The Turkish Competition Authority (“Authority“) recently published on its website the draft Guidelines on Vertical Agreements (the “Draft Guidelines”) for public consultation, along with an informatory note for the reasoning behind the amendments. Interested parties may submit their opinions and/or recommendations by September 11, 2017 by sending an e-mail to firstname.lastname@example.org.
Based on recent developments in EU competition law and sectoral needs, the Draft Guidelines introduce some significant new provisions regarding (i) agency agreements, (ii) online sales and (iii) most favored customer clauses.
The amendment concerning agency agreements is a minor yet significant change in wording that sheds light on the implementation of Article 4 of the Law No. 4054 on the Protection of Competition (“Competition Law“) to non-compete obligations in genuine agency relationships.
Similar to the EU competition law regime, the current Guidelines provide that restrictions on the agent’s conduct in a genuine agency agreement generally fall outside the scope of Article 4 of the Competition Law. An agency agreement would qualify as a genuine agency agreement for competition law purposes if and only if the agent does not take any relation-specific commercial or financial risks.
As an exception to this general rule, the current Guidelines state that non-compete obligations concern inter-brand competition and thus may fall within the scope of Article 4 of the Competition Law if they lead to a foreclosure effect in the relevant market. In other words, the current wording points to a rule of reason analysis as to whether a non-compete obligation would fall within the scope of the law, opposed to whether it is in violation of the law. The amendment proposal claims that this wording is at odds with the Competition Board’s general practice.
The amendment aims to remove this discrepancy by clearly stating that non-compete obligations, even if in a genuine agency agreement, are within the scope of Article 4 and must be assessed as to whether they violate the relevant article.
The proposed amendments introduce extensive explanations regarding the restriction of online sales, an increasingly growing source of retail sales. The Authority considers restraints on a reseller’s online sales a restraint on passive sales, and describes four specific examples that would not benefit from the block exemption under the Block Exemption Communiqué No. 2002/2 on Vertical Agreements:
- Agreeing that the (exclusive) distributor must restrict access to its website to customers located within the (exclusive) territory of another distributor or directs such customers to the manufacturer’s or other (exclusive) distributor’s website;
- Agreeing that the (exclusive) distributor must terminate the sale if the customer’s credit card data reveal that the address is not within the distributor’s (exclusive) territory;
- Limitations regarding the proportion of online sales to the overall sales; and
- Agreeing that the distributor must pay more for products the distributor resells over the internet than the products resold in physical points of sale.
The Authority posits, however, that suppliers may implement certain online sales restrictions on their resellers such as meeting quality criteria with respect to their web pages, only selling through online platforms that fulfil certain standards, to provide services to customers alongside the product or to operate a physical point of sale in addition to the online sales.
Regarding selective distribution systems, the Draft Guidelines provide that the launching of a website by the selective distribution member is not considered an additional point of sale and therefore may not be restricted.
The proposed amendments are heavily modeled on paragraphs 51 – 58 of the European Commission’s Guidelines on Vertical Restraints. As such, the amendment proposal also aims to bring the Turkish competition law practice in conformity with EU competition law, which has served as an inspiration to the Turkish Competition Authority since its inception.
Most favored customer (“MFC”) clauses have been a popular topic in recent years, especially with the Competition Board’s recent decisions regarding popular online platforms like Yemek Sepeti and Booking.com. While the Competition Board has taken a special interest in MFC clauses and discussed them in certain decisions, the Authority had never addressed the issue under any of its secondary legislation. The Draft Guidelines aim to provide some clarification on how to assess MFC clauses.
The Authority states that MFC clauses must be considered on a case-by-case basis, as MFC arrangements may have pro- or anti-competitive consequences. The Draft Guidelines therefore state that a variety of factors such as the market position of the relevant undertakings and their competitors, the specific structure of the MFC arrangement, the market dynamics and the purpose of including an MFC clause in the agreement should be carefully assessed.
The Draft Guidelines also recognize that MFC clauses are unlikely to present problems in certain cases, such as agreements where both parties, the supplier and the buyer, lack market power.
Actions to consider
Companies should carefully review the Draft Guidelines and take note of the Authority’s suggested approach to online sales and MFC clauses. The public comments period presents an opportunity for companies to provide their own perspective on the suggested amendments and further improve the Guidelines before its publication.