Hergüner Competition Monthly - September 2023

Reasoning of the Meta Decision Published

The Turkish Competition Board (“Board”) announced that Meta Platforms, Inc., Meta Ireland Limited, WhatsApp LLC (all referred to as “Meta”), and Madoka Turkey Bilişim Hizmetleri Ltd. Şti. (“Madoka”) must pay administrative fines for violating Article 6 of Law No. 4054 on the Protection of Competition (“Competition Law”) with the decision published on 26.10.2022. As discussed in our November bulletin, the expected reasoned decision was published on 11.09.2023.

WhatsApp, which was acquired by Facebook in 2014, informed its users that they must consent to sharing their data with Facebook Inc. companies² to continue using the app. The Board deemed it necessary to examine whether the use of user data for other products and services within the scope of the data sharing obligation constitutes an abuse of a dominant position within the scope of Article 6 of the Competition Law.

On 11.01.2022, the Board imposed an interim measure against Meta³ to stop the implementation of the announced practice and prevent the occurrence of irreparable damage until the investigation had been concluded. During the investigation, Madoka, the representative and sole subsidiary of Facebook, Inc. in Turkey, was included as a party to the investigation with the Board’s interim decision dated 11.03.2021 and an on-site inspection was conducted at Madoka on 20.08.2021. In consequence of the investigation, the Board determined that Meta made it difficult for its competitors to operate in the markets and distorted competition by creating barriers to entry into the market through the combination of collected data.

In the reasoned decision published this month, the relevant product markets were defined and the substitution relationship with competing products was examined. It was determined that Meta is dominant in the markets for personal social networking services, consumer communication services, and online display advertising services. In this context, it was also considered that data combining activities constitute exploitative and exclusionary abuse, have a restrictive effect on competition in the relevant markets, and cause harm to consumers.

The Board concluded that with the data obtained and processed within the scope of each Meta application, Meta, as an economic integrity, reached a more advantageous position than its competitors. The Board characterized the collection and processing of this data in a single pool as the creation of “super profiles” and considered this to be an ideal situation for advertisers. According to the Board’s assessment, expanding the data pool and making it available for processing reduces the number of alternatives for advertisers and makes Meta the most important online advertisement publisher. The decision also states that the difficulties for the activities of undertakings in the social networks market due to the data pooling action increases the lock-in effect of consumers and limits the opportunities of rival undertakings to reach consumers through the development of alternative products.

Accordingly, the Board examined the concept of explicit consent for data sharing. It is emphasized that, as one of the most important elements of the concept, if data will be processed in more than one category/point within the scope of obtaining consent for a specific subject, explicit consent must be given for each of the different data processing points in terms of the purposes for which the data will be processed.

On the other hand, it was stated that although user consent was obtained in a way that eliminates the exploitative effects of updates subject to the interim measure, this could not eliminate the exclusionary effects. It was determined that no responsibility could be attributed to Madoka as it had no role in the delivery of the activities subject to the investigation.

As a result, it was decided that there was a violation of Article 6 of the Competition Law and administrative fines were imposed. Compliance measures are also required to end the infringement and to establish effective competition in the market, and these measures must be reported periodically.

Elon Musk Could Not Avoid the Turkish Competition Authority!

In 2022, Elon Musk acquired Twitter Inc.’s (“Twitter”) sole control in a headline-making manner worldwide. On 02.03.2022, the Turkish Competition Authority announced its decision to impose an administrative fine on Elon Musk, which was subject to review ex officio, as also covered in our March bulletin. The reasoned⁴ decision for the investigation regarding the acquisition process was recently published.

Although the Board was not notified of the acquisition, upon becoming of the acquisition, the Boardassessed whether it was subject to approval under Article 7 of the Competition Law and the Communiqué Concerning Mergers and Acquisitions Calling for the Authorization of the Competition Board (“Communiqué on Mergers and Acquisitions”). Furthermore, the Board also assessed whether the acquisition would significantly reduce effective competition if it was in fact subject to approval.

The Board requested information and documents from Twitter, who provided certain reasons as part of their evaluation process regarding the transaction, including the fact that the notifiability analysis was made before the Communiqué on Mergers and Acquisitions was published. However, the Board stated that the agreement regarding the transfer was signed on 05.04.2022 and the closing transaction took place on 27.10.2022, so that the communiqué, entering into force on 04.05.2023, does apply.

Since Twitter is considered a technology undertaking with the nature of a digital platform, and therefore, pursuant to the Communiqué on Mergers and Acquisitions, as the turnover threshold of TRY two hundred and fifty million is not required for the acquisition of technology undertakings and the global turnover of at least one of the parties to the transaction exceeds TRY three billion as set forth in the relevant article, the Board determined that the transaction is subject to notification. However, the Board also determined that there is no horizontal or vertical overlap between the enterprises controlled by Elon Musk and the activities of the acquired Twitter on a global scale and Turkey, and in this context, there is no possibility of a significant restriction of effective competition.

Although it was determined that the transaction would not result in a restriction of competition, the Board decided to impose an administrative fine on Elon Musk, the acquirer, at a rate of one-thousandth of its gross revenue generated in Turkey for the year 2022, since the transaction was subject to authorization but was not notified.

