ARTICLE
20 May 2019

Significant Impediment of Effective Competition in the Relevant Market

EG
ELIG Gürkaynak Attorneys-at-Law

Contributor

ELIG Gürkaynak Attorneys-at-Law is an eminent, independent Turkish law firm based in Istanbul. The firm was founded in 2005. ELIG Gürkaynak is committed to providing its clients with high-quality legal services. We combine a solid knowledge of Turkish law with a business-minded approach to develop legal solutions that meet the ever-changing needs of our clients in their international and domestic operations. Our legal team consists of 90 lawyers. We take pride in being able to assist our clients in all fields of law. Our areas of expertise particularly include competition law, corporate law, M&A, contracts law, white collar irregularities and compliance, data protection and cybersecurity law, litigation and dispute resolution, Internet law, technology, media and telecommunications law, intellectual property law, administrative law, real estate law, anti-dumping law, pharma and healthcare regulatory, employment law, and banking and finance law.
Following the entry into force of the Law No. 7246 (the “Amendment Law”) the “Dominance Test” which was used as the substantive test by the Turkish Competition Board (“Board”) was replaced by the significant impediment of effective competition test (“SIEC Test”).
Turkey Competition and Antitrust
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Following the entry into force of the Law No. 7246 (the "Amendment Law") the "Dominance Test" which was used as the substantive test by the Turkish Competition Board ("Board") was replaced by the significant impediment of effective competition test ("SIEC Test"). The SIEC Test is also incorporated within the Communiqué No. 2010/4 on the Mergers and Acquisitions Subject to the Approval of the Competition Board ("Communiqué No. 2010/4") by way of the amendments introduced via Communiqué No. 2022/2 on the Amendment of Communiqué No. 2010/4 on the Mergers and Acquisitions Subject to the Approval of the Competition Board ("Amendment Communiqué").

The Amendment Law provided legal certainty and enabled the utilisation of the Board's past experience regarding mergers and acquisitions by indicating that a significant impediment of effective competition essentially occurs through the creation or strengthening of a dominant position. With this new test, the Board is now able to prohibit not only transactions that may result in creating a dominant position or strengthening an existing dominant position, but also those that can significantly impede competition. On the other hand, one can expect that in practice, the Board's assessment of concentrations would not materially change given that the Turkish Competition Authority's guidelines regarding the merger control regime are already aligned with and closely modelled after the relevant notices and guidelines in the EU, which were based on the SIEC test.

The Board's Guidelines on Horizontal Mergers ("Horizontal Merger Guidelines") and Guidelines on Non-Horizontal Mergers ("Non-Horizontal Merger Guidelines") provide guidance on what types of anticompetitive effects may occur as a result of a transaction.

Possible Anticompetitive Effects of Horizontal Mergers

Horizontal mergers may significantly impede effective competition through two main ways: (i) unilateral effects and (ii) coordinated effects.

(i) Unilateral Effects

A merger may result in significant impediment of effective competition in the relevant market if the merged entity gains market power through eliminating significant competitive pressure over it.

Numerous factors determine whether a merger will lead to unilateral effects. Those factors should be evaluated cumulatively. Such factors can be, though they are not limited to, the following:

  • The parties having large market shares
  • The merging parties being close competitors
  • The customers having limited possibilities of switching supplier
  • The competitors being unlikely to increase production in response to price increase
  • The merged company having the ability to hinder expansion of its competitors
  • The merger eliminating an important competitor in the market

(ii) Coordinated Effects

A merger in a highly concentrated market may result in creating or strengthening collective dominance in the market and thereby significantly impeding the effective competition. Coordinated effects occur when several companies adopt, on a sustainable basis, a behaviour pattern aimed at making sales at high prices (or similar anticompetitive conducts).

The merger does not need to result in an agreement or a concerted practice between the market players for collective effects to arise.

Coordination may appear in various forms such as keeping prices above the competitive level, limiting production or the amount of new capacity brought to the market, dividing the market according to geographic area or other customer characteristics, allocating contracts in bidding markets etc.

Coordinated effects are more likely to emerge in markets where it is relatively simple to reach a common understanding on sales terms. In order for coordination to be sustainable it should fulfil three conditions, namely (i) the coordinating companies must be able to monitor to a sufficient degree whether the terms of coordination are being adhered to, (ii) there must be some deterrence mechanism that will be activated if deviation from coordination is detected and (iii) the outsiders, such as current and future competitors should not be able to jeopardise the outcome expected from coordination.

Possible Anticompetitive Effects of Non-Horizontal Mergers

Possible anticompetitive effects of non-horizontal mergers are classified similarly to the effects of the horizontal mergers: (i) unilateral effects and (ii) coordinated effects.

(i) Unilateral effects

Unilateral effects generally emerge when non-horizontal mergers result in foreclosure. Foreclosure occurs when the merger hampers or eliminates actual or potential rivals' access to supplies or markets and thereby reduces these competitors' ability and/or incentive to compete. As a result of this foreclosure, the merged company may be able to profitably increase the prices. Two types of foreclosure can be distinguished, namely (i) input foreclosure and (ii) customer foreclosure.

(ii) Coordinated effects

Coordinated effects occur when companies which did not use to harmonize their behaviour before the merger, are significantly more likely to coordinate after the merger. Similarly, for companies which were already coordinating their behaviour, coordination will be easier, more stable and more efficient to coordinate. In order for coordination to be sustainable it should fulfil three conditions, namely (i) the coordinating companies must be able to monitor to a sufficient degree whether the terms of coordination are being adhered to; (ii) there must be some deterrence mechanism that will be activated if deviation from coordination is detected and (iii) the existence of outsiders, such as current and future competitors that are not within the scope of the coordination.

Take Note
This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.
ARTICLE
20 May 2019

Significant Impediment of Effective Competition in the Relevant Market

Turkey Competition and Antitrust

Contributor

ELIG Gürkaynak Attorneys-at-Law is an eminent, independent Turkish law firm based in Istanbul. The firm was founded in 2005. ELIG Gürkaynak is committed to providing its clients with high-quality legal services. We combine a solid knowledge of Turkish law with a business-minded approach to develop legal solutions that meet the ever-changing needs of our clients in their international and domestic operations. Our legal team consists of 90 lawyers. We take pride in being able to assist our clients in all fields of law. Our areas of expertise particularly include competition law, corporate law, M&A, contracts law, white collar irregularities and compliance, data protection and cybersecurity law, litigation and dispute resolution, Internet law, technology, media and telecommunications law, intellectual property law, administrative law, real estate law, anti-dumping law, pharma and healthcare regulatory, employment law, and banking and finance law.

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