Baran Baş
In this series of information notes[1], we briefly explain the basics of Turkish merger control regime. In doing so, we address the frequently asked questions of our colleagues from Türkiye as well as co-ordinator law firms from Europe (Brussels, London, Amsterdam offices etc.).
If you have any questions on this topic or any matter related to Turkish competition law, you may contact us via [email protected].
Merger Control in Türkiye – 5: Technology undertakings exception
Within the context of Article 7 of the Law No. 4054 on the Protection of Competition (“Law No. 4054”)[2], merger and acquisition transactions that lead to a change of control on a lasting basis as per Article 5 of the Communiqué No. 2010/4 on Mergers and Acquisitions Calling for the Authorization of the Competition Board (“Communiqué No. 2010/4”)[3] and that trigger the turnover thresholds specified in Article 7 of the Communiqué No. 2010/4 are subject to the authorisation of the Turkish Competition Board (the “TCB” or the “Board”). There is a critical exception to the turnover threshold requirement for M&A transactions involving technology undertakings.
The technology undertaking exception (which was introduced in Turkey in 2022 parallel to the developments in the world and is quite new in Turkish competition law) aims at putting those transactions characterised as ‘killer acquisitions’[4], which appear especially in digital markets, through the TCB’s examination.[5] Indeed, with the technology undertaking exception, a transaction that would not normally be subject to mandatory notification since the turnover thresholds are not triggered will now be subject to the TCB’s review. In this way, the TCB can examine transactions regarding the acquisition of technology undertakings, which are still in the start-up phase, by existing or potential competitors while the former’s turnover is still below the notification threshold.
The turnover threshold of TRY 250 million, which is applicable for all transaction parties under Article 7 of Communiqué No. 2010/4, is not sought for in technology undertakings operating in the Turkish markets.[6] Technology undertakings are defined in Communiqué No. 2010/4 as “undertakings operating in the field of digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agricultural chemicals and healthcare technologies or the assets thereof.”. If a technology undertaking;
(i) operates in the Turkish geographical market, or
(ii) has research and development activities in Türkiye, or
(iii) provides services to users in Türkiye,
then the turnover threshold of TRY 250 million stipulated in Article 7/2 of Communiqué No. 2010/4 shall not be sought. In other words, in merger or acquisition transactions to which technology undertakings engaged in activities connected to Turkey are a party, a mandatory notification obligation before the TCB shall be in place even if the turnover of the technology undertaking is below TRY 250 million.
As can be understood from the definition of technology undertaking provided above, the concept of technology undertaking is defined quite broadly in the legislation, and undertakings operating in digital markets, software and gaming companies, pharmaceutical companies, fintechs, and even undertakings operating in the fields of agriculture and health technology are included in the scope of this definition. From 4 May 2022, when the technology undertakings exemption was put into force, to August 2024, when this article was published, many TCB decisions have been published on the subject. Considering the TCB decisions on technology undertakings as a whole, it is possible to suggest that the TCB tends to interpret the concept of technology undertaking and the limits of the undertakings’ activities in Turkey broadly.[7]
[1] You can access the first four articles of the information notes series below:
‘Merger Control in Türkiye – 3/6: Public announcements throughout the notification process’
[2] The English translation of the full text of the Law No. 4054 is available on the Turkish Competition Authority’s (“TCA”) website: https://www.rekabet.gov.tr/en/Sayfa/Legislation/act-no-4054.
[3] The English translation of the full text of the Communique No. 2010/4 is available on the TCA’s website: https://www.rekabet.gov.tr/Dosya/2010-4-sayili-teblig-20231107142912073.pdf
[4] Paragraph 69 of the TCA’s Guidelines on the Evaluation of Horizontal Mergers and Acquisitions is as follows:
“It is important to look at potential competition restrictive effects in cases where large incumbent companies are acquiring nascent firms/startups. This kind of acquisitions may involve the risk that the product may not be adopted or developed or may be ignored or may be pushed out of the market. Those acquisitions are called killer acquisitions in the literature.”
[5] Amendments to the Communiqué No. 2010/4 were introduced under the Communiqué No. 2022/2, and in the TCA’s announcement on those amendments, the purpose in introducing the technology undertaking exception was explained as follows:
“With the said regulation, it is aimed that acquisition of technology undertakings will be subject to the supervision of the Competition Authority (the “Authority”) to a large extent and that killer acquisitions regarding relevant undertakings are prevented. As it is known, the rapid developments in technology-oriented markets, particularly in digital platforms, bring along some innovations in competition law as in many other areas. Lately, the most noted of the concerns in entire world in terms of merger and acquisition control is that the possibility that transactions by undertakings with significant market power in digital markets, as well as transactions involving the acquisition of newly established or emerging undertakings (start-ups) are not subject to notification obligation and thus, competition authorities’ examination.”
For the full text of the announcement, see https://www.rekabet.gov.tr/tr/Guncel/rekabet-kurulundan-izin-alinmasi-gereken-82269c8a8f9bec11a21c00505685ee05 (Turkish).
[6] Article 7/2 of Communiqué No. 2010/4 reads as follows: “In transactions regarding the acquisition of technology undertakings operating in the geographical market of Turkey or having R&D activities or providing services to users in Turkey, the thresholds of two hundred and fifty million TL in subparagraphs (a) and (b) of the first paragraph shall not be sought.”
[7] For detailed information on the subject, see ‘Limits of the Definition of Technology Undertaking’, Att. Hakan Özgökçen, Att. Esen Ergül, Att. Cem Buran, Bilgi University – Competition Law Seminars 2024. https://www.youtube.com/watch?v=XaDUlRy7-nE.