06 Mar Father Superıor Jumped the Gun: Elon Musk ıs to be Fıned Under Turkısh Competıtıon Jurısdıctıon
The world’s richest man[1] and focal point of many controversies Elon Musk, is under scrutiny of the Turkish Competition Authority (“TCA”) as well. Initiating an acquisition of the social media company Twitter Inc. (“Twitter”) on 14.04.2022, Elon Musk acquired Twitter on 27.10.2022; which raised many controversies for issues such as freedom of speech, threat of misinformation, harassment and hate speech. Even though the acquisition cleared from U.S.’s antitrust authorities’ the Department of Justice (“DoJ”) and Federal Trade Commission (“FTC”); it has been caught on the nets of the TCA. The TCA published its decision to fine Elon Musk on grounds of gun-jumping with respect to the Twitter transaction.
Following the submission of the acquisition of Twitter to the authorities, the U.S. antitrust review has been announced to be expired and the acquisition to be cleared on 03.06.2022[2]. In order to provide some insight regarding the U.S. antitrust review, we will summarize the legal process. Under the Hart-Scott-Rodino Act, similar the legislation in Turkey, the FTC and the DoJ are authorized to review most of the proposed transactions, which are over a certain size, that affect commerce in the U.S. Since both Authorities have jurisdiction over merger reviews, either agency can take legal action to block deals that it believes would “substantially lessen competition”. After an undertaking submits a planned transaction, the preliminary review initiates. During this stage, the parties to the merger shall wait 30 days (15 days in the case of a cash tender or bankruptcy transaction) before closing their deal. Preliminary review can be concluded with three different ways; (i) the waiting period can be terminated by the Authorities and the transaction can be allowed, (ii) the Authorities may do nothing and let the waiting period to expire, which allows the parties to complete the transaction; or 3) in the case that the Authorities spots certain competition issues, they may extend the review and request the parties to submit further information. In Twitter’s case, the Authorities stayed inactive and let the 30 days period of preliminary review expire.
There are many controversies followed the acquisition of Twitter, especially with the Elon Musk giving promises and raising expectations for his “fans”; which seems to be his main business strategy as it reoccurs in every venture he initiates. His views on freedom of speech prior to his acquisition of Twitter, worried many parties regarding the threat of misinformation and online harassment. Him lifting the ban on Donald Trump, who was banned from Twitter due to his role in the events of January 6 U.S. Capitol Attack, in November 2022 raised eyebrows[3]. Just after this issue, Elon Musk; who depicted himself as the protector of free speech, banned journalists from New York Times, Washington Post and CNN[4]. Another controversial move by Elon Musk was directly related to competition law; as he brought a new policy on 18.12.2022, which would prevent Twitter users from promoting accounts on competitor social media platforms such as Facebook and Mastodon[5]. Although, the company pulled back this new policy within a day; such business maneuvers are considered anticompetitive as they provide the undertaking a competitive advantage via restricting the competitors’ abilities rather than appealing to consumers or innovating. During this policy, Twitter were to face consequences in EU under the new legislation brought into force in order to prevent “gatekeeper” platforms from engaging in certain anticompetitive and unfair practices (restricting interoperability or giving preference their own platforms) Digital Markets Act (“DMA”) and also could have gone under investigation by FTC in U.S. under unfair methods of competition.
Besides all the controversies revolving around Twitter’s acquisition by Elon Musk, the TCA announced a new decision with respect to the concerned acquisition on its website on 06.03.2023. In its decision, the TCA stated that upon conducting an ex officio review of Twitter’s acquisition by Elon Musk, it has ruled on imposition of administrative fines on Elon Musk.
The TCA stated in its decision that the transaction is subject to authorization within the scope of Article 7 of Law No. 4054 on the Protection of Competition and Communiqué No. 2010/4 Concerning the Mergers and Acquisitions Calling for the Authorization of the Competition Board. The transaction has been cleared by the TCA as it does not significantly lessen the competition.
However, since the concerned transaction has been realized without the permission of the TCA, Elon Musk shall be fined by one in thousand of his annual gross revenues in 2022 from Turkey in accordance with Subparagraph (b) of the first paragraph of Article 16 of Law No. 4054 on the Protection of Competition.
Although the reasoned decision of the TCA is yet to be published, we can say that the Twitter transaction was a notifiable transaction as to Article 7 of the Communiqué No.2010/4 Concerning the Mergers and Acquisitions Calling For the Authorization of the Competition Board (“Merger Control Communiqué”). With the definition of “technology undertaking” and the exceptions envisaged with the Communiqué No. 2022/2[6], the acquisition of Twitter by Elon Musk falls under the TCA’s merger control jurisdiction. Current version of Article 7 of the Merger Control Communiqué is as follows:
“(1) In a merger or acquisition transaction as specified under Article 5 of this Communiqué, authorization of the Board shall be required for the relevant transaction to carry legal validity in case,
(a) Total turnovers of the transaction parties in Turkey exceed TRY 750 million, and turnovers of at least two of the transaction parties in Turkey each exceed TRY 250 million TL, or
(b) The asset or activity subject to acquisition in acquisition transactions, and at least one of the parties of the transaction in merger transactions have a turnover in Turkey exceeding TRY 250 million and the other party of the transactions has a global turnover exceeding TRY 3 billion million.
(2) The thresholds of TRY 250 million stated in subparagraphs (a) and (b) of paragraph (1); are not applicable in the acquisitions of technology undertakings that are active or have R&D activities, in the Turkish geographic market or that provide services to customers in Turkey.”
Technology undertakings are defined as undertakings follows in Article 4 of the Merger Control Communiqué; the undertakings that are active in areas of digital platforms, software and gaming software, financial technologies, biotechnology, pharmacology, agrochemicals and health technologies.
Since Twitter can clearly be considered as a technology undertaking according to the abovementioned legislation, the TRY 250 million thresholds are not applicable. Only remaining threshold for the transaction to be considered notifiable is whether the global turnover of the acquirer (Elon Musk) is over TRY 3 billion. Considering the fact that TCA ruled that Elon R. Musk shall be fined as an entity, it is safe to assume that they considered companies controlled by Elon Musk as a single economic unit. Therefore, we expect the administrative fine to be based on Elon Musk’s total gross income generated from Turkey including companies such as SpaceX and Tesla.
[1] https://www.bloomberg.com/news/articles/2023-02-27/elon-musk-is-world-s-richest-person-again-after-100-tesla-stock-surge#xj4y7vzkg, Access Date: 06.03.2023.
[2] https://www.wsj.com/articles/twitter-says-antitrust-waiting-period-for-elon-musk-deal-has-passed-11654281427, Access Date: 06.03.2023.
[3] https://www.bbc.com/news/world-us-canada-63692369, Access Date: 06.03.2023.
[4] https://www.theguardian.com/technology/2022/dec/17/elon-musk-reinstates-twitter-accounts-of-suspended-journalists, Access Date: 06.03.2023.
[5] https://slate.com/technology/2022/12/musk-twitter-antitrust-regulation-digital-markets-act.html, Access Date: 06.03.2023.
[6] Communiqué No. 2022/2 Amending the Communiqué No.2010/4 Concerning the Mergers and Acquisitions Calling For the Authorization of the Competition Board.
