Turkey: Public Consultation In Turkey For Proposed Amendments To Vertical Guidelines, Addressing Online Sales And Most Favored Customer Clauses

Last Updated: 11 August 2017
Article by Bora İkiler, LL.M.
Most Read Contributor in Turkey, July 2017

The Turkish Competition Authority recently announced a public consultation period for proposed amendments and additions to its guidelines on vertical agreements. The current regulatory framework fails to address the topic in any meaningful detail, simply indicating that online sales have the characteristic of passive sales. Current Turkish legislation also fails to address most favored customer clauses in vertical agreements. The proposed amendments aim to address these deficiencies by providing enhanced guidance information, to assist understanding and interpretation. The public can submit comments on the proposals to the Turkish Competition Authority until 11 September 2017.

The internet's development as a distribution channel enables consumers to easily reach a large amount of information, compare prices, as well as access more products and sellers. On the other hand, it also enables producers to market products at lower costs and to wider geography. Accordingly, the internet is accepted to provide a more intense competitive environment than traditional sales channels. Global discussions have increased in recent years about the role of competition law in striking the balance between protecting the benefits offered by the internet, vis-à-vis producers' commercial interests.

The European Commission revealed its approach to the issue in 2010 via the Regulation on Block Exemption (numbered 330/2010) and related guidelines. With these amendments, the Commission identified new prohibitions on online sales, as well as addressed vertical restrictions. These restrictions addressed permitted restrictions to eliminate producers' concerns about brand image and freeriding. The substance of the proposed additions is largely in line with the European approach, as is developed to date under European Commission decisions and guidelines.

A translation of the proposed amendments and additions to the Turkish vertical agreement guidelines is below. 

