Enis Doğa Küçükay&nbsp;specialises in competiiton&nbsp;and antitrust matters. Practice Areas &amp; Work DepartmentCompetition &amp; State Aid LanguagesEnglishTurkish Education2020: City University of London, London, Faculty of Law, LL.M2019: Istanbul Okan University, Istanbul, Faculty of Law, LLB2016: Charles University, Prag, Erasmus Student Exchange Program MembershipsIstanbul Bar Association

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In August 2023, the Turkish Competition Board (“Board”) approved 19 merger and acquisition transactions. During August the Board initiated 14 new, full-fledged investigations, concluded eight on-going investigations, and held oral defences for six investigations. Also in August, the Turkish Competition Authority (“Authority”) published its 24th annual report regarding its activities in 2022.

Two-minute Recap of Recent Developments in Turkish Competition Law - August 2023

&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">On 28 August 2023, the Turkish Competition Board (“&lt;strong>Board&lt;/strong>”) announced that it had concluded its investigation into
EssilorLuxottica S.A.’s (“&lt;strong>EssiLux&lt;/strong>”) alleged anti-competitive practices. [1] The investigation stemmed out of the
commitments offered and accepted during the 2018 merger of Essilor and Luxottica which that formed EssiLux. [2] The
decision is particularly interesting as the Board found EssiLux infringed the law on two accounts; &lt;strong>(i)&lt;/strong> violation of
commitments; &lt;strong>(ii)&lt;/strong> abuse of dominant position.&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">Although, the Board indicated in its short-form decision that EssiLux violated the Law No 4054 On the Protection of
Competition (“&lt;strong>Turkish Competition Law&lt;/strong>”) on two account, the Board only opted to impose a daily fine of 0.05% of
Essilux’s turnover starting from 2018, on the grounds that EssiLux acted against its commitments made binding on it
with its decision dated 1 October 2018. The Board refrained from issuing a fine for abuse of its dominant position with
reference to the ne bis in idem principle. The fine amounts to approximately EUR 16.9 million and correspond to a
whopping 1,781 days (more than 4 years) of daily monetary fine. [3]&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">One can ask whether it is all over for EssiLux or whether the Board can re-examine the merger, as there appears to be
a discrepancy between Communiqué No. 2010/4 on Mergers and Acquisitions Requiring the Approval of the
Competition Board (“&lt;strong>Communiqué No. 2010/4&lt;/strong>”) and the Turkish Competition Authority’s Guidelines on Remedies
Acceptable by the Competition Board in Merger and Acquisition Transactions (“&lt;strong>Guidelines on Remedies&lt;/strong>”). On the reexamination of a transaction, the former sets a rule for breaches of conditions and obligations together, while the latter
does not make a reference to the decision being null and void or a revocation in case of a breach of an obligation.
Therefore, the interpretation of the relevant legislation will be essential.&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">Below we discuss the possibility of a new examination of the merger of Essilor and Luxottica.&lt;/span>&lt;/p>&lt;h2 style="text-align: justify;">&lt;strong style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">Is the threat of re-opening of 2018 Merger case real, or is EssiLux safe?&lt;/strong>&lt;/h2>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">According to Article 16 of Communiqué No. 2010/4, the Authority shall re-examine a merger or acquisition if “the
conditions or obligations tied to the decision were not fulfilled.”&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">As can be seen, Article 16 makes no distinction between conditions and obligations. Furthermore, it does not award
any discretion to the Board to initiate a new examination on the concentration. According to it, the Board is simply
obligated to initiate a fresh examination if any of the conditions or obligations of its approval decision are not fulfilled.
That said, the Guidelines on Remedies seems to narrow the scope of Article 16 of Communiqué No. 2010/4. Indeed,
Paragraph 92 of the Guidelines on Remedies may warrant a reading that the consequences of non-compliance with an
obligation and condition are different. On this front, it states that non-compliance with a condition will automatically
render the transaction null and void; “on the other hand”, in case of non-compliance with obligations, the parties may
be subject to daily administrative fines.&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">The Guidelines on Remedies makes its example on divestiture when explaining the difference between conditions and
obligations. An obligation towards divestiture will be considered as a condition, and submitting the necessary reports
