On March 28, 2019, the Board published its reasoned decision1 on the investigation launched against Medsantek Laboratuar Malzemeleri Sanayi ve Ticaret Limited Şirketi ("Medsantek") and Genomed Sağlık Hizmetleri Anonim Şirketi ("Genomed"). The Authority investigated a complaint received from Intron Sağlık Ürünleri İthalat İhracat Ticaret Limited Şti. ("Intron"), alleging that Medsantek and Genomed had violated Article 6 of the Law No. 4054 by excluding their competitors from the market for kits used in the DNA sequence analysis devices,2 by virtue of their dominance in the sales, service and maintenance of the DNA sequence analysis devices market.
The complainant, Intron, stated that Thermo Fisher Scientific ("Thermo") is dominant in the DNA sequence analysis devices market both globally and in Turkey, where it has two authorized distributors, namely Medsantek and Genomed. Furthermore, Intron indicated that it is active in the sales activities of kits used in the DNA sequence analysis devices, and that it has been working with Genomed and Medsantek; however, after Medsantek started to operate in the kits market (where Intron is active), Medsantek had ceased to provide authorization certificates, which are necessary for the tenders in this industry. Intron further stated that, since it is not possible to bid in the tenders without the authorization certificate, it was forced to start buying the relevant devices from abroad at higher prices. Intron also declared that, since neither the manufacturers nor the authorized distributors would provide authorization certificates, it was not possible for Intron to participate in public tenders and to operate in the market for kits used in the DNA sequence analysis devices, which requires the authorization certificates from Medsantek.
In terms of the relevant product market definition, the Board emphasized that the medical devices market is considered as the primary market, since the devices need complementary products or services in usage and, the market for complementary products and services, such as spare parts and maintenance services, that are used with or required after purchasing the primary products, is defined as the secondary market. Accordingly, the Board explained that, in order to define the relevant product markets for primary and secondary markets, two conditions should be evaluated: (i) whether the relevant devices and services are included in the same market, and (ii) if it is not possible, whether the market can be defined as brand- specific. The Board stated that there was no need to make a precise market definition for the secondary market due to dynamics of the present case, and consequently, it defined the relevant market as the "Thermo-branded new generation sequence analysis devices market' and the "Thermo-branded sanger sequence analysis devices" for the purposes of its analysis. In its relevant product market analysis, the Board highlighted that the Sanger sequence analysis devices market differs from the new generation sequence analysis devices market both technically and also from the users' perspective, in line with its previous decision3 concerning the same relevant market. In its analysis of the merits of the complaint, the Board examined the market where the abuse of dominance had allegedly occurred, and accordingly, assessed whether the relevant undertakings had abused their dominance in the kits market, namely, the market for the sale of services in return for kits.
In its substantive analysis, the Board assessed that public tenders comprised a significant part of the market for the sale of diagnosis kits. The successful tenderer fulfills all the stages from the setup to the output. Therefore, in order for the bidding company to compete in the kits market, they should also provide the devices (in which the kits will be used) to the hospitals. In addition, the hospitals request and require the authorization certificates for the devices to be submitted among their tender specifications. To that end, the Board found that the undertakings that are not provided with the authorization certificates could not compete in public tenders in the kits markets as effective competitors. Accordingly, the Board concluded that authorization certificates constituted a significant entry barrier in the relevant market.
The Board also found that, since the authorization certificates could only be obtained from the distributors, this requirement negatively affected the purchasing power of the undertakings that purchased the DNA sequence analysis devices from Genomed and Medsantek. Accordingly, the Board concluded that, once Genomed and Medsantek sell their Sanger or new generation sequence devices to the distributors or undertakings that are active in the kits market, each undertaking becomes dominant at the stage of issuing the authorization certificates for the devices it sells. Consequently, the Board found that both Medsantek and Genomed had the power to block the use of the devices they sell in a manner that would compete with their own products in the downstream kits market.
In its analysis of the abuse of dominance allegations against Genomed, the Board stated that, according to its review of the information and documents obtained during the investigation, Genomed had not rejected any requests for authorization certificates from any undertakings active in the kits market, including Intron. Furthermore, Intron also confirmed that it had not requested an authorization certificate from Genomed. As for Medsantek, the Board first examined whether Medsantek had rejected Intron's request for an authorization certificate for public tenders. One of the documents collected during the on-site inspection showed that Medsantek had rejected such a request from Intron by indicating that it could not provide an authorization certificate for a tender in which it would also participate. Regarding the Authority's question as to whether any existing legislation prevented the company from providing authorization certificates to third parties that participate in the same tenders as Medsantek, Medsantek stated that they issue authorization certificates to third parties only for the tenders in which they do not participate, in accordance with Article 17 of the Public Procurement Law No. 4734 ("Law No. 4734"), and the decision of the 13th Chamber of the Council of State4.
Article 17 of the Law No. 4734 stipulates that an undertaking's representative cannot bid in a tender while simultaneously bidding on behalf of another company that it also represents. However, the Board found that the authorization certificate required for the devices and the kits within the scope of the case at hand was a document that provided a guarantee for the successful tenderer to repair the device and to supply consumables in case the hospitals were faced with problems with the device beforehand. Accordingly, the authorized company participates in the tender on its own behalf without engaging in a representation relationship. Accordingly, the Board emphasized that the relevant relationship did not constitute a representation relationship within the meaning of the Law No. 4734, and found that Medsantek's practices did not arise from a legal obligation. The Board concluded that the relevant practices led to the exclusion of the competitors from the public tenders and hindered the competitors from selling kits. Furthermore, the Board stated that certain documents collected during the on-site inspection also indicated that Medsantek had been pursuing an exclusionary strategy.
In terms of the effect-based analysis of the alleged exclusionary behavior, by way of comparing the turnovers of the undertakings that were active in the DNA sequence analysis devices market for a time period between 2013 and 2018, the Board concluded that Intron was the only undertaking that could not increase its sales in 2018 (compared to the previous year), and also noted that Intron had experienced a serious decline in its sales following the refusal by Medsantek to provide an authorization certificate in July 2017.
The Board determined that Medsantek's failure to provide the authorization certificate required to participate in the tender after selling the DNA sequence analysis devices had a negative effect on the competition in the kits market. Therefore, the Board indicated that Medsantek's failure to provide the authorization certificate for the devices that were sold to its competitors had led to market foreclosure and violated Article 6 of the Law No. 4054. In light of the foregoing considerations, the Board decided unanimously to impose an administrative monetary fine on Medsantek at the rate of 1% of its turnover in 2018, which amounted to TRY 504,534.02. On the other hand, the Board also unanimously resolved that Genomed had not violated the Law No. 4054, and therefore, should not be subject to any administrative monetary fines.
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in March 2020. A link to the full Legal Insight Quarterly may be found here
1. The Board's decision dated March 28, 2019, and numbered 19-13/182-80.
2. DNA sequence analysis devices are essentially used for diagnosing genetic disorders.
3. The Board's decision dated August 9, 2017, and numbered 17-26/397-176.
4. The decision of the 13th Chamber of the Council of State, dated December 14, 2010, and numbered E. 2009/6170 and K. 2010/8505.