GUIDELINES ON VERTICAL AGREEMENTS DRAFT GUIDELINE AMENDMENTS
Online Sales
Paragraph Paragraph
- No provision in current guidelines. 25 Restriction on online sales imposed to the purchaser by the supplier is referred to as restriction of passive sales. In principle, every retailer/distributor should have right to make online sales. Below restrictions on online sales which fall within the scope of passive sales shall exclude vertical agreements from the scope of block exemption.
  • agreeing that the (exclusive) distributor shall prevent customers located in another (exclusive) territory to view its website or shall put on its website automatic re-routing of customers to the manufacturer's or other (exclusive) distributors' websites.
  • agreeing that the (exclusive) distributor shall terminate consumers' transactions over the internet once their credit card data reveal an address that is not within the distributor's (exclusive) territory;
  • agreeing that the distributor shall limit its proportion of overall sales made over the internet.
  • agreeing that the distributor shall pay a higher price for products intended to be resold by the distributor online than for products intended to be resold off-line.
- No provision in current guidelines. 26 Abovementioned restrictions shall be deemed as equivalent of restrictions on passive sales. The first two of these restrictions are related to the restrictions imposed to the purchaser regarding territory or customer where or to whom the contracted goods or services could be sold by the purchaser. Preventing online demands of specific territory and group of customers by imposing these restrictions shall be considered as hardcore restrictions.
- No provision in current guidelines. 27 Another restriction is the restriction on the proportion of overall sales made over the internet. Thus, determining a maximum amount for the sales that will be made through the internet shall constitute a hardcore restriction. Last restriction is agreeing that a higher price shall be paid for products intended to be resold online than for products intended to be resold off-line. Application of different wholesale price by the supplier either directly or indirectly (for example, discount system) shall be deemed within this scope. If the supplier is able to influence the purchaser by providing different prices for different sales channels, this may prevent the purchaser from making online sales. However, the supplier may make a fixed payment to the purchaser regardless of the revenue and amount of sales in order to promote the sales efforts of the purchaser (online or store sales).
- No provision in current guidelines. 28 On the other hand, the supplier may determine provisions regarding usage of the internet as a sales channel. For instance, the supplier may require quality standards for the use of the internet site to resell his goods, just as the supplier may require provision of specific services to the online customers or he may require the online distributors to have brick and mortar shops as well. Similarly, a supplier may require that its distributors use third party platforms to distribute the contract products only in accordance with the standards and conditions agreed between the supplier and its distributors for the distributors' use of the internet However, the purpose of these provisions must not be to prevent the online sales either directly or indirectly.
- No provision in current guidelines. 29 However, criteria for these two sales channels are not required to be exactly same due to the differences between the nature of physical sales and online sales. These criteria are required to serve the same purpose, provide comparable results and have the qualification to confirm the differences arising from the nature of these two distribution channels ("equivalence principle"). In other words, these provisions must not directly or indirectly prevent the online sales. Accordingly, in the event that the criteria determined by the supplier are contrary to the equivalence principle and be capable of deterring the purchaser from the usage of the internet as a distribution channel, such provisions would be deemed as hard core restrictions.
31 As stated in article 4.1(c) of the Communiqué, members of a selective distribution system are not prohibited from making active or passive sales to end users. Even if the undertaking in the position of a supplier forms exclusive regions by stating that it would supply goods to a limited number of buyers in a certain region, active or passive sales by the buyers to end users outside the region may not be prevented. In other words, selective distribution system member buyers may engage in active or passive sales to end users in any region. However, the supplier may prevent a system-member buyer from changing the location of the point of sale the buyer operates in, or from opening a new point of sale. This is because, as mentioned above, in the selective distribution system, the physical characteristics of the point of sale is the most important factor affecting the success of the distribution system. The other regulation which partly opens selective distribution system to competition is included in article 4.1(d) of the Communiqué. Accordingly, undertakings which adopt the selective distribution system may not place an exclusive purchase obligation on the system-member buyers. In other words, system members are not required to procure the products from the supplier; system members may not be prevented from purchasing the products from other member undertakings. 36 As stated in article 4.1(c) of the Communiqué, members of a selective distribution system are not prohibited from making active or passive sales to end users. Even if the undertaking in the position of a supplier forms exclusive regions by stating that it would supply goods to a limited number of buyers in a certain region, active or passive sales by the buyers to end users outside the region may not be prevented. In other words, selective distribution system member buyers may engage in active or passive sales including those made through the internet to end users in any region. However, the supplier may prevent a system-member buyer from changing the location of the point of sale the buyer operates in, or from opening a new point of sale. This is because, as mentioned above, in the selective distribution system, the physical characteristics of the point of sale is the most important factor affecting the success of the distribution system. However, setting up a website for online sales by the purchaser who is the member of the system shall not be deemed as opening a new physical point of sale. The other regulation which partly opens selective distribution system to competition is included in article 4.1(d) of the Communiqué. Accordingly, undertakings which adopt the selective distribution system may not place an exclusive purchase obligation on the system-member buyers. In other words, system members are not required to procure the products from the supplier; system members may not be prevented from purchasing the products from other member undertakings.
Most Favoured Customer Clause (MFC Clause)
19 Direct and indirect methods for maintaining resale prices are more effective in case where the prices that are applied by the purchasers are monitored and controlled by the suppliers. For instance, an obligation applied to all purchasers to report purchasers who sell things at different prices other than that in the standard price list makes significantly easier for supplier to control prices applied in the market. 19 Direct and indirect methods for maintaining resale prices are more effective in case where the prices applied by the purchasers are monitored and controlled by the suppliers. For instance, an obligation on all purchasers to report the purchasers who do not sell the goods for the prices in the standard price list makes it significantly easier for the supplier to control prices applied in the market. In this regard, most-favoured-customer clauses which would decrease the motivation of supplier to provide products at more reasonable prices and in more convenient conditions to the purchasers other than that of favoured-customer, may reinforce the effects of direct and indirect methods for resale price maintenance.
- No provision in current guidelines. 223 Most-favoured-customer (MFC) clauses do not always produce the same results in the market in terms of the competition. While these clauses have positive impacts on the competition in the market, they may also have anti-competitive effects. Thus, for the competitive assessment of these clauses, it is required to evaluate; (i) the market positions of the party to whom this clause is in favour and its competitors, (ii) the purpose of this clause, and (iii) the characteristics of the market and specific clause.
- No provision in current guidelines. 224 For instance, MFC clause having retroactive effect and allowing the purchaser to receive more advantageous offers in any way or increasing the costs for the supplier to make discounts for the purchasers who are not the party to this clause is more harmful to the competition compared to other clauses. Besides, in cases where the parties to the MFC clause (especially the party to whom this clause favours) have significant market power, these clauses might be deemed to be more harmful to the competition. In such cases, these clauses may cause the exclusion of competitors, who are not the party to the clause, from the market and lead to foreclosure. Furthermore, these clauses can be more harmful in more concentrated markets since, in the markets where concentration is higher, the possibility for the competitors to find an alternative supplier is much lower. Additionally, in the event that application of MFC clause in the markets becomes common and the majority of the market is subject to these clauses, the effects of these clauses need to be examined with a stricter scrutiny. In this case, the cumulative anti-competitive effects arising from these clauses and the competition restrictions would be more serious.
- No provision in current guidelines. 225 On the other hand, application of the MFC clauses may not cause competitive concerns in some cases. For instance, in the event that none of the parties to the agreement have market power, application of these clauses would not create competitive concerns. In case MFC clauses are used by the purchasers who do not have market power, it could be stated that MFC clause has a positive contribution to the competition in the market since, the opportunity to benefit from better prices and convenient conditions in the market is provided to such purchasers. In case concentration level of the upstream market is low, in other words, upstream market is competitive enough, since current and potential competitors may turn to other alternatives, competitive harm may not be materialized. In case the market is not transparent, the negative effects on competition are relatively low, since application of MFC clause cannot be monitored effectively.

Information first published in the MA | Gazette, a fortnightly legal update newsletter produced by Moroğlu Arseven

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
Bora İkiler, LL.M.
 
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”

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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.