The concept of «group of companies» has been introduced to Turkish law for the first time by the Turkish Commercial Code No. 6102 («TCC»). Pursuant to Article 195 of the TCC, for a group of companies to be formed, a company shall have the instruments that enable it to dominate, directly or indirectly, over the other company(ies) included in the group. These instruments are listed as holding the majority of voting rights, ensuring the election of the number of members constituting the majority that can take decisions in the management body, establishing the majority of voting rights with other shareholders or partners through a contract, and finally holding a company under its control by contract or other means. As a rule, it is sufficient to have the theoretical means to create dominance; otherwise, it is not obligatory to exercise dominance in practice. In some cases, even if there is no contract or shareholding relationship, a group of companies may be formed through de facto dominance. Here, the expression “other means” used in the Article 195/1-b of the TCC implies that a group of companies can also be formed in case of de facto dominance. In competition law, on the other hand, the concept of “control” is put into the center instead of the concept of domination. Control can be expressed as the continuous determination of a company’s activities and policies such as financing, budget, investment, production, sales, and marketing policies.
The group of companies consists of the parent company and its subsidiaries. It is a fact that, from time to time, the parent company, by controlling its subsidiaries, and the subsidiaries, by using the power of the parent company in the market, harm each other and third parties. The fact that the parent company and its subsidiaries are legally independent due to having different legal entities may also lead to results incompatible with justice in some cases. For example, it would be unfair to hold the subsidiary company solely responsible for the violation of competition as a legal entity with legal independence in case the parent company manages the subsidiary and causes it to violate competition. In order to prevent such situations, the definition of «undertaking», which is the subject of competition law, has been introduced to include economic entities that do not have legal personality. Indeed, in Article 3 titled “Definitions” of the Law on the Protection of Competition (“Law”) No. 4054, the undertaking is defined as “Natural and legal persons who produce, market and sell goods or services in the market, units which can decide independently and constitute an economic whole”. As such, it is legally possible for the parent company, which is in the same economic integrity, to be held responsible for the competition violations of its subsidiary, even though the parent company did not directly participate in the violation of competition. Thus, the group of companies, including the parent company, becomes the subject of competition law.
On the other hand, even if the enterprises that create the group of companies are considered as a single undertaking within the scope of competition law, it is not possible to hold the parent company directly responsible for the competition violations of its subsidiary. For the parent company to be held responsible, the subsidiary must engage in activities and transactions contrary to the competition law as a result of the parent company’s operation of its control mechanism over the subsidiary.
The basis of holding the parent company responsible for the competition violations of the subsidiary is the theory of “piercing the corporate veil”. As it is known, this theory also bases its foundation on the prohibition of “abuse of right”. Although the theory has previously been developed for the damages caused by the misuse of the corporate legal personality by the real person shareholders using the limited liability principle, it has also been applied in time to prevent the group of companies from evasion of the law.
Behaviors violating competition law are regulated under the Law. These are: (i) agreements restricting competition, concerted practices, and undertaking decisions, (ii) abuse of dominant position, (iii) mergers or acquisitions without permission, which result in a significant lessening of effective competition, particularly in the form of creating or strengthening a dominant position. Competition violations by the subsidiary company, for which the parent company is also held responsible, are, most of the times, acts of anti-competitive agreements and concerted practices, such as involving the subsidiary in cartel agreements.
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