towards this condition will be considered as an obligation.&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">Based on the above definition, this distinction can be interpreted in two ways. In the first scenario, the Board will solely
declare a transaction incompatible and re-examine it, only where conditions are not fulfilled. If this is the case, the
distinction seems to be on whether the commitment is directly related to alleviating competition concerns. Reporting
obligations as such will then be perceived to be ancillary and not directly related to alleviating competition concerns
arising from structural changes in the market post-transaction. Considering that the Guidelines on Remedies also
makes a reference to Article 16 of Turkish Competition Law, which enables the Board to impose a fine for significantly
lessening effective competition, it may further strengthen this argument. After all, it is reasonable for a transaction that
significantly lessens effective competition to be null and void.&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">However, this can also be interpreted as a breach of obligations not warranting an immediate re-examination and
automatic nullity of the transaction but, it may nonetheless trigger a re-examination if the Board finds it necessary. In
this regard, the conjunction “on the other hand” simply refers to an alternative more lenient approach than breach of
conditions: a daily fine may suffice.&lt;/span>&lt;/p>&lt;h2 style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;strong style="">What does EU legislation say on this?&lt;/strong>&lt;/span>&lt;/h2>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">Considering that the EU Guidelines serves as a reference for Turkish legislation, we think that it would be beneficial to
compare the approach of the European Commission (“&lt;/span>&lt;strong style="font-size: 14px;">Commission&lt;/strong>&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">”) with the Board’s. According to Paragraph 19 of
Commission Notice on the Remedies Acceptable (“&lt;/span>&lt;strong>EU Guidelines&lt;/strong>&lt;span style="font-size: 14px;">”), the Commission also makes a distinction between
an obligation and a condition. According to the Commission, the requirement of achieving a structural change to the
market is a condition. The example given is a divestiture. On the other hand, the implementing steps to achieve the
necessary measures, such as the appointment of a trustee, is provided as an example of an obligation.&lt;/span>&lt;/span>&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">Regarding the consequences, Paragraph 19 of the EU Guidelines states that a breach of an obligation may result in
the Commission revoking the clearance decision. The parties may also be subject to fines of up to 10% of the
aggregate turnover of the undertaking concerned and periodic penalty payments. Where, however, a condition is
breached, the decision will be null and void and the Commission is entitled to re-examine the transaction. The parties
may also be subject to fines for breach of a condition but not a periodic penalty payment. Thus, the Commission holds
a margin of discretion when re-examining transactions based on obligations, but for conditions, the transaction will be
voided.&lt;/span>&lt;/span>&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">In light of the above, the conclusion we arrive is that the Board can adopt the same approach as the Commission. The
Guidelines on Remedies, after all, does not expressly declare that re-examination of a transaction will not be possible
for breach of obligations.&lt;/span>&lt;/span>&lt;/span>&lt;/p>&lt;h2 style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">&lt;strong style="">How can this be applied to EssiLux?&lt;/strong>&lt;/span>&lt;/span>&lt;/span>&lt;/h2>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">In the 2018 merger decision EssiLux committed to divest a business (&lt;/span>&lt;strong style="font-size: 14px;">Merve Optik&lt;/strong>&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">), which was expected to alleviate
horizontal competition concerns and to remedy conglomerate competition concerns, two sets of behavioural
commitments were accepted: &lt;/span>&lt;strong style="font-size: 14px;">(i)&lt;/strong>&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;"> no tying and &lt;/span>&lt;strong>(ii)&lt;/strong>&lt;span style="font-size: 14px;"> no exclusivity practices.&lt;/span>&lt;/span>&lt;/span>&lt;/span>&lt;/span>&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">In terms of conglomerate effects, the Board expressed its concerns that EssiLux leverages its dominance in the
horizontal market to two adjacent markets. It further stated that EssiLux would acquire a significant market power and
