Hergüner Competition Monthly - March 2023

Turkish Competition Board Fines Elon Musk

On 6 March 2023, the Competition Board published a decision on its official website regarding the Board’s examination of Elon Musk’s acquisition of sole control of Twitter Inc.

Elon Musk acquired sole control of Twitter in October 2022. This transaction was subject to the Board's authorization as it exceeded the turnover thresholds stipulated under the Communiqué Concerning Mergers and Acquisitions Calling for the Authorization of the Competition Board (“Communiqué on Mergers and Acquisitions”) and constituted a change of control. The Board conducted an ex officio examination of the transaction since the transaction parties failed to apply for the Board’s authorization prior to the consummation of the transaction. After conducting the examination, the Board concluded that the transaction will not significantly reduce competition in the market, and therefore granted authorization for the transaction.

However, because the transaction parties failed to notify the Board prior to the consummation of the transaction and proceeded without the Board's authorization, known as “gun-jumping” in competition law literature, the Board decided2 to impose an administrative fine in the amount of 0.1% of Elon Musk's turnover in Türkiye for the 2022 financial year pursuant to Article 11 of Act No. 4054 [1] on the Protection of Competition ("Competition Act").

The Concept of Gun-Jumping

Mergers and acquisitions that lead to a permanent change in the control structure of the target undertaking(s) and in which the turnover of the transaction exceeds certain thresholds are subject to the Board’s authorization, as per Article 7 of the Competition Act and the provisions of the Communiqué on Mergers and Acquisitions. Following the notification for the Board’s authorization, the Board will analyze the relevant transaction by examining its impact on eective competition in the market and will decide on the transaction.

The consummation of transactions which are subject to the authorization of the Board without obtaining authorization from the Board is referred to as “gun-jumping". Transactions realized in this way may be subject to sanctions, and in such cases, the Board will examine the transaction ex oicio. Upon the Board’s examination, they may decide to impose an administrative fine if the transaction is authorized or to terminate the transaction with an administrative fine if the transaction is not authorized.

In addition to failing to fulfil the notification obligation, realizing the transaction before the notification process has been completed can also be considered gun-jumping. There are examples of gun-jumping that concern de facto control changes over the target undertaking as well as cases involving the direct behavior of the parties, such as registering the share transfer at the trade registry oice without obtaining the Board's authorization. In such scenarios, the Board will conduct an examination on a case-by-case basis to determine whether the control of the target undertaking is actually transferred to the acquiring party beyond the measures intended to protect the current value of the target undertaking until the closing of the transaction.

The European Commission’s Altice/PT Portugal Decision [2] has significant importance on this point, as a fine of EUR 124 million was imposed as a result of gun-jumping. In the decision, it was stated that the powers granted to Altice for the operations of the target undertaking PT Portugal exceeded the purpose of protecting the value of the target undertaking as well as the limit of acting independently as an undertaking.

Another practice that may lead to the risk of gun-jumping is the exchange of competitively sensitive information between parties during the transaction. The Altice/PT Portugal Decision also stated that the exchange of sensitive information by the parties other than information deemed to be necessary for the transaction may pose a risk.

The Board Has Initiated a Sector Examination Due to the Earthquake

The earthquake that took place in Türkiye on 6 February 2023 caused devastating effects across the country. The Board directed its attention to competition issues that may arise in the markets in the 11 cities most affected by the earthquake.

The Board announced on 17 March 2023 that it had initiated a sector examination in this respect.

This examination is intended to address the possible anticompetitive or distortionary activities of undertakings due to the sudden and high demand in certain sectors. It also aims to design cooperation between undertakings in a competitive manner during the reconstruction and rebuilding of the earthquake area.

In this regard, the plan is to establish a permanent and fast communication channel with the existing stakeholders in the region, particularly with respect to public institutions such as chambers and exchange commodities, in order to identify competitive problems that may arise in the markets in the earthquake zone. This channel is intended to identify competition problems that may delay the recovery process in the earthquake zone from both a social and an economic perspective, and to help implement proactive steps in collaboration with other public institutions and organizations when necessary.

Guidance from the British Competition Authority for Employers on Not Engaging in Anticompetitive Behavior in the Labor Market

The Competition and Markets Authority (“CMA”) has published a set of guidelines to help employers identify anti-competitive behavior and agreements in the labor market and to ensure that their practices are compatible with competition. The guidelines identify non-solicitation agreements, salary-fixing agreements, and exchanges of information regarding the terms and conditions offered to employees between undertakings as the three main competition law violations that tend to occur in labor markets. The guidelines recommend avoiding various behaviors that may lead to these violations.

In this context, the CMA lists the measures that undertakings can take and the audits that they can conduct as follows:

• It is important to understand which types of agreements fall within the scope of non-solicitation and salary-fixing agreements under competition law.
• No agreement should be made with a competitor to fix the salary of employees.
• No agreement should be made with a competitor to avoid approaching or hiring each other’s employees.
• Sensitive information about the employer’s business or employees should not be shared with a competitor.
• Recruitment sta should be provided with training on competition law and how it applies in the recruitment context.
• Solid internal reporting processes related to issues deemed risky in terms of competition law must be in place in the workplace and sta must be aware of these processes and how to use them.

In our November newsletter, we covered the Board's decision on the investigation of private hospitals, which is important in terms of the Board’s approach towards anti-competitive behavior in the Turkish labor markets. Further details on the Board's views on non-solicitation and salary-fixing agreements are available in the November issue of Competition Monthly, accessible at this link.

[1] “Article 11- Where a merger and acquisition transaction whose notification to the Board is compulsory is not notified to the Board, the Board shall take the merger or acquisition under examination on its own initiative when becomes aware of the transaction in any way. As a result of the examination: a) It will allow the merger or acquisition if it decides that the merger or acquisition does not fall under the first paragraph of Article 7 but will impose fines on the concerned parties due to their failure to notify. (…)”

[2] Case M.7993, Altice/PT Portugal, 24.04.2018

First published by Hergüner Bilgen Üçer Attorney Partnership, April 2023

Tagged with: Competition, Competition Board, Competition and Markets Authority, CMA, 4054, Herguner, Kayra Ucer