The Relationship Between Economic Entity and Family Ties in Light of Competition Board Decisions
Introduction
In competition law, it is important to accurately determine the concept of undertaking, especially in terms of mergers and acquisitions. Therefore, the concept of economic entity aims to reveal the economic units covered by the undertakings. The relationship between the concept of economic entity and family ties comes to the fore especially in terms of mergers and acquisitions in which Turkish family companies are the parties to the transaction. In cases where there are many companies controlled by different members of the same family, the correct definition of the concept of economic entity becomes noteworthy for the exact evaluation of the merger or acquisition transaction as well as the accurate definition of the turnovers. Yet, whether these companies constitute an economic entity may lead to discussions.
Within the scope of Turkish Competition Board’s (“Board”) recently published Re-Pie/Hızlıpara decision[1], the relationship between the concept of economic entity and family ties is treated. Therefore, in this article, the Board’s approach towards the relationship between the concept of economic entity and family ties is discussed.
Evaluation of Family Ties in Light of the Concept of Economic Entity
The relationship between the concept of economic entity and family ties has been subject to various Board decisions. When the Board’s previous practice is examined, it can be seen that there are examples where real persons bearing the same surname are accepted as a group within the scope of the merger or acquisition transaction. For instance, in the Board’s Çimentaş[2] and Parıltı/Sofra[3] decisions, this approach was adopted. Likewise, in the Board’s Misbis decision[4], it was determined that a company controlled in equal shares by five different members of a family and companies controlled by one of the family members constituted an economic entity.
In addition, there are Board decisions where even people who did not bear the same surname were qualified as a group due to their economic ties and/or family ties. In the Board’s Bilkom decision[5], instead of the concept of control, the common interest strengthened by family ties was emphasized and the companies shared between the brothers were accepted within the same economic entity.
Subsequently, in the Board’s Altıparmak Gıda decision[6], the companies controlled by the brothers were evaluated within the same economic entity. In the decision, it was also stated that family ties significantly affected the analysis of economic entity and the fact that companies controlled by siblings operated in the same market was considered as a factor supporting the unity of interests.
On the other hand, in the Board’s Gıdasa/MGS decision[7], it was stated that although there had been Board decisions in which family ties were considered sufficient for defining an economic entity, there may be situations where a decision cannot be taken by means of solely taking into consideration these ties. In this decision, it was further mentioned that the following steps should be followed in order to define the concept of economic entity:
- Firstly, it should be determined whether there are economic ties and family ties between individuals and/or groups,
- Subsequently, the basis, nature and size of economic ties and their - if any - independent activities should be compared,
- Based on these determinations, it should be determined whether the relevant people are affiliated with a union of interests or not.
Therefore, it is seen that this approach of the Board was also adopted in the recent Re-Pie/Hızlıpara decision and the considerations mentioned above were also emphasized in this decision.
Evaluations Made in Re-Pie/Hızlıpara Decision
Re-Pie/Hızlıpara decision, which includes evaluations on the concept of economic entity and family ties, is related to the evaluation of the transaction concerning the acquisition of some shares of Hızlıpara Ödeme Hizmetleri ve Elektronik Para AŞ (“Hızlıpara”) by the venture capital investment funds, which are established and managed by Re-Pie Portföy AŞ (“Re-Pie”) by means of capital increase.
In the decision, the control structure before the completion of the transaction is examined. It is stated that there is a marriage relationship between Mahmut Savaş and Müge Selin Savaş who are the current shareholders of Hızlıpara. The Board decided that there is a common interest among the above-mentioned shareholders. In addition, the Board determined that apart from the said shareholders, there are no other persons belonging to the Savaş Family and united with a common interest.
Within the scope of its evaluation of the concept of economic entity, the Board stated that due to the existence of a marriage relationship between the current shareholders of Hızlıpara, Mahmut Savaş and Müge Selin Savaş can be considered as the economic entity of “Savas Family”. Accordingly, the Board reached the conclusion that Hızlıpara is under the sole control of Savaş Family prior to the completion of the transaction subject to the notification.
Subsequently, it is examined whether the transaction led to a change in control. Pursuant to the agreement regarding the transaction, in the decision quorums concerning the structuring of the company management and strategic commercial decisions, it is considered that the majority condition requiring the affirmative vote of the Savaş Family and the Re-Pie Funds meet the joint control condition. Therefore, the Board concluded that the transaction is aimed at establishing joint control over an undertaking that is already active and qualifies the transaction as an acquisition within the scope of the Communiqué Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board (“Communiqué No. 2010/4”).
Within the scope of its evaluation, the Board also examined the activities of Hızlıpara, Savaş Family, Re-Pie and the undertakings over which Re-Pie has control and evaluated that there is no horizontal or vertical overlap and authorized the notified transaction.
Conclusion
Within the scope of mergers and acquisitions, family ties can be determinative for the correct identification of undertakings and in the assessment of control. Therefore, when the previous decisions of the Board are examined, it can be said that family ties and economic interests are the most important criteria in determining whether the relations between real persons constitute economic entity. In line with the Board’s approach, the concept of unity of interest, which eliminates the motivation of competition, comes to the fore rather than the concept of control in terms of relationships between real persons. Accordingly, issues such as the intensity of economic ties in terms of quality and quantity and the degree of family ties should be clarified by means of taking into consideration the characteristics of each concrete case. In these matters, it would be beneficial to adopt the established approach of the Board and to follow the steps outlined in this article and listed in the Board's recent Re-Pie/Hızlıpara decision.
- The Board’s Re-Pie/Hızlıpara decision dated 08.12.2022 and numbered 22-54/842-347.
- The Board’s Çimentaş decision dated 07.08.2021 and numbered 01-39/391-100.
- The Board’s Parıltı/Sofra decision dated 04.10.2002 and numbered 02-61/759-307.
- The Board’s Misbis decision dated 08.11.2007 and numbered 07-85/1039-401.
- The Board’s Bilkom decision dated 09.01.2001 and numbered 01-03/10-3.
- The Board’s Altıparmak Gıda decision dated 31.03.2010 and numbered 10-27/393-146.
- The Board’s Gıdasa/MGS decision dated 07.02.2008 and numbered 08-12/130-46.
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