Law No. 7335 on the Amendment of the Law on the Union of Chambers and Commodity Exchanges of Türkiye and the Chambers and Commodity Exchanges and Certain Laws and the Decree Law No. 640 ("Law No. 7435"), has been published on the Official Gazette dated 1 February 2023 and numbered 32091 and introduced significant amendments to Law No. 6585 on the Regulation of Retail Trade (the "Law").
This Monthly Updates aims to provide a brief explanation on the amendments to the Law and highlight the essential novelties introduced therein.
Scope of The Amendments
Within the scope of the Law No. 7435 important changes have been especially made in the Law. These significant changes, which are detailed below, have been made regarding (i) unfair commercial practices in the supply chain; (ii) payments arising from commercial relationships between manufacturers, suppliers, and retail businesses; and (iii) common areas and common expenses in shopping malls.
Amendments on the Law on Unfair Commercial Practices
In the commercial relations between the manufacturer, supplier and retail businesses, the activities that cause one of the parties to significantly disrupt the commercial activities of the other party, reduce the ability to make reasonable decisions or cause them to become a party to a commercial relationship that they would not be a party to under normal conditions are defined as unfair commercial practices. Correspondingly, it is regulated that unfair commercial practices cannot be made in the supply chain.
Although it is not limited in number, with the amendments to the Law practices some practices have been classified as unfair commercial practices and new administrative fines have been introduced for those who engage in unfair commercial practices. However, such provisions of the Law on unfair commercial practices will enter into force on 1 January 2024.
Developments on Payment Terms
It has been regulated that it is crucial that payments emerging from commercial relations between producers, suppliers, and retail enterprises must be made in a certain period that introduced in the agreement. However, the payment terms for agricultural and food products which could be spoiled in 30 days from the date of production cannot exceed the stipulated period if the creditor is smaller than the debtor, and 45 days in other situations. Agricultural and food products that do not spoil within 30 days of period, the payment terms cannot exceed 60 days if the creditor is smaller in volume than the debtor.
Moreover, in addition to these stipulated payment terms for different cases, for those who do not comply with these terms, an administrative fine will be calculated by the rate of five per thousand of the unpaid amounts for each day up to 30 days, and one percent of the unpaid amount for each day after 30 days. In the determination of the payment periods, the date before the delivery or transfer of ownership will be taken as basis.
These provisions of the Law on payment terms will enter into force on 1 January 2024.
Developments on Common Use Areas
In line with the amendment the definition of common income and common expense have been introduced to the Law and new administrative fines have been also set forth. These definitions are detailed below.
- Developments on common expenses: It has been regulated that, expenses related to the duties of the payroll management such as personnel working in the shopping mall, electricity, water, natural gas, non-renewal maintenance, repair, security, and cleaning expenses related to common areas of use, are common expenses. With the Law, only a contribution fee can be collected from the retail businesses in the shopping mall for these expenses. It has been stated that no fee will be charged for expenses that do not have the characteristics of common expenses, such as advertising, marketing and consultancy, and expenses that are not documented.
- Developments on common income: It has been regulated that all kinds of income obtained from rental, advertising, marketing, cultural and artistic activities and other common usage area incomes and advances for common expense participation share from common use areas are common income. It has been stated that the common revenues will be used to cover the common expenses and those who violate this regulation will be penalized with an administrative fine in the amount of the common income not used to cover the common expenses.
- Developments on common income and expense reports: The owner or management of the shopping mall is already under the obligation to prepare the common income and expense reports for the previous year and send them to the retail businesses in the shopping mall. Those who do not duly prepare the common income and expense report or do not send it to retail businesses will be fined TL 20,000 for each retail business in the shopping mall.
These provisions of the Law regarding common use areas have entered into force on 1 February 2023.
Upper Limit and Increase of Administrative Fines
In line with the Article 18 of the Law No.7435, it has been regulated that all administrative fines limited regarding the size of the enterprise in relation with the relevant violation. As a result, the total value of administrative fines cannot exceed TL 5 million for small-scale enterprises, TL 50 for medium-scale enterprises, and TL 250 million for large-scale enterprises within a calendar year.
As a conclusion, with the amendments on Law 7435, unfair commercial practices encountered in the supply chain have been regulated, and to be noted that these have not been specified in limited numbers. With the amendment, new and deterrent administrative fines have been introduced within the framework of combating unfair commercial practices. In terms of payment periods, the legislator aims to protect small-scale and medium-sized enterprises dealing with agricultural and food products against large-scale enterprises within the scope of commercial needs. The amendments made in the Law regarding the use of common areas have been changed recently and new administrative fines to be applied to those who violate these regulations have been determined. It is important for the retail sector stakeholders to complete the work on compliance with the Law until the regulations entered into force.
Originally published April 2023
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