The Turkish Competition Board has recently published the reasoned decision of the Roche/Corena case, which was awaited for a while to evaluate the exact status of restrictions on the export bans within the Turkish competition rules after the Council of State revoked the previous decision of the Board on the same case. Roche/Corena case had been started further to Corena’s complaint with the claims that Roche requires the signing of the contract containing the export prohibition clause, refuses to supply products to Corena which does not accept that export prohibition clause and presses other warehouses not to sell products to Corena. After the annulment decision of the Council of State, the Board has evaluated the matter in notably details and highlighted that the direct and indirect export ban is necessary for the pharma industry, because of the sector specific rules and practices i.e. pricing, licensing, packaging and interests of patients in Turkey. We believe that this decision will be a guidance to the innovator pharmaceutical companies while determining the practice to prevent parallel export.
The Board has evaluated whether Roche is violating the Law, with respect to Article 4 (Agreements, Concerted Practices and Decisions Limiting Competition) and Article 6 (Dominant Position) as below;
1. Assessment under Article 4 of the Act No. 4054
It was claimed that the direct and indirect export ban clause is restricting the active and passive sales of the pharma warehouses and therefore constitutes a substantial violation of Article 4. The Board has referenced the Guideline on Vertical Agreements and the Communiqué No. 2002/2 in its assessment and stated that since there is no allocation of territories or customer groups within the borders of Turkey, it is not possible to assess the direct and indirect export ban as active and passive sales ban. The Board has clearly stated that the respective rules are for the prohibition of active and passive sales within Turkey. In other saying, the Board looks whether the ban is restricting competition within the country.
About the indirect export ban, the Board has accepted that it is complementary to the direct export ban and direct export ban would have no enforcement without the indirect export ban.
The Board has declared that it is understood that the ban on direct and indirect exports are not adversely affecting the operation of pharmaceutical market and its competitive structure in Turkey, and as the result, such ban is not restricting or making it difficult to access medicines by the patients or hospitals. On the contrary, it is considered that such an export ban contributes to the availability of products in the pharmaceutical warehouses sub-market and it will increase the competition among the warehouses and accordingly will benefit the consumers.
As a result, the Board has stated that the direct and indirect export ban does not constitute a violation of Article 4 of the Act No. 4054.
2. Assessment under Article 6 of the Act No. 4054
The Board has evaluated the complaint-related practices of Roche with respect to the abuse of dominant position as below;
a) Assessment on the claim that Roche did not supply goods to Corena
The Board has stated that it is possible to mention the indirect refusal of the granting of goods in the concrete case because of the non-acceptance of the export ban clause. The Board has referenced the Guideline on Dismissive Behavior and stated that the following conditions must exist in addition to being in the dominant position in the market;
- Rejection must relate to an indispensable product or service to compete in the downstream market,
- Rejection should be likely to eliminate effective competition in the downstream market,
- Rejection should be likely to cause consumer harm.
In the assessment of the existence of these conditions, the Board has resulted that these conditions are not provided because of the following reasons in sum;
- Where there is only resale or distribution of the product supplied in the upper market (in other words, no added value can be mentioned), it is assumed that there is no competition worth protecting.
- Corena mainly competes in foreign markets and the fact that Roche does not deliver goods to Corena on the grounds that it exports has the potential to affect the competition in foreign markets.
- The consumers in Turkey are unlikely to incur any damage.
In addition to the assessment hereinabove, the Board has also expressed that it is justifiable not supplying any products to Corena, considering the fact that Corena’s field of activity is drug exports. The Board has explained the justified reason for not supplying products in details to ensure integrity in terms of the file. We believe that this part of the report is very important because the matter is evaluated considering the facts and rules of the pharmaceutical industry.
The Board has mentioned the fact that drug exports from Turkey is undoubtedly attractive because the drug prices are low compared to other countries, since the prices are determined within the strict rules of the government. The Board has emphasized that such exports are not in the interest of consumers in Turkey and the availability of drugs in the market may be compromised. The Board has also found the Roche’s actions in compatible with the policies of the Ministry of Health (significantly Circular no. 2014/11 on the Market Availability of Medicines).
