Since 1998, the Turkish automotive industry has been regulated by sector-specific rules, with the (latest) Block Exemption Communiqué released in February 2017. These sector-specific rules lay down the conditions to be met for vertical agreements in the automotive industry to benefit from block-exemptions from the prohibition on the allocation of markets, interfering with sales conditions and exclusive dealing of article 4 (akin to article 101 of Treaty on the Functioning of the European Union) of the Law on the Protection of the Competition, No. 4054 (the Competition Law). The provisions of the Block Exemption Communiqué apply to vertical agreements concerning the purchase, sale and resale of new motor vehicles; the purchase, sale and resale of spare parts of motor vehicles; and maintenance and repair services.
As long as the market share of the parties to the vertical agreement does not exceed 30 per cent, exclusive distribution systems, quantitative distributions systems or qualitative distribution systems can be concluded. Vertical agreements in which the market share of the parties exceeds 30 per cent benefit from the block exemption only if they adopt the qualitative distribution system. The Block Exemption Communiqué aims to protect distributors from immediate termination by regulating the terms of their agreements and the notice periods for termination. Accordingly, to benefit from the block exemption, the agreement must have a duration of at least five years and both of the parties must accept a provision in the agreement to notify their desire not to renew at least six months before the expiration of the agreement, where the agreement is for an indefinite duration, the notice of termination period must be at least two years for both parties (see question 4).
The Block Exemption Communiqué contains a list of hardcore restrictions applicable to the distribution of vehicles, spare parts and the aftersales market, and is supplemented by a sector-specific guideline. The main restrictions can be summarised as follows:
- restrictions on setting the distributor’s resale prices, with the exception of setting maximum and recommended prices;
- restrictions related to the region or customers to which the distributor may sell, with the following exceptions:
- in case of an exclusive distribution system, restriction of active sales to an exclusive region or an exclusive customer group allocated by the supplier to itself or to another buyer, provided the restriction does not include sales by customers of the buyer;
- restriction on sales to final users by a buyer operating at the wholesales level;
- prohibition of sales by selective distribution system members to unauthorised distributors within the region allocated by the supplier for the operation of the system concerned; and
- in case of parts procured for assembly, prohibition on the buyer selling these parts to manufacturing competitors of the supplier;
- restrictions on active or passive sales by selective distribution system members operating at the retail level to final users. However, the supplier is entitled to prohibit a system member from operating at a location where it is not authorised. Furthermore, prevention of sales and purchases between members of the selective distribution system is prohibited; and
- restriction on an authorised service station’s freedom to limit its operations to maintenance and repair services, and spare part distribution.
In its regulation of the distribution of spare parts, the Block Exemption Communiqué aims to ensure that authorised distributors, authorised spare part distributors, authorised service stations, independent spare part distributors, private service stations and end users are not forced to depend on the motor vehicle supplier for the procurement of the goods in question, and to allow other suppliers of such goods to be active in the market.
Non-compete obligations are regulated separately under the Block Exemption Communiqué for the distribution of motor vehicles, for the distribution of spare parts, and for aftersales services. A non-compete obligation is defined as ‘any direct or indirect obligation placed on the buyer forcing the buyer to make its purchases of the relevant goods or services in the relevant market, or substitutes thereof, from the supplier or from an undertaking designated by the supplier at a level of over 80 per cent in the new motor vehicle sales market and over 30 per cent in the aftersales market.
For the distribution of motor vehicles, non-compete obligations with a period of a maximum of five years are within the scope of the block exemption. However, the distribution of spare parts and aftersales services do not benefit from the block exemption.
Investigations in the automotive industry
The automotive industry, including the spare parts sector, is a relatively frequent investigation target of the Turkish Competition Authority (TCA). The first violation decision of the Turkish Competition Board (the Board), a part of the TCA, related to Renault’s practices on vertical agreements in 2000. Renault was fined for non-compliance of its distribution agreements with competition rules, fixing the discount rates, prohibiting the use of matching-quality spare parts, and prohibiting fleet sales by authorised dealers to public entities. Two subsequent decisions of the Board against Doğuş Group, which imports and distributes Volkswagen Group brands into Turkey in 2001, and Peugeot in 2004 also related to vertical agreements that were not in line with the requirements of permitted block exemptions.
In its widest investigation of the industry, the TCA initiated an investigation of 23 undertakings active in the automotive sector (both passenger cars and light commercial vehicles) in 2009. The TCA alleged that the undertakings under investigation discussed future pricing policies, stock data, sales targets and sales strategies. According to the Board’s decision in 2011, 19 undertakings under investigation violated article 4 of the Competition Law (article 4 is akin to article 101 of Treaty on the Functioning of the European Union). The Board imposed fines on these 19 undertakings totalling approximately 277 million lira. At that time, it was the largest fine ever imposed by the Board. In its decision, the Board emphasised that exchange of future prices or price strategies can be deemed a violation of competition rules. The Board indicated that unless otherwise proven by the investigated undertakings, it is presumed that the undertakings used the exchanged information to coordinate their actions in the market. Exchange of other information such as stock data, sales targets, sales amounts and sales strategies among the undertakings was deemed as complementary to the exchange of future prices and price strategies. The appeals process against the fines has still not concluded even though the hearings before the Council of State were held in November 2015.
The length of the appellate process for competition law violations often prevents claims for damages by private action because Turkish courts are unwilling to accept suits for damage claims before the final decision regarding the underlying infringement has been issued.
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