The Turkish Competition Authority (the "TCA") recently published two reasoned decisions which set out its approach on suppliers restricting retailers' freedom to use online marketplaces as a sales channel. The decisions concern vertical restrictions imposed by Arçelik Pazarlama Anonim Sirketi ("Arçelik") and BSH Ev Aletleri Sanayi ve Ticaret Anonim Sirketi ("BSH"), two prominent undertakings active in the small and major home appliances sector in Türkiye.1
The TCA's practice concerning restrictions on the use of online marketplaces diverges from the European Commission's approach in the Vertical Block Exemption Regulation ("VBER") and the VBER Guidelines. According to the TCA's Guidelines on Vertical Agreements ("Vertical Guidelines"), vertical agreements that restrict the use of online marketplaces as a sales channel cannot benefit from block exemption. The Vertical Guidelines states that suppliers may impose standards and rules on online marketplace sales, however an absolute ban of using online marketplaces would constitute a competition law violation. That said, the Vertical Guidelines does not provide much guidance on the acceptable standards and rules that may be imposed concerning online marketplace sales.
The TCA's Arçelik and BSH decisions include various examples of possible criteria that may be imposed by suppliers that wish to use online marketplaces as a sales channel.
I. Background of the Decisions
In December 2021, the TCA had rejected BSH's individual exemption application concerning agreements executed with authorized dealers that ban the dealers from using online marketplaces to sell BSH products.2 Although BSH argued that an absolute online marketplace sales ban aims to prevent free riding and preserve the distribution system's effectiveness as well as BSH's brand image, the TCA concluded that an absolute ban does not legitimately serve this purpose and could, to the contrary, even prevent market entries and distort competition.
On 9 September 2021, the TCA launched an investigation against Arçelik and BSH on the allegations that they imposed an online marketplace ban on their authorized dealers. Both Arçelik and BSH use a selective distribution system in which authorized dealers are required to meet certain criteria. Following the TCA investigation, Arçelik and BSH offered commitments requesting the TCA to cease the investigation without imposing monetary fines. The TCA accepted to start the commitment procedure but rejected the first set of commitments offered by both companies and granted them a right to amend their commitments. Accordingly, the second sets of commitments which removed the absolute ban of online marketplace sales and introduced detailed standards and rules on authorized dealers' online marketplace sales, were accepted by the TCA.
II. The TCA's Evaluation of the Commitments
The TCA rejected BSH's first set of commitments since the offered commitments did not eliminate competition concerns and were related to third parties' (i.e., online marketplaces) practices. The rejected commitments obliged the online marketplaces to only display advertisements approved by BSH, and share certain information such as traffic data, quantity sold and seller rating with BSH.
Upon the TCA's rejection of the first set of commitments, BSH submitted revised commitments which generally related to the vertical agreements between BSH and its authorized dealers. The TCA accepted the second set of commitments and ceased the investigation against BSH. According to the decision, authorized dealers that accept the conditions imposed by BSH will be free to use online marketplaces as a sales channel. The conditions accepted by the TCA include the following:
- the authorized dealers must display an "authorized dealer badge" on their online marketplace stores;
- the authorized dealers must ensure that their online marketplace store does not include any tool (e.g., advertisement or display) that directs consumers to BSH's competitors;
- the authorized dealers can only use online marketplaces that apply equal ranking criteria to all sellers and that immediately inform sellers of the potential changes in the ranking process and services;
- the authorized dealers must allow the online marketplaces to share with BSH statistical information regarding the sales made through online marketplaces;
- the authorized dealers must use online marketplaces equipped with technical solutions preventing the sale of more than four of the same products at once,
- the authorized dealers must use BSH approved materials and information (product characteristics, photos, videos, etc.) in their online marketplace stores and product page;
- the authorized dealers must allow consumers to ask questions through their online marketplace stores,
- the authorized dealers can only sell brands and products that they sell in their physical stores;
- the authorized dealers should follow BSH's corporate standards in their online stores;
- the authorized dealers should sign a separate agreement with BSH which include certain standards regarding online sales (e.g., the logo to be used, brand images, criteria for product content explanations, etc.);
- the authorized dealers' seller name in the online marketplace must be their trade name and must allow BSH to examine their sales procedures through online marketplaces and service quality; and
- the authorized dealers must be solely responsible for the products' delivery to the buyer, allow consumers to track their delivery, respond to questions asked through online marketplaces within two days, cover costs due to consumer complaints and display time or stock limits regarding applicable offers.
