Turkey: New Era In The Motor Vehicle Sector - New Block Exemption Communiqué For The Vertical Agreements In The Motor Vehicle Sector In Turkey

The New Block Exemption Communiqué No. 2017/3 for the Vertical Agreements in the Motor Vehicle Sector in Turkey ("Communiqué No. 2017/3" or "the New Communiqué") is published in the Official Gazette dated 24 February 2017. In this regard, the New Communiqué revoked the Block Exemption Communiqué No. 2005/4 for Vertical Agreements and Concerted Practices in the Motor Vehicle Sector ("Communiqué No. 2005/4" or "the Previous Communiqué"). Furthermore, the Turkish Competition Board is expected to publish a new set of guidelines, which will provide further details regarding the implementation of the Communiqué No. 2017/3.

The efforts to prepare the Communiqué No. 2017/3, which has entered into force as of February 24th 2017, is mainly triggered with the reformation of some of the restrictive provisions under the No. 1400/2002 (especially with regards to the sales of the motor vehicles) in the EU with Regulation No. 461/2010. Consequently, a sector inquiry had been initiated in Turkey in 2011 following a workshop with respect to the motor vehicles sector in 2014 that stakeholders requested to share their amendment proposals concerning the Communique No. 2005/4. Later on March 2nd 2016, a draft Communiqué had been exposed to public opinion, where stakeholders also shared their comments with the Competition Authority. Set forth below is an introductory summary of the fundamental changes brought by the New Communique:

The Block Exemption Conditions

The market share thresholds that are applied in order to determine whether an agreement would benefit from the block exemption have been uniformed under the New Communiqué for the quantitative distribution agreements and the exclusive distribution agreements. In this regard, with the Communiqué No. 2017/3 the market share threshold provided for the quantitative selective distribution has been reduced from 40% to 30%. Alongside with this, the 30% market share threshold provided for both the sales market and the after-sales markets has been preserved. Similar to the Communiqué No.2005/4, the New Communiqué does not provide for a market share threshold for the application of the block exemption to the qualitative selective distribution systems.

Together with this, the freedom to transfer the agreements concluded between the distributors and the suppliers is no longer provided as a condition in order for an agreement to benefit from the block exemption. Likewise, a detailed, reasoned and written termination notice is no longer as requirement. Furthermore, granting the parties (suppliers and the distributors) with the right to bringing the conflicts arising from the agreement to an independent expert or to an arbitrator is no longer provided as a condition for the agreement to benefit from block exemption.

On the other hand, the provisions related to the time periods which apply to the termination notice are preserved which are (i) six month notice period for the agreements that are made for at least five years; (ii) at least two year notice period for the agreements with an indefinite period).

Non-Compete Obligations and Multi-Branding

The Communique No. 2005/4 regulated the sales of motor vehicles, maintenance and repair services and spare parts cumulatively; while the Article 7 of the Communique No. 2017/3, regulates the sales of motor vehicles and after sales (maintenance and repair services and spare parts) separately regarding the non-compete obligations. One of the most substantial amendments within the Communique No. 2017/3 is concerned with the revisions on the non-compete obligations regarding the "sales of motor vehicles".

Non-compete obligation in terms of sales of motor vehicles is defined within the Communique No. 2017/3 as any direct or indirect obligation imposed on the buyer, aimed at purchasing, from the supplier or another undertaking to be designated by the supplier, more than 80% of the goods or services, or substitutes of such goods or services subject to the agreement, based on the purchasers purchases within the previous calendar year, in the market for sales of motor vehicle. In this respect, with regards to the sales of motor vehicles the Communique No. 2017/3 (i) amends the %30 threshold as %80 and therefore, allows for abandoning the multi-branded distribution structure and (ii) indicates that the non-compete obligations that do not exceed five years or in cases where the extension after five years is possible by both of the parties' mutual consent and there are no circumstances preventing the purchaser from terminating the non-compete obligation will benefit from the block exemption.

In parallel to Communiqué No. 2005/4, non-compete obligations (in terms of the distribution of motor vehicles, the distribution of spare parts and the provision of maintenance and repair services) after the termination of the agreement are not included within the scope of the exemption.

Within the scope of Communiqué No. 2017/3 it is provided that, in terms of maintenance repair services and the distribution of spare part, direct or indirect obligations that oblige the purchaser to make more than %30 of its purchases regarding a certain type of product cannot benefit from the group exemption. In this sense, in terms of maintenance repair services and the distribution of spare parts, the systematic of Communiqué No. 2005/4 has been preserved.

On the other hand, as an exception to the abovementioned provision; non-compete obligations of up to 5 years imputed on (i) independent spare part distributors in terms of the spare part distribution networks established by independent spare part suppliers, and (ii) chain services in terms of maintenance repair chains, can benefit from group exemption.

The provisions prevention the restriction on the establishment of additional sales points within the scope of the distribution of motor vehicles under certain conditions has been abolished. However, the same approach has not been adopted with regards to the establishment of additional service points in terms of the distribution of spare parts and maintenance repair services; and it is provided that the exemption will not be applicable to the direct or indirect obligations which restricts establishment of additional facilities and service areas where the selective distribution system is being applied.

Equivalent and Original Spare Parts

The definition of "equivalent quality original spare part" under Communiqué No. 2005/4 was providing that the compliance with the mandatory standards required by the legislation is to be documented by the manufacturer; whereas within the scope of Communiqué No. 2017/3 the definition was amended to be more definitive by providing the definition "compliance of a part, which has been produced with the purpose of the replacement of the original parts used in a motor vehicle, with the criteria such as mass, size, material, functionality which is determined by comparison to the original part pursuant to inspection methods is to be documented by an accredited institution."

Restrictions that Prevent the Agreements from Benefiting from the Group Exemption

Although there have been certain minor amendments in terms of the restrictions that prevent the agreements from benefiting from the group exemption, the provisions included within Communiqué No. 2005/4 has been preserved to a large extent.

Withdrawal of the Exemption

Finally, the statement of "the case in which a substantial part of the relevant market is covered" that is provided under the Previous Communiqué has been changed to "the case in which the application covers more than 50% of the relevant market" within the Article 8 of the New Communiqué on the withdrawal of the exemption. In this regard, it is indicated that the Competition Board may withdraw the block exemption may be in cases where this threshold is exceeded.

Changes in the Market Shares Over Time

Finally, the New Communiqué also contains provisions related to the cases where the relevant suppliers' market share exceeds the thresholds that are required to benefit from the block exemption over time. In this regard, in cases where a market share below 30% subsequently exceeds the threshold (without exceeding 35%), following two years after the year in which the 30% threshold is exceeded for the first time and if the market share exceeds 35% while it was below 30% initially, the year following the year in which the 35% market share threshold was first exceeded would still benefit from the block exemption.

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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