Ercüment Erdem Prof. Dr. H. Ercüment Erdem

Minority Share Transfers Within The Framework Of Competition Law

August 2015


Minority share transfers between competitors can be examined within the scope of Art. 4 of the Act on the Protection of Competition (“Competition Act”) on agreements, concerted practices, and decisions that limit competition, Art. 6 regarding the abuse of dominant position, and Art. 7 regulating mergers and acquisitions. Minority share transfers are often considered within the context of mergers and acquisitions.

In general, authorizations that are granted by the competition authorities in mergers and acquisitions are subject to the concept of control as the legal basis. Within the European Union (“EU”) practice, the concept of control is stipulated by Council Regulation (EC) No. 139/2004 (“Regulation”). In parallel with the EU practice, Communiqué Concerning the Mergers and Acquisitions (“Communiqué”) calling for the Authorization of the Competition Board No. 2010/4 requires a permanent change in control for a merger or an acquisition to be deemed as calling for authorization.

The mergers and acquisitions between competitors are realized either by transfer of full or partial control or by minority share transfers. A certain merger or acquisition transaction is subject to examination under the Communiqué, provided that it results in a permanent change of control. Minority share transfers that do not cause such a change are not considered to be mergers and acquisitions.

The Concept of Control within the Scope of Mergers and Acquisitions

In order for the conditions upon which the minority share transfers between competitors are subject to authorization may be identified, the concept of control must be elaborated upon within the context of competition law. Both the Communiqué and the Guidelines on Cases Considered as a Merger or an Acquisition and the Concept of Control (“Guidelines”) regulates the instruments that constitute control, as well as the change of control. Similarly, the ability to exercise a “decisive influence” over an undertaking is the condition foreseen by the Regulation for a minority share transfer to fall within its scope. The “decisive influence” as described by the Regulation may be defined as the power to influence the strategic decisions of an undertaking.

As per Art. 5 of the Communiqué, the control is defined as whether, separately or together, there is de facto or de jure exercise of decisive influence over an undertaking. The influence in question may be acquired through rights, such as the transfer of shares or assets, contracts or other instruments.

Sole Control

The Guidelines define the concept of sole control as the case where one undertaking, alone, has decisive influence over an undertaking. The decisive influence in question is regulated as the right to determine the strategic commercial decisions of an undertaking and, although not being able to take advantage of these strategic decisions, the right of a single shareholder to prevent these types of decisions from being taken, in other words, the right to veto. Pursuant to the Communiqué and Guidelines, sole control can be acquired on a de jure and/or de facto basis.

In order for de jure sole control to be in question, the majority of voting rights must be transferred. In cases where minority shares are transferred, when the market structure, the shareholding structure of the company, and the distribution of voting rights are considered, the majority of voting rights may be transferred between the competitors by way of preference shares on voting, thereby resulting in that merger or acquisition being subject to authorization as per the Communiqué.

In addition, certain rights held by the minority shares can constitute sole control. It may also be observed in cases where certain preferences are granted to minority shares. Specifically, preferences that have an effect over strategic decisions may create sole control. It can also be the case when, due to the shareholding structures and management structures of certain undertakings, various minority shareholders make financial, executive, or business-related decisions.

In determining de facto sole control, the share percentages, the participation levels in general assembly meetings, and the voting patterns adopted are taken into account. The Guidelines require the minority shareholders to hold a majority in the general assembly for them to be considered as having sole control. However, it is essential that the change of control is permanent.

Joint Control

Joint control exists where two or more undertakings or persons are able to exercise decisive influence over another undertaking. Decisive influence is described by the Guidelines as the power to block actions that determine the strategic commercial behavior of an undertaking. In this instance, the possibility of a deadlock situation exists when the power of two or more companies rejecting proposed strategic decisions by taking joint action is in question.

Joint control is also exercised in situations where equality in voting rights and appointment of decision-making bodies, the rights of the minority shareholders to veto decisions, such as the budget, the business plan, major investments, etc. exist (it is laid out in the Guidelines that possession of even one such veto right may be sufficient), and where voting rights are jointly exercised by the minority shareholders even though they do not have veto rights.

