We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
11 October 2018
On 29 May 2018 the Competition Board issued its decision (18-16/293-146) regarding Turkuvaz TK Kitap ve Kırtasiye AŞ's (TveK's) acquisition of Doğan Müzik Kitap Mağazacılık Pazarlama AŞ (D&R) and its two subsidiaries (Hür Servis Sosyal Hizmetler ve TicAŞ and AGT Tanıtım Kağıt Ürünleri Sanayi ve TicA.Ş).
The acquirer, TveK, sells books, stationery, electronic devices and accessories, toys and souvenirs and is controlled by Zirve Holding AŞ and ultimately by Mr Ömer Faruk Kalyoncu. Zirve Holding AŞ wholly owns Turkuvaz Dağıtım Pazarlama AŞ, through which it is active in the newspaper, distribution, television, radio, advertising and construction sectors.
The target, D&R, is a retailer of books, e-books, music-related products (ie, CDs, DVDs and Blu-rays), home videos (ie, VCDs, DVDs and Blu-rays), stationery, games, toys, magazines, electronics and accessories, souvenirs, personal products, food and sports and outdoor products. D&R has 169 stores and operates under the D&R brand.
The board started its assessment of the acquisition by examining the relevant market sectors and dividing the bookselling sector into:
Printing houses are undertakings which print periodical or non-periodical publications, newspapers, magazines, brochures, catalogues, albums, guides, dictionaries, bulletins and calendars. However, there is a growing trend for bookstores to sell stationery, toys and various other products.
The board found the parties to be generally active in the sale and marketing of:
The board also noted that TveK is active in the wholesale of media-related products, such as newspapers and magazines, and unrelated products, such as books, lighters, batteries, and CDs.
When assessing the market relevant to the acquisition, the board drew on previous jurisprudence which recognised it as the "retail sales of books, music, films, electronics, stationery, toys and other souvenirs under the same roof".(1) However, the board noted that this precedent and other relevant decisions had recognised the possibility of evaluating each of the relevant products in different sub-sectors. The board also noted that the Turkish market for newspaper and magazine distribution is a duopoly-structure, as indicated in its decision in Doğan Dağıtım. In its current structure, the market is controlled by Turkuvaz and Demirören Medya Yatırımları Ticaret AŞ. D&R purchases newspapers and magazines from both of these players and sells them to consumers.
As a result, the board focused its assessment on the horizontally affected markets:
Moreover, the board assessed vertically affected markets as:
The board noted that the e-commerce sector has grown steadily in Turkey (reflecting global trends) as a result of:
Referring to studies by and data from the Turkish Informatics Industry Association, PwC and KPMG, the board acknowledged that online sales constitute an important source of retail sales.
While D&R and some of its competitors conduct retail sales online, there are other market players (eg, Idefix, kitapyurdu and okuoku.com) that sell only online. The board noted that although the differences between traditional and online retailers are significant for producers (in terms of investment, personnel and business models), the two sectors do not vary significantly from a consumer perspective. The board therefore found that the sale of the relevant products online or through traditional retailers could not be substituted from a supply perspective; however, the relevant sales channels could easily be substituted from a demand perspective.
Adopting an in-depth approach, the board referred to previous acquisition assessment decisions in which online channels were recognised as a separate market. The board stated that if online and retail markets compete with each other, they can be considered to be the same market. Conversely, if a product is sold only online or e-commerce provides other specific advantages for its sale, online sales are deemed to constitute a separate product market. The competition parameters when considering online and retail channels in previous decisions concerned:
The board had previously considered online and traditional retail channels to be separate markets.
The board also referred to the European Commission's decisions in Lagardere v Naxetis and Egmont v Bonnier, as well as the UK Competition and Markets Authority's decision in HMV v Ottokar, and found that in cases of asymmetrical competition (ie, where sales in one channel can place significant competitive pressure on other channels that cannot be deemed as competition for the sales channel in question), a separate market definition is required depending on the channel exercising the competitive pressure. In other words, if online sales channels exercise competitive pressure on traditional sales channels (whereas traditional channels will not be deemed as competition to online sales channels), the market must be defined as a whole and not divided into online and traditional sales.
The board also drew on the French Competition Authority's recent decision in Fnac v Darty, in which it deemed that online and retail sales constitute one single market, which it defined as 'retail sales'. The board found the French Competition Authority's findings to be noteworthy in terms of its assessment of defining the relevant product market, taking into account the growth of online sales, consumer experience, multi-channel business models and the ability to compare prices available via online channels.
In its assessment of online and traditional retail channels, the board noted that:
The board concluded that the two channels constituted a single market: the market for the retail sale of books.
In order to examine the competitive significance that location can have on bricks-and-mortar stores, the board assessed the turnover of a number of stores. It noted that D&R's competitors unanimously believed that:
In light of these factors, the board made no distinction between online and traditional sales and shopping centres and high street shops.
In its geographic market assessment, the board stated that in terms of the broader national market (ie, Turkey), TveK's acquisition of D&R would create no competition law concerns in the retail market for books. However, given that the parties' activities were mainly traditional retail activities, different local markets (ie, cities and their districts) needed to be evaluated separately.
In its analysis, the board referred to its approach in previous cases in which it had evaluated regional market shares (eg, Migros v Tesco, in which the parties' turnovers had overlapped).(2) When considering online sales, the board noted that if the understanding of the market were to be extended to include the online channel, this would artificially bring together non-competing undertakings and enhance the market. Therefore, in accordance with the current doctrine, the fact that the online retail channel cannot be limited to a specific area could result in local conditions being overlooked, whereas customer preferences are shaped by both geographical proximity and available online alternatives.
In this context, the board decided on 47 district-based geographical markets for each relevant product market on a retail level. The board noted that there are no geographical differences in market conditions on a wholesale level and defined the geographical market as Turkey.
In assessing and determining a dominant position, the board stated that it would need to consider the relevant market's current status, future dynamics and any potential competition concerns. The lack of entry barriers to potential entrants to the market was deemed to be a significant competitive pressure that would prevent any potential competition restrictions. As a result, the board found that TveK's acquisition of D&R would not lead to a significant restriction of competition at the district level for the following reasons:
In light of the above, the board approved the transaction unconditionally.
For further information on this topic please contact Gönenç Gürkaynak at ELIG Gürkaynak Attorneys-at-Law by telephone (+90 212 327 17 24) or email (email@example.com). The ELIG Gürkaynak Attorneys-at-Law website can be accessed at www.elig.com.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.