Turkey: The Turkish Competition Board Refuses to Grant Individual Exemption to the Exclusivity Agreement for a Key Drug

Daiichi Sankyo İlaç Ticaret Ltd. Şti. ("Daiichi"), a globally active company in the distribution, sale, marketing and importation of pharmaceutical products, and Aksel Ecza Deposu A.Ş. ("Aksel"), a drug wholesaler, entered into a vertical exclusivity agreement ("Agreement"). They jointly applied to the Turkish Competition Board ("Board") for an individual exemption to be granted to the Agreement. The Board published its reasoned decision on November 22, 2016, refusing to grant an individual exemption.

The Agreement was designed to give exclusive authority to Aksel to participate in tenders across Turkey for the drug known as Simdax1.  Simdax is used by hospitals to provide support therapy to patients who have undergone coronary bypass surgery. 

In defining the relevant product market, the Board referred to the European Pharmaceutical Marketing Association's ATC categorization. The Board asserted that an ATC-3 level categorization would not reflect the entire competitive landscape of the drug, since Levosimendan (the active substance in Simdax) carries particular features and hospital tenders are usually made on the basis of a specific drug molecule. The Board thus defined the relevant product market collectively, based on the type of sale and the active substance of the drug, and established the relevant market as, "tender of the products with the drug substance Levosimendan."

The Board noted that the Agreement did not contain any provisions that entailed resale price maintenance. However, the Board found that the exclusivity and non-compete provisions nevertheless amounted to a violation of Article 4 of Law No. 4054. The Board stated that Simdax does not have a generic substitute, and therefore, it is unrivalled in the tender sales market in terms of its active substance. Accordingly, the Board decided that the Agreement could not benefit from a block exemption under the Block Exemption Communiqué No. 2002/2 on Vertical Agreements ("Communiqué No. 2002/2"), as the supplier in this case held a market share of over 40% in the relevant market for Simdax. Since the agreement was unable to benefit from the block exemption under Communiqué No. 2002/2, the Board applied an individual exemption test to see if the Agreement was eligible for an individual exemption under the following conditions:

  1. The agreement must contribute to the improvement of the production or distribution of goods or the promotion of technical or economic progress,
  2. it must allow consumers a fair share of the resulting benefit,
  3. it should not impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives, and
  4. it should not afford the parties the possibility of eliminating competition with respect to a substantial part of the products in question.

The Board concluded that the Agreement met the first condition, as it contributed to the improvement of the production or distribution of goods or to the promotion of technical or economic progress. The Board noted that the Agreement allowed Daiichi to effectively follow and actively participate in the tenders, and thus ensured the continued and uninterrupted provision of the product. By collecting regular information on tenders, the Agreement enabled Daiichi to adjust its production, importation and inventory planning accordingly.

For the second condition, the Board decided that the Agreement did not meet the test of allowing consumers a fair share of the resulting benefit. The Board stated that both the public health expenses and the satisfaction of hospital demands had been taken into account. The Board determined that hospital demand had largely not been met since the Agreement had entered into effect.

For the third condition, the Board concluded that it is not possible for the agreement to eliminate competition with respect to a substantial part of the products in question, since there are numerous pharmaceutical wholesalers active in Turkey.

With regard to the fourth condition, the Board decided that the agreement fell short of satisfying the test, since the Agreement restricted Aksel's participation in tenders involving products that competed with any Daiichi products. The Board noted that this clause prevented Aksel from participating in group tenders where more than one type of drug was required. Because of this clause, none of the other wholesalers could participate in a tender that includes Simdax along with other types of drugs, since the agreement also restricted Aksel's ability to sell Simdax to other wholesalers to enable them to participate in the group tenders.

Consequently, the Board decided by a majority vote that the Agreement did not meet the cumulative conditions of individual exemption under Article 5 of Law No. 4054. Therefore, the Board did not grant an individual exemption to the Agreement.

The dissenting opinion argued that the Agreement would not restrict competition in the relevant market since it included a clause that allowed Daiichi to appoint another wholesaler to procure Simdax when Aksel was not able to. Moreover, the Agreement could possibly lead to positive results after implementation in terms of the number of participated tenders and drugs transmitted to patients and hospitals. As a result, the dissenting opinion concluded that the Board should have granted an individual exemption to the Agreement.

(1)The Board's reasoned decision numbered 16-30/504-225 and dated September 8, 2016.

This article was first published in Legal Insights Quarterly by ELIG, Attorneys-at-Law in March 2017. A link to the full Legal Insight Quarterly may be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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