Cement Consolidation in Eastern Anatolia: TCA Grants Conditional Clearance to the Kars–Arkoz Merger
October 13, 2026
I.Introduction
On 14.09.2026, the Turkish Competition Authority (“TCA”) published its reasoned version of its 11.11.2025 decision1 on the acquisition of Kars Çimento Sanayi ve Ticaret A.Ş. (“Kars Çimento”), a grey cement and clinker producer based in Kars, by Arsem Madencilik Enerji Sanayi ve Ticaret A.Ş. (“Arsem”), the acquisition vehicle of the Uçar Family Group (“Uçar Family”), which controls the Ağrı-based cement producer Arkoz Madencilik and the autoclaved aerated concrete (“AAC”) producer Arkoz Gazbeton. The transaction was notified to the TCA in June 2025 and escalated to an in-depth (Phase II) review in September 2025 following the initial review which identified notable competitive concerns.
The transaction brought together the two largest cement producers active in Türkiye’s eastern border provinces. Following an in-depth review, the TCA concluded that the merger would significantly impede effective competition in the regional grey cement market, yet ultimately cleared the transaction subject to an extensive package of behavioural commitments offered by Arsem. Notably, the TCA’s approval departed from the case handlers’ views, who had concluded that the commitments insufficient to remedy the identified competitive harm and proposed that the transaction be blocked. The decision thus stands as one of only a handful of modern TCA merger cases in the cement sector where the TCA has overridden its own case handlers to clear a transaction on behavioural remedies alone. The case, notably, invites comparison both with the TCA’s earlier 20 year old refusal to allow Sanko to acquire Gaziantep Çimento2, where similarly high HHI levels in a neighbouring cement market led to an outright prohibition, and with the Caba Çimento/Titan Cement clearance3, where the TCA approved a Marmara-region cement consolidation without conditions thanks to materially lower combined market shares and abundant spare capacity among competitors.
II.Definition of Relevant Markets
The TCA identified three relevant product markets, drawing on its well-established cement-sector precedent spanning over a dozen decisions dating back to the 2000s. Clinker, the semi-processed intermediate used in cement production, was defined as a distinct market given its different customer base and the TCA’s consistent precedent treating clinker supply as an independent commercial activity. Cement was split between white and grey cement, which follow separate production processes and are not demand-side substitutes. AAC was defined as a further distinct product market given its differentiated performance characteristics.
On this basis, the TCA defined the relevant product markets as the “grey cement market”, the “clinker market” and the “autoclaved aerated concrete market”. The TCA noted that a horizontal overlap between the parties existed in both the grey cement and clinker markets, while a vertical relationship arose between clinker (upstream) and grey cement (downstream), and separately between grey cement (upstream) and AAC (downstream), since cement is itself an input into AAC production.
As regards the relevant geographic market, the TCA applied its well-established toolkit for the cement sector, including the 150/250 km radius method and the TCA-developed “10% criterion”, which considers a province part of the relevant market where a plant’s sales into that province cover at least 10% of the province’s cement consumption. Taking these methodologies into account, the geographic market for clinker was defined regionally as the “Eastern and South-Eastern Anatolia region”. For grey cement, the geographic market was defined on a plant-by-plant basis: under the 10% criterion, the relevant geographic market for Kars Çimento comprised “Ardahan, Artvin, Iğdır and Kars”, while for Arkoz Madencilik it comprised “Ağrı, Bitlis, Hakkari, Iğdır, Kars and Van”. The geographic market for AAC was defined nationally as “Türkiye”, given the wide availability of substitute products and the nationwide scope of AAC sales and marketing activities.
III.Competitive Concerns and Overlapping Markets
Having defined the relevant markets, the TCA proceeded to map the horizontal and vertical overlaps between the parties’ activities and to assess the resulting competitive concerns.
A horizontal overlap was identified in both the grey cement and the clinker markets, since Kars Çimento and Arkoz Madencilik are both active producers of grey cement and clinker in neighbouring provinces. In addition, two distinct vertical relationships were identified: between the upstream clinker market and the downstream grey cement market, and between the upstream grey cement market and the downstream AAC market.
