Competition Monthly

The Mergers and Acquisitions Overview Report for 2022 has been Published

On 6 January 2023, the Turkish Competition Authority ("TCA") published its Mergers and Acquisitions Overview Report for 2022 ("Report") on its website.

The Report includes a comprehensive overview of merger control in Turkey in 2022 by providing statistics for merger control cases that took place in 2022 as well as comparisons with previous years.

In 2022, the Turkish Competition Board ("Board") examined a total of 309 mergers and acquisitions, and the combined total value of these transactions was approximately 5.6 trillion TL. The number of notified transactions in 2022 decreased by 21% compared to the 310 transactions reported in 2021. One of the reasons for this decrease might be due to the increase in turnover thresholds for transactions that will be subject to notification in May 2022 as per Communique No. 2022/2 on Amending Communique No. 2010/4 Concerning Mergers and Acquisitions Requiring the Approval of the Turkish Competition Board ("Communique No. 2022/2"). However, the impact of the turnover threshold exemption, which particularly applies to acquisitions of technology undertakings, on the number of transactions examined is not clear in the Report.

In 2021, excluding privatizations, the target companies of the 118 transactions examined were companies established under the laws of the Republic of Turkiye, and this number decreased to 82 in 2022. The total transaction value of these examined transactions was 42 billion 667 million TL in 2021, while it increased by approximately 70% to 72 billion 209 million TL in 2022. At this point, it can be predicted that the value of M&A transactions determined in foreign currency had an effect on the total transaction value.

According to the grouping in terms of the origin of the parties:

• The total number of transactions, all of which originated in Turkey, was 39, and the value of these transactions increased by 58% compared to 2021 with a total transaction value of TRY 25 billion 73 million TL,
• The number of transactions in which at least one of the parties is of Turkish origin was 34 and the transaction value was 36 billion 224 million TL, and
• The number of transactions in which all parties are of foreign origin was 9 and the transaction value was 10 billion 912 million TL.

An analysis of the number of transactions by investors reveals that the Netherlands and the United Arab Emirates ranked first with 5 transactions each. These countries were then followed by the United Kingdom with 4 transactions. In the transactions where the target company is of Turkish origin, the amount of investment reported to be realized by foreign investors is approximately TL 43 billion.

The "generation, transmission, and distribution of electric energy" is the area with the highest number of transactions as well as the highest transaction value notified in 2022 with 8 transactions and a transaction value of 12 billion 164 million TL for mergers and acquisitions where the target company is located in Turkey. The transaction value in this field corresponds to approximately 11% of the reported transaction value in 2022.

For acquisitions in Turkey where the target company is public, transportation and warehousing has the highest number and volume of transactions.

The number of transactions in this field was 5, with a transaction value of 20 billion 536 million TL.

The distribution of the aforementioned data is presented below:

In 2022, among the transactions notified to the TCA, 3 transactions were subject to final review. One of these transactions was approved while the examination process remains ongoing for the other two.

The Board’s Decision to Conduct an Investigation against Certain Private Schools

On 12.01.2023, the TCA announced on its website that the Board initiated two separate investigations against certain private schools for alleged violations of Article 4 of the Act No. 4054 on the Protection of Competition ("Turkish Competition Act"). One of the investigations was initiated against 8 private schools based in Ankara operating at the primary and secondary education level while the other one concerns 5 French private high schools.

Private schools have been on the Board's radar several times in the past few years, although the Board has not initiated an investigation directly against any private schools until now.

The Board first initiated an investigation[1] against the Turkish Private Schools Association in 1999 for its decisions on the association of undertakings to determine private school fees. This investigation was based on the suspicion that the private school fees for 1998-1999 were determined in meetings organized by the Association under the name "Fee Meeting". However, the Board decided that there was no violation of the Turkish Competition Act as there were no similarities in the private school fees and there was no evidence that the content of the meetings went beyond the sharing of inflation rates determined by different organizations, despite the fact that the meetings called "Fee Meetings" had been held for a long time.

Private schools became a topic for the second time as the subject of a preliminary investigation[2] conducted by the Board in 2011. In this preliminary investigation, which was initiated against 31 private schools alongside the Turkish Private Schools Association, the Board stated that since that some private schools organized meetings in 2001 and shared information on tuition fees, scholarships, and salaries for the 2001-2022 academic year, such meetings and sharing of information could be considered a violation of the Turkish Competition Act. However, the violation was time-barred at the time of the violation, and thus, no investigation was opened against the private schools in question.

In the same preliminary investigation decision, the Board also examined the Private School Principles prepared by the Turkish Private Schools Association for its members, which are the conditions necessary to continue membership with the association. The Board considered these principles as a decision of the association of undertaking, restricting competition under Article 4 of the Turkish Competition Act, because some of these principles weaken the bargaining power of consumers and may make it difficult for teachers working in private schools to transfer to other schools. However, the Board did not impose any fines and instead decided to issue an opinion in accordance with Article 9(3) of the Turkish Competition Act.

