The Board recently published its reasoned decision1 regarding the acquisition of Doğan Müzik Kitap Mağazacılık Pazarlama A.Ş. ("D&R") and its two subsidiaries (Hür Servis Sosyal Hizmetler ve Tie. A.Ş. and AGT Tanıtım Kağıt Ürünleri Sanayi ve Tie. A.Ş.) by Turkuvaz TK Kitap ve Kırtasiye A.Ş. ("Turkuvaz"), owned by Zirve Holding A.Ş. ("Zirve"), and ultimately controlled by Ömer Faruk Kalyoncu.

The acquirer, Turkuvaz, is active in the sales of books, stationery, electronic devices and accessories, toys, and souvenirs. The acquisition target, D&R, is a retailer of books, e-books, music-related products (i.e., CDs, DVDs, and Blu-Ray), home videos (i.e., VCDs, DVDs, and Blu-Ray), stationery, games, toys and hobbies, magazines, electronics and accessories, souvenirs, personal products, as well as food, sports and outdoor recreational products.

The Board identified the horizontally affected markets as consisting of the following: (i) the retail sales of books, (ii) the retail sales of periodical publishing products, (iii) the retail sales of stationary products, (iv) the retail sales of games, toys and hobby products, (v) the retail sales of user electronics, and (vi) wholesale of books. Moreover, it defined the vertically affected markets as: (i) the distribution of periodical publishing and nonmedia products, and (ii) the printing of periodical and non-periodical publishing products.

The Board's centred its attention on its assessment of the relevant product market and the relationship between retail sales and online sales. To that end, following an in- depth analysis of its own precedents and decisional practice, as well as the precedents of various foreign competition authorities (including the findings of the UK Competition and Markets Authority), the Board determined that: (i) the usage rate of e-commerce services in Turkey is increasing, primarily due to the lower prices available in online channels; (ii) even though online and traditional retail sales differ in terms of their investment costs, number of employees, and business methods from the perspective of the undertakings, no significant difference exists between the two channels from the consumers' point of  view; (iii) online channels can exert competitive pressures on traditional channels since the availability of lower prices online is the most important factor leading consumers to prefer and choose online channels over traditional retail channels, especially for books and music products. Accordingly, the Board concluded that, even though there was no substitutability on the supply side, there was a demand-side substitutability relationship between these two channels; therefore, the Board found that the online channel and the traditional channel constituted a single market, which is the market for the "retail sales of books."

The Board also examined whether stores located in shopping malls and on the streets are in the same relevant product market, and ultimately decided not to distinguish between:

(i) online and traditional retail sales, and (ii) retail activities in shopping malls and retail activities in stores on the streets.

With regard to the relevant geographical market, the Board determined 47 district- based geographical markets for each relevant product market at the retail level. At the wholesale level, whilst noting that there are no geographical differences in market conditions, the Board, defined the geographical market as "Turkey".

With regard to the horizontally affected markets, the Board concluded that the parties' market shares did not lead to a significant level of concentration. In terms of the vertically affected markets, the Board assessed potential input effects and customer foreclosure effects, and, in light of the competitive dynamics of the sector at hand, determined that no competition law concerns would arise after the acquisition in question was completed. Accordingly, the Board unconditionally approved the transaction.

Footnote

1 The Board's decision dated May 29, 2018, and numbered 18-16/293-146.



This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in December 2018. A link to the full Legal Insight Quarterly may be found here.

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