that undercuts prices or maintain the same level of price despite the majority of retailers raising prices, with a view to ensure that such maverick retailers conform with the pricing decisions of the collusion members. Within that scope, the Board also found that A101, BİM, Carrefour, Migros and Şok have pursued aggressive pricing policies against non-conforming members of the collusion or charged price difference invoices to the common supplier in order to penalize such supplier’s failure to interfere with the non-conforming retailer’s prices.

In terms of the evidences that allegedly showing indirect contacts between the retailers, the Board indicated that it have found correspondences belonging to the period of May 2018 and February 2021 between Savola on one hand and A101, BİM, Carrefour, Migros and Şok on the other, supposedly indicating that pricing decisions and dates have been coordinated between A101, BİM, Carrefour, Migros and Şok through Savola. Thus, the Board noted that although there have been direct communications between A101, BİM, Carrefour, Migros and Şok to fix pricing decisions, the reason for it to deem Savola as a part of the alleged collusion was that the alleged conduct showed the characteristics of a hub & spoke cartel based on such correspondences.

As for the direct contacts, the Board found numerous evidences that mainly show that the relevant retailers have been in contact and coordinated their pricing behaviours in accordance with such contacts. For instance, the Board confirmed that a simultaneous price increase regarding a certain brand of potato chip from TL 4,25 to TL 4,75 by A101, Carrefour, Migros and Şok, which was followed by BİM with one day delay occurred as a result of direct communication between these undertakings. Within that scope, the Board reasoned that the following correspondences regarding the prices of such potato chip evidenced the collusion: a note that reads as “Competitor prices will become effective on Monday” included in a document annexed to an internal correspondence between BİM employees and internal correspondences of Şok made on the same date and two days before that respectively note the following: “We will change prices with Competitor A simultaneously on Monday” and “The market has been organised. Could you please determine “only the sales prices” in the annex effective as of tomorrow?”.

Against the foregoing, the Board concluded that A101, BİM, Carrefour, Migros and Şok violated article 4 of Law No. 4054 by way of involving in agreements/concerted practices showing characteristics of a hub & spoke cartel. Additionally, the Board noted that efficiency gains of such conduct could not outweigh its anti-competitive effects, thus it could not benefit from an individual exemption under article 5 of Law No. 4054.

As for Savola’s alleged involvement in the cartel, the Board argued that the respective retailers have been able to coordinate price change dates owing to the information that they have received on future pricing behaviours and plans of each other through Savola. Additionally, the Board indicated that the retailers have complained to and steered Savola to interfere, if other retailers involved in the cartel do not comply with the common pricing decisions.

Against the foregoing, the Board found that Savola have partaken in the collusion between A101, BİM, Carrefour, Migros and Şok, by way of facilitating and maintaining coordination/collusion between them as a hub. Thus, the Board determined that Savola is equally liable for the collusion, which the Board characterized as a cartel and violated the article 4 of Law No. 4054.

It is important to note that the Decision does not refer to the criteria that it adopted in two of the previous decisions that it dealt with hub & spoke type arrangements. In LASID Decision, the Board utilized the criteria that originally put forth in the Toys and Kits judgement of the Court of Appeal, by way of referring to Competition Appeal Tribunal’s Tesco Decision. The relevant criteria requires the following conditions to be met for establishing a hub & spoke collusion, having as its object the restriction of competition: (i) retailer A discloses to supplier B its future pricing intentions, with an intention that B will make use of that information to influence market conditions by passing that information to other retailers; (ii) B does, in fact, pass that information to retailer C, who knows the circumstances in which the information was disclosed by A to B; and (iii) C does, in fact, use the information in determining its own future pricing intentions. The Board also applied such criteria in its Consumer Electronics Decision. The necessity to apply such criteria to establish the existence of a hub & spoke cartel was also raised by Savola in its defences, however Savola’s defence was rejected by the Board without a detailed analysis in terms of such criteria, by way of referring to the findings/correspondences between Savola and the retailers and the internal correspondences of the retailers.

