The Board published its reasoned decision1 on the investigation initiated upon a complaint by a pharmaceutical warehouse, namely Çınar Ecza Deposu ve Dış Tic. A.Ş. ("Çınar"), against Novartis Sağlık Gıda ve Tarım Ürünleri San. ve Tic. A.Ş. ("Novartis") and its subsidiary, Alcon Laboratuvarlan Tic A.Ş. ("Alcon"). Çınar alleged that Novartis had violated the Law No. 4054 by refusing to supply its pharmaceutical products, and that it had therefore abused its dominant position. Çınar further claimed that Novartis had prohibited the pharmaceutical warehouses from making sales to Çınar.
According to the reasoned decision, Çınar alleged that Novartis had terminated the General Sales Agreement ("Agreement") executed between Novartis and Çınar, without just cause. Furthermore, Çınar asserted that, as a result of the termination, it could no longer conduct sales to the pharmacies that had been its customers for many years, as the pharmacies usually tended to procure all of the products they required from a single pharmaceutical warehouse. Therefore, in order to be able to supply Novartis products to its customers, Çınar attempted to purchase Novartis products from other pharmaceutical warehouses. However, Çınar claimed that those pharmaceutical warehouses refused to supply Novartis products, without first obtaining Novartis's consent, due to the agreements they had in place with Novartis.
The Board found that Novartis had instituted an export ban in all of the agreements with the pharmaceutical warehouses, and that the agreements in question did not include any other de jure or de facto restrictions on the sales conducted among the pharmaceutical warehouses, with the exception of the rule pertaining to exports or reasonable suspicion of exports.
- Potential vertical restraints under Article 4 of the Law No. 4054
The Board analyzed the sales restriction under Novartis's agreements with the pharmaceutical warehouses and found that this restriction was, in fact, an export ban that only concerned and applied to sales to foreign countries, not to sales within Turkey or the Turkish Republic of Northern Cyprus. In addition, Novartis argued that one of its products (named Galvus) had been illegally exported to Iraq by Çınar, Pharma Turca, and Yunus Eczanesi, by exchanging the product barcodes and the medicine tracking system numbers with each other. Moreover, when Novartis requested information on the export of Galvus, Çınar responded Novartis with contradictory statements and it had breached its contractual obligation to Novartis. Furthermore, a number of warehouses explained to the Authority that they did not sell Novartis products to Çınar, due to their contractual obligations to Novartis with respect to not selling its products to third parties who might export or raise a reasonable suspicion of exporting such pharmaceutical products to foreign countries. Against this background, the Board concluded that there was no evidence indicating the existence of an agreement or concerted practice that had the underlying aim of excluding Çınar from the relevant market. Additionally, the Board decided that Novartis's agreements did not contain any restrictions concerning the sales of its products between warehouses, and thus concluded that the clause regarding the export ban did not constitute a violation of Article 4 of the Law 4054.
- Potential refusal to supply under Article 6 of the Law No. 4054
The Board found that three cumulative conditions had to be satisfied for a dominant firm to infringe Article 6 through a "refusal to supply": (i) the refusal should relate to a product or service that is indispensable for competing in a downstream market, (ii) the refusal should be likely to lead to the elimination of effective competition in the downstream market, and (iii) the refusal should be likely to lead to consumer harm.
In the case at hand, the Board held that the commercial relationship between the supplier and the warehouse was merely a resale and distribution agreement, and that the warehouses did not add value to the products sold. Thus, the Board found that the indispensability condition was not satisfied.
As regards to the second condition, the Board determined that, if the seller merely resells the products supplied by a dominant undertaking, there is no meaningful relationship between the dominant firm and the reseller; and thus, the reseller cannot be harmed by a refusal to supply.
As for the third and final condition, the Board held that, where the dominant undertaking is not vertically integrated in the downstream market, market foreclosure effects cannot be considered. The Board noted that Çınar's activities merely consisted of redistribution of the products, without any added value to the final product, and that Novartis was not active in the downstream market. Against this background, the Board concluded that Novartis had not violated Article 6 by engaging in "refusal to supply," since the effects on a small-scale pharmaceutical warehouse such as Çınar would not lead to elimination of effective competition in the market, and thus would not create any harm to consumers by impeding competition.
Based on the foregoing considerations, the Board unanimously decided that Novartis had not violated Article 4 or Article 6 of the Law No. 4054.
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in December 2019. A link to the full Legal Insight Quarterly may be found here
1 The Board's decision dated April 11, 2019, and numbered 19-15/215-95.
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