Differing Views on Big Tech M&A: Google and GalileoAI in Turkey

The published decision by the Turkish Competition Authority regarding Google’s acquisition of Galileo AI sheds light on the complexities that competition authorities face in regulating Big Tech M&A deals. This decision and the accompanying dissenting opinion highlight the challenges in addressing the anticompetitive risks associated with such mergers. What makes this case particularly interesting is that three of the seven board members at the TCA disagreed with the decision, advocating for a more rigorous scrutiny of the merger.

While the TCA’s decision specifically focuses on digital markets in Turkey, its implications extend beyond the country’s borders. Competition authorities worldwide are grappling with how to effectively address concerns related to innovation resulting from mergers. The European Union, for instance, has initiated a review of its merger guidelines, with a particular emphasis on topics such as killer acquisitions and innovation in the context of merger control.

Big Tech companies, including Google, have been actively engaging in mergers as a key business strategy. While the exact number of acquisitions by these firms is challenging to pinpoint, the data suggests a significant volume of merger activity over the years. Notably, many of these mergers have flown under the radar due to falling below the notification thresholds of competition authorities. The evolving nature of competition in digital markets, driven by non-price factors like innovation, quality, and privacy, further complicates the assessment of the impacts of such mergers.

In response to the challenges posed by below-threshold mergers, Turkey introduced a concept of technology undertakings in its merger control regime. This innovative approach, implemented through Communique No. 2022/2, requires merging parties to notify transactions to the TCA if the target technology company operates in Turkey, undertakes R&D activities in the country, or offers services to users in Turkey. Unlike other jurisdictions that use deal value-based thresholds, Turkey’s technology undertaking framework offers a unique perspective on regulating mergers in the digital economy.

The assessment conducted by the TCA focused on determining whether the proposed merger warranted mandatory notification and whether it would significantly impede effective competition. The identification of Galileo as a technology undertaking was straightforward, as it provided software-based technology services. Google’s high turnover in Turkey triggered the mandatory notification requirement, highlighting the importance of the TCA’s jurisdiction in regulating such transactions. Unlike some other jurisdictions, Turkey’s approach did not require the target company to have substantial activity in the domestic market, demonstrating a flexible and inclusive regulatory strategy.

In analyzing competition effects, the TCA considered the genAI tools developed by Galileo, which enable users to generate high-quality designs using text and image inputs. Google’s intention to integrate Galileo AI into its Google Labs platform raised questions about the potential impact on developer tools and UI design. These considerations underscore the importance of competition assessments in digital mergers, emphasizing the need for thorough scrutiny to safeguard market competition.

Overall, the Google/GalileoAI case in Turkey offers valuable insights into the evolving landscape of merger control in digital markets and the challenges faced by competition authorities in addressing innovation concerns in M&A transactions. As competition authorities continue to navigate the complexities of regulating Big Tech mergers, innovative approaches like technology undertakings may play a crucial role in ensuring effective competition and safeguarding consumer welfare in the digital economy.