Turkey: The Board's Decision on BSH Ev Aletleri Sanayi ve Ticaret A.Ş. Regarding the Preliminary Investigation on the Restriction of Online Sales

Last Updated: 11 April 2018
Article by Gönenç Gürkaynak Esq

Most Read Contributor in Turkey, March 2019

The Authority published the Board's reasoned decision (dated 22.08.2017 and numbered 17-27/454-195) on the preliminary investigation launched against BSH Ev Aletleri Sanayi ve Ticaret A.Ş. ("BSH"), a subsidiary of BSH Hausgeräte GmbH operating in the market for durable consumer goods in Turkey with its master brands of Bosch and Siemens, in order to determine whether it had violated Article 4 of the Law No. 4054 by imposing restrictions on its distributors' online sales through: (i) a restrictive provision within BSH's standard distribution agreements, (ii) automatic re-routing of the customers to the BSH's website, and (iii) sending warning letters to the distributors who made online sales in order to prevent them from doing so. The decision sets a landmark precedent strengthening the Board's and the European Union's ("EU") stance that the online sales of distributors cannot be restricted, unless such restriction is objectively justified.

Within its decision, the Board conducted an in-depth analysis of the Turkish and EU legislation on this issue, as well as examining the relevant EU precedents. The Board initially determined that the online sales of products in Turkey are generally considered as "passive sales," pursuant to paragraph 24 of the Guidelines on Vertical Agreements ("Vertical Guidelines").  Therefore, the Board concluded that a supplier restricting its distributors from performing online sales, as was the case within the preliminary investigation at hand, would, by its own nature, constitute a restriction regarding the passive sales of the distributor, which is explicitly deemed as a restriction under Article 4(c) of the Block Exemption Communiqué No. 2002/2 on Vertical Agreements ("Communiqué No. 2002/2") and under the Vertical Guidelines. Furthermore, the Board evaluated the European Commission's Vertical Agreements Block Exemption Regulation, the European Commission's Guidelines on Vertical Restraints, as well as several precedents of EU courts and competition authorities (e.g., Pierre Fabre, Scout Satchels, Bang & Olufsen, Bosch Siemens)[1] and indicated that the main perspective and established precedent of the EU case law regarding distribution agreements is that distributors (who are parties to a vertical agreement) should not be restrained from performing online sales.

Following its analysis, the Board primarily evaluated the "active vs. passive sales" issue. The Board first noted that, prior to 2015, BSH's standard distribution agreements had restricted both active and passive online sales altogether, and that, after a revision was made to these agreements in 2015, only 'active' online sales were restricted. Moreover, the Board asserted that, as per Article 4(c) of the Communiqué No. 2002/2, the restriction of passive sales through the distribution agreement eliminates the economic/technical developments and advantages that the vertical agreements are expected to stimulate, and should be prohibited unless such restrictions are otherwise objectively justified. In addition, the Board considered that passive sales were not only restricted through the distribution agreement itself, but also through de facto applications in practice. In light of the foregoing considerations, the Board finally determined that, even though passive sales had not been restricted by BSH after 2015 within or through the distribution agreement itself, the fact that BSH was sending warning letters to its distributors performing online sales as well as the automatic re-routing of the customers to BSH's website, were deemed to constitute de facto restrictions of passive sales.

Considering the provision within BSH's standard distribution agreements restricting active sales, along with the de facto applications and practices of BSH, the Board concluded that the distribution agreements, which had previously been granted a block exemption, did not satisfy the conditions laid down by Article 5(a) of the Law No. 4054, as it did not offer any economic/technological developments or improvements for the distribution of goods and provision of services. As such, the Board did not consider BSH's defenses to amount to an objective justification for the restriction. Accordingly, the Board decided that: (i) the block exemption previously granted to BSH pursuant to the Communiqué No. 2002/2 with its decision dated 06.10.2015 and numbered 15-37/573-195 should be revoked, and (ii) the exclusive distribution agreement should be amended to comply with the block exemption regulation above. At the conclusion of the preliminary investigation, the Board unanimously decided that there was no need to launch a full-fledged investigation against BSH at this stage, by determining that: (i) BSH had significant competitors with high market powers, and (ii) BSH had not imposed any specific, concrete sanctions on its distributors regarding online sales.

[1] See Autorité de la concurrence Pierre Fabre Dermo-Cosmétique SAS decision No. C-439/09, dated 13.10.2011; Kammergericht, the Court of Appeals of Berlin, Scout Satchels decision No: Case 2 U 8/09 Kart, dated 19.09.2013; Autorité de la concurrence, Bang et Olufsen decision No: 12-D-23, dated 12.12.2012; Bundeskartellamt, Bosch Siemens decision No: B7-11/13, dated 23.12.2013.

This article was first published in Legal Insights Quarterly by ELIG, Attorneys-at-Law in March 2018. A link to the full Legal Insight Quarterly may be found here.

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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