One of the most important areas of focus of the Turkish Competition Law enforcement is the practices that force the competitors out of the market and/or prevent the entry of new competitors. Exclusivity is one of these practices. Exclusivity obligations may take the form of direct/indirect customer/territorial restrictions in vertical agreements, below-cost pricing, above-cost discounts, foreclosing entry and leveraging.
Exclusive dealing arrangements are dealt with under Article 4 of Law on the Protection of Competition No. 4054 ("Competition Law"). Communiqué No. 2002/2 exempts certain exclusive arrangements in vertical agreements. It also lays down the conditions with which such agreements must comply.
In general, companies may grant exclusive rights to their distributors with respect to certain territories or customers. However, such arrangements are acceptable only to the extent that they restrict active sales to territories/customers exclusively reserved to the supplier or allocated to a distributor. Restriction of passive sales, whether on the basis of customer groups or territories, is outside the scope of the exemption. Unless individually-exempted, it constitutes a violation of Article 4 of the Competition Law. Although an ultimate supplier may place direct exclusivity obligations on immediate distributors, it cannot restrict active or passive sales by the distributors' customers. There are two exceptions to this rule: (i) it is permitted for a company to set up a selective distribution system where the distributor can resell the products only to authorized customers; and (ii) in cases where a supplier sells parts of its products to downstream parties to be assembled before sale, it may restrict the buyers from selling the relevant parts to competitors. With respect to the latter exemption, the relevant parties must still be able to sell such parts to the final consumer, or to parties authorized to perform maintenance of the products to be used as spare parts.
Since 2007, vertical agreements of undertakings possessing more than 40 percent market share in the relevant market(s) for contract good(s)/service(s) falls outside the block exemption. As a result, exclusive dealing arrangements by suppliers that surpass the 40% threshold—or possess market power in general—warrant closer consideration as they are more likely to produce anti-competitive effects on the market. Since they do not benefit from block exemption, they may fall within the Article 4 prohibition unless they merit an individual exemption under Article 5 of the Competition Law.
Examples of enforcement decisions by the Board concerning exclusive dealing arrangements by dominant undertakings include Unilever (15.05.2008, 08-33/421-147); Mey Ýçki (10.09.2007, 07-70/863-326); and Coca Cola (10.09.2007, 07-70/864-327). All three cases involve the revocation of negative clearances/exemptions in favor of exclusive dealing arrangements by dominant firms. In these cases, the Board ruled that the vertical agreements of the companies in question were no longer covered by the block exemption, following the introduction of the 40% market share threshold. Therefore, it conducted an individual exemption analysis under Article 5 of the Competition Law, whereby it found that the exclusive arrangements in question generally did not fulfill the conditions of individual exemption in that (a) the agreements did not involve the transfer of significant know-how or individualized investments into the facilities of the buyers, which would otherwise have legitimized the exclusivity arrangements; and (b) the arrangements in question impeded competition more than what was necessary to achieve the desired pro-competitive effects. However, the Board did carve out some of the exclusive vertical arrangements and considered them to benefit from individual exemption. It found that Unilever made significant custom-tailored investments for Algida café-shops so the exclusivity provisions were justified for the return of the investment.
The Board therefore pays close attention to exclusive dealing arrangements, especially in the case of firms with significant market power. In particular, since the introduction of the 40 percent market share threshold for the application of Communiqué no. 2002/2, the Board has been very active in its policing of exclusive dealing arrangements.