Turkey: TCA Revises Terms Of Block Exemption For Motor Vehicle Sector

Last Updated: 5 June 2017
Article by Dr. Eren Gunay

Turkish Competition Authority (TCA) has published a new Block Exemption Communiqué (Communiqué No. 2017/3) for the Vertical Agreements in the Motor Vehicle Sector ("New Communiqué) on 24 February 2017, updating terms of the block exemption on specified vertical arrangements. With this New Communiqué, the Competition Authority has instituted some changes in policy, in line with the 2011 sector study that they have conducted. This regulatory update follows a similar update by the European Commission, whose Regulation No. 461/2010 necessitated changes to some of the provisions of its Regulation No. 1400/2002.

The New Communiqué, replaces Communiqué No. 2005/4 which was in force since January 1, 2006. The Competition Authority has instituted a grace period of two years to achieve compliance with new provisions stipulated in the new communiqué.

In their study, TCA deemed that market concentrations in the sales market were in line with competitive markets and observed that prices have not increased in real terms since 2005, despite increased demand. TCA concluded that there was no evidence of a sufficient degree of market failure necessitating stricter measures on the sales market. On the other hand, in the after sales market, referring to spare parts and repair and maintenance services, the study has identified market distortions, including high profit margins and high market concentration of authorized dealers in the after sales market for more recent vehicles.

Conditions to Qualify for the Block Exemption Have Been Removed

In Communiqué No. 2005/4, block exemption was subject to meeting some restrictions on vertical arrangements which are no longer conditions in the New Communiqué.

Previously, vertical contracts could not restrict dealers or after-sales service providers from transferring their rights and obligations arising from the vertical arrangement to another dealer or service provider within the authorized network. Further, both parties to the vertical contract were obligated to specify their reasons to terminate a contract with proper notice. Since provisions of the Turkish Commercial Code (Law No. 6102) and the Turkish Code of Obligations (Law No. 6098) allow the intended results of these provisions, such provisions were deemed no longer necessary in the new communiqué. Likewise, the provision of the right to arbitration to settle disputes was removed due to conflict with Article 413 of Law No. 6100 on Civil Procedure.

Marketshare Thresholds Have Been Simplified

Companies will benefit from this block exemption as long as their market share remains below the threshold set at 30%. This threshold will apply equally to the sales and after-sales markets and to exclusive distribution and quantitative selective distribution systems alike. This implies a lowering of the threshold set at 40% for quantitative selective distribution networks under the guidelines of the previous communique, while maintaining the other thresholds. As before, no threshold has been set for qualitative selective distribution networks.

Sector studies conducted by TCA have indicated that differentiated thresholds have not contributed to efficiency, but market participants have found compliance challenging. Specifically, shares of participants in the sales market have remained below the threshold and therefore they have chosen to implement quantitative selective distribution systems, whereas participants in the after sales market have chosen quantitative or qualitative selective distribution systems based on whether their market shares have remained below or exceeded the threshold, according to their own estimation of market shares. However, such estimations of market share cannot be corroborated by the Competition Authority and create legal indeterminacy. Following these, the thresholds have been homogenized to create a simpler policy.

TCA has also argued that high profit margins incentivize market entry when qualitative-selective distribution systems are implemented, however the determination of whether qualitative conditions have been met by a service provider to become authorized should be left to the court system and regulation should not be introduced.

Single-Branding Obligations (Non-Compete Clauses)

Under the new regulation, any direct or indirect obligation by a supplier to limit the buyer's purchases from other (non-designated) suppliers to below 20% of the buyer's total purchases for some class of goods or services constitutes a single-branding obligation. In other terms, there is a single-branding obligation when a supplier obliges a buyer to make at least 80% of its purchases for a product or service from that supplier. Previous regulation had set the threshold at 70%, that is a supplier would have enforced single-branding obligation by requiring to provide at least 30% of a buyer's total purchases.

Previously, no single-branding obligation would benefit from the block exemption, but under the new regulation, single-branding obligations on dealers (sales market) will benefit from the block exemption, provided they have terms no longer than five years or they may only be extended by mutual consent after five years. No such exemption is provided for the after-sales market which was determined to be less competitive than the sales market in the 2011 study. Chains of independent spare parts providers will benefit from the block exemption for single-branding obligations of terms no longer than five years.