In the grey cement market, the merging parties were by a wide margin the two largest players in the overlapping geographic areas, with their combined post-merger market share reaching the 85–95% band — far above the 50% threshold the Guidelines on the Assessment of Horizontal Mergers and Acquisitions (the “Horizontal Guideline”) treats as indicative of dominance. Post-merger HHI levels rose to approximately 8,622 under the 150 km radius method and to approximately 9,343 under the 10% criterion, with delta increases of 4,115 and 4,234 respectively; multiples of the 150-point safe harbour that both the TCA’s own Horizontal Guideline and the European Commission’s Horizontal Merger Guidelines recognise as the threshold for presumed competitive harm. By comparison, the Sanko/Gaziantep Çimento transaction blocked in 2005 involved a post-merger HHI of approximately 4,052 with a delta of 1,588 in the core three-province geographic market (Gaziantep, Adıyaman and Şanlıurfa), yet was not-cleared.
Crucially, the TCA’s assessment did not stop at market shares and concentration indices. The TCA placed considerable weight on the capacity position of the parties’ competitors in the affected region, namely Aşkale, Limak, SYCS and Yurt Çimento. The evidence showed that Aşkale, the nearest and most significant competitor, was already operating at full capacity utilisation with no spare capacity to absorb diverted demand. Similarly, SYCS, despite having limited sales in the region, was also found to be operating at full capacity in 2024. The remaining competitors were operating at comparatively lower capacity utilisation rates. The TCA reasoned that even where switching costs might not otherwise be prohibitive, competitors cannot exert a meaningful competitive constraint on the merged entity if they lack the spare capacity to actually respond to a price increase by expanding output.
By contrast, in the clinker market, the TCA found that the parties’ clinker output was overwhelmingly captive because it is used internally in their own cement production rather than sold commercially, such that the resulting horizontal overlap did not raise a material competitive concern on a standalone basis. As regards the clinker–cement vertical relationship, the TCA nonetheless noted that the merged entity’s very high market share in grey cement could restrict competitor clinker producers’ access to downstream customers as well as competitor cement producers’ access to clinker, creating a foreclosure risk in both ways. The TCA stated that the commitments package was relevant to mitigating this risk, though notably none of the commitments directly targeted the clinker–cement vertical relationship as such.
As regards the cement–AAC vertical relationship, the TCA found that no serious vertical concern was expected to arise from the transaction, given Arkoz Gazbeton’s limited presence in the AAC market and the continued strength of established competitors such as YTONG, AKG, Nuh Yapı and KÇS Kipaş.
IV.The Conditional Clearance: Insufficient Commitments According to the Case Handlers, Yet Approved by the TCA
Having identified a significant risk that the transaction would substantially lessen effective competition, in particular in the grey cement market, the TCA turned to whether this risk could be addressed through remedies. The TCA’s Guidelines on Remedies that are Acceptable by the Turkish Competition Authority in Merger/Acquisition Transactions (the “Remedies Guideline”) permits clearance conditional on remedies only where the proposed solution eliminates the competitive concern in a sustainable and verifiable manner, and treats structural remedies as inherently more effective than behavioural ones, accepting the latter only exceptionally and only where equally effective monitoring can be assured. Since no structural remedy was realistically available in this case, the entirety of the remedy package submitted by Arsem was behavioural in nature.
Having found that the concerns were horizontal in grey cement and clinker and vertical as between clinker and cement and between cement and AAC, and that no structural commitment capable of addressing them existed, the TCA held that because the behavioural commitments were quite comprehensive and would be subject to regular supervision, they could be expected to be “at least as effective as structural commitments”.
It is notable that the case handlers had recommended that the commitments be rejected as insufficient and that the notified transaction accordingly be blocked. The decision making body of the TCA, the Competition Board, nonetheless reached the opposite conclusion and cleared the transaction conditional upon compliance with the commitments. It is worth noting that the item was brought onto the TCA’s agenda by way of a verbal motion from the TCA President, Mr Birol Küle, a route that stands out against the TCA’s usual practice.
Overview of the Commitments Package
The commitments submitted by Arsem, framed around the competitive concerns identified in Kars, Ağrı and Iğdır provinces, span pricing, capacity and investment, minimum supply, export planning, dealer network protection, equal treatment, regional development, and a five-year reporting and audit regime. The most consequential elements are addressed in more detail below; the remaining commitments are summarised more briefly.