In 2012, the Board initiated a preliminary investigation[3] with the allegation that private schools in Istanbul violated the Turkish Competition Act by increasing their fees at a high rate at the same time. The Board decided not to initiate an investigation against the private schools as no evidence of violation was found.

In 2013, a preliminary investigation[4] was conducted against 5 French high schools who are now parties to the newly initiated investigation in January 2023. In this preliminary investigation decision, the Board stated that all of the schools party to the investigation declared that they set their annual tuition fees all together during a meeting in April of each year. However, the Board once again decided not to open an investigation, because the price fixing was not intended to restrict competition and did not have a restrictive effect on competition. In accordance with Article 9(3) of the Turkish Competition Act, the Board decided to send a warning letter to the schools to refrain from engaging in behaviors that may constitute a violation of the Turkish Competition Act.

One of the parties to the new investigation filed an application with the TCA in 2015 requesting an exemption for the practices of French high schools operating in Istanbul to jointly determine their annual school fees. The Board stated that price fixing agreements between competitors are deemed to be per se violations of competition. As a result of this assessment, the exemption request was rejected and the Board decided to send a warning letter to the private schools in question one more time.[5]

In its decisions rendered in 2013 as well as its prior decisions, the Board referred to the risk of violation and encouraged undertakings to refrain from such actions. In its exemption decision rendered in 2015, the Board emphasized that setting school fees together with other schools is considered a per se violation. We are yet to see how this process, which has been ongoing since 1999, will evolve following the Board's decision after its first fully fledged investigation against private schools.

Decisions on Hindering / Complicating On-Site Inspections

The TCA's most important instrument in accessing evidence to establish alleged infringements of undertakings is its authority to conduct on-site inspections. Unannounced and unscheduled visits to the undertakings' premises enable the TCA personnel to examine the undertakings' documents and physical/digital data. During this process, undertaking employees are required to act in co-operation with the TCA experts. Otherwise, the TCA may impose an administrative fine at a rate of 0.5% of the previous financial year's turnover on the ground of obstruction of the on-site inspection.

i. Board's Decisions

Administrative fines arising from hindering on-site inspections have been a hot topic in the last year, and the decisions published in the first month of the year actually indicate that the topic will remain popular in 2023.

In the subject of these decisions[6]-[7], the Board conducted on-site inspections at the headquarters of:

• L'oreal Türkiye Kozmetik Sanayi ve Ticaret A.Ş. ("L'oreal"), which was subject to a preliminary investigation, and
• Softtech Yazılım Teknolojileri Araştırma Geliştirme ve Paz. Tic. A.Ş. ("Softtech"), which was subject to an investigation.

During the on-site inspection of Softtech's premises, the TCA determined that one HR employee of the company deleted some e-mails after the initiation of the on-site inspection. Despite the claim that the deletion was due to the stress and panic of the employee, the Board determined that the deletion of any data after commencement of the on-site inspection constitutes hindering/complicating the on-site inspection in accordance with established precedents. Thus, the Board did not further evaluate whether it could retrieve the deleted data or whether the content of the deleted data was relevant to the determination of an act against competition.

Softtech also argued that they sent a warning e-mail to its employees requesting them not to make any deletions, but the deletions were made before the employees in question could see such warning e-mail. The Board emphasized that these and similar warnings are a company's internal matters and will not be taken into account during the assessment of the hindering/complicating of an on-site inspection. Indeed, during the on-site inspection at L'oreal, the TCA determined that some employees deleted messages from the WhatsApp groups after the TCA personnel arrived on L'oreal's premises and that the deleted messages were related to the on-site inspection. Even though L'oreal argued that the deletions were made before the warning e-mail was sent to its employees, and therefore, it cannot be considered as hindering the on-site inspection, the Board, nonetheless, maintained its position in the Softtech decision.

ii. Court's Decision

The decision[8] rendered for Pasifik Tüketim Ürünleri Satış ve Ticaret A.Ş. ("Pasifik") demonstrates that the Board's attitude towards the hindering on-site inspections is also approved by the administrative judiciary. Pasifik filed a lawsuit against this decision and requested cancellation of the administrative fine imposed by the Board.

As per the Board decision, it was determined that some e-mail correspondences were deleted when the sales director had remote access to his computer while he has been out of the city during the on-site inspection at Pasifik's company headquarters. Pasifik claimed that the e-mails might contain personal data or information regarding the employee's private life and the deletion of these e-mails arose from a basic human reflex. Pasifik further argued that even if these correspondences were deleted, the TCA's personnel could still recover these correspondences. However, the Board concluded that the deletion process delayed the experts' access to the data and created difficulties for the experts' access to the possible evidence and findings that could have been obtained (should such deletion has not occurred) and decided to impose an administrative fine on Pacific.