It has been mentioned that since the drug is directly related to human health and is therefore closely related to public health, the availability of drugs in the market is of great importance in terms of both pharmaceutical sector and public health, and this distinguishes the pharmaceutical sector from other sectors. In the scenario that Roche supplies products to Corena and Corena realizes higher rates of drug sales to other countries, the Turkish pharmaceutical market will be prevented from presenting an adequate amount of drug.
In addition the Board has highlighted the negative impact of such exports on the innovator pharmaceutical companies, which cannot obtain the earnings from the countries in question and accordingly decide to seize the budget for R & D investments, consequently the patients' access to new and improved products may be difficult. The Board has considered that it is acceptable to take measures to ensure the effective distribution of drugs in the domestic market, considering that the manufacturer is responsible of ensuring the availability of medicines on the Turkish market.
Another subject that has been brought by the Board is the importance of complying with the legislation of the countries that the drug is exported. Medicines are produced according to Turkish law in terms of content and presentation and holding a drug license in Turkey, does not show that it has been licensed in the other countries. The Board has emphasized that if the exported drug fails to comply with drug regulations in export countries, Roche may have extremely severe criminal, legal and administrative responsibility. Besides since Roche does not have any control mechanism on shipping or storage conditions for the drugs exported by warehouses, if the product is decayed or subjected to a fraud, in addition to the possibility of serious damage to public health, Roche may also have a legal responsibility.
As a result, the Board has assessed that the only reason why Roche does not supply products to Corena is related to the export of Corena, in addition Roche’s attitude of not supplying products to Corena does not bear the elements necessary for the alleged action to be considered as a violation, but is based on some justified reasons.
b) Assessment on the claim that Roche aims to exclude Corena from the market and realize discrimination against Corena
The Board has evaluated that since Roche and Corena do not operate in the same market, it is not possible to talk about the motive of Roche to take Corena out of the market, because there is no benefit to be derived from this action in the Turkish market. According to Board’s assessment, as Roche and Corena are not competitors and Roche is not in active in the distribution market itself, it is not possible to talk about discrimination that causes primary level damage. In order to be able to talk about discrimination that causes secondary level damage, different conditions must be determined for the pharmaceutical warehouses of equal status.
In the concrete case, it has been observed that Roche had been treating pharmaceutical warehouses of equal status as the same and if any other pharmaceutical warehouses were found to have acted contrary to the export prohibition stipulated in the contract, firstly a warning was sent to the warehouse in question and an explanation was requested on the subject. In cases where it cannot be clarified or repetition of unlawful behavior, it is understood that the contract with such warehouse is terminated and goods are not given.
c) Assessment on the claim that Roche presses on other pharmaceutical warehouses not to supply products to Corena
The Board has reviewed the correspondence with the said pharmaceutical warehouses and stated that these documents show that these warehouses have responded to Corena with reference to the indirect export ban in the contract they concluded with Roche. The Board has emphasized that there is no document indicating that Roche has contacted the pharmaceutical wholesalers. With respect to one of the warehouses, the Board has suspected from the correspondence that such warehouse (Çınar) may have contacted Roche.
The Board has evaluated considering the fact that the pharmaceutical warehouses clearly demonstrate their will to act in line with the direct and indirect export ban provision by signing the contract, that it is a rational behavior that they do not give goods to a warehouse which is reasonably expected to export such goods.
The Board has assessed that, as a manifestation of the prohibition of export prohibited in the contract, it is highly probable that Roche has reminded to Çınar that sales should not be made to Corena which can be reasonably expected that it is going to export the products. During the investigation, it is understood that the pharmaceutical warehouses were not asked about why the products were supplied to Corena, they were asked whether the Roche Products are sold domestically or abroad by Corena. The Board has not found it possible to say that Roche establishes a systematic pressure on the pharmaceutical warehouses to require permission or approval from Corena for their sales.
In the Roche-Corena decision, the Board has decided that direct and indirect export bans are not violating the Turkish Competition Law in accordance with the Article 2 of the Act No. 4054 (Scope), because the effects of these export bans are not seen in the Turkish market. In the assessment, it is also stated that the Board’s and the EU's latest decisions are in this direction.
As long as the practices such as refusing to provide goods and etc. are intended to apply the export bans equally to the warehouses as in the Roche-Corena decision, they will not be considered as a violation to the Law.