A notion of control and its interpretation serves as a starting point of any concentration control analysis, as a concentration should be deemed to exist in case a change of control takes place. Whether the control of an undertaking is acquired or not is determined on a case-by-case basis. The essence of the definition lies in the words “decisive influence on an undertaking” (Article 3(2) EUMR), i.e., its strategic decisions such as business plans, budget, investments, appointments of management, etc.
Control of an undertaking may be acquired by a single undertaking leading to a sole control, or jointly by two or more undertakings leading to a joint control. Sole control is acquired on a legal basis where an undertaking acquires a majority of the voting rights of a company. It is not in itself significant that the acquired shareholding is more than 50% of the share capital or that it is 100% of the share capital. An acquisition which does not include a majority of the voting rights does not normally confer control even if it involves the acquisition of a majority of the share capital. Sole control might also result from the acquisition of a “qualified minority” of the share capital with ability to veto strategic commercial decisions. Joint control exists where two or more undertakings have the power to block strategic commercial decisions of an undertaking. Therefore, joint control is characterized by the possibility of a deadlock situation resulting from the power of two or more parent companies to reject proposed strategic decisions. It follows, therefore, that these shareholders must reach a common agreement in determining the commercial policy of the JV.
Control, whether sole or joint, can be exercised on a de jure or de facto basis. While de jure control requires review of shareholdings (more than 50 per cent), de facto control is a much broader concept, which looks at other possible influence over the undertakings that would result in control. There are various factors which may be relevant in deciding whether de facto control exists. The ability to appoint the majority of the board of directors, which is in charge of the company’s strategic decisions, is one of the most common forms of de facto control. This is true for the situations where a shareholder is highly likely to achieve a stable majority at shareholders’ meetings or if the remaining shares are widely dispersed. In Electrabel although holding close to 50% of CNR’s shares, due to the wide dispersion of the remaining shares and past attendance rates at CNR’s shareholders’ meetings, Electrabel enjoyed a stable majority at such meetings. In Vivendi/Telecom Italia, the transaction consisted of the acquisition of control by a minority shareholder over a listed company with a widely dispersed share capital.
Usually these are the cases where a minority shareholder has the right to manage the activities of the company and to determine its business policy; minority shareholders may have a strong common interest which means that they would not in practice act against each other. A veto right on the approval of the business plan, the budget and the appointment of the senior management are considered to be sufficient to have a control over an undertaking. De facto control occurs in a situation of economic dependency, through economic and other links between the two undertakings and regardless of the size of the shareholding concerned. In J&J/ACTELION there were strong economic links between J&J and Idorsia on a long-term basis: J&J was to provide to Idorsia a 10-year loan, a 15-year credit facility, as well as access to IP rights through the cross licensing arrangement. These economic links were coupled with a structural link, with J&J acquiring between 16% and 32% of Idorsia’s share capital while all the other shareholders would each hold less than 5% of the shares. The interpretation of control under the Turkish Competition Law resembles the EU approach, in that control may be acquired through rights, contracts or other instruments which, separately or together, allow de facto or de jure exercise of decisive influence over an undertaking. In particular, these instruments consist of ownership rights or operating rights over all or part of the assets of an undertaking, and those rights or contracts granting decisive influence over the structure or decisions of the bodies of an undertaking.
As in the EU, de facto control under the Turkish Competition Law can occur in various ways. Long-term supply agreements concerning an essential component for the business of an undertaking might give rise to decisive influence over management actions, and thus control might be acquired on a de facto basis. Another example of de facto control can be seen in a certain circumstance where a minority shareholder is likely to have the majority at the shareholders’ meetings, e.g. when taking into consideration the share proportion, the voting pattern at past shareholders’ meetings and the position of other shareholders.
Control can be conferred through a contract. In AstraZeneca LP, the transaction did not include a transfer of shares, but the TCA considered the “Agreement on Common Offers” enabling change of control allowed joint control of Amylin by Bristol and AstraZeneca, even though 100% of shares remained under the control of Bristol. In practice, the most common example of control through a contract is through a long term lease agreement.
Transfer of intellectual property rights might enable control, but only where an intellectual property right constitutes a business with a market turnover. This is particularly so in the situations when transfer of related brands plays an essential role in activities which enable the undertaking to acquire market share and generate a turnover.
Finally, control may arise through appointment of professionals. In Medya Holding Sabah the changes in the board of the company were considered sufficient to establish a change of control. Change in the positions on the boards of the four companies was implemented by the withdrawal of the directors representing Sabah Group and the subsequent appointment of new directors among the nominees, who were assumed to be “bound to MTM group.”