The Administrative Court emphasized that not only hindering but also complicating the on-site inspection is subject to an administrative fine. Similar to the Board's position in the Pasifik, Softtech, and Loreal decisions, the administrative court underlined the fact that whether the deleted e-mails are related to private life or work or whether they can be restored after deletion, does not matter, but the deletion itself indeed constitutes an act of hindering the on-site inspection.

Another court decision regarding the hindering of on-site inspections was published on 27.12.2022. As per the Board's preliminary investigation against the undertakings active in the fast moving consumer goods sector, which was challenged before the court, the TCA conducted an on-site inspection at the premises of Eti G1da Sanayi ve Ticaret Anonim Sirketi'nin ("Eti"). During the on-site inspection, the representatives of Eti misinformed the TCA personnel that certain company representatives were not present at the company's premises, even though such representatives were actually in the premises when the on-site inspection was initiated. In fact, TCA's review of the entrance records revealed that such persons were present in the company when the on-site inspection started. Due to such misinformation, the Board decided to impose an administrative fine of approximately 28 million TL on Eti, as the flow of incorrect information in question constituted hindering the on-site inspection.[9]

Eti filed a lawsuit before the Ankara 17th Administrative Court for the annulment of the Board's decision. The court, however, determined that the Board's decision was in compliance with the applicable laws and approved the decision. Such conclusion demonstrates that the Board not only considers the destruction or deletion of information and documents after an on-site inspection has begun but also the flow of incorrect information about individuals present at the company at the time of the on-site as an act of hindering the on-site inspection.

In the second on-site inspection carried out at the same address, some WhatsApp correspondences emerged. The TCA discovered certain phone records belonging to an employee's relative after making a comparison between the phones whose correspondence could not be identified and the phones synchronized with the associated e-mail address. Thereupon, the TCA requested information from the Information Technologies and Communication Authority ("BTK"), to understand whether the GSM number used by the person in question was also used on the phones registered with different IMEI numbers, and if such number was used, whether the phone signaling the GSM number differed, especially after the on-site investigation started. In response, BTK determined that the aforementioned GSM number was used on the phone with a different IMEI number before the first on-site inspection, and on a phone with a different IMEI number only after 26 minutes following the start of the on-site inspection.

Accordingly, in the subject matter investigation, the TCA determined that the experts were misled by removing the SIM card and inserting it into an "empty" phone. 

Biletix Decision

On 20.06.2019, the Board initiated an investigation against Biletix Bilet Dağıtım Basım ve Ticaret Anonim Şirketi ("Biletix")[10] on the grounds that Biletix allegedly abused its dominant position in the market of intermediation services for the sale of event tickets (excluding football matches) through the platform. As a result of the investigation, the Board concluded that Biletix should not enter into agreements containing exclusivity or provisions that would lead to de facto exclusivity and must refrain from such practices.

Thereupon, Biletix filed a lawsuit before the Ankara 12th Administrative Court ("Court") for the annulment of the Board's decision. In the decision[11] dated 23.11.2022, the Court assessed whether Biletix could benefit from the group exemption or the individual exemption.

In terms of block exemption

The Court concluded that Biletix had significant bargaining power compared to its competitors because Biletix's market share was significantly above 40% during the period of 2016-2019 and that Biletix was also a subsidiary of Ticketmaster, which was the world's leading ticketing companyBiletix argued that the Board's market definition should also include intermediary services for the sale of football match tickets. However, the Court noted that no undertakings, including Biletix, were permitted to provide intermediary services for the sale of football match tickets in light of the applicable legislation, and therefore, the "market" cannot be defined as requested by Biletix.

The Court further concluded that as Biletix had a market share exceeding the threshold for a block exemption within the scope of the market definition, Biletix's exclusive agreements with organizers could not benefit from the group exemption available under the Communique No. 2002/2.

In terms of individual exemption

Most organizers who prefer to work with a single ticket sales company signed an exclusivity agreement with Biletix during the period of 2016-2019. The Court assessed that Biletix prevented organizers from working with other undertakings in the relevant period.

Due to such high rate, the Court upheld the Board's decision considering that the condition of "no elimination of competition in a significant part of the relevant market" was not met.

Duru Bulgur Decision

On 23.01.2023, the Board published its reasoned decision[12] regarding its investigation against Duru Bulgur G1da San. ve Tic. A.S. ("Duru Bulgur") on the grounds that Duru Bulgur allegedly determined the resale price in its sales to retail chains.