The fact that the majority shareholders are dependent on the minority shareholders when adopting certain decisions, as well as the possession of certain know-how by the minority shareholders, may also create de facto control.

It must be noted that the transfer of either majority or minority shares gives rise to the same consequences for situations where sole, joint, de facto or de jure control is created. The most basic of these are the merger or acquisition in question being subject to authorization (provided that the turnover thresholds stipulated by the Communiqué are exceeded), and being examined within the same competitive concerns and effects.

Anti-Competitive Effects and Concerns

The mergers and acquisitions concluded between competitors are evaluated within the framework provided by the Guidelines on the Assessment of Horizontal Mergers and Acquisitions (“Guidelines II”). The evaluation stipulated by Art. 9 of the Guidelines II is twofold: defining the relevant product and geographical market, and assessing the effects of the merger or acquisition on competition.

Situations that may create anti-competitive concerns are the creation and strengthening of a dominant position, and the prevention of competition through coordination between undertakings. The creation of a dominant position causes unilateral anti-competitive effects and concerns. The reduction of competitive pressure by a merger through creating market power is a unilateral anti-competitive effect. The competitive dynamics may be altered due to market shares, whether the undertakings are in competition or not, the substitutability of products specifically in markets of differentiated products, the likelihood of customers to change their providers, the barriers to growth, and the taking part in a merger of an undertaking that can create competitive pressure.

Another anti-competitive effect may be caused by coordinating undertakings. In this regard, keeping the prices above the competitive level is given as example to a most likely coordination by the Guidelines II. Undertakings may also coordinate the dividing of the market, or for limiting production.

In accordance with the Regulation, the coordination between undertakings is taken into consideration even when minority share transfers that do not create control are in question; more specifically, the level of influence of the minority shareholders – for instance, their power to appoint management, and their access to classified information of the undertaking[1].

The Minority Share Transfers within the Framework of Agreements, Concerted Practices and Decisions that Limit Competition

Minority share transfers may be subject to examination pursuant to Art. 4 of the Competition Act, or in relation to investigations and evaluations concluded with regard to another transaction (for example, a cartel agreement) even when the above-mentioned change of control is not in question. In this regard, the issue that the Competition Authority pays the utmost attention to is the management structure and representation.

The role of an undertaking that is also a minority shareholder of its competitor in the management can be examined because of a possible coordination between the competitors, facilitation of exchange of information, and creation of an anti-competitive effect[2]. However, instead of generalizing, each case must be evaluated separately due to its unique conditions.


Mergers and acquisitions are subject to evaluation under the Communiqué, provided that they result in a permanent change of control. This practice is in parallel with the EU legislation. As per the Communiqué and the Guidelines, control can be sole, joint, de facto or de jure, and is described as the ability to make strategic decisions, and to prevent them from being made. Similarly, holding the majority of the voting rights, the special rights, and preferences that are conditional on holding minority shares, and the power to hold the majority in general assembly meetings can create de facto and de jure sole control, as well. The possibility of creating a deadlock situation by blocking strategic decisions, voting rights, equality in the appointment of decision-making bodies, and veto rights are the examples of the instruments that constitute joint control.

The change of control by way of minority share transfers attracts the attention of the Competition Authority since it is likely to cause competitive concerns and anti-competitive effects, and the transfer of both majority and minority shares are subject to the same examination within the scope of the Communiqué. Anti-competitive concerns, such as the facilitation of coordination between competitors and the exchange of information, increasing transparency in the market, the creation and strengthening of the dominant position and, thereby, impeding competition between competitors, and decreasing competitive pressure are assessed within the scope of horizontal mergers and acquisitions.

[1] M. Selim Ünal, Sanayi İktisadı ve Rekabet Hukuku Açısından Rakipler Arası Azınlık Hisse Devirler, Series of Expert Thesis No: 93.

[2] Please see: Decision dated 13.7.2005, numbered 05-46/668-170 and Decision dated 29.3.2007, numbered 07-29/268-98.