Turkish Competition Authority (TCA) still eyes for vertical relationships between fuel distribution companies and gas stations, and usufruct rights exceeding the term of exemption continues to bear competition law risks to fuel distributors. In its recently published decision on the vertical agreement between a single economic entity comprised of Kışpet and N-PET, and a fuel dealer in Konya province who owned the land of a gas station, the TCA found that the parties breached the term of the 10-year individual exemption. Accordingly, the TCA informed the parties in writing that the vertical relationship must be terminated in 30 days to avoid enforcement. The decision echoes the TCA's previous decisions concerning fuel distributors and their dealership systems.
In 2010, the TCA carried out extensive exemption evaluations on the dealership agreements between fuel distribution companies and dealers (gas stations), which included non-compete clauses. In practice, usufruct right is established on behalf of fuel distributors for 10-15 years on the land that the gas station is built upon, although the dealership agreements are inked for 5 years. TCA considered the dealership agreement and the usufruct as a single vertical agreement between distributors and stations, inked for the term of the usufruct (10-15 years). Since the vertical agreements containing non-compete clauses are benefiting from block exemption only for 5 years, the TCA deemed necessary to further evaluate individual exemption due to longer-term of vertical agreement comprised of usufruct and dealership agreement. In this case, the TCA regarded the return of investment argument of distributors plausible, and separated individual exemption analysis based on the ownership of the land that the station is installed on:
- If the ownership of the land belongs to the distributor or to a third party other than the distributor and the dealer, individual exemption is granted for 10 years.
- If the ownership of the land belongs to the dealer and it has not been previously used for fuel dealership, individual exemption is granted for 10 years, provided that distributor and dealer are agreed upon to enable termination of the agreement with the condition of dealer paying the price corresponding to the remaining period of the investment specific to the relationship (gas station facility investment).
- If the ownership of the land belongs to the dealer and it has a previously installed gas station facility on it, individual exemption cannot be granted since the distributor cannot be deemed as invested enough to legitimize a non-compete clause longer than 5 years.
In Kışpet/N-PET case, the TCA followed the same approach and decided that the agreement falls within the scope of a 10-year individual exemption since the land has not been previously used to host a gas station. The TCA reviewed the contracts concluded by the dealer with Kışpet for one term and N-PET in the following period in detail and produced a timeline in terms of the vertical agreement. Within this scope, although there are usufruct rights, lease agreements, and dealership agreements in different periods, it has determined that Kışpet and N-PET are part of the single economic entity. Therefore, the vertical agreement between the dealer and Kışpet/N-PET is accepted to be established in 2004, and the TCA found that the vertical agreement is still in place due to the failure to remove usufruct annotation from the title deed by fuel distributor. Hence, the TCA found that the individual exemption period is exceeded and the vertical agreement is in violation of Competition Law. Upon these findings, the TCA decided to send a written opinion to the parties and to warn that the enforcement is pending if the usufruct is not removed from the title deed.
Keeping in mind that the 10-year individual exemptions granted by the TCA in 2010 are about to expire, this decision of the TCA contains essential nuances for the fuel sector. A re-examination of these agreements by the TCA is possible, and the TCA can find competition infringements due to the usufruct rights exceeding this period. As can be seen from the decision, the TCA can examine and put into a historical order of a large number of agreements between fuel companies and dealers to determine the duration of the vertical relationship between the parties. In this context, the TCA may reveal that the vertical link in continuation due to usufruct rights, even if the fuel distribution companies evaluate that the relationship with their old dealers has ended.
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