The Turkish Competition Board ("Board") assessed the application for QTerminals W.L.L.'s ("QTerminals") acquisition of sole control over Ortadogu Antalya Liman Isletmeleri A.S. ("Ortadogu Antalya"), which is ultimately controlled by Global Yatirim Holding A.S. ("Global Yatirim") through Global Liman Isletmeleri A.S. ("Global Liman").1
The target Ortadogu Antalya is active in the management and operation of the port in Antalya ("Port Akdeniz"). The acquirer QTerminals, on the other hand, was incorporated for the operation of Hamad Port in Qatar and is active since September 2017. QTerminals is solely controlled by Mwani, which is in turn ultimately controlled by the Ministry of Transportation and Communication of Qatar. After the completion of the transaction, Mwani will acquire the sole control over Port Akdeniz.
The Board first evaluated the parties' activities in Turkey and then globally, to determine the relevant product markets for the transaction. Port Akdeniz is a multi-purpose port with cruise and container terminals, as well as bulk cargo, general cargo and project cargo terminals. QTerminals and its ultimately controlling entity Mwani are terminal operators in Qatar providing container, general cargo, roll-on/roll-off, livestock and offshore supply services. The Board noted that QTerminals and Mwani do not have any activity in Turkey and defined the relevant product markets as "dry bulk, general cargo, container handling market" and "cruise port services" markets.2
As for the relevant geographical market, the Board followed the "catchment areas" criterion. The relevant criterion aims to cover the geographical area in which ports can compete, by taking into account all the ports and/or geographical areas that the relevant port provides services to or receives services from. The Board noted that it is important to take into account the hinterland of Port Akdeniz when determining the geographic market. Accordingly, separate geographical market definitions were made for each market: For the dry bulk, general cargo, container handling market, the geographical market was defined as the West Mediterranean; and for the cruise port services, it was Turkey.
The Board stated that QTerminals and Port Akdeniz's activities horizontally overlap in terms of port services. On the other hand, the Board concluded that there is no overlap in terms of their activities in Turkey since QTerminals and its ultimately controller are not active in Turkey. Accordingly, the Board found no affected market in Turkey and stated that the transaction would not significantly lessen the efficient competition in any relevant product market in Turkey.
On the other hand, the Board separately evaluated the content and the scope of the non-compete obligation imposed on the seller party Global Liman within the context of ancillary restraints. The Board stated that the share purchase agreement includes provisions on non-compete obligations and no-poaching arrangements. The Board emphasized that the relevant non-compete obligation was brought against Global Liman in a way that would encompass Turkey in its entirety in terms of geographical area. The Board then referred to the evaluations set forth in the Guidelines on Undertakings Concerned, Turnover and Ancillary Restraints ("Guidelines") and stated that (i) in order for a non-compete clause to be considered as ancillary restraint, its scope in terms of duration, subject, geographic area and persons must not exceed the reasonably necessary level, (ii) non-compete obligations not exceeding three years are generally deemed reasonable, (iii) non-compete obligations for more than three years may also be allowed depending on the specific dynamics of the case (such as the nature of the know-how and the level of customer loyalty) and (iv) non-compete obligations must be limited to the geographic areas where the seller is active prior to the transaction.3
Accordingly, the Board stated that the seller (Global Liman), in addition to the energy, real estate, and finance sectors, is active in port operations and manages Port Akdeniz, Bodrum Kruz Port and Kusadasi Ege Port. The Board stressed that the non-compete obligation imposed on Global Liman covers Turkey in general.
The Board then examined the suitability of the non-competition obligation in light of the framework drawn in the Guidelines within the context of ancillary restraints. By referring to the parties' explanations, the Board held that the relevant clause does not cover cruise port services. As for the other relevant markets (i.e., dry bulk, general cargo, container handling market), the relevant agreement imposed a non-compete obligation on Global Liman for Turkey in general and for a period of eight years. The Board stated that Port Akdeniz's activities are limited to the Western Mediterranean region and thus the area affected by the transaction consists of the Western Mediterranean. Accordingly, the Board found that the relevant clause exceeds the geographic scope of the seller's activities and therefore is not reasonable. The Board also concluded that the parties could not sufficiently explain the necessity of the scope of this clause from economic and other perspectives.
Consequently, while approving the relevant transaction on the basis of lack of significant impediment of competition in the absence of affected markets in Turkey, the Board concluded that the non-compete obligation imposed on Global Liman can only be deemed an ancillary restraint on the condition that the scope of the relevant obligation is narrowed down to the Western Mediterranean region.
The Board's decision is important as it shows the Board's stance in terms of non-compete obligations brought in the context of concentrations, which are commonly seen in mergers and acquisitions. In this regard, the decision reveals that the Board is keen in evaluating ancillary restraints in terms of their scope and does not hesitate to deep dive into such clauses when it finds the scope of these clauses excessive.
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in June 2021. A link to the full Legal Insight Quarterly may be found here.
1 The Board's decision dated November 26,2020 and numbered 20-51/708-316.
2. The Board noted that while it is possible to further segment these markets, such segmentation would not change the essence of its assessment and it did not provide a precise market definition for the relevant activities.
3.Guidelines provides that in exceptional circumstances such as when the seller has made investments to enter into new regions, restraints concerning these regions may also be accepted as necessary and reasonable.
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