Amendments Introduced to the Communique Concerning the Mergers and Acquisitions Requiring Competition Board’s Approval
Introduction
Pursuant to the Amendment Communiqué Concerning the Mergers and Acquisitions Requiring the Competition Board’s Approval (“Amending Communiqué”) published in the Official Gazette dated March 4th, 2022 and numbered 31768, certain amendments have been introduced to transactions which require the Competition Board’s (“Board”) authorization. In this regard, turnover thresholds have been amended, a special provision has been added in relation to technology undertakings, changes have been introduced in relation to the significant impediment in effective competition test, turnover calculations for financial institutions have been revised and the notification form has been changed completely. The changes introduced with the Amending Communiqué will enter into force on May 4th 2022.
Turnover Thresholds
Mergers and acquisition transactions which result in permanent change in control, and where transaction parties’ turnovers exceed the thresholds highlighted in Article 7 of the Communiqué Concerning the Mergers and Acquisitions Requiring the Competition Board’s Approval (“Communiqué No 2010/4”) require the Board’s approval to gain legal validity. These turnover thresholds have now been amended with the Amending Communiqué.
To that end, under Article 7(1)(a) of Communiqué No 2010/4, the TL 100,000,000 threshold has been amended to TL 750,000,000, and the TL 30,000,000 threshold has been amended to TL 250,000,000. In addition, the TL 30,000,000 threshold has been changed to TL 250,000,000 and TL 500,000,000 has been increased to TL 3,000,000,000 under Article 7(1)(b).
Accordingly, the Board’s authorization shall be required for the following cases in order for the relevant transactions to gain legal validity:
a) Whenever total turnovers of the transaction parties in Turkey exceed TL 750,000,000 and turnovers of at least two of the transaction parties in Turkey each exceed TL 250,000,000, or
b) The asset or activity is subject to acquisition in an acquisition transaction, and at least one of the parties of the transaction has a turnover in Turkey exceeding TL 250,000,000 and the other party has a global turnover exceeding TL 3,000,000,000.
Technology Undertakings
In addition to the amendments to turnover thresholds, technology undertakings have been defined in the Amending Communiqué, and undertakings operating in digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agricultural chemicals and health technologies have been included in this definition. Through the relevant amendment, the above-mentioned 250,000,000TL turnover thresholds are not applicable for transactions concerning the acquisition of technology undertakings operating or having R&D activities in the Turkish geographical market or providing services to users in Turkey.
It is stated that the amendment is aimed at allowing the Competition Authority (“Authority”) to largely supervise technology undertakings’ takeover transactions and to prevent killer acquisitions in relation to these undertakings.
Turnover Calculations for Financial Institutions
With the Amending Communiqué, changes have been introduced in relation to the way in which turnover figures are calculated for banks, financial leasing, factoring and financing companies, insurance, reinsurance and pension companies and other financial institutions.
Significant Impediment to Effective Competition Test
Significant impediment to effective competition criteria has been introduced as a result of the changes made to Article 7 of Law No. 4054 in 2020. These have been reflected in the Amending Communiqué with the aim of aligning it with Communiqué No 2010/4. Under the new criteria, mergers or acquisitions that result in a significant impediment to effective competition in the whole country or in part of it, especially by creating a dominant position or strengthening an existing dominant position, will be prohibited.
Changes Introduced to the Guidelines
The guidelines on mergers and acquisitions have also been amended in accordance with the significant impediment to effective competition test. In this regard, explanations were added to the Guidelines on the Assessment of Horizontal Mergers and Acquisitions (“Horizontal Guidelines”) in relation to proximity of competition and substitution, maverick firms, coordination effects, potential competition, killer acquisition theory and loss theory regarding digital markets.
In light of loss theories such as potential competition, competitive loss theory and killer acquisition loss theory, general principles have been included that can be considered in the acquisitions of especially newly established and developing companies. In addition to these principles, explanations on consumer data, the importance of which is increasing day by day due to digitalization and technological developments, and the effects of possessing consumer data on competition have been added to the Horizontal Guidelines.
Similarly, detailed updates regarding unilateral coordination effects have been included to the Assessment of Horizontal Mergers and Acquisitions.
Notification Form
The merger control filing notification form has also been changed. In this context, it has been stated that it is planned to significantly reduce the paperwork burden for written notifications that require comprehensive annexes and will allow the notification form to be filled and forwarded electronically in the near future. It has also been stated that the purpose of the change is to allow missing information requested by the Authority to be completed in a more practical and faster manner through the same electronic platform, and to shorten the approval process for undertakings.
Categorization of the requested information is another change in the notification form. To that end, the information is grouped under the headings of transaction, parties, market information and joint ventures. In addition, it was stated that some requested information was detailed in order to make the notifications complete and shorten the process.
Conclusion
The amendments introduced to Communiqué No. 2010/4, which regulates the procedures and principles regarding mergers and acquisitions transactions subject to the approval of the Board, turnover thresholds have been increased, it has been determined that turnover thresholds will not be sought in transactions related to technology undertakings and the relevant Guidelines have been updated within this scope. In this context, increasing turnover thresholds may be expected to reduce the number of transactions subject to the approval of the Board. On the other hand, since the turnover thresholds for technology enterprises will not be required, the fact that the transactions of these undertakings will be subject to permission may be a factor that increases the number of related transactions. The changes made in the notification form, on the other hand, are expected to facilitate electronic submission and reduce the paperwork burden.
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