(b) Assessment regarding Resale Price Maintenance

The Decision also indicates that Savola has interfered to resale prices of its retail level customers. In that context, although Savola’s defences underscored that Savola has only recommended resale prices to its customers, the Board argued that Savola directly interfered with the resale prices, while, in certain instances, retailers have complied with Savola’s interferences. Additionally, the Board noted that Savola has monitored the resale prices of the retailers, interfered to the prices that are below the desired level and even employed incentive mechanisms such as price discounts to maintain retail price levels at the desired level.

It is also noteworthy that, against Savola’s defences that an effects-based analysis must be conducted in terms of establishing resale price maintenance, the Board emphasized that resale price maintenance is considered to restrict competition by object, by way of citing its recent decisional practice on the subject matter. Additionally, the Board underscored that categorization of resale price maintenance as an explicit and hard-core restriction under the secondary legislation regarding the commitment mechanism and de minimis principle is a testament to by object character of resale price maintenance.

Furthermore, the Decision indicates that resale price maintenance would not meet the criteria of contributing to new developments or improvements or economic or technical improvement in the production/distribution of goods and services, while allowing consumers a fair share of the resulting benefit, thus such a conduct is unable to benefit from individual exemption under article 5 of Law No. 4054. Accordingly, the Board concluded that Savola has violated article 4 of Law No. 4054 by way of resale price maintenance from the beginning of 2017 to February, 2021.

 (c) Assessment regarding Collusion at Supplier Level

Further to its assessment regarding resale price maintenance, the Board proceeded with its assessment on the findings indicating that there have been exchanges of competitively sensitive information between the investigation parties operating on supply level. In that context, the Board initially assessed that the information exchanged between the suppliers were competitively sensitive, given that such information cover sales prices and quantity. That being said, the Board remarked that exchanges of such information could not be deemed as a by object violation of article 4 of Law No. 4054; due to the fact that information exchanged did not reveal future position of the relevant undertakings (i.e. future prices and/or quantities were not included in such information).

Thus, the Board proceeded with an effects based analysis and scrutinized whether the characteristics of information exchanged are adequate to create anti-competitive effect by way of increasing the transparency of the market. Accordingly, the Board first dealt with the findings related with the information exchanges regarding cleaning and hygiene products (the findings are related to the following parties: P&G Turkey, Henkel Turkey, Eczacıbaşı, Unilever Turkey, Colgate-Palmolive Turkey and Evyap) and afterwards the information exchange between flour suppliers (the finding are related to the following parties: Söke Un and Katmer Un).

In assessing the anti-competitive effects of information exchanges between the suppliers of both categories of products the Board followed the guidance set out in the Guidelines on Horizontal Cooperation Agreements (“Horizontal Guidelines”) that reads as following: “When assessing the restrictive effects of information exchange on competition, the characteristics of the relevant market and the nature of the information exchange is taken into consideration”.

In terms of its assessment regarding cleaning and hygiene product category, the Board first examined whether the information exchanged could be obtained from publicly available sources. In that context, the Board acknowledged that the information on shelf prices could be obtained by undertakings through their field personnel, but noted that information on sales quantity, turnover and market shares exchanged between the suppliers could not be deemed as publicly available information.

As regards the market coverage, the Board remarked that based on the main categories, the undertakings involved in such conduct covered at least 60% of the market in terms of personal care products, and at least 70% in terms of cleaning products. Accordingly, the Board determined that such suppliers covered a significant part of the market and that was sufficient to facilitate a common understanding prevailing in the market as well as setting a mechanism that would target non-compliant new-entrants.

On the other hand, given that the information has been exchanged mainly through local retail chains, the Board also examined that the coverage regarding the downstream market (i.e. retail level). To that end, the Board delved into the market shares of Çağrı, Yunus and Mopaş Marketcilik Gıda Sanayi Ve Ticaret Anonim Şirketi (“Mopaş”), which served as a means to exchange competitively sensitive information between the suppliers of the FMCG retailing market and concluded that, even if the information exchanges lead to collusion in the market, the effect would be negligible considering the level of market coverage.

