Turkish Competition Board’s Decision on the DFDS-Ekol Lojistik Acquisition

Assessment of the Relevant Product Market and Geographic Market

Within the scope of the Transaction, it is determined that there is no horizontal overlap between Ekol Lojistik and DFDS. However there is a vertical overlap between Ekol Lojistik’s operations, namely international freight transportation by road, and the Ro-Ro transportation market in which DFDS operates. In this framework, the Board evaluated whether road transportation is considered an alternative to Ro-Ro transportation to determine the relevant markets. It is concluded that Ro-Ro and road transportation differ in terms of speed, safety, personnel employed, business model, necessary equipment, and fields of activity, and therefore the two types of transportation cannot be considered in the same market. Thus, within the scope of the Transaction, two separate relevant product markets are defined as “international transportation activities by road” and “Ro-Ro transportation market”. Considering the previous precedents, the relevant geographic market for Ro-Ro transportation services was defined as “Ro-Ro lines between Türkiye and Europe”. Within the scope of international freight transportation by road, the relevant geographical market was described as “Türkiye” since the relevant activities were generally directed to Türkiye.

Competitive Analysis of the Transaction 

Within the Transaction scope, it is considered that the Ro-Ro transportation market and the international freight transportation market by road are vertically related markets, where the Ro-Ro transportation market is the upstream market and the international freight transportation market by land is the downstream market. In this respect, the Transaction assessment is made under two categories: market-closing effects and coordination-inducing effects that may arise as a result of a non-horizontal merger. 

The Board considered separate assessments regarding market closure concerns that may arise due to the Transaction according to input restriction and customer restriction risks. Accordingly, it is first assessed whether the relevant input is essential for production in the downstream market. It is also emphasized that for a market closure to occur, the vertically integrated undertaking should have a specific market power in the upstream market. Accordingly, it is accepted that the Ro-Ro transportation service offered by DFDS in the upstream market is an essential input for the international transportation by road market. In this context, the market power of DFDS in the Ro-Ro transportation market is analyzed and it is determined that the market share of DFDS exceeds the dominant position threshold.

On the other hand, for an undertaking to have an incentive to restrict inputs, the restriction must be profitable and rational. According to the assessments made in this context, when the low- profit rates of Ekol Lojistik in the road transportation market are compared to the high-profit rates of DFDS in the Ro-Ro transportation market, it is unlikely that DFDS has an input restriction motive in the downstream market at the expense of sacrificing its profit in the upstream market or jeopardizing its trade with its customers^[4] . Finally, considering the importance of occupancy rates and economies of scale in the Ro-Ro transportation market, DFDS, which operates in the more profitable upstream market, may experience losses in Ro-Ro transportation service sales in case of input restrictions after the transaction. Therefore, although DFDS has significant market power in the upstream markets compared to its competitors, the combined undertaking is unlikely to have an input restriction motive, given that the customers of DFDS have a significant share in DFDS’s total sales, that the undertaking’s share in the downstream market will remain low after the transaction, and that its profit margins in the relevant upstream market are already higher than its profit margins in the downstream market.

The Board also evaluated the possibility that Ekol Lojistik may divert its purchases to DFDS after the vertical integration, and the market closing effects of this possibility. As a result, Ekol Lojistik would not be considered a significant market share customer as it only purchases a limited portion of its services from competing providers. Therefore, the Transaction will not have a significant anti-competitive effect related to the customer restriction, as it will not significantly contribute to competitors’ market shares. Moreover, due to the intense competitive environment in the downstream market and the limited market power of Ekol Lojistik, competitors can turn to alternative customers. Therefore, as the market structure for other competing Ro-Ro operators will remain largely the same after the Transaction, it is concluded that there will be no motive for customer restriction for the merged undertaking.

Other concerns raised in the context of the Transaction include the risk of competitively sensitive information exchange because DFDS holds information such as shipper and consignee information of its customers within the scope of Ro-Ro transportation business, title of the transporter, description of the cargo, quantity, weight, value of the cargo, port of origin and port of destination, and Ekol Lojistik will have access to this information after the Transaction. In this context, the fact that Ekol Lojistik will have access to the information obtained by DFDS from transportation undertakings within the scope of its activities after the Transaction may put Ekol Lojistik in an advantageous position when it is compared to other transportation undertakings. The Board Decision also addresses the concerns raised by the shipping undertakings regarding discrimination against Ekol Lojistik in the onboarding and booking phases after the transaction.

Finally, concerning the analysis of the coordination effects, it is assessed that a horizontal concentration will not arise as a result of the Transaction, and a buyer with a significant market share will not join the combined undertaking due to vertical concentration. Although it is foreseen that the likelihood of coordinated behavior in the downstream or upstream market after the Transaction is low, it is assessed that the commitments made by the parties may eliminate the possibility of such coordination risk.

Commitments Submitted within the Scope of the Transaction 

DFDS has provided several commitment proposals to address concerns about the sharing of commercially sensitive information with Ekol and discrimination in favor of Ekol Lojistik. The commitments include that DFDS's Ro-Ro business unit in Turkey will operate as a separate legal entity, the managers and employees responsible for the Mediterranean Business Unit of both Ekol Lojistik and DFDS will remain completely independent, and employees in shared support functions - such as accounting, human resources, and information technology departments - will be prohibited from making commercial decisions or sharing commercially sensitive information outside the business unit to which they belong. In addition, DFDS has undertaken to not directly or indirectly share commercially sensitive information obtained as a Ro-Ro carrier with Ekol Lojistik and that Ekol Lojistik and DFDS will completely separate data access by using different information systems. Accordingly, employees of one business unit will be prevented from accessing customer information that belongs to the other business unit, and DFDS’s pre-transaction reservation and embarkation procedures will be maintained for all customers after the transaction without any change. In this context, the commitments above have been deemed sufficient to eliminate the competition problems that as a result of the Transaction and the Transaction was given conditional clearance.

Dissenting Opinion on the Board Decision

In the dissenting vote of the Board Decision, it was emphasized that DFDS has an indispensable position in the upstream market with its Ro-Ro transportation service and will become the most essential player in the international freight transportation market by road due to the Transaction. In this context, it is assessed that DFDS may abuse its dominant position in the upstream market against competing undertakings in the market in which Ekol also operates, and that the commitments offered by DFDS are insufficient to address these concerns. In addition, because the undertakings, whose opinions were consulted within the scope of the file, the Transaction would adversely affect competition and that the Transaction would not result in any efficiency, therefore a clearance decision should not be rendered for the Transaction. 

Conclusion 

The vertical Transaction involving the acquisition of Ekol Lojistik’s road transportation activities by DFDS generated diverse opinions among market participants and underwent a thorough assessment under competition law. Consequently, concerns such as market foreclosure, sharing of competition-sensitive information, and discriminatory practices were raised about the Transaction. Nonetheless, the Board determined that the commitments provided by DFDS were adequate to address the competition concerns and conditionally approved the Transaction. The Board’s decision, along with the dissenting opinion, serves as a significant example of competition concerns arising from vertical mergers or acquisitions where parties hold substantial market power, and the evaluation of commitments proposed to mitigate such problems.