Increase in merger control thresholds
New merger control regime for companies active in certain markets/sectors
Press Release No. 2022/2 amending Press Release No. 2010/4 (Communiqué No. 2010/4) relating to mergers and acquisitions subject to the approval of the Competition Council (the Modifying Press Release) was published on the Official Gazette on March 4, 2022 and will come into force on May 4, 2022.
This article gives an overview of the substantive changes introduced by the amending communiqué.
The amendment statement raised Turkey’s merger control thresholds. Following the modification press release, if a transaction is closed (i.e. the concentration is completed) on or after May 4, 2022, this transaction will have to be notified in Turkey if one of the turnover thresholds following alternatives is achieved:
- the total turnover of the parties to the transaction exceeds 750 million Turkish liras (approximately 7.19 million euros or 84.9 million dollars) and the turnover of at least two of the parties to the transaction each exceeds 250 million Turkish liras (approximately 23.9 million euros or 28.3 million dollars); Where
- the turnover of the transferred assets or acquired businesses exceeds 250 million Turkish liras and the worldwide turnover of at least one of the other parties to the transaction exceeds 3 billion Turkish liras (approximately 287.9 million euros 339.7 million) or the Turkish turnover of one of the merging parties exceeds 250 million Turkish liras and the worldwide turnover of at least one of the other parties to the transaction exceeds 3 billion Turkish liras.
In summary, the Amendment Notice updates the Turkish merger control thresholds as follows:
- the previous threshold of 30 million Turkish liras (approximately 2.8 million euros or 3.3 million dollars) has been raised to 250 million Turkish liras;
- the previous threshold of 100 million Turkish liras (approximately €9.5 million or $11.3 million) has been raised to 750 million Turkish liras (approximately €71.9 million or $84.9 million). dollars); and
- the previous threshold of 500 million Turkish liras (approximately €47.9 million or $56.6 million) was raised to 3 billion Turkish liras.
(All currency conversions are based on the Turkish Central Bank’s applicable average buying exchange rates for fiscal year 2021.) Prior to May 4, 2022, the current regime will apply.
These new notification thresholds updated the previous thresholds, which had remained in effect for more than nine years. During this period, exchange and inflation rates increased significantly. Based on the US dollar and euro equivalents of the applicable thresholds at the time of their introduction, the update will act as an equalizer, as the new dollar and euro thresholds are close to the levels that were applicable when the updates previous ones were adopted.
The previous update of the notification thresholds was made in February 2013, which means that the national competition law enforcement regime has been using the same thresholds for more than nine years. Prior to the February 2013 changes, the old numbers were in use for just over two years.
In February 2013, the equivalent in US dollars and in euros of the applicable thresholds were respectively close to:
- $57 million – €42 million;
- $17 million – €13 million; and
- 286 million dollars – 210 million euros.
The corresponding figures in dollars and euros are now very close to the figures that were applicable in February 2013:
- $53 million – €48 million;
- $18 million – €16 million; and
- 212 million dollars – 192 million euros.
Therefore, the amendment release brought the figures closely in line with their 2013 levels to match increases in exchange rates and inflation.
Due to the rapid evolution of the technology industry, the amendment communiqué also introduced a new merger control regime for companies active in certain markets/sectors. Following the Amendment Communique, the “250 million Turkish lira turnover threshold” mentioned above will not be sought for acquired companies active in the numerous fields or assets related to these fields if they:
- operate in the Turkish geographic market;
- conduct research and development activities in the Turkish GeoMarket; Where
- provide services to Turkish users.
Fields and associated assets include:
- digital platforms;
- computer software or game software;
- agricultural chemicals; and
- health technology.
The amendment communiqué also updated the rules applicable to the calculation of the turnover of financial institutions in accordance with recent changes in financial regulations. Recent updates to Article 9 of Communiqué No. 2010/4 are as follows:
- calculating the turnover of financial institutions. The Amendment Communiqué aligns wording and terms with applicable banking and financial regulation – namely, it excludes the term “participating banks” and refers to the term “banks” in general, which covers all legal forms of banks; and
- the names and references of the relevant regulations issued by the Banking Regulatory and Supervisory Agency and the Capital Markets Board.
According to press release No. 2010/4, the notification form and attachments are filed at the headquarters of the Competition Authority in Ankara by physical delivery. Recent updates allow notifying parties to submit the notification form via e-Devlet, an elaborate system of web services, one of which is electronic submission. E-Devlet was already available for submissions, with increased usage during the pandemic period. Press release no. 2010/4 explicitly mentions these alternative methods of submission in order to make it official.
In June 2020, the dominance test applicable to merger review was reformulated from the test of “creation or strengthening of a dominant position, thereby resulting in a significant lessening of competition” to the test of significant impediment of competition effective (SIEC). In order to align with this modification of the underlying rules, the amendment press release now provides that:
[m]Additions and acquisitions that would result in a significant reduction in effective competition in all or part of the territory, in particular in the form of the creation or strengthening of a dominant position, are prohibited.
This mirrors the recently introduced SIEC test, since the wording “one or more undertakings with a view to creating a dominant position” has been replaced by “in particular in the form of creating a dominant position”.
The change release also revises the structure and content of the notification form, which is attached to the change release. With regard to the definition of “affected markets”, the Change Notice excludes the expression: “possibly affected by the operation which is the subject of the notification”; instead, it provides that:
in Turkey, affected markets include all relevant product and geographic markets where (a) two or more of the parties are engaged in commercial activities in the same product market (horizontal relationship), (b) at least one of the parties is engaged in commercial activities in the market downstream or upstream of any product market in which the other operates (vertical relationship).
Communiqué No. 2010/4 provided that the information requested in sections 6, 7 and 8 of the notification form (for example, import conditions, supply structure, demand structure, market entry conditions and potential competitive and efficiency gains) were not required where:
- the combined market share of the parties did not exceed 20% in terms of horizontal relationships; and
- the market share of one of the parties did not exceed 25% in terms of vertical relationships within the affected markets.
On the other hand, the new model form requires parties to provide some of the detailed information requested in sections 6, 7 and 8 of the old model form in cases where there are affected markets in Turkey, regardless of are the market shares held by the parties on these markets.
In addition, the change release requires information claimed to be confidential to be highlighted in red, which was not required on the previous notification form template.
The model form emphasizes that the value of the transaction reflects the value of all pecuniary and non-pecuniary assets and benefits (denominated in Turkish lira) that the acquirer has acquired or will acquire from the seller as part of the transaction. As such, the transaction value now includes all pecuniary payments to be made in the context of:
- the transaction;
- right to vote;
- movable and immovable property;
- conditional payments;
- additional payments for non-compete obligations (if any); and
- buyer’s obligations.
The update to local turnover notification thresholds was long overdue. The last update dates back nine years, in 2013. The adjustment of the applicable thresholds (i.e. a multiplication by five for the worldwide turnover thresholds and by seven for the turnover thresholds Turkish business) has brought the equivalent value in US dollars and euros back close to their 2013 levels. that reach the following markets (and users), whether or not they exceed the Turkish thresholds:
- digital platforms;
- agricultural chemicals; and
- health technology.
For more information on this subject, please contact Gönenç Gürkaynak at ELIG Gürkaynak Avocats by telephone (+90 212 327 17 24) or by e-mail ([email protected]). The ELIG Gürkaynak Avocats website can be accessed at www.elig.com.