Turkey: The Board published its reasoned decision on the preliminary investigation conducted against Yüce Auto Motorlu Taşıtlar Tic. A.Ş. and Doğuş Otomotiv Servis ve Tic. A.Ş

Last Updated: 16 March 2017
Practice Guide by ELIG, Attorneys-at-Law

The Board published its reasoned decision on the preliminary investigation conducted against Yüce Auto Motorlu Taşıtlar Tic. A.Ş. and Doğuş Otomotiv Servis ve Tic. A.Ş. (16.11.2016, 16-39/649-290)

The Turkish Competition Board (“Board”) recently published its reasoned decision on the preliminary investigation conducted against Yüce Auto Motorlu Taşıtlar Tic. A.Ş. and Doğuş Otomotiv Servis ve Tic. A.Ş., based on the allegations that Yüce Auto Motorlu Taşıtlar Tic. A.Ş. (“Yüce Auto”) that is the distributor of Skoda vehicles, has violated the Block Exemption Communiqué No. 2005/4 for Vertical Agreements and Concerted Practices in the Motor Vehicle Sector (“Communiqué No. 2005/4”)[1] by implementing discriminatory applications amongst its authorized sellers and/or services. In 1999, Yüce Auto and Doğuş Otomotiv Servis ve Tic. A.Ş (“Doğuş Otomotiv”) has initiated a partnership regarding the Skoda brand.

The Board indicated that in line with the previous Competition Board decisions[2] the relevant product market could be defined as “the market for new personal automobiles” and “the market for after sales services with respect to Skoda vehicles”, however did not make a precise relevant product market definition by making reference to the Paragraph 20 of the Competition Authority’s Guidelines on Relevant Market, which states that that the market definition can be left open in cases where the transaction in question does not raise competition law concerns regardless of the market definition.

In its evaluation, the Board firstly determined that the allegations are concerned with the vertical agreements concluded between Yüce Auto and its distributors. The Board indicated that the vertical agreements concluded between undertakings on different levels of supply chain are evaluated in scope of the Article 4 of the Law No. 4054. In addition the Board stated that the Article 5 of Law No. 4054 provides conditions that, if met, may exempt agreements, decisions by associations of undertakings and concerted practices from the prohibition of Article 4 of Law No.4054 and also empowers the Board to issue communiqués that set forth the conditions to grant block exemption to certain types of agreements. The Block Exemption Communiqué No. 2005/4, issued based on this authority, indicates that those vertical agreements concerning the purchase, sale or resale of new motor vehicles, their spare parts or repair and maintenance services, which contain vertical limitations are exempt from the prohibition set forth in the Article 4 of the Law No. 4054, provided that they meet the conditions provided in the Communiqué No. 2005/4. In this respect, the Board assessed the allegations in scope of the case file pursuant to the relevant provisions of the Communiqué No. 2005/4.

The Board indicated that according to the paragraph 51 of the Guidelines on the Explanation of the Block Exemption Communiqué No. 2005/4, if a certain brand’s authorized service network is above the %30 market share threshold, solely the qualitative distribution systems can benefit from the block exemption.[3] In light of the foregoing, the Board determined that it is likely that Skoda’s market share is above the %30 threshold with respect to after sales services and accordingly, Yüce Auto has adopted qualitative distribution system both in the after sales market and sales market.

With regards to the evaluation on whether the notice periods and grounds for termination[4] are applied on the contrary to the relevant provisions of the Communiqué No. 2005/4, the Board indicated that the compliance with the notification termination periods and grounding termination on valid grounds are foreseen as conditions for benefitting from the Communiqué No. 2005/4; however, as stated within the previous Board decisions[5] the breach of such conditions cannot be deemed as an explicit competition law violation that is evaluated within the framework of Article 4 of the Law No. 4054. In this regard, the Board asserted that the allegations that Yüce Auto applies the notice periods in appearance and/or that it applies the notice periods contrary to the purpose of the Communiqué No. 2005/4 brings about private law disputes that are outside the scope of the Competition Authority’s duties and authorities. Therefore, the Board decided that the allegations do not fall within the scope of the Law No. 4054.