Moreover, the Board examined whether the information exchanged was individualized or aggregated. In that context, the Board found that the nature of information enabled the suppliers to match the relevant information with each supplier, each product and even with the package size of the product. Accordingly, the Board noted that such exchanges of individualized information exceed beyond what is necessary for the undertakings to benchmark themselves against their competitors, thereby improving their efficiency. Additionally, although the findings indicate that the suppliers occasionally could not have immediate access to the information that they required, the Board noted that the frequency of the information exchanges between the suppliers was high and such level of contact might facilitate establishing, maintaining and monitoring a common understanding in the market as well as detecting the diversions from such an understanding.

Against the foregoing, the Board concluded that the information exchanges between suppliers of cleaning and hygiene products could not be deemed as having the effect of restriction competition on the grounds that such information exchanges were not continuous (i.e. the suppliers occasionally could not have immediate access to the information that they required) and especially covered a negligible part of the market. That being said, the Board underscored that such an information exchange could entail competition law related concerns if the market coverage grows by the involvement of other suppliers and retailers. Accordingly the Board decided to issue for and send an opinion letter to all retailers and suppliers involved in information exchanges that were examined under the Investigation, to inform such undertakings to act in compliance with the Board’s remarks in the Decision as well as the guidance set out in the Horizontal Guidelines in terms of exchange of competitively sensitive information regarding competitors with their vertical and horizontal counterparts.  

Lastly, in terms of the allegation regarding flour suppliers, the Board determined that Söke Un obtained two price lists of Katmer Un, based on an internal communication between Söke Un employees, where one of Söke Un employees shares Katmer Un’s price lists and implies that she/he communicated with a Katmer Un employee. That being said, there is no clear determination in the Decision that the price lists were obtained directly from Katmer Un or not.

Additionally, the Board found that one of the price lists has been put into effect as of the date of Söke Un’s internal communication, whereas the other price list was not effective at the date of communication; however it was circulated to the market (i.e. customers of Katmer Un) prior to the date of communication. Thus, the Board remarked that such an exchange of information could not be deemed as a violation by object, given that such exchange does not involve transfer of future information regarding prices and/or quantity before the time customers have no access to such information.

Against the foregoing, the Board concluded that a one-off information exchange regarding historic prices as well as up-to-date effective prices that have been shared with the market was unlikely to restrict competition in the market, thus Söke Un and Katmer Un did not violate article 4 of Law No. 4054. That being said, the Board decided to issue for and send an opinion letter to Söke Un and Katmer Un, to inform such undertakings to act in compliance with the Board’s remarks in the Decision as well as the guidance set out in the Horizontal Guidelines.

Conclusion

As a result of the Investigation, an administrative monetary fine totalling to 2.671.434.094,38 TL (approximately 173,8 million EUR) was imposed to A101, BİM, Carrefour, Migros, Şok and Savola for involving in a cartel and Savola was separately imposed another administrative monetary fine of 11.105.499,32 TL (approximately 722,5 thousand EUR) for its resale price maintenance practices. That being said, the Board found no evidence that would establish that article 4 of Law No. 4054 has been violated by Çağrı, Metro, Çağdaş, Yunus, Gratis, Watsons, Karizma Beşler, Henkel Turkey, Banvit, Söke Un, Katmer Un, Evyap, Colgate-Palmolive Turkey, Beypi, Küçükbay, J&J, Unilever Turkey, Nivea Turkey, Dentavit, Eczacibaşı, Dalan, Nestle Turkey, P&G Turkey and Food Retailers’ Association.

The Decision of the Board will serve as a game-changer in the retail and wholesale FMCG sector given that the remarks of the Board clarify the rules of the game in terms of information exchange at horizontal level as well as vertical level. Although, a relatively few undertakings faced administrative monetary fines as a result of the Investigation, the opinion letters of the Board issued as per the Decision will serve as a means to guide the undertakings active in retail and wholesale FMCG sector in terms of clarifying the boundaries of a legitimate information exchange. Furthermore, the opinion letters of the Board signal vigorous enforcement activity by the Authority, in case of non-compliance to the Board’s remarks in the Decision as well as the ones in the Horizontal Guidelines.