Thus, the new regulation is more permissive towards vertical agreements limiting multi-branding in the sales market. Similar regulatory changes were introduced by the European Commission, based on the observation that the previous regulation did not succeed in introducing in-store competition between brands providing little benefit from increased competition while introducing additional costs as manufacturers demanded greater levels of investment from their dealers to defend their brand identity against multi-branding.

This block exemption will not apply to obligations relating to the establishment of additional spare parts sales outlets or after-sales service facilities, however suppliers may prevent dealers in the sales market from establishing new outlets. Again, this differentiated approach mirrors the study findings of limited competition in the after-sales service and spare parts market.

Equivalent Spare Parts are Underutilized but Certification Has Been Introduced

The after sales market has been observed to be dependent on Original Equipment (OE) spare parts, supplied by the manufacturer of the vehicle. OE equivalent parts have low market share and are found only at independent service providers because certification of OE equivalence was not introduced until recently. In their study, the Competition Authority determined that certification of equivalent spare parts was necessary to improve market competition. Since then, Prime Ministry's Undersecretariat of Treasury has issued Circular No 2015/2 dated January 13, 2015, effective June 1, 2015 which tasked Turkish Standards Institute (TSE) with the certification of equivalent spare parts for a term of two years. After the expiration of that term, accredited bodies will be allowed to certify spare parts as equivalent to OE. As before, in their new communiqué, TCA has excluded from the block exemption any vertical restrictions on the procurement of OE or OE equivalent spare parts from third parties, other than for work carried under warranty cover.

Regulation of Access to Technical Information is Outside the Scope of the Communiqué

Independent after sales service providers should have access to the same technical information, training and equipment as service providers in the authorized network. However, TCA has removed relevant regulation from the new communiqué since such access is extensively regulated by European Community regulations No. 715/2007 and No. 595/2009 published in issues No. 27207 (dated April 21, 2009) and No. 28014 (dated August 3, 2011), respectively, of the Official Gazette of the Republic of Turkey. Regarding access to technical information on vehicles sold before 2008 or technical information not within the scope of the referred directives, TCA would evaluate the matter according to Article 6 of Act No. 4054. However, it could be argued that access to technical information is necessary primarily for new models of vehicles and therefore lack of regulation on this matter is not expected to limit market competition.

Out-of-Warranty Cover Repair or Maintenance Work During the Warranty Period is Not Addressed

TCA has argued before releasing this communiqué that existing regulations imply that authorized after-sales service providers should execute out-of-warranty work during the warranty period and no stipulations should be introduced with a communiqué even though independent service providers have been restricted from the after sales market for warranty-covered vehicles. Allowing authorized service providers to recoup their investment should ensure availability of after sales service and assure parts supply. TCA has cited Article 7 of the "Implementing Regulation on Introductory Guide and User's Manual" on the determination of the timing and provision of periodic maintenance, Article 11 of the "Implementing Regulation on Certificate of Guarantee" on the determination of whether any defects were caused by misuse and Article 14 of the "Regulation on After Sales Services" on the provision of after-sales service. These regulations were published in issue No. 29029 (dated June 13, 2014) of the Official Gazette of the Republic of Turkey. With these regulations, the manufacturer or importer, vendors and authorized service centers have been authorized to determine existence of misuse and obliged to determine details of periodic maintenance and to provide after-sales service. As stated above, TCA has argued that these regulations imply that out-of-warranty work should also be performed by authorized after-sales service providers on vehicles covered by warranty.

Final Remarks

The new communiqué differentiates between the sales and after-sales markets following the findings of the sector inquiry of 2011. Since the sales market was deemed to be vibrant, some of the restrictions on vertical agreements have been removed, allowing single-brand obligations and allowing suppliers to deny dealers additional sales outlets. In contrast, the after-sales market has been found to have limited competition based on the dominance of authorized service providers for repair and maintenance work during the warranty period and limited availability of certified OE equivalent spare parts. Therefore, the Competition Authority has preserved restrictive provisions found in the previous regulation.

In other changes, general conditions and the obligations to provide access to technical information have been left out of the scope of this regulation, based on the argument that such provisions may be found in other regulations or laws.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions