Amendments Introduced By The Communiqué No. 2022/2 To The Mergers And Acquisitions Regime

2010/4 Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board (the "Communiqué No. 2010/4") which was published in the Official Gazette dated 7 October 2010 and took effect on 1 January 2011, with which the market share threshold mechanism had been replaced by the turnover-based threshold mechanism as a material change in the Mergers and Acquisitions regime for the sake of uniformity of the Mergers and Acquisitions regime with the source European Union ("EU") laws.

For the purposes of up-to-datedness of the legislation and its adaptation to the practice, the Authority has published the Communiqué No. 2022/2 Amending the Communiqué on Mergers and Acquisitions Calling for the Authorization of the Competition Board (the "Communiqué No. 2022/2") published in the Official Gazette no. 31768 dated 4 March 2022, and significant amendments have been introduced particularly with respect to turnover thresholds sought in terms of mergers and acquisitions as per the regulations put into effect in 2010 under the Communiqué No. 2010/4, and a further regulation has been made for technology undertakings.

The Communiqué No. 2022/2 published by the Authority mainly serves the purpose of harmonising those amendments, which were introduced in 2010 and took effect in 2011, and the Merger and Acquisition transactions conducted through practices, decisions and guidelines of over 10 years with the domestic and source legislations that have been developed throughout this process. It is also opined that the increase of the turnover thresholds in the Communiqué No. 2010/4 is a consequence of the need for ensuring that the changing value of Turkish Lira against foreign currencies meets the turnover thresholds targeted by the Communiqué.

In this article, the amendments introduced by the Communiqué No. 2022/2 to the Mergers and Acquisitions regime will be evaluated under four main topics: (i) The Effect of the Transition Period under the Communiqué No. 2022/2 on the Transactions to Be Entered into in the Interim Period, (ii) The Effect of the Regulations Newly Introduced for Technology Undertakings on the Existing Regime, (iii) The Amendments to the Relevant Guidelines, and (iv) The Amendments to the Filing Procedure as per the New Notification Form.

(i) The Effect of the Transition Period under the Communiqué No. 2022/2 on the Transactions to Be Entered into in the Interim Period
For a Merger and Acquisition transaction to attain a legal consequence to the fullest extent, all consecutive transactions consisting of multiple interdependent transactions should be realised in coordination. Another significant milestone for the completion of the Merger and Acquisition process is the phase of authorization of and/or notification to the competition authority of the relevant country.

For Merger and Acquisition transactions, the Communiqué No. 2010/4 stipulates that authorization of the Turkish Competition Board (the "Board") should be obtained before the realisation of the transaction, yet it does not clearly state in which stage of the process the authorization should be sought or the notification should be made. It is, however, stated that the date of realisation of the transaction is accepted as the "date of change of control". Even though no specific time period is specified in the Communiqué No. 2010/4, certain practices have come out since 1997 on the basis of both the Board’s decisions and the nature of the documents requested within the scope of the notification forms. According to the relevant practice of the Board; submission of the final version of the agreement between the parties was mandatory under the Communiqué adopted in 1997, while this requirement has been removed from the notification forms under the Communiqué No. 2010/4 and the Board's decisions have changed accordingly. It appears from certain decisions of the Board¹ that submission of the drafts of documents such as Share Purchase and Transfer Agreements, Letters of Intent and preliminary protocols, which are not yet signed between the parties, with the notification form has also been accepted under the Communiqué No. 2010/4. As a matter of fact, in its Huntsman² decision, the Board accepted the submission of the non-binding preliminary protocol and the notification stating that the closing would be realised following the authorizationl of the Board, which were attached to the notification form, and approved the realisation of the transaction, proves that the time of notification to the Board may vary in each case if it is made prior to change of control.

The Communiqué No. 2022/2 has not introduced any regulation on the timing of notification of the Merger and Acquisition transactions either, and the same regulation as in the Communiqué No. 2010/4 has been maintained in article 6 of the amended notification form. We believe that this was a deliberate choice. That is to say, it appears that the freedom of time provided for the submission of either final or draft versions of documents reflecting the parties' will concerning the transaction such as Share Purchase and Transfer Agreements, Letters of Intent, etc. remains in place.

Additionally, Communiqué No. 2022/2 is stated that the Communiqué No. 2022/2 will enter into force 2 months after its publication (i.e. 4 May 2022). This will result in a change in the turnover thresholds requiring notification as well, according to the timing of the change of control within the scope of the relevant Merger and Acquisition transaction. In other words, with respect to a Merger and Acquisition transaction, the decision on whether the transaction is subject to notification or not will be made;

• according to the turnover thresholds applicable before the amendment if change of control is to be realised within such 2 months' period,
• according to the turnover thresholds introduced by the Communiqué No. 2022/2 if change of control is to be realised 2 months later.

It should further be noted that the date of change of control, called as "closing" in practice, is important in identifying the relevant time, and the timing of any previous transaction within the process of the Merger and Acquisition transaction has no significance.

In the light of the foregoing, we are of the opinion that the filing can be made either as per the thresholds under the new Communiqué by waiting for 2 months or as per the previous thresholds without waiting for 2 months following the completion of the signing stage of a Merger and Acquisition transaction that is ongoing within the 2 months' period under the Communiqué No. 2022/2. However, if the transaction remains below the new turnover thresholds, waiting for the expiry of the 2 months' period and realising the transaction without notification to the Board will operationally eliminate the demanding and time-consuming filing process.

(ii) The Effect of the Regulations Newly Introduced for Technology Undertakings on the Existing Regime
The Communiqué No. 2022/2 has introduced new regulations for technology undertakings, which were not directly defined in the previous Communiqués, and to the Merger and Acquisition regimes related to those undertakings. The fast growing technology sector is gradually developing and strengthening its competitive nature with the participation of new players in the market. The rapid and competitive development in the mentioned sector is sometimes undermined and interrupted due to some large-scale actors' attempts to acquire new "start-ups" or small-scale actors that get into the market. The source EU law and other domestic laws of states have developed certain additional control mechanisms in order to avoid such transactions called as "killer acquisition" in the doctrine and to prevent disruption of the competitive structure.

The new control regime introduced by the Communiqué No. 2022/2 actually aims to prevent interruption in the rapid development of the technology sector as mentioned above and to establish an order in harmony with the source branches of law. Within the scope of this newly introduced concentration control regime, the turnover threshold of 25 million Turkish Liras stipulated under the Communiqué No. 2022/2 will not be sought in Merger and Acquisition transactions realised with respect to undertakings engaged in the areas of digital platforms, software and game software, financial technologies, biotechnology, pharmacology, agriculture chemicals and health technologies, which operate in the geographic market of Turkey and offer services to the users in Turkey. We are of the opinion that this regulation has been introduced as a control mechanism against the risk of big market players' acquiring the undertakings that get into the sector at the start-up level and removing them from the market, without such transaction being controlled due to absence of sufficient turnovers.

(iii) The Amendments to the Relevant Guidelines
The Communiqué No. 2022/2 has introduced certain amendments to the Guidelines on the Assessment of Horizontal Mergers and Acquisitions (the "Horizontal Guidelines") and the Guidelines on the Assessment of non-Horizontal Mergers and Acquisitions (the "Non-Horizontal Guidelines") which were drawn up in line with the Communiqué 2010/4. Those amendments generally aim the harmonisation of the legislation and the practice by adding many issues that have attained a place in practice by the Board's decisions, and besides, analyses particularly on technology- and innovation-based Merger and Acquisition transactions have been added to the guidelines.

It appears that principles, criteria and methods mainly established by the Board's decisions with respect to:

• definition of the competitive relationship particularly between all potential competitors in the market definitions within the scope of the concept of potential competition;
• reliance on the closeness of competition analysis in markets involving differentiated products;
• analyses' primary point of focus being factors such as number of users, number of visits, network effects, ecosystems owned and scope and size of data in Merger and Acquisition transactions in digital markets under the topic of innovation and effects related to consumer data;
• performance of an examination strictly within the framework of killer acquisition theory and potential competition harm theory in a case where one of the parties to the merger is newly established

and on many similar matters have been detailed and added to the Horizontal Guidelines.