Upon the Board's preliminary investigation regarding the allegation that Duru Bulgur determined the resale price of Duru Bulgur in its sales to retail markets in Konya and Karaman regions, the Board decided not to initiate an investigation against Duru Bulgur, but to issue an opinion in accordance with the Turkish Competition Act. However, Ankara 13th Administrative Court annulled the Board's decision. The Board appealed the annulment decision before the Ankara Regional Administrative Court, but the Court rejected the Board's appeal.

Thereupon, the Board initiated an investigation against Duru Bulgur in order to comply with the court decision.

As a result of the investigation, the TCA determined that Duru Bulgur "was engaged in practices regarding the determination of the sales price of the markets selling in the organized retail channel since 2011 and that these practices have continued until today." The Board also emphasized that these practices were common and continuous. In light of these assessments, the Board decided to impose an administrative fine of approximately 5 million TL on Duru Bulgur based on its assessment that Duru Bulgur violated Article 4 of the Turkish Competition Act.

Settlement Trend Continues in 2023

In January, TCA published 4 reasoned decisions and 2 short decisions revealing that the increasing settlement trend in Turkish competition investigations maintained its rise in 2023. You can find the decisions we previously discussed on the topic in our November bulletin here.

These 5 investigations, which resulted in settlements, were initiated by the Board in 2022 for alleged violations of Article 4 of the Turkish Competition Act on the grounds that:

• Hayırlı El Kozmetik Pazarlama A.Ş.[13] ("Hayırlı El Kozmetik") interfered with the resale price of the products it supplies and restricted the internet sales,
• Beypazarı İçecek Pazarlama Dağıtım Ambalaj Turizm Petrol İnşaat Sanayi ve Ticaret A.Ş. [14] ("Beypazarı") and Kınık Maden Sulari A.Ş. [15]("Kınık") were in an agreement for future price fixing, and
• DyDo Drinco Turkey İçecek Satli ve Pazarlama A.Ş.[16] ("DyDo Drinco Turkey"), Panek Ziraat Aletleri Dayanıklı Tüketim Malzemeleri Otomotiv Yakıt Petrol Ürünleri Tarım Ticaret A.Ş.[17] ("Panek") and NAOS İstanbul Kozmetik San. ve Tic. Ltd. Şti. [18] ("NAOS")  interfered with the resale price of products supplied by such companies.

As a result, taking into account the settlement applications of the undertakings, the Board decided to apply a 25% reduction on the administrative fines to be imposed to Hayırlı El Kozmetik, Beypazarı, Kınık Panek and NAOS and a 20% reduction for DyDo Drinco Turkey. Especially in the DyDo Drinco decision, the Board deviated from its then established precedents - where it would usually apply a settlement reduction from the upper limit of 25%, but applied a 20% reduction. Nevertheless, we are of the view that such deviation resulted from the mitigating elements already factored in the calculation of the base fine. In fact, the Board did already reduce the base fine by 50%, taking into account the facts that DyDo's actions regarding the resale price determination of retail outlets were concentrated in the local channel, DyDo's low turnover share obtained from this channel in light of its total turnover, as well as DyDo's position in the market. 

Another notable feature derived from Beypazarı and Kınık decisions, is that these two decisions were the first ones in which both of the leniency and the settlement procedures were applied. In this respect, a 35% reduction was applied to Beypazarı - which was the first undertaking applying to benefit from leniency, and a 30% reduction was applied to Kınık, which was the second undertaking applying to benefit from leniency, on top of the 25% reduction rates already applied due to the settlement mentioned above.

1. Board's decision dated 11.02.1999 and numbered 99-6/48-1

2. Board decision dated 03.03.2011 and numbered 11-12/226-76

3. Board decision dated 27.12.2012 tarih ve 12-68/1681-617 sayılı karar

4. Board decision dated 19.12.2013 and numbered 13-71/960-407

5. Board decision dated 07.07.2015 and numbered 15-28/328-103

6. Board decision dated 29.09.2022 and numbered 22-44/646-278

7. Board decision dated 15.09.2022 and numbered 22-42/614-258

8. Ankara 18th Administrative Court's decision dated 07.12.2022 and numbered 2022/548

9. Board's decision dated 29.04.2021 and numbered 21-24/278-123

10. Board Decision dated 21.01.2021 and numbered 21-04/53-22

11. Ankara 12th Administrative Court's decision dated 23.11.2022 and numbered 2021/2007

12. Board Decision dated 17.02.2022 and numbered 22-09/130-50

13. Board decision dated 21.07.2022 and numbered 22-33/523-210 

14. Board decision dated 18.05.2022 and numbered 22-23/379-158

15. Board decision dated 14.04.2022 and numbered 22-17/283-128

16. Board decision dated 07.07.2022 and numbered 22-32/508-205

17. Board decision dated 29.12.2022 and numbered 22-57/899-369

18. Board decision dated 12.01.2023 and numbered 23-03/29-12

Tagged with: Hergüner Bilgen Üçer Attorney Partnership, Kayra Üçer, Competition