Vertical agreements that are covered by Block Exemption Communiqué No. 2002/2 on Vertical Agreements ("Communiqué No. 2002/2") are exempted from the prohibition of Article 4 of Law No. 4054 on the Protection of Competition (the "Competition Law"). That being said, a network of vertical agreements may still restrict competition by preventing competitors' access to the relevant market to a certain degree, even though individual vertical agreements that form the web fall within the block exemption.
- Exclusionary Vertical Agreement Networks
Competition concerns may arise if there is insufficient competition at one or more levels of trade due to market foreclosure arising from vertical non-compete obligations. For instance, if competitors compete for all the needs of each customer on equal footing; single branding provisions (exclusionary agreements) of an undertaking generally would not restrict efficient competition. However, there are obvious risks to the competitive process if consumers face significant difficulties due to market foreclosure and/or long-term non-compete obligations.
Individual non-compete obligations are not covered by the block exemption when their duration is indefinite or exceeds five years. Non-compete obligations that are tacitly renewable beyond a period of five years are also not covered by Communiqué No. 2002/2. In general, non-compete obligations are covered when their duration is limited to five years or less and no obstacles exist that hinder the buyer from effectively terminating the non-compete obligation at the end of the five year period. The block exemption regime does not apply if the supplier's market share(s) in the relevant market(s) for contract good(s)/service(s) exceed(s) the 40% market share threshold. In the case that the vertical agreement contains an obligation to supply to a single buyer, the block exemption would apply as long as the market share(s) of the buyer in the relevant market(s) for contract good(s)/service(s) does not exceed 40%.
Market foreclosure can, depending on circumstances, fall under Article 4 or Article 6 of the Competition Law, separately. Article 4 is akin to and closely modeled on Article 101(1) of the Treaty on the Functioning of the European Union ("TFEU"). It prohibits all agreements between companies, trade associations and concerted practices that have (or may have) as their object or effect the prevention, restriction or distortion of competition within a Turkish product or services market or a part thereof. Article 6 is modeled after Article 102 of the TFEU. It prohibits the abuses of dominance by one or more firms.
Article 4 Analysis
Certain decisions of the Board examine "market foreclosure through a web of vertical agreements" cases under Article 4. In Alkan (16-40/662-296; 21.11.2016), Fritolay (29.08.2013;13-49/711-300), Biletix (05.11.2013;13-61/851-359) and Mey Icki (12.06.2014;14-21/410-178),the Board assessed the allegations on the basis of Article 4, without analyzing whether the defendants were dominant. It concluded that de facto exclusionary practices of each of the defendants aimed at excluding competitors so violated Article 4.
Article 6 Analysis
Further details of the Board's analyses of market foreclosure cases within the meaning of Article 6 of the Competition Law can be found under the "Market Foreclosure" section.
- Parallel Networks
Foreclosure may occur for potential entrants when a number of major suppliers enter into single branding contracts with a significant number of buyers in the relevant market. The Board takes the anti-competitive effects attributable to each individual network of agreements into consideration in the assessment of such circumstances. Accordingly, it examines the anti-competitive effects of the agreement on the basis of the dynamics of each case by considering the existence of alternative buyers, suppliers and efficiency of the competitors in the constitution of competition in the relevant market.
- Withdrawal and Exclusion of the Block Exemption
Article 6 of Communiqué No. 2002/2 enables the Board (i) to withdraw the block exemption granted to a vertical agreement if the vertical agreement created anti-competitive effects incompatible with the purposes of the block exemption or (ii) to exclude a vertical agreement from the protective cloak of the block exemption regime, if the parallel networks of vertical agreements cover more than 50% of the relevant market.
The procedures applied in cases of withdrawal and exclusion are different:
- The Board assesses whether withdrawal of block exemption is sufficient and proper for eliminating the undesired effects of the vertical agreements. Before rendering its final decision on withdrawal, the Board requests an oral or written opinion of the supplier or of the buyer, where the agreement contains an obligation supply to a single buyer. Withdrawal is not retrospective. Therefore the vertical agreement would benefit from the block exemption until the Board's withdrawal decision.
- Exclusion is not addressed to individual companies, but concerns all companies whose agreements are defined in Communiqué No. 2002/2. For the purpose of calculating the 50% market coverage ratio, the Board takes into consideration each individual network of vertical agreements containing restraints, or combinations of restraints, producing similar effects on the market.