By Gonenc Gurkaynak, Partner, and Fırat Egrilmez, Associate, ELIG Gürkaynak Attorneys-at-Law

Former Cakmak Partner Kemal Aksel has joined the International Finance Corporation – the private sector finance arm of the World Bank.

Aksel has been with Cakmak since 2020, when he joined the firm from Clifford Chance (as reported by CEE Legal Matters on September 3, 2020). He worked as a Counsel with Clifford Chance between 2014 and 2020. Before that, he was a Managing Associate with Kolcuoglu Demirkan Kocakli between 2012 and 2014. Earlier still, he worked Herguner Bilgen Ozeke Attorney Partnership.

“After 17 years of leading countless landmark transactions and working at top tier law firms in Turkey and UK, I am leaving private practice at the top of my game,” announced Aksel. “As of March, I have joined the legal team of IFC (CLED – Europe & MCT) to work on groundbreaking transactions in emerging markets with a development focus.”

Originally reported by CEE In-House Matters.

In Turkey, 2021 continued to be dominated by the COVID-19 pandemic and the various legal difficulties and ambiguities that it brought. This raised several questions on how to apply the Turkish data protection law and related legislation, in particular about how to properly process data on health, vaccination status, and PCR tests.

While the Turkish Data Protection Board (Board) passed various decisions in 2021, they generally did not result in the final resolution of the above issues. Conversely, while the Turkish government did publish decrees and letters impacting this area, it remains unclear how the provisions of these decrees and letters should be interpreted together with the provisions of the law.

The following is a summary of the main developments in the field of data protection in Turkey, in 2021.

Decisions of the Board

Unfortunately, during 2021 the Board did not publish any decisions or guidance on how personal data related to vaccinations and PCR tests should be kept, with the exception of one decision in which the Board found that various systems implemented by public authorities for the recording of personal data relating to vaccinations, PCR tests, and infection status were outside the scope of the law. Yet this decision, unfortunately, does not clarify if and how private entities may collect and process the same set of data.

The Board did, however, decide to extend the deadline for VERBIS registrations – the public data controllers’ registry in Turkey – until December 31, 2021. Registration with VERBIS is mandatory for various Turkish and foreign data controllers, and the extension of the registration obligation prevents entities that have not complied with this obligation, also due to the difficulties brought about by the pandemic, from being subject to sanctions.

Decrees and Governmental Orders

There is currently a decree and an official letter in force, published by governmental authorities in Turkey, on the data protection implications related to COVID-19.

The decree in question was issued by the Ministry of Interior and requires all individuals to show their HES Code (HES Kodu), created using an app issued by the Ministry of Health, when entering public areas such as shopping malls, cinemas, and theaters. The HES code contains information on vaccination status, PCR tests, and whether the person has suffered from a COVID-19 infection in the last 14 days. The said letter was sent to all governors by the Ministry of Labor and Social Security. The letter succinctly states that, “beginning September 6, employers are authorized to require unvaccinated employees to submit to weekly PCR testing and to maintain records of vaccinated employees and those who submit weekly PCR test results.”

As mentioned, the processing of personal data by private legal entities continues to fall under the scope of the law, which provides strict rules for the processing of health-related data. Thus, the obligations imposed on employers by the above-mentioned letter could be considered as contrary to the law. Therefore, it is necessary to clarify, on the basis of precedents and decisions of administrative authorities, how these potentially contradictory issues are interpreted in Turkish legal practice.

Further Work

To conclude, the law, which is based on EC Directive 95/46, was a major step forward for the implementation of, and compliance with, data protection in Turkey. However, there is still a considerable need for development, especially as many questions remain largely unanswered due to the existing regulations and thus cause difficulties in the application and implementation of the law.

To this end, and in view of the problems mentioned, we expect the Board to clarify which persons (e.g., company doctors) are authorized to process health data on behalf of the employer, as mentioned in the above letter.

