Bannermedicaldevices
Bannermedicaldevices

A Brief Sector-Specific Assessment in the light of the Latest Siemens Investigation of Turkish Competition Board from the Competition Law Perspective

The medical diagnostic and monitoring equipment market has been one of the priority markets for Turkish Competition Authority (“TCA”) to this day. In this regard, TCA recently held an investigation against Siemens and announced its reasoned decision on the issue as of the beginning of 2017. Even though Siemens was not fined by the Turkish Competition Board (“TCB” – the decision making body of the TCA), it is possible to assume that its interest in the market is to persist.

Sector-specific decisions of the TCB

The TCA’s interest in the market for medical diagnostic and monitoring equipment has been gradually increased since 2005. Upon the claims of Benefit (a firm active in the spare part and technical services market), the TCB initiated a preliminary inquiry (which is the initial process before deciding on initiating an investigation). The claims were focused on Siemens’ practices on preventing Benefit’s activities in the market after the end of guarantee periods, especially by way of password requirements provided for the equipment. After examining the claims, the TCB held that the relevant password requirements were necessary in order to ensure that only competent persons get access to the devices. However, the TCB also indicated that such requirements might also prevent market entries. On the other hand, the TCB noted that Siemens was ready to provide such passwords for a fee, and based on this, the TCB closed the case without initiating with an investigation. (see 28.10.2005 / 05-75/1019-285)

In another file in 2007, Siemens claimed that Philips prevented harmonization of its monitoring devices with Siemens devices within the scope of a tender for Dokuz Eylül University (harmonization of Philips’ PET/CT device with Siemens’ PACS device). The TCB determined that such harmonization problem might give rise to a serious entry barrier, but added that the case was the only one raised before the TCA. Furthermore, for the reasons that the relevant administration also chose Philips in the tender, there was no sufficient evidence to prove otherwise, and the tender finalized in favour of Philips; the TCB held not to initiate an investigation against Philips. However, the TCB underlined for the first time that the firms active in the market might prevent entries by way of passwords and/or software programs which may give rise to competitive problems (see 6.12.2007 / 07-89/1131-442).     

In 2009, the TCB ex officio initiated a preliminary inquiry specific to the market and the undertakings Philips, GE, Toshiba, and KURT&KURT. The main framework of the inquiry based on the assumption that the firms active in the market (i.e. manufacturers and/or distributors) prevented the4 activities of the firms active in the downstream markets (i.e. the markets for provision of technical services and spare parts for the relevant equipment). Firstly, the TCB defined the market specific to each branded equipment. It is clear that such a market definition would bring each brand manufacturer/distributor in dominant position in the relevant market. After that, the TCB concluded that certain practices of the firms active in the market (i.e. manufacturers and/or distributors) negatively affect the activities of the firms active in the downstream market (i.e. the markets for provision of technical services and spare parts for the relevant equipment) and therefore provided certain requirements for the firms active in the upstream market. The requirements can be briefly cited as follows:

  • Providing the passwords for the equipment upon the request of the owner of the equipment or its representative.
  • Providing any device ensuring provision of technical services for the equipment for the clients or technical services receiving requests from the clients within 3 days.
  • Providing non-discriminatory and proportionate rental fees for any apparatus considering the prices of the relevant apparatus.
  • Informing the clients on the above-mentioned issues in the written form when the equipment is sold.
  • Announcing the prices of the most sold out devices in the light of the data of the last 3 years on the internet, which is accessible to anyone.
  • Answering any request for spare parts for the equipment within 3 days as of receipt.
  • Avoiding any discriminatory practices which are based on non-objective criteria against competitor technical service providers in spare part sales.

The TCB informed the undertakings active in the market that it is to initiate an investigation against any undertaking non-compliant with the above obligations.

Especially after the above-mentioned 2009 decision, the number of claims against the manufacturers/distributors of medical diagnostic and monitoring equipment have been increased.

During the administrative process for the above 2009 decision, the TCB has received a separate claim against Siemens regarding its restrictive practices in the market for spare parts and technical services. However, the TCB determined that Siemens was compliant with the obligations provided (see 16.3.2010 / 10-23/326-114).

After the above decisions, Siemens prepared an agreement on Service Software and Use, which is to be signed by the clients requesting the passwords, and it requested from the TCB to give the green light for its application by way of a negative clearance decision. Siemed and the client, which was requested to sign the relevant agreement, opposed the agreement and filed claims against Siemens to the TCB. However, the TCB refused the claims stating that such the agreement releases the responsibilities of Siemens in the case that the passwords are requested but damages occurred, which is in accordance with the chosen legal request of the client. The TCB therefore given clearance to the agreement (see 7.10.2010 / 10-63/1315-492).

In a claim against Toshiba (TMST Tıbbi Sistemler) in 2010, it is mainly claimed that TMST requested predatory prices for the spare parts of a ultrasound devices and therefore abused its dominant position. The TCB initiated a preliminary inquiry upon the claim. However, the TCB determined that the spare parts were easy to provide from abroad, and the claimant itself provided from abroad for a better price. Furthermore, the TCB took into account TMST’s market share in the market and its compliance with the obligations provided, and it therefore closed the case without investigation and fine (see 10.6.2010 / 10-42/756-243).   

In 2012, the appeal court annulled the decision of the TCB, which was held upon the claim of Siemed and against Siemens. However, the TCB held that there was no evidence against Siemens and closed the file again without initiating an investigation (see 25.04.2012 and 12-22/572-166).

Siemed persisted on its claims against Siemens before the TCB in 2010 and 2012, however the TCB closed the files referring that there was no sufficient evidence (see 21.10.2010 / 10-66/1408-527, 15.11.2012 / 12-57/1540-553). Siemed appealed the decisions before the appeal court, and the court annulled the TCB decisions. Upon the annulment decisions of the appeal court, the TCB held that Siemens tied its services relating to sales of spare parts to provision of technical services and fined Siemens 0.2% of its annual gross turnover (equal to TRY 2.6 million) at the end of investigation (see 20.08.2014 / 14-29/613-266).

Siemed’s efforts was not over with the above mentioned fine against Siemens, and upon its appeal, the TCB decision on Siemens toolkits is also annulled by the court. Upon the annulment, the TCB initiated an investigation against Siemens in 2015. However, the TCB closed the file at the end of the investigation since there was no evidence putting forth that Siemens abused its dominant position by way of its practices relating to Toolkit devices and non-compliance with the obligations provided by the TCB. Accordingly, the latest investigation was closed without any fine (see 24.10.2016 / 16-34/589-259). 

Our conclusion: To-Dos to Ensure Compliance with the Competition Rules

In conclusion, it is clear that the TCA strictly scrutinizes the markets for provision of technical services and spare parts for the relevant equipment, and that the firms active in the market should highly care for compliance with the competition rules. This recommendation proves itself considering the fact that the firms active in the market have been examined within the scope of more than 10 TCB decisions, noting that 2 out of these were investigations. Since the TCB defines the downstream market specific to each brand, each firm becomes a dominant in its respective brand in the downstream market. Therefore, the TCB provided certain obligations for each firm active in the manufacturing or distribution market for the relevant branded equipment, such as providing the passwords, avoiding discriminatory practices against the firms active in the downstream markets, providing spare parts. As such, the firms active in the upstream market shall actively put forward efforts to ensure full compliance with the competition rules.

Att. İsmail Ünal Doğan

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