March 2023 – Elon Musk made news globally when he made an offer to buy the social networking platform Twitter in 2022. After months of back and forth and an overwhelming amount of news and critical analysis, Musk's acquisition of Twitter was completed in late October 2022 for a reported USD 44 billion.
This transaction, of course, affects the market in a variety of ways all over the world. One issue is how the various competition authorities will assess the transaction. The Turkish Competition Authority has given an indication, as it has just announced the Competition Board's decision regarding the acquisition.
In the brief announcement, the Authority noted that the Competition Board has authorised the transaction for the acquisition of sole control of Twitter by Elon Musk since it does not significantly impede effective competition. However, the Board has also imposed an administrative fine, as the transaction was carried out without the authorisation of the Board. Accordingly, Musk must pay a penalty assessed as 0.1% of his gross income in Turkey in 2022.
Why Was Elon Musk Fined?
To provide a brief overview of why Elon Musk was fined, we should note that, similar to legislation in in various jurisdictions that requires notification to the relevant authority of qualifying transactions, the Competition Law foresees that certain transactions must obtain the approval of the Turkish Competition Board before being completed.
Any transaction that (i) results in a permanent change of control over the target or the transaction parties and (ii) exceeds the turnover thresholds set out under Article 7 of Communiqué No. 2010/4 requires the Board's approval.
Under the new rules (which have been in effect since May 2022), the turnover thresholds are defined as follows:
- The aggregate Turkish turnover of the transaction parties exceeding TL 750 million (approx. EUR 43.1 million or USD 45.2 million) and the Turkish turnover of at least two of the transaction parties each exceeding TL 250 million (approx. EUR 14.4 million or USD 15.1 million), or
- (i) The Turkish turnover of the transferred assets or businesses in acquisitions exceeding TL 250 million (approx. EUR 14.4 million or USD 15.1 million) and the worldwide turnover of at least one of the other parties to the transaction exceeds TL 3 billion (approx. EUR 172.5 million or USD 180.9 million), or
(ii) the Turkish turnover of any of the parties in mergers exceeding TL 250 million (approx. EUR 14.4 million or USD 15.1 million) and the worldwide turnover of at least one of the other parties to the transaction exceeds TL 3 billion (approx. EUR 172.5 million or USD 180.9 million).1
It should also be underlined that the new rules introduced last year foresee that the local turnover thresholds of TL 250 million are not applicable for the acquisitions of technology undertakings. The Authority defines technology undertakings as undertakings that (i) are active in the Turkish geographical market, (ii) conduct R&D activities in the Turkish geographical market or (iii) provide services to users in Turkey in the areas of "digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agrochemicals and health technologies".
As the transaction permanently changed the control structure of Twitter (which is a technology undertaking, of course) and as Elon Musk's worldwide turnover is over TL 3 billion, the transaction required the Competition Board's approval. As no such merger control filing was made in Turkey, this resulted in a case of gun-jumping (a violation of the suspension requirement).
Pursuant to Article 11 of Turkish Competition Law, if it is compulsory for an M&A transaction to be notified to the Competition Board and no such merger control filing is made, the Board has the authority to review the transaction when it becomes aware of it. Of course, there is almost no one who has not heard that Twitter was taken over by Elon Musk, so the Competition Board, on its own initiative, examined whether this transaction disrupted the competitive structure in the market. Although they decided at the end that Elon Musk's takeover of Twitter did not significantly impede effective competition in the market, they imposed an administrative fine of 0.1% of his Turkish turnover for 2022 due to Musk's failure to comply with the obligation to notify the Authority of the transaction and wait until approval.
1 The amounts in EUR for the financial year 2022 (i.e., 1 January 2022 – 31 December 2022) are converted at the exchange rate EUR 1 = TL 17.39 in accordance with the applicable Turkish Central Bank average buying exchange rate for the relevant time period (i.e., 1 January 2022 – 31 December 2022). Similarly, the amounts in USD for the financial year 2022 (i.e., 1 January 2022 – 31 December 2022) are converted at the exchange rate USD 1 = TL 16.58 in accordance with the applicable Turkish Central Bank average buying exchange rate for the relevant time period (i.e., 1 January 2022 – 31 December 2022).
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