Similar to BSH, Arçelik offered several commitments which do not impose an absolute ban on authorized dealers' online sales but oblige the authorized dealers to fulfil certain standards and rules. Arçelik's first set of commitments which were rejected by the TCA included applying different prices to authorized dealers that use online marketplaces. The TCA stated that price differentiation based on online marketplace sales, a practice known as dual pricing, is a major competition law infringement and cannot benefit from exemption. This approach is contrary to VBER which does not list dual pricing amongst hard core restrictions and thus is considered to benefit from block exemption. Accordingly, the TCA rejected Arçelik's first set of commitments. Arçelik's revised commitments, which were accepted by the TCA, imposed the following conditions on authorized dealers wishing to use online marketplaces as a sales channel:
- the authorized dealers must use online marketplaces which provide the same quality and content of displays (logo, images, composition information, etc.) as Arçelik/Beko's websites, and not use misleading information about products;
- the authorized dealers must use their registered trade name in online marketplaces, not sell Arçelik products under different store names and submit an application form to Arçelik explaining their intent to sell through online marketplaces;
- the authorized dealers must exclusively sell Arçelik/Beko branded products provided by Arçelik;
- the authorized dealers' sales through online marketplaces must target end users only and must not include more than two products under the same product category or corporate sales;
- the authorized dealers must transmit information to Arçelik on their sales made through online marketplaces (i.e., sales amount, sales anddelivery date, store rankings, customer information);
- the authorized dealers must provide a shipping service for products that require installation and ensure that shipping companies deliver products to the installation place;
- the authorized dealers' online marketplace stores must maintain their rankings among the top 20%;
- the authorized dealers must allow Arçelik to track their sales on online marketplaces and ensure that sales in physical stores represent at least 85% of the authorized dealers' turnover; and
- the authorized dealers must sign an agreement with Arçelik that establishes certain conditions and quality standards for online marketplace sales, and which can unilaterally be terminated by Arçelik in cases of breach.
Both BSH and Arçelik decisions are related to online marketplace restrictions for selective distribution systems. The decisions state that the offered standards and rules would enhance the distribution quality, brand image and potential efficiencies and are concrete, reasonable and acceptable. The decisions are based on the grounds that the standards and rules (i) aim to protect consumers welfare and the brand image (ii) ensure the functioning of the selective distribution system, and (iii) are equivalent to distribution criteria adopted for physical sales channels.
The TCA's BSH and Arçelik decisions fill an important gap in the TCA's practice concerning vertical restrictions on online marketplace sales and provide further guidance to suppliers operating a selective distribution system. Still contrary to the VBER and VBER guidelines, these decisions demonstrate a milder approach compared to the TCA's previous decisions.
Suppliers operating a selective distribution system can refer to these decisions to identify which conditions they can impose on their authorized dealers' online marketplace sales. However, it is not clear whether and to what extent online marketplace restrictions are acceptable in other distribution models. Therefore, suppliers should make a through competition law assessment while designing any standards and for their retailers that use online marketplaces as a sales channel.
1. The Competition Board's decisions (i) dated 8 September 2022 and numbered 22-41/580-240 and (ii) dated 8 September 2022 and numbered 22-41/579-239.
2. The Competition Board's decision dated 16 December 2021 and numbered 21-61/859-423
© Kolcuoglu Demirkan Koçakli Attorneys at Law 2020
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