― Pricing Policy and Price Stability
This was one of the central planks of the package. For five years following completion, cement sale prices are to be governed by a fixed pricing formula anchored to the last invoiced prices of December 2025. Each subsequent increase, whenever it is made, and whatever the interval since the previous one, is capped at the arithmetic (or weighted) average of the TÜFE (Consumer Price Index) and TEFE (Wholesale Price Index) movements recorded over the period since the last increase. Increases must be notified to all dealers in writing at least 15 days before taking effect, discriminatory pricing among dealers is prohibited, and Arsem must file a semi-annual “Price and Cost Report” with the TCA setting out the prices applied, the rates of increase, the underlying index data and its energy, transport and raw-material costs.
― Production Capacity and Supply Continuity
The capacity commitments are best read against the plant’s recent performance, which the commitment text itself discloses: over 2022–2024, Kars Çimento’s clinker line ran at 77.8% of capacity and its cement line at only 49.7%, leaving roughly half of its cement capacity idle. Against this baseline, Arsem committed that the plant will be optimised to operate at full capacity following completion, on an eleven-month production / one-month planned maintenance cycle, and that its capacity utilisation rate will not fall below 90%. In addition, cement production at the Kars and Arkoz (Ağrı) plants combined must not fall below the annual consumption of Kars and Iğdır provinces.
― Investment Plan
The investment commitment is the mechanism through which the capacity undertakings are meant to become achievable, and it is notably specific. Arsem committed to an efficiency-enhancing investment programme in the Kars plant of a stated (though redacted) USD amount, phased over the first two years following clearance and covering the improvement of the clinker cooling line, modernisation of the kiln burner pipe and the mills, renewal of process automation, and raw-material and fuel studies. The stated objectives are to raise output, cut energy consumption per tonne and reduce emissions, with a targeted 10% saving in variable costs at the end of the two years. Progress is to be reported to the TCA annually, supported by invoices, permits and project reports.
Two further elements are attached to the plan. First, because the local climate confines clinker production to roughly eight months a year, Arsem projects that supplying clinker to the Uçar Family’s grinding facility in Georgia will allow production for approximately three additional months, extending the plant’s operating season by around 25% and diluting fixed costs per tonne. Second, the plant, previously run under the seller’s centralised management, is to be managed locally, with headcount increased by roughly 10% (ten new positions on a current workforce of 98, across production, HR, finance and accounting/IT) within three years of clearance. The TCA welcomed the investment plan as concrete, technically itemised and reportable, treating it as a positive factor in a regional market with high entry barriers.
― Minimum Supply Commitment
Arsem committed (i) to supply the domestic market with at least the average annual volume Kars Çimento placed on it over 2022–2024, with shortfalls permissible only in force majeure circumstances (natural disaster, state restrictions, severe winter conditions and the like) and subject to a reasoned notification to the TCA within 30 days; and (ii) to a 100% supply guarantee for Kars and Iğdır provinces, under which any production or shipment below provincial consumption must be explained to the TCA within 30 days. Where supply falls short for capacity reasons, continuity of sales is to be maintained through a stock plan. The TCA regarded the Kars–Iğdır guarantee as a critical safeguard against the transaction’s regional effects.
― Export Plan and Domestic Market Priority
The export commitment ties the investment programme, the capacity undertakings and the domestic-supply guarantees together. Kars Çimento’s clinker exports have so far been marginal: in recent years only 2024 saw any, in a redacted tonnage sold through a dealer to Georgia. Once the efficiency investments are complete, Arsem committed to increase clinker exports in three annual steps over 2026–2028, undertaking specific (redacted) export tonnages and corresponding revenue targets for each year, and it expects full capacity utilisation to lift the plant’s production potential by 25%. The Caucasus, and Georgia in particular, where the Uçar Family already operates a grinding facility, is the target market. Critically, the commitment is subordinated to the domestic market: exports must not under any circumstances weaken the merged entity’s supply obligations in Kars, Ağrı and Iğdır, may be curtailed temporarily where domestic demand rises or supply tightens, and any such curtailment must be notified to the TCA immediately with reasons. The TCA read the plan as a means of channelling surplus output abroad without destabilising domestic prices; it treated the 2024 exports as evidence that the projected increase was grounded in existing capability rather than speculative, and the domestic-priority undertaking as an important guarantee for the sensitive Kars–Ağrı–Iğdır provinces.
