The Turkish Competition Board ("the Board") has recently published its reasoned decision1 pertaining to the acquisition of sole control of Marport Liman İşletmeleri Sanayi ve Ticaret Anonim Şirketi ("Marport") by Terminal Investment Limited Sàrl ("TIL").
The notified transaction concerned the acquisition of 50% of the shares and the sole control of Marport by TIL, from Arkas Group. At the time of the notification, Marport had been jointly controlled by TIL and Arkas Group and thus the transaction would result in a change of control, granting TIL sole control over Marport.
TIL was founded in 2000 and it invests in, develops and manages container terminals around the world. TIL is jointly controlled by Mediterranean Shipping Company ("MSC") and Global Infrastructure Partners ("GIP"). It holds indirect shareholdings in various Turkish port operating companies: TIL holds 70% of the shares in Asyaport Liman A.Ş. ("Asyaport") through its subsidiary Global Terminal Limited Sàrl ("GTL") and jointly controls Asyaport together with Ahmet Soyuer. TIL also holds %50 indirect shareholding in Assan Liman İşletmeleri A.Ş. ("Assan") which is active in the container and cargo handling services in Turkey.
Based on the parties' activities and its decisional practice, the Board defined the relevant product markets as "port management for container handling services," "port management for container handling services concerning transit traffic," and "port management for container handling services concerning hinterland traffic." In terms of the relevant geographic market, by considering the Economic Analysis Report of the Economic Analysis Department of the Authority and the characteristics of the ports and the sizes of the hinterlands of the ports along with the customer choices, the Board defined the relevant geographic market as "North-west Marmara" for the local cargo in the relevant product markets; however, the geographic market definition for the "port management for container handling services concerning hinterland traffic" was left open.
In its competitive assessment, upon evaluating the information provided by the parties to the notified transaction, the Board stated that the relevant transaction led to a horizontal overlap in the relevant product market for the "port management for container handling services" and a vertical overlap in the relevant product market for the "container line transportation." Furthermore, the Board pointed towards the fact that TIL operated in the relevant product market or in the sub segments of the relevant product market, and as TIL particularly had a significant market power in those markets, it was found likely that competitive concerns might arise pursuant to Article 7 of the Law No. 4054 on the Protection of Competition ("Law No. 4054"). To that end, the Board highlighted that the transaction would be subject to evaluation under the "Significant Impediment to Effective Competition Test" (SIEC) within the framework of Article 7 of Law No. 4054.
In order to evaluate the pre- and post-transaction market structure, the Board assessed the relationship between TIL and MSC, and subsequently the relationship between Asyaport and TIL. It was noted that TIL was a company established mainly to secure the terminal capacity in the ports used by MSC. In this regard, MSC is currently the biggest customer of TIL. The same goes for Asyaport, as Asyaport renders almost entire of its services to MSC. In conjunction with this business relationship between MSC and TIL, the Board came to the conclusion that, even though Asyaport and TIL were two separate joint ventures, the two undertakings rendered their services almost entirely to MSC. In addition, even though TIL and Asyaport were two jointly controlled undertakings separate from MSC, the Board emphasized the trade relationship between TIL and MSC as well as the fact that none of GIP, which jointly controlled TIL together with MSC, and the Soyuer family who jointly controlled Asyaport together with TIL had any activities in relevant product market. Thus, the Board stated, the influence of MSC on TIL and Asyaport was increased. Thereby, the Board evaluated that the activities of TIL and Asyaport were not independent from the activities of MSC, and that the activities of TIL and Asyaport formed a part of MSC's activities. More specifically, the Board assessed the sales figures of Marport's five major customers within the frame of transit and local loads between 2015 and 2019. Upon its substantial assessment, the Board inferred that in terms of local loads, MSC was the major customer of Marport. In a similar fashion, it was inferred that Asyaport almost entirely served to MSC regarding transit and local loads.
Furthermore, the Board evaluated the market shares of Marport and Asyaport for the port management for container handling services market for local loads in the North-west Marmara Region. The Board stated that, Marport was in the leading position as of 2019 in the relevant product market while Asyaport, on the other hand, was in the third place with the services it mainly provided to MSC. As the notified transaction concerned the inclusion of Marport to MSC's container handling activities carried out through Asyaport, the Board stated that it was evident that the market share of the MSC/TIL group in the port management for container handling services for local loads in the North-west Marmara Region would increase significantly. Furthermore, the Board stated that, despite the fact that Kumport was the second biggest undertaking operating in the relevant product market and an important competitor, the acquisition of sole control of Marport, the biggest player in the relevant product market by TIL, would further increase the concentration level in the product market in which the concentration level is significantly high at present, since MSC is currently operating Asyaport. In this regard, the Board stated that, considering that Marport and Kumport were the biggest players in the said product market, it could be inferred that the market is a narrow oligopolistic market which resembles a duopoly, noting that the other undertakings had relatively low market shares in the relevant product market.
