Compliance quarterly

The EU anti-subsidy regulation enters trilogue negotiations: New obligations for multinationals coming into focus

Exactly one year after the European Commission (Commission) proposed the Anti-Subsidy Regulation (the Regulation) on May 5, 2022, EU legislators launched their “trilogue” negotiations to reach an agreement on the final text.

The Regulation is a global first. It combines elements of traditional merger control, EU State aid review and trade law. The Regulation gives the Commission sweeping new powers to investigate and combat distortions of competition caused by subsidies granted by non-EU countries, for example to State-owned enterprises (SOEs), who may use those subsidies to compete against EU companies that are subject to EU State aid rules.

Importantly, the Regulation creates mandatory new notification requirements for M&A transactions, the formation of joint ventures and public tenders. These requirements are based on a combination of the target’s EU revenues and the parties’ “financial contributions,” a new global, group-wide metric. “Financial contributions” are defined broadly, including, for example, contracts with governments or entities whose actions are attributable to governments and calculated over a rolling three-year period .

The Regulation distinguishes between three related concepts: “financial contributions,” “foreign subsidies”, and “distortions on the internal market.”   Importantly, the new mandatory reporting regimes for acquisitions, joint ventures and public tenders are triggered by receipt of financial contributions, not foreign subsidies

The Regulation will create a new, mandatory ex-ante notification system for mergers, acquisitions and joint ventures that will sit alongside the EU Merger Regulation (EUMR), as well as foreign direct investment screening regimes. Preparatory documents published by the Commission highlighted concerns over non-EU companies using subsidies to overbid for EU businesses, crowding out potential EU buyers in competitive acquisitions.  The burden of the new monitoring and compliance procedures required to identify and quantify financial contributions from 2020 will vary from firm to firm. However, such procedures will need to be carefully designed in cooperation with EU and local counsel familiar with the different arrangements prevalent in global markets and how these arrangements will be viewed from an EU law perspective. In many cases, designing and implementing new procedures will take many months. Perhaps ironically, the new Regulation’s burden will fall most heavily on EU-based multinationals who are most likely to meet the notification thresholds.

Turkish Competition Board eases threshold for M&A approvals 

The Turkish Competition Board has raised the threshold for  mergers and acquisition which need its approval and eased  restrictions on M&A transactions in the technology sector.  M&A transactions only need approval if:

• the aggregate Turkish turnover of the transaction parties  exceeds TL 750m and the Turkish turnover of at least two of  the transaction parties exceed TL 250m respectively; or
• the Turkish turnover of the transferred assets or businesses  exceeds TL 250 million in acquisitions, the Turkish turnover  of any of the parties exceeds TL 250m in mergers, and the  worldwide turnover of at least one of the other transaction  parties exceeds TL 3bn.

The Turkish Competition Board announced the change in an  Amended Communique, which also states that technology  firms active in Turkey or with R&D activities in the Turkish  market are not subject to the TL 250m turnover threshold.  Technology firms are defined as companies with digital  platforms, software and gaming software, financial  technologies, biotechnology, pharmacology, agrochemicals  and health technologies are not subject to the TL 250m  turnover threshold. In addition, methods used to calculate  turnover has been revised for financial institutions along with  the template notification form. 

Advertising rules are amended 

 
Rules governing commercial advertisements have changed  after the 2015 Commercial Advertisement and Unfair  Commercial Practices Regulation (29232) was amended and  came into force on March 1, 2022. The changes are as follows:

• advertisements may not now contain expressions or images  of patients before and after treatment
• the burden of proof that discounted goods are sold at a  lower price than the price before the discount, will rest with  the advertiser
• increasing the price of goods or services on grounds  of changes to the cost of input and exchange rate  increases, is no longer within the scope of Deceptive  Commercial Practice.
   

Turkish Competition Board indicates its position on online sales in household appliance case

Authorized dealers of goods from a major household appliance  manufacturer active in white goods and small household  appliances can continue to sell its products online after  the Turkish Competition Board rejected the manufacturer’s  attempt to prevent this activity. The decision is important  since it reflects the Turkish Competition Board’s position on  prohibiting online sales. The Turkish Competition Board found  that restricting online sales violates Article 4 of the Act on the  Protection of Competition and the manufacturer did not meet  all of the requirements required for an individual exemption.

The Competition Board did not accept arguments raised  by the household appliance manufacturer about online  sales jeopardizing its brand image, and opening the risk of  imitation products and non-authorized dealers, consumer  relations, delivery and service problems. It decided that online  marketplace restrictions proposed by the manufacturer are  not proportionate, and that online sales do not damage its  brand and online platforms, and that they provide a consumer  benefit, which a restriction would remove. Its decision was  numbered 21-61/859-423 and dated 16 December 2021.