A Conservative Use of the Newly Adopted Significant Impediment to Effective Competition Test under Turkish Merger Control Regime? – The Turkish Competition Board Forbids TIL-Marport Transaction
On March 12, 2021, the Turkish Competition Authority (“Authority“) announced on its website the reasoned decision that it refused to clear the acquisition of the sole control of Marport Liman İşletmeleri Sanayi ve Ticaret Anonim Şirketi by Terminal Investment Limited Sàrl. The Turkish Competition Board (“Board“), with its decision No. 20-37/523-231 of August 13, 2020, did not grant the transaction clearance, stating that the transaction would significantly impede effective competition in the relevant markets. This is the first transaction that the Board did not grant clearance as a result of the significant impediment to effective competition test. The decision is also significant because it is the first joint-to-sole control transaction that can be followed from public records to which no approval was granted by the Board.
The Board made the following evaluations regarding the acquisition of 50% of the shares and sole control of Marport Liman İşletmeleri Sanayi ve Ticaret A.Ş. (“Marport“) by Terminal Investment Limited Sàrl (“TIL“) in a joint-to-sole control transaction submitted to the Authority’s records on July 22, 2019 and No. 4779:
- The transaction subject to notification was mainly related to the container terminal management sector.
- The relevant product market was provided as “terminal management for container handling services” and the sub-markets were defined as “terminal services for container handling for transit traffic” and “terminal services for container handling concerning hinterland traffic” based on the Board’s former decisions.
- The Board provided detailed assessments of the geographical market. The relevant geographical market was provided as “Northwest Marmara,” with a narrower scope for the “terminal management for container handling services” market. As for the “terminal services for container handling for the transit traffic” and “terminal services for container handling concerning hinterland traffic” markets, the geographical definition was provided as “Northwest Marmara” after taking into account client choices, location of the port and accessibility options for local traffic. The Board refrained from identifying a definitive scope for transit traffic.
- The transaction was evaluated with the “Significant Impediment to Effective Competition Test” (“SIEC“) within the framework of Article 7 of the Law No. 4054 on the Protection of Competition (“Law No. 4054“). In parallel to the European Commission Merger Regulation, the relevant test replaced the creation or strengthening a dominant position test, which had been used until the introduction of the Law No. 7246 on Amending the Law No. 4054 on the Protection of Competition, published in the Official Gazette No. 31165, dated June 24, 2020. The new test evaluates transactions not only from the creating or strengthening a dominant position perspective, but also identifies transactions that may significantly impede competition in the relevant markets even if they do not create a dominant position or strengthens the dominant position in any given relevant product market.
- As a noteworthy point, in the decision where no dominant position assessment had been made at all, the SIEC assessments concluded the transaction would result in reducing competition significantly. Whereas the competitive risk for transition from joint control to sole control is considered relatively low in creating a competition concern, factors such as the potential concentration in the market; the position of competitors; the structure and characteristics of the market; the acquiring party’s presence and significant market power in the related market; and the upstream/downstream markets raised competition concerns.
As a result, the Board concluded that the transaction could cause negative effects on both terminal management and line management, especially since the relevant market which is in a narrow oligopolistic structure. In this regard, the Board followed its approach in the former Limaş/Mardaş decision (No. 18-14/267-129 and dated May 8, 2018) where it defined the market as the “Marmara Region” while also stating that the effects of the transaction would be concentrated on the Northwest Marmara sub-market. Accordingly, the Board narrowed its geographical market definition and rejected objections that the transaction would not result in significant impediment to effective competition in the market.
The decision demonstrates that a more detailed competition assessment will be conducted, even in mergers and acquisition submissions previously considered less risky, and one of the most important instruments in this thorough assessment will be the SIEC tests. In this regard, the Board will be carrying out a test to assess whether the competition in the market will be significantly affected instead of its previous test of creation or strengthening of a dominant position. The Board’s decision finding significant impediment to effective competition in a transition from joint control to sole control could signal that the Board may have shifted into a more conservative approach in its merger control review.