Spotlight: merger review in Turkey

All questions

Merger review

The main legislation on merger review is Article 7 of the Competition Law and Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board. Following the amendment made in Article 7 of the Competition Law, to harmonise with EU legislation, the significant impediment to effective competition (SIEC) test was adopted by the Turkish competition law system, replacing the ‘dominant position’ test for mergers or acquisitions.

Significant changes were introduced in Communiqué No. 2010/4 in March 2022. Pursuant to new revisions, a concentration shall be deemed notifiable in Turkey if:

1. the aggregate Turkish turnover of the transacting parties exceeds 750 million liras and the Turkish turnover of at least two of the transacting parties each exceeds 250 million liras; or
2. the asset or business subject to acquisition in acquisition transactions, and at least one of the parties to the transaction in merger transactions, has a turnover in Turkey exceeding 250 million liras and the other party to the transaction has a global turnover exceeding 3 billion liras.

In line with these newly introduced amendments, transactions regarding the acquisition of technology undertakings operating in the Turkish geographical market or having R&D activities or providing services to users in Turkey shall be subject to notification to the TCA regardless of the above-mentioned 250 million liras turnover thresholds. In this regard, technology entities are defined as undertakings or related assets operating in the fields of digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agrochemicals, and health technology under the relevant communiqué.

In addition, there are amendments regarding the methods used for calculating the turnover of financial institutions. Another amendment concerns the submission of notification forms to the TCA via the e-government portal. While the TCA had accepted the notification forms via the e-government portal prior to the amendment, with this addition, the actual practice has also been included in the written legislation.

Last, the provision in Article 13(2) of Communiqué No. 2010/4 that states ‘mergers and acquisitions that lead to a significant impediment of competition by creating or strengthening a dominant position shall be prohibited’ has been amended to ‘mergers and acquisitions that lead to a significant decrease in competition particularly by creating or strengthening a dominant position shall be prohibited’. The purpose of the added word ‘particularly’ is to emphasise that a concentration will not be permitted if it significantly restricts competition, even if it does not create a dominant position. This is in line with the relevant amendment to the Turkish Competition Law in 2020 when the SIEC test was introduced officially into Turkish merger control. This newly introduced amendment merely harmonises the secondary legislation with the Competition Law.

i Significant cases

The TCA has published its first decisions on acquisitions targeting technology undertakings. The decisions came amid some uncertainties regarding the newly added definition in the merger notification rules of technology undertakings, which are defined as undertakings active in the areas of digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agrochemicals and health technologies.

Following the recent amendments that set lower notification thresholds for technology undertakings that are active or have R&D activities in the Turkish geographic market or that provide services to customers in Turkey, the TCA concluded that several transactions were subject to authorisation under the new rules and cleared these transactions on the basis that they did not lead to a significant reduction to effective competition. For example, in the acquisition of Airties through P8 Holding, the TCB concluded that due to the software services that Airties provides, it is considered as a technology undertaking.

ii Trends, developments and strategies

In 2022, 245 mergers and acquisitions (M&A) and privatisation transactions were examined by the TCA. There was a decrease in the number of M&A transactions examined by the TCA in 2022 compared with 2021. Of these, the most transactions and the highest transaction value in which the target company originated in Turkey were reported in the field of ‘generation, transmission and distribution of electrical energy’ with a total value of 5.1 billion liras in eight transactions.

iii Outlook

With the recent legislative amendments, the TCA aims to protect innovation-based competition by introducing the definition of technology undertakings in terms of M&A control. Indeed, the TCA, with the amended lower thresholds, embraces a broader approach to bring the acquisitions of technology undertakings under a greater degree of control and to prevent stopping acquisitions of such undertakings. In particular, the tendency for large-scale incumbent undertakings to take over nascent competitors is to be controlled to avoid restricting effective competition.