The fast-moving consumer goods (FMCG) retail sector has been put under the spotlight by the Turkish Competition Authority (the “TCA”) once again.
The TCA had previously published the Preliminary Sector Study Report on the Fast-Moving Consumer Goods Retail Sector (the "Preliminary Report") on February 5, 2021. This time on March 30, 2023, the TCA has published the Final Sector Study Report on the Fast-Moving Consumer Goods Retail Sector in Turkey (the “Final Report").
At the preparation stage of the Final Report, the TCA requested information and documents from many undertakings including organised FMCG retailers, suppliers, research companies, undertakings offering online marketplace services, internet-based commercial platforms, etc. as well as associations of undertakings and public institutions. The TCA also issued an Economic
Analysis Report in order to determine the buyer power in the FMCG retail sector.
- In the examinations made within the scope of the Final Report, the general structure and functioning of the sector is first explained. In this context, the development of the sector by years is analysed, and it is stated that the share of the organised channel within the FMCG retail market in Turkey has gone beyond the traditional channel, and the organised channel maintains its development.
- The Final Report analyses how concentration in the sector has increased, and evaluates whether there is any need to introduce separate thresholds for merger and acquisition filing for the retail sector. It is stated that, throughout the relevant 10-year period, 15 acquisitions in total (i.e. the acquisition by Gimsa of an undertaking which was not engaged in the retail sector, two acquisitions by ŞOK in the retail sector, and 12 acquisitions by Migros again in the retail sector) were not notified to the TCA. Those acquisitions were not notified to the TCA due to remaining below the turnover thresholds, and it is considered that the number of such transactions remains small. Following detailed discussions on the introduction of sector-specific turnover thresholds and after giving examples from the European Union, it is stated that lower turnover thresholds to be introduced for the sector in general would reduce the efficiency of mergers and acquisitions to be conducted between retailers of relatively smaller scales, prevent their growth, and cause the transaction processes to take longer. Within this framework, it is concluded that there is no need at this stage to put such suggestion, which was brought forward in the Preliminary Report, into practice and decrease the merger and acquisition filing thresholds specifically for the retail sector.
- The Final Report also covers the impacts on the sector of the buyer power which the undertakings engaged in the retail market have in the supply market, considering that the increase in concentration in the FMCG retail market throughout years has also affected the markets in which the products are manufactured, packaged and supplied. Finally, it is concluded that the interests of the suppliers and the consumers are affected by the buyer power in connection with each other, and that the use of the advantages of the buyer power solely in the favour of supermarkets is unfavourable for the suppliers and the consumers.
- The Final Report particularly focuses on the impacts of the abuse of buyer power on the competition, and suggests solutions for the elimination of the risk of abuse of buyer power.
- The Final Report further analyses the trend and ratio of digitalisation in the sector, and discusses the inclusion of the impacts of digitalisation on markets in the competition law analyses relating to the relevant sector. As a matter of fact, digitalisation in the FMCG retail market has gain much more momentum throughout the Covid-19 pandemic. It is considered that such change in the FMCG retail sector will affect both the volume and the form of competition in the sector. From this perspective, it is emphasized that the impacts of digitalisation on the competitive dynamics and the scales of competition must be taken into consideration in the determination of relevant product markets and relevant geographic markets and in the competition analyses. It is, on the other hand, stated that making such evaluations on a case-by-case basis according to the conditions specific to each concrete case will yield more accurate results.
- The Final Report also analyses a number of factors which may make adverse effects on the competitive nature of the FMGC retail sector, and includes evaluations on unfair commercial practices, behaviours of companies misleading the consumers, production of products of special weight, and introduction of population criteria for opening new stores.
By Duygu Bozkurt Kadirhan, Senior Associate Moral, Kinikoglu, Pamukkale, Kokenek