Upon its Herfindahl-Hirschman Index ("HHI") based evaluation in the relevant product market, the Board concluded that the HHI level which had already been quite high pre-transaction (>2000), would further increase (would be approx. 4573 with an 1187 increase) post-transaction and the notified transaction would lead to an even narrower oligopolistic market. Thus, the notified transaction would create a further weakened price competition among the players as well as price increases.
Moreover, the Board evaluated the established capacity of the North-west Marmara Region ports combined, and Marport and Asyaport, separately. Upon its assessment, the Board stated that, bearing in mind that MSC was one of the biggest line operators on a global scale, when evaluated together with its significant presence in the area of liner shipping, the fact that MSC would operate a significant part of the container handling capacity of the North-west Marmara Region was likely to become a disadvantage for other line operators that use the ports in the Northern Marmara Region, and increased the costs for these line operators. The Board highlighted that this might especially be the case when there was not enough capacity available for other line operators.
The Board also put emphasis on the fact that transit loads would be almost entirely handled in the North-west Marmara Region and thus as a result of the notified transaction, MSC would control 60% of the transit handling services therein. The Board stated that this would ultimately cause competitive concerns to arise.
Another point the Board evaluated is the planned railway line connecting Asyaport to the existing railway line. To that end, it considered the ongoing project that connects Asyaport to the existing railway line and stated that in the event that the relevant project is materialized, Asyaport would be capable of serving the North-west Marmara Region as well as Istanbul to a greater extent via the railway line extending into its port. Considering the above mentioned facts, the Board stated that Marport, located at the Ambarlı Port Facilities, handled approximately 90% of the total local load volume in the North-west Marmara Region. The Board also acknowledged that in the event that the relevant railway line project became operational, Asyaport would be a substitute to Marport. However, as TIL already holds 70% of the shares in Asyaport, and as the railway project will make Asyaport a substitute for Marport, the acquisition of Marport, the current biggest undertaking in the Ambarlı Port, by TIL would mean that the two ports that have been current competitors and/or future substitutes would be operated by the same undertaking, TIL.
In light of the foregoing, the Board ultimately concluded that the notified transaction would cause significant impediment of effective competition pursuant to Article 7 of Law No. 4054. Thus, the Board refused to grant approval to the relevant transaction based on the grounds that the notified transaction was likely to cause significant impediment of effective competition.
Although very rare, there have been other decisions in which the Board refused to grant clearance in similar product markets concerning port operation and marina services.
For example, in its UN Ro-Ro decision2, the Board delved into substantive analysis regarding the significant barriers to entry and determined that if an undertaking aims to operate in the market for Ro-Ro transportation, it is required to possess at least three Ro-Ro ships. Also, the Board evaluated barriers to entry such as an undertaking which aims to enter into the market having to find an appropriate port for its operations with a suitable infrastructure and capacity for regular liner shipping. The Board also evaluated that the market has strong and established players, and this may cause an entry barrier too. To that end, the Board determined that high investment costs, the difficulty of finding alternative ports, the existing players' financial strength and brand recognition and previous unsuccessful entry attempts indicate that the barriers to entry into the market are high in this case. Consequently, the Board rejected the acquisition of Ulusoy Ro-Ro by UN Ro-Ro.
In its Beta Marina Liman decision,3 the transaction concerned the acquisition of all shares of Beta Marina Liman and Pendik Turizm Marina by Setur. The Board ultimately refused to grant approval and rejected the transaction, as it reasoned that the transaction would lead Koç Holding, which is the ultimate parent company of Setur, to become dominant in the İstanbul City Port Marina and impede effective competition in the relevant product market.
Finally, in its Port Izmir I4 and Port Izmir II decisions,5 the Board has taken into consideration (i) the overall capacity level, (ii) capacity usage levels and (iii) possible capacity increment in order to determine whether a transaction would lead to the creation or strengthening dominant position and thus restrict competition in the conventional cargo and container handling as well as cruise port services market. Ultimately, the Board decided to prohibit the transfer of the operating right of İzmir Port through its privatization by the Turkish State Railways to Alsancak Ortak Girişim Group (Izmir I) and Babcock and Brown-PSA-Akfen Ortak Girişim Group (Izmir II) as these transactions would lead to restriction of competition in the container handling services.
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
Footnotes
1 The Board's decision dated August 13,2020 and numbered 20-37/523-231.
2 The Board's decision dated November 9, 2017 and numbered 17-36/595-259.
3 The Board's decision dated July 9, 2015 and numbered 15-29/421-118.
4 The Board's decision dated June 5, 2007 and numbered 07-47/507-182
5 The Board's decision dated June 20, 2007 and numbered 07-53/615-204.
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