The Communiqué No. 2010/4 Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board (“Communiqué No. 2010/4“) sets out the principles for the merger and acquisition transactions which require notification to and authorization by the Turkish Competition Board (“Board“) in order to gain legal validity pursuant to Article 7 of the Law No. 4054 on the Protection of Competition (“Law No. 4054“).[1]
In accordance with the rapid developments and increase of merger and acquisition transactions in technological markets, amendments have been introduced to Communiqué No. 2010/4 on 4 March 2022 with the Communiqué Amending the Communiqué Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board (“Communiqué No. 2022/2“), which entered into force on 4 May 2022. Communiqué No. 2022/2 updated the turnover thresholds for notification of the transactions and introduced a new rule specific to the acquisition of “technology undertakings”.
Technology undertakings are defined in the newly amended legislation as follows; “Undertakings operating in the fields of or assets relating to digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agricultural chemicals and health technologies.“. The new rule sets forth that, the turnover threshold applicable for the target (i.e. TRY 250 million (approximately EUR 24 million[2] and USD 28 million[3])) shall no longer be sought in the transactions related to the acquisition of technology undertakings operating or having R&D activities in the geographical market of Turkey or providing services to users in Turkey. In that respect, technology undertakings’ turnovers become relatively irrelevant by themselves whereas they shall still be count in terms of determination of aggregate turnovers of the parties. With this “exception”, the Board aims to examine the impact of such transactions even when the Turkish turnover of a target technology undertaking is below TRY 250 million, which will prevent disruption of competition through the acquisition of tech start-ups by large-scale undertakings with the aim of removing them from the market.
Following the introduction of the Communiqué No. 2022/2, the Board published a couple of decisions, where the Board examined the acquisition of technology undertaking under the newly amended Article 7. In IFGL & CINVEN decision[4], the Board found that as a small part of its activities in the life insurance sector in Turkey; IFGL also provides services to its customers with digital access via digital platforms and has about 230 registered users who have access to and use these digital platforms in Turkey. Based on this limited digital platform activity, since IFGL falls within the definition of “technology undertaking” specified in the Communiqué No. 2010/4, the Board determined that the relevant transaction was subject to approval of the Board. The transaction was ultimately approved by the Board for not significantly lessening the effective competition.
Similarly, in Airties & Providence decision[5], since the target Airties is a provider of residential wi-fi solutions for broadband operators and provides software services that enable broadband operators to deliver and manage wi-fi networks to residential customers, it was considered a technology undertaking. The Board found that the transaction was subject to approval, considering that (i) no turnover threshold is required for Airties, and (ii) the global turnover of Providence exceeds the thresholds stipulated in Article 7/1(b) of the Communiqué No. 2010/4 by itself. This transaction too was approved by the Board for not significantly lessening the effective competition.
Although these are the initial applications, it can be said that the Board aims to interpret the definition of the activities of technology undertakings in a wide manner, even if those are not the main activity of the relevant undertaking. Accordingly, any activity in the technology markets may result in the target’s being considered as a technology undertaking, which will then subject the transaction to the Board’s approval assuming that the other thresholds are met. Accordingly, the transaction parties should be mindful of any activities of the target and seek approval of the Board in a timely manner, and before the closing date at the latest, in order to avoid fines or other measures under Article 11 of the Law No. 4054.[6]
[1]. Article 7 of the Law No. 4054: “It is illegal and prohibited for one or more undertakings to merge, or for an undertaking or a person to acquire – except by inheritance – assets, or all or part of the partnership shares, or instruments conferring executive rights over another undertaking, where these would result in a significant lessening of effective competition within a market for goods or services in the entirety or a portion of the country, particularly in the form of creating or strengthening a dominant position.
The Board shall declare, via communiqués to be issued by it, the types of mergers and acquisitions which have to be notified to the Board and for which permission has to be obtained, in order for them to become legally valid.”
[2]. The amounts in TRY for 2021 fiscal year are converted to EUR by using the Central Bank of the Republic of Turkey’s average EUR buying rate in 2021 (i.e. EUR 1 = TRY 10.44).
[3]. The amounts in TRY for 2021 fiscal year are converted to USD by using the Central Bank of the Republic of Turkey’s average USD buying rate in 2021 (i.e. USD 1 = TRY 8.86).
[4]. The Board’s decision dated 18.05.2022 and numbered 22-23/372-157
[5]. The Board’s decision dated 02.06.2022 and numbered 22-25/403-167
[6]. Article 11 of the Law No. 4054: “Where a merger and acquisition transaction whose notification to the Board is compulsory is not notified to the Board, the Board shall take the merger or acquisition under examination on its own initiative, when it is made aware of the transaction in any way. As a result of the examination;
- a) It allows the merger or acquisition in case it decides that the merger or acquisition does not fall under the first paragraph of Article 7, but imposes fines on those concerned due to their failure to notify.
- b) In case it finds that the merger or acquisition falls under the first paragraph of Article 7, it decides that fines be imposed; the merger or acquisition transaction must be terminated; that all de facto situations committed contrary to the law must be eliminated; that any shares or assets acquired must be returned, if possible, to their former owners, within those terms and duration as determined by the Board, or if not possible, these must be assigned and transferred to third parties; that the acquiring persons may by no means participate in the management of undertakings acquired until these are assigned to their former owners or third parties, and that other measures deemed necessary by it must be taken.”
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