In addition, the Board should also clarify the exact conditions for the cross-border effects of the Law. This is important to determine the data controllers abroad who, as mentioned above, are required to register with VERBIS.

Finally, we expect the Board to publish a list of safe countries to which personal data can be transferred without explicit consent. This is an important issue, as Turkey hosts many subsidiaries of global companies. Accordingly, the publication of such a list should ease the cumbersome cross-border data transfer procedures that currently apply to these companies under the law.

By Sinan Abra, Head of Data Protection, Yalcin Babalioglu Kemahli in Cooperation with CMS

This Article was originally published in Issue 8.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Despite uncertainty due to the pandemic, the pace of merger activity in Turkey has not decreased and merger control is still one of the Turkish Competition Authority’s (TCA) key enforcement areas. The Law on Protection of Competition (Competition Law) amendment in June 2020 was a milestone for merger control in Turkey as it changed the substantive test for assessment of mergers. Below are some observations regarding the adoption of the new test and the TCA’s recent approach to merger control and remedies.

Adoption of the SIEC Test

The substantive test for the assessment of mergers changed from the dominance test to the significantly impeding effective competition (SIEC) test. To block a transaction under the dominance test, the TCA was required to prove that the transaction would lead to the creation or strengthening of a dominant position. Under the SIEC test, proving a dominant position would not be a legal precondition for blocking a transaction, and the transactions that could harm competition without creating a dominant position could also be blocked. Therefore, the adoption of the SIEC test allows the TCA to make a more thorough assessment of the anticompetitive effects of proposed transactions, in terms of both unilateral and coordinated effects.

Shortly after the SIEC test’s adoption, its effects were observed in the TCA’s decisional practice. In March 2021, the TCA announced the first decision (dated August 13, 2020, and numbered 20-37/523-231) to block a transaction after the adoption of the SIEC test. The decision does not include any assessment of dominance but analyzes the characteristics of the relevant markets and the potential anticompetitive effects on the upstream and downstream markets. The decision demonstrates that the TCA’s focus moved to a more effects-based approach from a dominance-oriented analysis, and stricter merger control enforcement is on the horizon.     

The TCA’s Approach to Merger Remedies

The TCA’s approach to merger remedies has also evolved during recent years. The prominent trends in remedies are the alignment with the European Commission’s decisions and the rise in behavioral remedies. 

The TCA’s recent approach regarding multi-jurisdictional transactions that are notified before the European Commission is to wait for the European Commission’s final decision on remedies and to apply the same remedies to the transaction as accepted by the European Commission. Moreover, the TCA does not require any monitoring obligations that are specific to Turkey for the application of these remedies. This approach prevents duplicity and is practical and effective both for the TCA and the transaction parties.

It should also be noted that the TCA assesses the transactions’ effects in Turkey and may require the parties to submit remedies specific to the local market. In the Fiat/Peugeot merger decision dated December 30, 2020, and numbered 20-57/794-354, the TCA concluded that the transaction as notified would lead to coordinated effects in Turkey, since a direct competitor of the target company is jointly controlled by the purchaser’s ultimate shareholder and there is a structural link between these parties, due to a common directorate. As a result, the remedies submitted before the European Commission were insufficient for the TCA, and the transaction parties submitted additional remedies that directly addressed concerns related to the local market.

Behavioral remedies became a popular tool to eliminate competitive concerns raised by a transaction and to obtain the TCA’s approval. Even though the TCA’s guidelines on remedies explicitly state that structural remedies are more efficient and preferable when compared to behavioral remedies, the TCA’s recent decisions imply a more permissive approach towards behavioral remedies.

In 2021, three transactions were cleared with behavioral remedies. These behavioral remedies mostly addressed vertical concerns and included obligations, such as to not discriminate among buyers in the downstream market, not refusing to deal, and not imposing exclusivity on buyers. However, in some cases, horizontal concerns, such as the dissemination of competitively sensitive information, are addressed with obligations to end interlocking directorates.

By Neyzar Unubol, Head of Competition, and Ali Tuncsav, Associate, Kolcuoglu Demirkan Kocakli

This Article was originally published in Issue 8.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Crowdfunding is a new generation funding and investment system which allows different individuals to invest in a project in exchange for shares or interest. Crowdfunding offers an alternative funding market that creates a win-win situation for entrepreneurs and investors.

The biggest challenge with crowdfunding is fraud risk. Another challenge is the potential for misleading information about projects. In order to ensure trust in the crowdfunding ecosystem and make it a popular funding method, certain regulations must be in place and scrutinized by competent authorities to prevent the potential risks associated with this funding method and to ensure its reliability for market players, for investors in particular.

Legislation on Crowdfunding in Turkey

The first legislation on crowdfunding in Turkey came into force on November 28, 2017, with an additional article in the Capital Markets Law requiring the approval of the Capital Markets Board of Turkey (CMB) for crowdfunding platforms. At later stages, the CMB published the equity-based crowdfunding Communique on October 3, 2019, while lending-based crowdfunding is regulated by the Crowdfunding Communique (Communique) from October 27, 2021.

The Communique regulates (1) platforms, (2) investors and investment limitations, and (3) entrepreneurs and venture companies.

Platforms: The platform is defined in the Communique as an institution that acts as an intermediary in lending-based and/or equity-based crowdfunding services in the electronic environment. To operate as a crowdfunding platform in Turkey, the CMB’s approval must be obtained. There are several qualifications that platforms need to comply with to obtain the CMB’s approval. Such qualifications – including the type of companies, capital requirements, founders’ and board members’ requirements, and funding limits – are regulated under the Communique. Platforms cannot carry out crowdfunding activities for foreign start-ups with the purpose of collecting funds from a person residing in Turkey. Crowdfunding activities such as opening accounts for crowdfunding and fund transfer to these accounts of persons resident in Turkey on foreign platforms are outside of the Communique’s scope, provided that these platforms are not carrying out any promotion, advertising, and marketing activities towards residents of Turkey. The CMB is authorized to set the criteria if the activities are aimed at a Turkish resident.

There are five different platforms established by the CMB. Several projects have been successfully funded via these platforms. Even though there is no specific regulation on donation-based crowdfunding, there are also donation-based crowdfunding platforms in Turkey. There is no lending-based crowdfunding platform yet, as the Communique came into force quite recently.

Entrepreneurs and Venture Companies: Venture companies or entrepreneurs that will receive funds via lending-based and/or equity-based crowdfunding must engage only in technology and/or production activities. There are also detailed requirements as to financial statements, mandatory provisions in the articles of association, the type of venture company, etc. Some companies, such as public companies, cannot raise funds through lending-based crowdfunding. At the same time, some requirements set out in the relevant article do not apply to venture companies that will receive funds via lending-based crowdfunding.

Investors: The Communique regulates specific investment thresholds for investors that are not qualified. Qualified investors are determined by the CMB. Venture capital trusts and investment trusts are qualified investors. The thresholds are: (1) for equity-based crowdfunding, an investor who is not qualified can make investments up to TRY 50,000 in a year – however, this threshold can go up to TRY 200,000, as 10% of the investor’s declared income; (2) for lending-based crowdfunding, the same yearly investment thresholds apply – additionally, an investor who is not qualified can make investments up to TRY 20,000 for each project.

It would seem that, if the legislation on crowdfunding is too rigid, this funding method can lose its attraction. On the other hand, if the legislation is not protective enough, crowdfunding can be used as a means for fraud, which would cause investors to lose trust in the ecosystem and result in entrepreneurs losing potential funding alternatives. Therefore, there has to be balanced legislation that addresses the needs of the ecosystem. As there is a growing interest in crowdfunding in Turkey, we are of the opinion that such a new set of regulations introduced by the CMB will have a positive effect on the crowdfunding ecosystem.

By Nilay Duran, Partner, and Kubilay Cetin, Associate, Nazali

This Article was originally published in Issue 8.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.