Vertical Agreements in Turkey: What You Need to Know

Vertical agreements are contractual agreements between parties at different levels of the supply chain, such as between manufacturers and distributors or between distributors and retailers. In Turkey, vertical agreements are subject to specific competition laws that apply to any agreements which may hinder competition within the market. Here is what you need to know about vertical agreements in Turkey.

What Are Vertical Agreements?

Vertical agreements refer to the contractual arrangements between parties in different levels of the supply chain, as mentioned earlier. These agreements are made to coordinate the behavior of the parties, such as price or distribution restrictions, and they can include exclusive distribution agreements, franchising agreements, and supply agreements.

Vertical agreements allow parties to benefit from economies of scale and scope, reduce transaction costs, and create efficiencies in the distribution channel. However, they can also have anticompetitive effects, such as limiting access to the market for new entrants, reducing choice for consumers and facilitating collusion between firms.

Competition Law in Turkey

In Turkey, vertical agreements are subject to the Competition Law No. 4054, which aims to protect competition in markets and to prevent antitrust behavior that may hinder free competition. The Turkish Competition Authority (TCA) is responsible for enforcing the law to ensure fair competition in Turkish markets.

Under the competition law, vertical agreements that have the potential to restrict competition are assessed under Article 4 and Article 6. Article 4 prohibits agreements that have anticompetitive effects, while Article 6 focuses on agreements that are considered to have a block exemption. Block exemption is a group of agreements that are considered to have a limited anticompetitive effect and are exempted from the competition law.

Block Exemption Regulations in Turkey

In Turkey, block exemption regulations apply to specific types of vertical agreements that meet certain criteria specified in the law. These regulations include the Vertical Agreements Block Exemption Regulation, which applies to agreements between firms at different levels of the production and distribution chain.

The Vertical Agreements Block Exemption Regulation specifies that agreements between firms at different levels will only be exempted if they do not contain certain clauses that have the potential to restrict competition. These clauses include:

– Resale price maintenance (RPM) clauses, which limit the ability of the buyer to sell the product at a lower price than the one set by the manufacturer.

– Territorial and customer restrictions, which limit the ability of the buyer to sell the product in specific territories or to specific customers.

– Restrictions on passive sales, which prevents buyers from selling the product to consumers who approach them.

If an agreement meets the criteria specified in the Vertical Agreements Block Exemption Regulation, it is considered to have a limited anticompetitive effect and is therefore exempted from the competition law.

Conclusion

Vertical agreements play an essential role in the distribution of goods and services in Turkey. However, they can potentially have anticompetitive effects and can limit the entry of new competitors, reducing consumer choice, and increasing prices. To ensure fair competition in the market, Turkey has a specific competition law to regulate vertical agreements. In particular, block exemption regulations exempt certain types of vertical agreements from the competition law, but only if they meet certain conditions specified in the law. If you are operating in Turkey, ensure that your vertical agreement complies with the Turkish Competition Law and the relevant block exemption regulations to avoid any potential antitrust penalties.