― Dealer Network, Commercial Terms and Equal Treatment
Arsem committed to continue working with all of Kars Çimento’s existing dealers on existing terms, to confirm this to them in writing within one month of the short-form decision, and not to impose any exclusivity, priority right or supply restriction impeding dealers’ access to cement. Contractual, commercial and operational conditions may not be changed to dealers’ detriment; unilateral terminations or amendments require objective grounds and prior notice to the TCA, and dealer appointments or removals must be notified 15 days in advance. For existing customers in Kars, Ağrı and Iğdır — dealers, ready-mix producers and contractors alike — payment maturities, discounts, prepayment and guarantee requirements may not be tightened relative to pre-transaction averages, and new customers may not be treated in a discriminatory or exclusionary manner; a semi-annual “Commercial Terms and Dealer Relations Report” will disclose average maturities, discount rates and per-customer guarantee practices to the TCA.
― Other Commitments
The remaining commitments include: retention of the existing workforce (subject to just cause) and regional development pledges, including cooperation protocols with the governorates, chambers of industry and universities of Kars, Ağrı and Iğdır on local suppliers, youth employment and internships, and a projected 25% uplift in regional demand for logistics, spare parts, maintenance and services; a five-year reporting regime built around a semi-annual “Implementation and Monitoring Report” (production volumes, price increases, domestic/export split, dealer and employee numbers, complaint records), with the possibility of an independent monitor appointed by the TCA at Arsem’s expense; and a competition law compliance programme comprising training for all managers and staff within three months of clearance, a compliance policy document and handbook, and a dedicated complaints channel for dealers, suppliers and customers with a ten-business-day response obligation. The commitments take effect upon notification of the short-form decision, run for five years and are to be re-evaluated by the TCA at the end of that period; breach exposes the parties to administrative fines under Article 17 of Law No. 4054.
V.Assessment of the Commitments and Conclusion
The central question is whether the commitments package accepted by the TCA, which is, as noted, entirely behavioural, adequately addresses each of the competitive concerns that the decision itself identified. Read as a whole, the decision suggests that this was not, in truth, the question that decided the case. On the competitive analysis alone, combined shares of 85–95%, post-merger HHI levels above 8,600, no significant competitor with spare capacity, high entry barriers and weak buyer power, the case handlers’ recommendation to prohibit was the orthodox outcome. What carried the transaction across the line was a different consideration: the prospect that an under-utilised, 70-year-old plant which had been running at roughly half its cement capacity would be modernised, operated at full capacity, managed locally, staffed more fully and connected to export markets in the Caucasus.
The Board’s own language is telling. It credits the investment and employment plan with strengthening the transaction’s “public-interest dimension” at regional level, describes the regional development pledges as “prioritising social benefit”, and reads the export plan as contributing to regional economic integration and even as a potential source of external competitive pressure. These are, in substance, industrial-policy considerations, and the commitments operate less as measures restoring the rivalry the merger removes than as the instrument by which the promised efficiencies are locked in and made monitorable. Seen in that light, the individual commitments perform unevenly against the concerns actually identified.
The pricing commitment addresses unilateral price effects, but only partially. General inflation indices do not track sector-specific cost dynamics (energy, limestone, transport), a limitation the TCA itself acknowledged in general terms. In a market where the merged entity faces no competitor with spare capacity, a price ceiling pegged to economy-wide inflation rather than a cement-sector cost index leaves room for pricing above competitive levels. That said, read together with the capacity utilisation floor and the 100% regional supply guarantee, the combined effect is more meaningful than any single commitment in isolation: the merged entity is simultaneously prevented from raising prices beyond a defined ceiling, required to maintain output at or above provincial consumption levels, and subject to semi-annual reporting on both price and cost movements. This combination may go some way toward constraining the most straightforward forms of unilateral exploitation. None of the commitments, however, is expressly framed around the coordinated-effects concern the TCA identified, and the decision does not explain how the package addresses it; if anything, a known, formula-based price trajectory may facilitate tacit coordination by providing a focal point around which the few remaining competitors can align.
The capacity and investment commitments are primarily supply-side undertakings. They provide a measurable and verifiable framework for ensuring that regional cement supply is maintained post-merger, and the 90% capacity utilisation floor in particular gives the TCA a clear benchmark against which to monitor the merged entity’s conduct. These commitments may effectively mitigate the risk that the merged entity deliberately restricts output or withdraws supply from the affected provinces. They do not, however, address the more fundamental concern: the elimination of the only significant independent competitive constraint in the region — a constraint the decision itself describes as a rapidly growing competitor that had been taking share principally from Arkoz Madencilik. A commitment to produce does not restore the competitive rivalry that the merger removes. Likewise, none of the commitments directly targets the clinker–cement vertical foreclosure risk that the TCA separately flagged; the decision treats the wider package as implicitly relevant to that risk, without identifying which specific commitment is supposed to mitigate it.
