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CLIENT ALERT REGARDING BLOCK EXEMPTION COMMUNIQUÉ ON VERTICAL AGREEMENTS AND CONCERTED PRACTICES IN THE MOTOR VEHICLE SECTOR COMMUNIQUÉ NO: 2017/3

Block Exemption Communiqué No: 2017/3 on Vertical Agreements and Concerted Practices in the Motor Vehicle Sector (“Communiqué No: 2017/3”) has been published in the Official Gazette dated 24.02.2017 and numbered 29989 and entered into force. With the enforcement of Communiqué No: 2017/3, Block Exemption Communiqué No: 2005/4 on Vertical Agreements and Concerted Practices in the Motor Vehicle Sector (“Communiqué No: 2005/4”) is abolished.

 

Communiqué No: 2017/3 comprises the vertical agreements concerning (i) sale, purchase or resale of new motor vehicles; (ii) sale, purchase or resale of spare parts of motor vehicles and (iii) procurement of maintenance and repair services of motor vehicles. Vertical agreements concluded between competing undertakings in the motor vehicle sector shall not benefit from the exemption granted with Communiqué No: 2017/3. However, exemption shall also be applied to the agreements between competing undertakings that do not have the condition of reciprocity and to the agreements where the provider is the manufacturer and distributor of goods or services and the buyer is not the manufacturer but only the distributor of the goods or services competing with the goods under the agreement.

Major amendments introduced with the Communiqué No: 2017/3 may be summarized as follows:

 

Definitions: Definitions within the Communiqué No: 2005/4 have been updated with the Communiqué No: 2017/3 and some definitions such as maintenance and repair chains and chain services have been included.

 

Market Share Thresholds: With regards to the agreements concerning quantitative selective distribution and exclusive distribution, market share thresholds for motor vehicle and spare part providers are amended with the Communiqué No: 2017/3 and market share threshold of the provider in the relevant market is determined as 30%. However, in line with the previous application, no threshold is foreseen for the agreements creating a qualitative distribution system and 30% threshold shall continue to be applied in vertical agreements including an obligation for exclusive provision.

General Block Exemption Conditions: Contrary to the Communiqué No: 2005/4, the Communiqué No: 2017/3 does not include less general exemption conditions. In this respect, the freedom to transfer the agreements concluded between the distributors and the suppliers is no longer listed as a general condition in order for an agreement to benefit from the block exemption. Furthermore, a detailed, reasoned and written termination notice is no longer a requirement (however, reasoned and written termination notice is still a requirement for the agreements based on Turkish Commercial Code and Turkish Code of Obligations). Finally, granting the parties (suppliers and the distributors) with the right to bring the conflicts arising from the agreement to an independent expert or to an arbitrator is no longer provided as a general condition for the agreement to benefit from block exemption. On the other hand, the provisions related to the term of the agreement and rules with respect to renewal clauses are preserved and accordingly, exemption shall be applied to the agreements executed between the provider and distributor or authorized service provided that;

1.   the agreement is concluded for a minimum of five years and both parties accept to make the notification six months before the due date of the agreement, regarding their request for no renewal, which will be contained in the agreement, or

2.   the notification period for termination is determined as at least two years for both parties, in case it is concluded for an indefinite period of time, which can be reduced to minimum one year in some defined cases.


Non-compete Obligations and Multi-branding: Provisions of Article 6 of the Communiqué No: 2005/4 titled “Specific Conditions” have been re-regulated under Article 7 of the Communiqué No: 2017/3 titled “Non-compete Obligation and Restriction of Opening Additional Facilities”. In comparison with the Communiqué No: 2005/4 which regulated the sale, maintenance and repair of motor vehicles collectively, the formation of the relevant article is more detailed and provisions as regards to distribution of the motor vehicles, distribution of the spare parts and procurement of maintenance and repair services are regulated separately:

With regard to the distribution of the motor vehicles; non-compete obligations of up to five years – or where an extension beyond five years is possible with the parties' mutual consent and there are no circumstances preventing the purchaser from terminating the non-compete obligation – will benefit from the block exemption. In addition, the Communiqué No: 2017/3 increases the 30% threshold to 80%, thereby allowing the multi-branded distribution structure to be abandoned.

With regard to the distribution of spare parts and the provision of maintenance and repair services; In parallel to the Communiqué No: 2005/4, direct or indirect obligations that oblige the purchaser to buy 30% of a certain type of product cannot benefit from the block exemption. However, as an exception, non-compete obligations of up to five years attributed to independent spare part distributors in terms of the spare part distribution networks established by independent spare part suppliers and chain services in terms of maintenance repair chains can benefit from the block exemption.

Communiqué No: 2005/4's provisions regarding non-compete obligations imposed on the buyer following the termination of the agreement have been preserved. Accordingly, with regard to the distribution of motor vehicles, spare parts and the provision of maintenance and repair services, non-compete obligations effective after the termination of the agreement shall not benefit from the block exemption.

In relation to the establishment of additional service points in terms of the distribution of spare parts and maintenance repair services, it is provided that the exemption will not be applicable to the direct or indirect obligations which restrict the establishment of additional facilities and service areas where the selective distribution system is being applied.

Restrictions Preventing Benefits of Block Exemption: Except for some minor amendments, Communiqué No: 2005/4’s provisions with regard to restrictions that prevent agreements from benefiting from the block exemption have mostly been preserved with the Communiqué No: 2017/3.

Transition period for the adjustment of the Communiqué No: 2017/3 is determined as two years.



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