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After a long legislation period, the Regulation on Principles and Rules Applicable to Retail Business ("Regulation"), regulated as a secondary legislation to the Law on Regulation of Retail Trade, has been published on the Official Gazette on August 6, 2016 and entered into force as of its publication.
In general, mostly in parallel with the provisions under the Law, the Regulation includes detailed principles as to the contribution payments made by the suppliers or manufacturers, campaign sales as well as continuous discount sales.
With this article, we aim to provide an overview of the significant regulations introduced with the Regulation.
(i) Contribution Payments
Article 4 of the Regulation, as in the Law, specifies conditions for provision of contribution payments made to chain stores, department stores, retail business and specifically authorized business (together as "Retailers") by suppliers and manufacturers.
As per Article 4, in order for the Retailers to be able to demand contribution payments from manufacturers or suppliers; (i) the contribution payment shall "directly affect" the product demand, (ii) type and rate of the payment and the contribution as well as period and/or volume of the service they will provide shall be specified in the agreement signed between parties and (iii) the service they will provide shall be limited with the period/volume specified in the agreement.
Although at first glance the foregoing rule brought also by the Law seems clearly put forward, in practice determination of a "direct effect" on product demand is what confuses market players the most. The Regulation, in this respect, exemplifies payments directly affecting the product demand as; contribution payments for promotional and placement activities, advertisements, magazines, announcements, shelf allocation, point of sale marketing expenses.
(ii) Campaign Sales
Article 7 of the Regulation lists activities to be considered as campaign sales. In this respect, activities such as provision of (i) discounted goods or services, (ii) increased amount of goods or services for the same price and (iii) free of charge or discounted additional goods or services for promoting goods, brands or businesses, encouraging and increasing product sale or strengthening the business's/brand's image are considered as campaign sales.
The same article also brings a limitation regarding campaign sales during business openings, closures, turnovers as well as change in business address, activity area and liquidation. As per Article 7, duration of campaign sales cannot exceed a period of 3 months during business openings, closures, turnovers as well as address and activity area changes. Also during liquidation process to be conducted in accordance with the Turkish Commercial Code, this period will be limited to 6 months.
(iii) Continuous Discount Sales
Products which can be subject to continuous discount sales are listed under Article 10 of the Regulation. To that end, according to Article 9, retail businesses are obliged to use signs showing the continuous discount sales, if 70% of their product portfolio consists of the products which can be subject to continuous discounted sales.
Also, these signs should be positioned in retail businesses' front areas and entrance/front sections of discount sections in an apparent and readable way.
(iv) Shelf Allocation for Regional Products
The Regulation imposes shelf allocation obligation for regional products on Retailers which, as a field of operation, sell fast moving consumer goods (i.e. nourishment, beverage, cleaning and personal care products).
With this provision, Retailers will have to reserve at least 1% of their selling space for regional products (i.e. fast moving consumer goods registered with geographical indication or if not, determined by related province's provincial directorate, provided that such goods are manufactured in the same province where the Retailer is located.)
This being said, with Provisional Article 1, Retailers are granted with a period of one year as of the enforcement date of the Regulation (i.e. August 6, 2016) for preparing their selling spaces to be in compliance with Article 11.
(v) Audit and Sanctions
According to Article 16 of the Regulation, Ministry of Customs and Trade ("Ministry") as well as provincial directorates authorized by the Ministry are allowed to audit Retailers' compliance with the Regulation.
Article 16, by way of referring to Article 18 of the Law, also sets forth a monetary sanction against Retailers which fail to comply with the rules under the Regulation.
This article was first published in Legal Insights Quarterly by ELIG, Attorneys-at-Law in December 2016. 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.