The Board then evaluated the allegations that the distributors were not treated equally by Yüce Auto. With regards to the allegation that in scope of the Investment Construction Business Plan application, additional periods were granted towards some of the distributors while some of the distributors’ projects were not evaluated or delayed, the Board found that the relevant matter requires technical assessment and evaluation. Therefore the Board decided that the allegation falls outside the scope of the Law No. 4054. With regards to the allegation that the Octavia model was not sent to the distributors in equal amounts, the Board found that the difference between the vehicle numbers designated to the distributors is derived from the sales and projections conducted by the distributors and therefore the allegations do not reflect the reality. With regards to the allegation that different rebate rates applied amongst the distributors and some distributors are allowed to sell below the recommended prices, the Board found that Yüce Auto does not interfere with the prices and rebate rates applied by the distributors. The Board indicated that different types of rebates are valid concurrently and applied provided that the required conditions are met. In addition, the Board stated that Yüce Auto applies a recommended price system, however the distributors are free to apply prices below or above the relevant prices and therefore, the distributors are free to compete with one another by decreasing prices. Therefore, the Board did not find any violation in terms of Law No. 4054 with respect to the relevant allegation. With respect to the allegation that the fleet sales requests are referred to certain distributors instead of being met by the distributor who receives the customer, the Board found that demands directly received by the distributors are not referred to certain other distributors by Yüce Auto.

With regards to the allegation that Yüce Auto forces the distributors to use Shell and Castrol motor oils the Board found no evidence indicating that Yüce Auto engaged in such applications. The Board also stated that the rest of the claims asserted against Yüce Auto do not fall within the scope of the Law No. 4054.

In light of the foregoing, the Board refrained from initiating a full-fledged investigation.

[1] The New Block Exemption Communiqué No. 2017/3 for the Vertical Agreements in the Motor Vehicle Sector in Turkey (“Communiqué No. 2017/3”) has been published in the Official Gazette dated 24 February 2017. In this regard, the Communiqué No. 2017/3 revoked the Block Exemption Communiqué No. 2005/4 for Vertical Agreements and Concerted Practices in the Motor Vehicle Sector (“Communiqué No. 2005/4”). At the time of this decision (16.11.2016, 16-39/649-290), Communiqué No. 2005/4 was in effect.

[2] The Competition Board’s decision dated 24.10.2013 and numbered 13-59/833-355

[3] According to the Guidelines on the Explanation of the Block Exemption Communiqué No. 2017/3 for the Vertical Agreements in the Motor Vehicle, the general conditions for vertical agreements to benefit from the block exemption are (i) the market shares of the parties must not exceed the specified threshold in the relevant market and (ii) the parties’ must comply with the termination notice periods for the vertical agreement which are regulated under Communiqué No. 2017/3. To that end, paragraph 18 of the Guidelines states that in cases where the parties’ market share are below the 30% threshold and the exclusive distribution system, a quantitative distribution system or a qualitative distribution system is applied, the relevant vertical agreement is deemed to meet the first condition set forth in Communiqué No. 2017/3. Moreover the vertical agreements where the parties’ market shares are above 30% can benefit from the block exemption granted by Communiqué No. 2017/3, provided that a qualitative distribution system is applied.

[4] The provisions included within the Communiqué No. 2005/4 related to the termination-notice periods (six-month-notice period for the agreements that are made for at least five years; at least two-year-notice period for the agreements with an indefinite period) as the second condition for an agreement to benefit from block exemption have been preserved in Communiqué No. 2017/3. However, a detailed, reasoned and written termination notice suppliers is no longer provided as a condition in order for an agreement to benefit from the block exemption.

[5] The Competition Board’s decision dated 08.01.2009 and numbered 09-01/8-7 and the decision dated 10.04.2008 and numbered 08-28/325-108.

This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

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