would be in a position to satisfy a significant portion of the need of opticians, and thus acquire a significant portfolio
power to the detriment of its competitors. A remark is also made about a previous anti-competitive practice, where
Luxottica was found to have abused its dominant position by way of de facto exclusivity practices on re-sellers. [4]&lt;/span>&lt;/span>&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">Yet, the Board classified these behavioural commitments as “obligations” and not as “conditions”. It is clear that these
commitments should be considered directly related to preventing the significant lessening of effective competition.
After all, exclusion of a rival from the market would amount to a significant lessening of effective competition. As
opposed to the example in the Guidelines on Remedies, where an obligation is classified as an ancillary step, such as
reporting on implementation, these commitments seem to be directly related to preventing the significant lessening of
competition.&lt;/span>&lt;/span>&lt;/span>&lt;/p>&lt;h2 style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">&lt;strong style="">Conclusion&lt;/strong>&lt;/span>&lt;/span>&lt;/span>&lt;/h2>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">As the goal of merger control is to prevent the lessening of effective competition in the market, we think that the
classification of anti-exclusivity commitments as “obligations” may not matter. As a matter of fact, the Competition
Board’s decision establishes that EssiLux abused its dominant position for almost 1,781 days, by way of not
implementing the behavioural commitments.&lt;/span>&lt;/span>&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">However, despite the conclusion that EssiLux’s agreements in which the ophthalmic lens and ophthalmic machine are
offered together and other actions in the market create de facto exclusivity and exclude competitors, and that these
actions constitute an abuse of dominance, the Board decided against imposing a fine for abuse of dominant position
within the scope of the ne bis in idem principle, considering that a fine is already being imposed for breach of the
commitments, which is caused by the same behaviour. This poses the question on the efficacy of the commitments
defined as obligations, especially in scope of the ne bis in idem principle. If a behaviour is subject to a fine, regardless
of whether such commitments were proposed, and the undertaking concerned does not face any other sanctions, it
can be argued that the relevant commitments serve as mere declarations of intention, as also stated in the EU
Guidelines and the European Court of Justice’s relevant decisions.&lt;/span>&lt;/span>&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;span style="font-size: 14px;">As of the writing of this article, we do not have information how the Board will handle this issue yet. The Board may
consider that, irrespective of the result, a re-examination is not warranted. As this is a first in Turkish merger control,
one cannot be certain to what the next move of the Board may be.&lt;/span>&lt;/span>&lt;/span>&lt;/p>&lt;hr>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;strong>1.&lt;/strong>&lt;span style="font-size: 14px;"> The Competition Board’s decision dated 17.08.2023 and numbered 23-39/749-259 (reasoned decision is not published yet). The short-form
decision can be accessed via the following link, available only in Turkish: https://www.rekabet.gov.tr/Dosya/essilorluxottica-nihai.pdf&lt;/span>&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;strong>2. &lt;/strong>&lt;span style="font-size: 14px;">The Competition Board’s decision dated 01.10.2018 and numbered 18-36/585-286.&lt;/span>&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;strong>3.&lt;/strong>&lt;span style="font-size: 14px;"> Based on the exchange rates of 31 August 2023. The TL amount is: TL 492,191,132.&lt;/span>&lt;/span>&lt;/p>&lt;p style="text-align: justify;">&lt;span style="font-family: Arial, Helvetica, sans-serif; font-size: 14px;">&lt;span style="font-size: 14px;">&lt;strong>4. &lt;/strong>&lt;span style="font-size: 14px;">The Competition Board’s decision dated 01.10.2018 and numbered 18-36/585-286, paras. 115-117 and 175.&lt;/span>&lt;/span>&lt;/span>&lt;/p>

The Turkish Competition Board has fined EssiLux EUR 16.9 million for violating the commitments it made as part of its 2018 merger with Luxottica. The Board found that EssiLux had engaged in tying and exclusivity practices, which could have significantly lessened effective competition in the market. The Board's decision is a major setback for EssiLux, and it raises questions about the efficacy of commitments made as part of merger control approvals.

Lawyers Enis Doğa Küçükay

Enis Doğa Küçükay

Two-minute Recap of Recent Developments in Turkish Competition Law - August 2023

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