Turkey: Amendments To The Guidelines On Vertical Agreements

The Authority published revised Guidelines on Vertical Agreements ("Guidelines") on March 30, 2018.

The Guidelines include newly introduced provisions and amendments with regard to online sales and MFN clauses. These changes are aimed at aligning the secondary legislation in Turkey with current European Union laws in order to meet the needs and challenges posed by evolving market conditions in a modern economy.

In relation to online sales, the Authority's main objective in revising its Guidelines was to take into consideration the necessity of providing specific provisions under the Turkish competition law regime and to harmonize the current legislative framework with the approach adopted by the European Commission's Guidelines on Vertical Restraints. In its announcement, the Authority stated that the emergence of the internet platform as a new distribution channel provides consumers with the opportunity to (i) easily access large amounts of information, (ii) compare prices, and (iii) reach more products and more sellers without difficulty. It also enables suppliers to market and promote their products to wider geographical markets at lower costs. For these reasons, and due to the rapid growth of online sales in Turkey, it is apparent that a regulation regarding internet sales has become necessary.

The Authority further added that these amendments seek to maintain a balance between (i) re-evaluating competition law rules with respect to online sales and thereby ensuring the preservation of the internet's contributions and benefits to consumers and resellers, and (ii) the protection of the commercial interests of suppliers.

In view of these objectives, a couple of new paragraphs have been added to the Guidelines, and the regulatory changes entailed by these new paragraphs can be categorized as follows: (i) description of certain restrictions with regard to online sales which would exclude the relevant agreement from the benefit of the block exemption (i.e., hard-core restrictions for online sales), (ii) conditions that suppliers may impose on internet distribution channels—which must be objective, fair and acceptable ("principle of equivalence"), and (iii) provisions regarding online sales in selective distribution systems.

These amendments include expanded descriptions and specific examples of the types of online sales that would be categorized as active or passive sales or that would be considered to fall within or outside of the protective cloak of the block exemption. For instance, examples of hard-core restrictions include (i) restrictions on sales requested through the distributor's website from a particular region or customer group in exclusive distribution systems, (ii) rules about terminating an exclusive distributor's transaction after realizing that the customer is not located in its exclusive region, (iii) restrictions regarding the share of online sales in the total amount of sales, and (iv) restrictions about a supplier's application of different prices to its distributors for online sales.

The Guidelines also state that the prohibition of active sales of exclusive distributors may benefit from the protective cloak of the block exemption. As for selective distribution systems, it is asserted that if a distributor launches a website for reselling through the internet, this will not be deemed as a new physical sales point.

In terms of MFN clauses, the Guidelines introduce new provisions that assess MFN clauses under the "rule of reason" approach. The amended Guidelines deviate from the draft version that was submitted to public comment. The draft version of the amended Guidelines merely stated that MFN clauses may lead to resale price maintenance; in contrast, the updated version now provides that an MFN clause on its own may not result in determining the resale price, although it still recognizes that there may be a risk of resale price maintenance.

The Guidelines indicate that MFN clauses should be evaluated on a case-by-case basis, and that this analysis should be based on a number of factors, such as (i) the position of the parties and their competitors within the relevant market, (ii) the purpose of the MFN clause, and (iii) the specific characteristics of the relevant market and the MFN clause in question. An MFN clause may benefit from the block exemption, provided that the market share of the beneficiary of the relevant MFN clause does not exceed 40%, together with other conditions as set forth under Communiqué No. 2002/2. If the market share threshold is exceeded, an individual exemption assessment should be conducted by taking into consideration the pro-competitive and anti-competitive effects of the relevant MFN clause. For instance, if the parties to an MFN clause possess market power, the risk of market foreclosure or the exclusion of competitors that are not party to the MFN clause cannot be eliminated or overlooked. Moreover, if MFN clauses are applied in concentrated markets and in a cumulative manner, certain anti-competitive effects may arise, such as the difficulty for other market players to find alternative suppliers or the cumulative restrictive effects in the relevant market.

When small-scale buyers use MFN clauses in their agreements, this would generate positive effects for the competitive environment in the market instead of raising any competition law concerns, given that the relevant buyers could benefit from favorable prices and advantageous conditions in the market. When the concentration level of the upstream market is low (i.e., when the upstream market is highly competitive), competition may not be harmed, given that competitors can choose alternative suppliers in the market in such a situation. If the relevant market is not transparent, the negative effects of MFN clauses would be expected to be relatively low since, in such situations, it is unlikely for the parties imposing MFN clauses to effectively monitor the implementation of these clauses in the market.

The revised Guidelines provide valuable guidance on the assessment of two important commercial practices, namely internet sales and MFN clauses, under the Turkish competition law regime. The new text added to the Guidelines brings more legal certainty and clarity to the Turkish legal system, as it incorporates the principles already set forth by the Board's decisional practice and promises further compliance and increased harmony with European Union law.

This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in June 2018. A link to the full Legal Insight Quarterly may be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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