Block Exemption Communiqué on Vertical Agreements and Concerted Practices in the Motor Vehicle Sector
Introduction
Block Exemption Communiqué on Vertical Agreements and Concerted Practices in the Motor Vehicle Sector numbered 2017/3 (“Communiqué”)[1] entered into force through publication in the Official Gazette dated February 24, 2017, numbered 29989. The Communiqué abolished the Block Exemption Communiqué on Vertical Agreements and Concerted Practices in the Motor Vehicle Sector numbered 2005/4 (“Abrogated Communiqué”) regulating distribution agreements in the motor vehicle sector, which had been in force since January 1, 2006.
For the purpose of clarity with respect to the issues that are addressed through the application of the Communiqué, and lowering the risk for any possible uncertainty that the undertakings might face, the Guidelines on the Explanation of the Block Exemption Communiqué on Vertical Agreements and Concerted Practices in the Motor Vehicle Sector[2] was adopted.
The Communiqué was prepared considering the problems faced during the application of the Abrogated Communiqué, and efforts were made to create conformity with the European Union regulation. The system that was regulated under the Abrogated Communiqué is mostly preserved by the changes that are made in terms of the general conditions of the block exemption.
Definitions
The scope of the definitions included in the Abrogated Communiqué has been amended, and the new definitions are included, and the current definitions of the Abrogated Communiqué are removed from the scope of the Communiqué.
- Definitions of “competing undertakings,” “intellectual rights,” “automobile,” “light commercial vehicle,” “undertaking within the distribution system,” “ultimate user,” “independent undertaking,” and “site of unauthorized facility,” are removed from the scope of the Communiqué.
- Definitions of “independent distributor of spare parts,” “maintenance and repair chain,” “distributor,” “exclusive distribution system,” “supplier,” “authorized distributor,” “authorized seller,” “authorized distributor of spare parts,” and “chain service” are included in the Communiqué.
- Definitions of “spare parts of matching quality,” “non-compete obligation,” “selective distribution system,” are amended. In this respect, the definition of “spare parts of matching quality” is defined more clearly.
General Conditions of the Exemption
In order to benefit from the exemption, two main conditions are provided within the scope of the Communiqué. The market share should not exceed certain thresholds in the relevant market, and the notification period of termination must be complied with. In this regard, firstly, the relevant market should be designated; thereafter, the market share should be calculated in line with the regulation provided under Article 9 and, finally, the market share should be evaluated with respect to the thresholds listed under Article 5. Market share thresholds are different as compared to the Abrogated Communiqué in which the market share thresholds for an exclusive distribution system was designated as 30%, and for the selective distribution system as 40%.
As per Article 5 of the Communiqué, implementation of the exemption depends on the market share not to exceed 30% in (i) the relevant market in which the vehicle providers supplies motor vehicles (ii) the relevant market in which vehicles or spare parts providers supply spare parts, (iii) the relevant market in which the vehicle provider supplies maintenance and repair services, and (iv) in terms of the maintenance and repair chain, the network provider’s market share in the maintenance and repair market with regard to quantitative selective distribution and exclusive distribution agreements.
The market share threshold for the quantitative selective distribution system is decreased from 40% to 30% under the Communiqué. The Communiqué does not regulate a market share threshold for the qualitative selective distribution parallel to the Abrogated Communiqué.
In order for an agreement executed between the provider and the distributor to benefit from exemption, the following conditions must be met:
- An agreement must be executed for a minimum of five years, and both parties agree to make notification six months before the due date of the agreement regarding their request for non-renewal, which will be contained in the agreement,
- The notification period for termination must be at least two years for both parties, if it is concluded for an indefinite period of time; however, this period is reduced to at least one year where the provider is obliged by law or by special agreement to pay appropriate compensation to terminate the agreement, or where the provider ends the agreement because it is necessary to re-organize the whole, or a substantial part of, the network.
With this regulation, it is intended to protect intra brand competition.
Article 6 of the Communiqué provides a list of limitations that exclude agreements from the scope of group exemptions. In order for a vertical agreement to benefit from an exemption, such limitations must not be present.
Non-Compete Obligations
Exemptions are not applied to non-compete obligations as per Article 7. These obligations are evaluated, separately, from the entire agreement and, therefore, implementation of exemption to the rest of the agreement is not prevented.
Conditions for exemption in terms of the non-compete obligation is regulated separately under Article 7 of the Communiqué for “distribution of motor vehicles,” “maintenance and repair services,” and “distribution of spare parts,” even though it was collectively regulated under the Abrogated Communiqué.
One of the new regulations under the Communiqué is the opportunity for motor vehicle distributors to impose non-compete obligations upon buyers for a five-year term (Article 7). Non-compete obligations for the term following the expiry of the agreement cannot benefit from the exemption that is parallel to the Abrogated Communiqué.
Non-compete obligations imposed by the spare parts distributors, and maintenance and repair service providers to buyers within the term of the agreement, are excluded from the exemption. Under the Communiqué, for maintenance and repair chains, non-compete obligations up to five years imposed upon chain services can benefit from group exemptions, unlike the Abrogated Communiqué.
In terms of the indirect non-compete obligation, Article 4 of the Communiqué only makes an amendment in relation to the sale of the motor vehicles market. In this respect, based on the buyer’s purchases for the preceding year, any direct or indirect obligation imposed upon the buyer in terms of the purchase of goods or services in the relevant market, or the substitute of goods and services exceeding 80% for the new motor vehicle sale market, and 30% for the after-market sale from the supplier, or an undertaking determined by the supplier, will also be considered as a non-compete obligation.
Opening an Additional Facility Site
The Communiqué provides flexibility to the suppliers in order to build distribution chains for motor vehicles. In this regard, in the motor vehicle distribution market, multi-brands and opening additional facility site provisions are amended. If a selective distribution system is adopted in terms of spare parts distribution, and/or maintenance and repair services’ direct or indirect obligations imposed with regard to opening an additional facility site, cannot benefit from the exemption (Art. 7(2)).
Obligation to Provide Technical Information
The Abrogated Communiqué imposes an obligation upon manufacturers to provide technical information regarding maintenance and repair of motor vehicles to independent repairers in order to provide the opportunity to compete with the authorized services. As the obligation to provide technical information of the manufacturers is provided under various regulations, the Communiqué does not impose any additional obligation in this respect.
Conclusion
The Communiqué mostly preserved the system of the Abrogated Communiqué. It especially amends the general conditions of the exemption. In this respect, amendments made to the market share thresholds for the implementation of exemptions, possibility to impose non-compete obligations up to five years by the motor vehicle distributors to buyers, as well as definitions, calls for attention.
[1] http://www.rekabet.gov.tr/File/?path=ROOT%2f1%2fDocuments%2fG%C3%BCncel%2ftebligler%2f20173.pdf.
[2] http://www.rekabet.gov.tr/File/?path=ROOT%2F1%2FDocuments%2FKilavuz%2F201733.pdf.
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