Definition and Limits of Technology Undertaking from the Perspective of Competition Law

The continuous and systematic advancement of technological innovation has resulted in a marked increase in the number of technology companies, positioning these undertakings more prominently within the contemporary economic landscape. In particular, the recent acceleration of technological developments has cultivated  a highly competitive environment in the sector, prompting the Competition Board (the “Board”) to develop new regulations. The Board has identified  the need of implementing various regulatory measures to protect emerging technologies and market participants within the framework of competition rules.

THE REFLECTION OF TECHNOLOGICAL DEVELOPMENTS ON THE COMPETITIVE MARKET AND THE REGULATORY ROLE OF THE BOARD

In the context of Turkish Competition Law, the historical background of the technology undertakings exemption  can be traced back to the Sector Inquiry Report on E-Marketplace Platforms published in April 2011, wherein initial insights into the definition of a technology undertaking were discussed. This report assessed the competitive concerns and policy recommendations regarding to killer acquisitions and market concentration.

Subsequently, with the amendments introduced by Communiqué No. 2022/2 published in April 2022, the definition of « technology undertaking » and its exemption for notifiable concentrations were elaborated and incorporated into Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the Competition Board (the “Communiqué”). Similarly, the Guidelines on the Assessment of Horizontal Mergers and Acquisitions published in March 2022 reinforced the definition and applicability of technology undertakings.

In this context, one of the most significant interventions by the Board to ensure a healthy competitive environment in the technology sector has been the adoption of the Communiqué. Within this regulatory framework, technology undertakings have been clearly  defined and  specific turnover thresholds have been established for them. The aim of this regulation is to make turnover threshold criteria more flexible in line with the unique dynamics of the technology sector and to mitigate potential anti-competitive effects. Indeed, small-scale yet high-potential technology companies may be acquired by dominant market players while still in the growth phase, thereby hindering competition.  Accordingly, a more robust monitoring mechanism has been established to prevent such killer acquisitions.

DEFINITION OF TECHNOLOGY UNDERTAKINGS AND THE ROLE OF BOARD DECISIONS

According to the Communiqué, technology undertakings are defined as « undertakings or assets operating in the fields of digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agricultural chemicals, and health technologies. » The Board adopted  a sector-based approach when  formulating this definition,  assessing both the nature of the service provided and the industry in which the undertaking operates as primary criteria.

Additionally, the Communiqué stipulates that acquisitions involving technology undertakings  operating in the Turkish geographic market, conducting R&D activities in Türkiye, or providing services to users in Türkiye are not subject to the standard turnover thresholds of 250 million TRY set forth in paragraphs (a) and (b) of the first clause.

Since the concept of technology undertakings remains relatively novel, the definitions included in the Communiqué and other secondary legislation alone do not, by themselves, offer full legal clarity, thereby necessitating support through case law. While several Board decisions have already evaluated the scope of the definition of technology undertakings, an increased number of such rulings would help clarify its practical implementation.

The application of this definition can also be observed in the Board’s decisions. For instance, in the Corden Pharma decision, the Board ruled that Corden Pharma Group, which produces pharmaceutical products, should be considered a technology undertaking due to its  operations in the pharmacology sector. Accordingly, the standard turnover thresholds did not apply in that case.

Likewise, in the Cinven/IFGL decision, Cinven was identified as a global private equity firm, while the target company, International Financial Group Limited (IFGL), was engaged in offering investment, savings, and protection solutions to international investors. The Board noted that IFGL operated in Türkiye by providing life insurance-based savings and investment products through a local broker. Despite not having a local subsidiary or affiliate in Türkiye, IFGL was classified as a technology undertaking under the Communiqué due to its delivery of digital financial services to Turkish users via online platforms, even thought it had only around 230 registered users in the country.

Similarly, in the Sartorius decision, the company was active in the research, development, production, and distribution of products used in industries such as chemistry, pharmaceuticals, biopharmaceuticals, medicine, agriculture, and food. Although Sartorius’s operations fell within the scope of a technology undertaking as defined by the Communiqué, its products were marketed in Türkiye solely through third-party distributors. Nevertheless, the Board determined that the transaction was subject to notification, given its direct relevance to the health technologies sector. Further Board decisions show that companies providing home Wi-Fi solutions, developing and licensing software to third parties, offering cloud-based software services, operating in payment systems, and designing software for reinsurance companies have also been classified as technology undertakings.

These cases demonstrate that firms operating indirectly in technology-related sectors may still fall within the scope of the definition.

SPECIAL TURNOVER THRESHOLD FOR TECHNOLOGY UNDERTAKINGS

The Board has adopted the view that, in digital markets, the potential economic value of technology companies should be prioritized over their existing turnover. Accordingly, Article 7 of the Communiqué differentiates the notification thresholds for mergers and acquisitions involving technology undertakings. In acquisitions involving technology undertakings, the standard turnover threshold of 250 million TRY—ordinarily applicable as a general criterion—does not apply.

Under this specific regulation, a transaction will be subject to notification if either (i) the total turnover of the parties in Türkiye exceeds 750 million TRY, or (ii) the acquirer’s worldwide turnover exceeds 3 billion TRY. However, where the target company qualifies as a technology undertaking, its turnover in Türkiye  does not need to exceed 250 million TRY.

By introducing this exemption, the Board aims to prevent large undertakings from acquiring low-turnover but highly innovative technology companies without oversight. The regulation also aims to preserve the integrity of the entrepreneurial ecosystem and to foster a more dynamic investment environment..

CONCLUSION

In conclusion, the amendments introduced by the Board through the Communiqué represent a timely and targeted response to the evolving nature of competition in digital markets.

These regulations are designed to ensure stricter oversight of mergers and acquisitions involving technology companies, particularly aimed at preventing the elimination of emerging market players through anti-competitive conduct.

Based on the definitions in the Communiqué and the Board’s practices, companies active in fields such as software, fintech, biotechnology, pharmacology, agricultural chemicals, and health technologies may be classified as technology undertakings. Moreover, it is considered  sufficient for an undertaking to offer products and services that are even indirectly related to these sectors to fall within the scope of the definition.

Ultimately, the Board’s approach facilitates more effective oversight of mergers and acquisitions involving technology companies, supports the preservation of competitive market structures, and serves as a safeguard against so-called killer acquisitions. In doing so, it contributes to sustaining both the growth potential of innovative undertakings and the broader dynamism of the market.