Turkey: Exclusivity Practices Examined in the Two- Sided Market of Cinema Screen Advertising: The Board Rejected the Exclusivity Allegations against Mars due to a Lack of Evidence

The Board published its reasoned decision^[1] on the preliminary investigation launched against Mars Sinema Turizm ve Sportif Tesisler İşletmeciliği A.Ş. ("Mars"), a company active in the areas of movie screening services, movie distribution services and cinema screen advertising services, in order to determine whether Mars had abused its market position by offering special prices and implementing discounts to certain media agencies and advertisers, subject to the condition that those agencies and advertisers spend their entire cinema advertising budgets in Mars's own movie theaters.

In its evaluation of the relevant product market, the Board first provided general background information on the dynamics of the media promotion and marketing services markets in Turkey. The Board observed that the most significant characteristic of media platforms is that these platforms operate as two-sided markets. Accordingly, the Board noted that undertakings operating in the fields of print and visual media compete not only at the audience level (i.e., pursuing high circulation numbers or ratings), but also compete on the advertisers' side of the market. The Board then evaluated whether different media channels can be considered as substitutes for each other. In this regard, the Board asserted that, similar to other advertising channels, the demand structure in terms of cinemas is affected by a wide variety of factors. Accordingly, the Board held that advertisers or advertising agencies planning to use cinema screen advertising services take numerous parameters into consideration, such as the audience profile for a specific movie (i.e., age, gender, income, etc.) or the location of a particular cinema. In light of these characteristics, the Board determined that this advertising channel did constitute an alternative to traditional media channels (such as television, outdoor advertising and newspaper) for advertisers aiming to reach their target audiences.

The Board then assessed the share of the cinema screen advertising channels in the overall market for general advertising channels. In this regard, the Board focused on the relative amounts of advertising expenditures for various advertising channels, and noted that cinema screen advertising's share in the advertising market was quite low (approx. 1% of total expenditures), and observed that television, print publications and digital channels were the principal alternatives preferred by advertisers. In this regard, the Board referred to its previous decisions involving the advertising sector and declared that while advertisers may choose to employ diverse advertising channels to achieve specific purposes, different advertising channels may also function as complementary to each other in certain instances. Consequently, even though the Board acknowledged it would be difficult to make distinctions between these various advertising channels in terms of defining the relevant product market, it ultimately opted to define the relevant product market in the present case as "cinema screen advertising." Furthermore, the Board defined the relevant geographic market as "Turkey," considering the fact that all the advertisers, advertising agencies and media planning and buying agencies in this market operated on a nationwide scale.

The Board proceeded to evaluate the complainant's allegations under the category of "exclusivity practices." The Board first noted that such practices may be assessed within the scope of provisions concerning anticompetitive agreements (Article 4) and unilateral conducts (Article 6) under the Law No. 4054. The Board then referred to the Commission's established approach toward exclusivity agreements and concluded that the Commission also evaluates such practices both in the context of anticompetitive agreements and unilateral conducts. Furthermore, the Board observed that the Commission provides similar analyses in its assessments of exclusivity practices under these categories, even though it generally tends to evaluate the agreements concluded by dominant undertakings within the scope of Article 102 of the TFEU. As for the Board's own precedents involving exclusivity practices, it referred to its earlier decisions in which exclusivity practices had been evaluated either under Article 4 or Article 6 of the Law No. 4054. Moreover, the Board stated that there were also several decisions in which it had assessed exclusivity practices within the scope of both Article 4 and Article 6. In this regard, the Board declared that, so long as it does not lead to the investigated undertaking being penalized twice for the same conduct, initiating an investigation regarding the same practice within the scope of both Article 4 and Article 6 would not violate the "ne bis in idem" principle (i.e., the prohibition against double jeopardy). Consequently, the Board concluded that exclusivity practices may be evaluated within the scope of both Article 4 and Article 6, and the main factors that must be appraised on this front are (i) the market power of the relevant undertaking, and (ii) the possible restrictive effects that may be caused by the exclusivity agreements under scrutiny, due to the market power of the undertaking.

Following this line of reasoning, the Board first assessed Mars's market power in the relevant product market. At the outset, the Board underlined the duopolistic structure of the market for cinema screen advertising agency services, in which only Mars and Istanbul Medya are active in Turkey. Accordingly, the Board evaluated Mars and Istanbul Medya's market shares on the basis of their revenue and the duration of their advertisements. As a result of its evaluations on this front, the Board concluded that Mars's market share had been consistently higher than Istanbul Medya's market share in the previous three years. Moreover, given that Mars is a vertically-integrated undertaking in the cinema industry, where it operates movie theaters under the Cinemaximum brand, the Board made an assessment with respect to the position/market power of Mars's movie theaters in the relevant sector as well. In this regard, the Board found that Mars's movie theaters comprised 38% of the total number of movie theaters in Turkey.

Furthermore, the Board also examined whether advertisers and advertising agencies were able to exert any pressure or have any effect on Mars's business practices. The Board relied on statements that had been obtained from various undertakings in the sector, in which the relevant undertakings declared that cinema screen advertising was not a top priority for them among various advertising channels due to (i) its limited share in general advertising expenditures, and (ii) periodic fluctuations in demand in this particular advertising channel. Considering these fundamental characteristics of cinema screen advertising, the Board concluded that Mars was not in a position to fully exercise its market power on advertisers and advertising agencies. However, by considering Mars's firmly high market share and the leading position of Cinemaximum movie theaters in the movie screening sector, the Board nevertheless concluded that Mars possessed significant market power in the relevant market.

In its evaluation on whether Mars had engaged in exclusivity practices, the Board referred specifically to a piece of evidence that had been obtained during the on-site inspection of Mars's premises, which clearly stated that "exclusivity agreements will not be made in writing." That said, the Board also noted that no other finding had been produced (beyond this single piece of evidence) which would indicate that Mars had engaged in exclusivity practices in the relevant market. Moreover, the Board also assessed the agreements that had been concluded between Mars and advertisers and advertising agencies. In this regard, the Board concluded that the relevant agreements did not contain any exclusivity provisions. Consequently, the Board ultimately decided not to initiate a full-fledged investigation against Mars due to a lack of evidence supporting the exclusivity allegations.