The efficiency case is where the decision’s underlying logic is most visible. The Horizontal Guideline contemplates efficiencies as a factor in the substantive assessment, provided they are verifiable, merger-specific and passed on to consumers; the decision does not conduct that analysis. Instead, the efficiencies, the 10% variable-cost reduction, an approximate 25% extension of the production season through clinker supplies to the Uçar Family’s Georgian grinding facility, and a projected 25% increase in regional demand for logistics and auxiliary services, are absorbed into the commitments and assessed for their plausibility as undertakings. Their substantiation is thin. The decision discloses no independent cost analysis behind the projected variable-cost savings; the 25% season-extension figure rests on the assumption that the Georgian facility will absorb sufficient clinker volumes, without any demand-side verification; and the regional demand uplift is acknowledged to be a qualitative estimate, which the TCA nonetheless accepted as reasonable in light of the accompanying investment plans. The tension with the framework the decision itself recites is evident: under the Remedies Guideline, a remedy must remove doubt as to its ability to eliminate the competitive concern, its purpose is to preserve the pre-merger level of competition rather than to improve the market in other respects, and it must protect competition rather than competitors. Efficiency projections that are asserted rather than demonstrated do not meet that standard, nor, on a fair reading, were they being held to it.
In sum, while the commitments package is undeniably broad in scope and granular in its reporting obligations, it does not fully correspond to the competitive concerns articulated in the decision. The pricing commitment does not account for sector-specific cost dynamics and does not address coordinated effects; the capacity and supply commitments address output levels but not the loss of competitive rivalry; the vertical foreclosure risk in the clinker–cement relationship is left without a targeted remedy; and the efficiency claims that underpin several of the commitments are asserted rather than demonstrated. What the package does correspond to is a different set of objectives, investment, supply security, employment and export growth in a peripheral region, and it is those objectives that the decision ultimately secured.
Placed against the TCA’s cement-sector track record, the shift is striking. In 2005, the TCA blocked the Sanko/Gaziantep Çimento acquisition at post-merger HHI levels of approximately 4,052 in the core geographic market, concluding that the transaction would create a dominant position and thereby significantly reduce competition; concentration was, in effect, dispositive. Here, at concentration levels more than double those in Gaziantep Çimento, the TCA approved the transaction on an entirely behavioural package. The Caba Çimento/Titan Cement clearance, by contrast, illustrates the conventional path for low-share cases: where the analysis reveals modest combined shares, abundant spare capacity among competitors and strong alternative suppliers, a transaction is cleared without conditions. This decision is not a midpoint between those two poles so much as a departure from the axis on which they sit: concentration no longer decides the outcome by itself, and a credible investment-and-export narrative, backed by verifiable and reportable undertakings, can carry a transaction across the line even at near-monopoly shares.
That departure is not an isolated one. The Board itself notes in the decision that accepting time-limited behavioural commitments has become a common feature of its practice, and the TCA’s recent merger decisions (e.g. Uber’s acquisiton of Getir, A101’s acquision of CarrefourSA) reflect a growing willingness to weigh investment, capacity and supply-continuity undertakings alongside, and at times above, structural concentration metrics. The same drift is visible internationally, where competitiveness, scale, resilience and investment have moved to the centre of the merger-control debate: the European Commission’s review of its merger guidelines is expressly framed around those themes, the UK CMA has signalled greater openness to behavioural remedies, and the US agencies have returned to negotiated settlements. For Türkiye, the Kars Çimento decision is therefore worth noting less as an outlier than as a marker: it shows the TCA prepared, in a capital-intensive regional industry with idle capacity, to accept a near-monopoly market structure in exchange for a package of efficiency and public-interest commitments, and to rely on five years of reporting and supervision, now against the backdrop of its sector-wide inquiry into cement launched in March 2026, to police that bargain. These observations do not necessarily mean the transaction should have been blocked, but they do suggest that the gap between the case handlers’ recommendation and the TCA’s ultimate decision reflects genuine analytical tension, one that the five-year review clause will, in due course, put to a practical test.
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