Further Measures for MAÇKOLİK

As we published in our July bulletin, upon the Board’s decision dated 07.07.2022 and numbered 22-32/500, an investigation⁵ was initiated with the allegation that D Elektronik Şans Oyun ve Yayıncılık AŞ (“NESINE”) violated the Competition Law by concluding contracts containing exclusivity clauses regarding Mackolik Internet Hizmetleri AŞ (“MAÇKOLIK”). In the course of the aforementioned investigation, an interim injunction⁶ was issued to remove the exclusivity provisions in the Advertising Service Sales Agreement, the provisions regarding the “click commitment” clause and all provisions that may contain exclusivity within the scope of the aforementioned agreement and its annexes.

Although NESINE and MAÇKOLIK concluded an Amendment Protocol to remove the exclusivity provisions following the Board's interim injunction, it was found that when the websites and mobile application of MAÇKOLIK are examined, MAÇKOLIK does not cooperate with any other betting company in a manner similar to its cooperation with NESINE.

An investigation was initiated against MAÇKOLIK with the Board's decision dated 10.08.2023 and numbered 23-37/714-M in order to determine whether the aforementioned situation violated Articles 4 and 6 of Law No. 4054 by causing de facto exclusivity.

With its decision dated 07.09.2023 and numbered 23-41/797-281, the Board decided to impose interim injunctions on MAÇKOLIK until the investigation is concluded due to the possibility of undertakings operating in the virtual betting services market incurring serious and irreparable damages.

Some of the new injunctions imposed by the Board in this respect are as follows:

• Limiting the visibility privilege of NESINE's advertising space on MAÇKOLIK's page by using a concrete criterion,
• Developing of an algorithm that will provide a rotational display in ad spaces,
• Ensuring that NESINE and MAÇKOLIK’s joint projects are equally and transparently offered to other betting companies,
• Providing click-through routing equally to all virtual betting companies, and
• Ensuring that MAÇKOLIK does not engage in practices that will lead to de facto exclusivity in advertising and routing areas.

The Board also required MAÇKOLIK to submit various reports on the extent to which it has implemented such measures.

US Competition Authorities Publicly Announce Draft Merger Guidelines

The United States Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) (collectively referred to as the “Authorities”) published the Draft Merger Guidelines on 19.07.2023 and made them available for public comment until 18.09.2023. It is expected that the Authorities will finalize the Guidelines in a short period of time.

Replacing both the Horizontal Merger Guidelines of 2010 and the Vertical Merger Guidelines of 2020, the most recently issued guidelines since their first publication in 1968, this new text outlines the Authorities’ approach to merger transactions. The guidelines, which have their legislative counterpart in Section 7 of the Clayton Act, provide a set of 13 guidelines on the competitive concerns raised in merger transactions. In contrast with the previous Guidelines, structural presumptions are emphasized rather than the competitive effects of transactions in the market or concrete market dynamics. In particular, the authorities are more sensitive to highly concentrated markets and dominant positions.

In this respect, mergers will be evaluated through the lens of whether they are capable of entrenching or extending the dominant position, regardless of whether they trigger any structural presumption suggested in the Guidelines.⁷ Additionally, transactions leading to a post-merger share of more than 30%⁸ will be presumed to substantially lessen competition, regardless of the level of concentration in the market. It is also stated that competition may be substantially lessened if companies with a market share of more than 30% enter into a merger transaction or if one of the parties to the transaction has a share of up to 50% in a product/service market that constitutes input from the competitors of the other party.⁹

In order to measure the concentration in the relevant market, the Authorities adopted the Herfindahl-Hirschman Index (“HHI”) calculation and determined values lower than the concentration thresholds set in the 2010 Horizontal Merger Guidelines.¹⁰ On the other hand, it is argued that mergers in concentrated markets should not eliminate potential market participants by increasing the tendency to create monopolies,¹¹ and for multi-sided platforms, mergers that harm competition in any part of such platforms should be considered risky.¹²

Mergers involving the labor market is another prominent issue discussed in the Guidelines. Authorities have developed a reflex to protect competition in the labor market, just like in product/services markets, by identifying that a merger transaction between employers who are buyers in the relevant market may significantly lessen competition for workers and may result in a decrease in wages or adverse effects on workers’ rights and working conditions.

All in all, in accordance with these and other guidelines, the Authorities have determined that a merger transaction will be unlawful provided that it substantially lessens competition, currently, or will have same effect in the future. Implementation of the Guidelines, which advise market players to act more diligently and cautiously in merger transactions, is eagerly awaited.

[1] Board’s decision dated 22.10.2022 and numbered 22-48/706-299.

[2] Facebook Inc. is a technology company that has 30 products and subsidiaries according to its 2019 Annual Report and is an operator of applications and websites that oer social networking services, consumer communication services, and numberless communication and photo/video sharing functions. Facebook Inc. oers social networking services via Facebook and Instagram, and consumer and unnumbered communication services via Facebook Messenger and WhatsApp.

[3] Facebook, Inc. notified that it has changed its trade name, and the Board decided to change the new trade name of the undertaking referred to as Facebook, Inc. to Meta Platforms Inc. Therefore, hereinafter Facebook, Inc. is referred to as Meta.

[4] Board’s decision dated 02.03.2023 and numbered 23-12/197-66.

[5] Board’s decision dated 07.07.2022 and numbered 22-32/500

[6] Board’s decision dated 15.06.2023 and numbered 23-27/520-176.

[7] Guideline no 7.

[8] This figure was determined in United States v. Philadelphia National Bank, 374 U.S. 321, 364 (1963).

[9] Guideline no 5.

[10] While in the 2010 Guidelines, post-merger HHI values above 2,500 indicate highly concentrated markets, new Guidelines define markets with HHIs of 1,800 points as highly concentrated.

[11] Guideline no 4.

[12] Guideline no 10.