As to the Non-horizontal Guidelines, additions have been made for changes stipulated concerning matters related to evaluation of vertical and multi-market acquisition transactions, particularly including updates concerning digital markets with reference to the evaluations in the Horizontal Guidelines, and for unilateral and coordinated effects.

Considering all those amendments, it should be concluded that theories and precedents brought in practice through the Board's decisions have gained a legislative foundation and integrity upon their incorporation into the relevant guidelines.

(iv) The Amendments to the Filing Procedure as per the New Notification Form
Another significant amendment introduced by the Communiqué No. 2022/2 is the change of the notification form used for notification to the Board. In the announcement made on the Authority's website, it is stated that changes in the notification form have been made in order to achieve a structure convenient for the submission of notifications only through electronic media in the forthcoming period and create a system through which specialists can more easily access to information concerning the relevant transactions.

The expression added by the Communiqué No. 2022/2 stating that notification forms can also be sent through e-Government is construed as providing a legal ground to a situation which is already applicable in practice. When looked into the new notification form template, it is understood that the format of the form has been turned into a chart filling-out model, with an attempt to switch to a uniform practice in terms of content and manner of response, rather than each undertaking's freedom of responding the questions in the format it will create as in the previous practice. The practice of marking in red the information in the nature of commercial secret added to the notification form also appears as a change preferred for uniforming different methods used in practice. The most useful amendment to the new notification form may be the systematisation of the requested information under headings, and the explanation of such information in detail with example diagrams and footnotes.

In addition, information included in the long-form filing only in case of exceeding certain market shares (in terms of affected markets, 20% of the total market shares in horizontal transactions and 25% of the market share of one of the parties in vertical transactions) in the previous version of the form (i.e. information requested under Sections 6, 7 and 8 of the previous form) will, from now on, be filled out and submitted to the Authority for each and every merger and acquisition transaction involving an affected market in Turkey. As can be seen from the structure of the new form attached to the Communiqué No. 2022/2, sections between "Section 3.9 and Section 3.20" in the new form requires in further detail the information requested under "Sections 6, 7 and 8" of the previous form. In addition, the number of undertakings whose contact details are requested under the form is increased, and it is stipulated that even the contact details of suppliers of the transaction parties as well as the new undertakings in the market should be submitted.

Having reviewed the new notification form, we are of the opinion that the Authority has conducted a study in line with the purposes indicated on its website, and that, as previously stated, the form is turned into a uniform and systematic structure suitable for being electronically submitted only in the future.

Conclusion
The amendments introduced by the Communiqué No. 2022/2 in the Mergers and Acquisitions regime are in fact a reflection of the disciplines created through 10 years of practice, the changing foreign currency index, the updated legislation, the technological developments and the globalisation on the legislation. These are greatly important and -in our opinion- legitimate amendments especially for the uniformity of concepts and expressions developed through practice and for adaptation to the evolving conditions.

The legitimacy of the definition made with respect to the Technology Undertakings and the control in practice can only be evaluated once the relevant practice becomes established and the Board's point of view is understood.

The Communiqué No. 2022/2 can be found here.
The announcement made by the Authority concerning the amendments to the Guidelines concerning Mergers and Acquisitions can be found here.
Our initial memo regarding the Communiqué No. 2022/2 can be found here.

MORAL & PARTNERS
Duygu Bozkurt Kadirhan, Senior Associate
Işılay Işık, Associate
Deniz Yontuk, Intern Associate



1 The Board Decision no. 11-44/1021-437 dated 03.08.2011 and the Board Decision no. 11-48/1212-425 dated 22.09.2011
2 The Board Decision no. 11-48/1212-425 dated 22.09.2011