AMENDMENT ON VERTICAL AGREEMENTS BLOCK EXEMPTION: MARKET SHARE

The Communiqué Amending the Vertical Agreements Block Exemption Communiqué[1] (Communiqué No. 2002/2) (the “Amendment Communiqué”) which was published on the Official Gazette dated 05.11.2021 and number 31650 introduced significant changes on the Vertical Agreements Block Exemption Communiqué[2] (the “Communiqué”) which was published on the Official Gazette dated 14.07.2002 and number 24815. Amendment Communiqué has been entered into force with the date of publication.

Pursuant to the scope of said Communiqué; agreements between two or more undertakings operating at different levels of the production or distribution chain for the purpose of purchasing, selling or reselling certain goods or services -vertical agreements-, provided that they meet the conditions specified in this Communiqué, have been exempted as a group from the prohibition in Article 4 of the Law on the Protection of Competition[3] number 4054 (the “Law”) titled "Agreements Limiting Competition, Concerted Actions and Decisions" based on Article 5 of the Law titled "Exemption".

The Competition Authority (“Authority”) has determined the evaluation of a vertical limitation as 3 steps within the scope of Article 4 of the Law: “1)Firstly, the party undertakings should determine the relevant market in order to calculate the market share of the supplier or the buyer, depending on the type of vertical restraint. 2) If the market share does not exceed the 40% threshold, the agreement enjoys block exemption depending on whether it contains prohibited restrictions and fulfills the other conditions in the Communiqué. 3) If the market share remains above the 40% threshold, it should be evaluated whether the agreement fulfills the conditions in Article 5 of the Law.”[4]

Amendment Communiqué envisages amendments in the market share limit:

· The market share limit of the supplier affiliate in the relevant market has been reduced from 40% to 30% in order to provide exemptions to the undertakings.

· The market share limit of the buyer undertaking in the relevant market, which is required to be provided an exemption in vertical agreements including the obligation to provide to a single buyer, has been reduced from 40% to 30%.

Also in compliance with the market share limit, in Amendment Communiqué, threshold integrity has been preserved by reducing (i) the market share limit specified in the paragraph 2 of article 6/A titled “Calculation and Application of Market Share” from %40 to %30 and (ii) limits foreseen in subparagraphs (c) and (d), which states that the exemption will continue for a certain period if the market share is subsequently exceeded, to %35.

Finally, in the Amendment Communiqué, a transitional period of six months has been determined as of 05.11.2021, which is the effective date, with a temporary article in order to regulate the compliance process of these amendments. With this transitional article, undertakings with market share of between 30-40% benefiting from the block exemption provided by the Communiqué at the effective date of Amendment Communiqué despite the agreements that fall outside the scope of exemption due to exceeding the 30% market share threshold brought by the Amendment Communiqué must comply with the conditions set forth in Article 5 of the Law within six months. The prohibitions stipulated in Article 4 of the Law shall not be applied to the aforementioned agreements during this period. If the undertakings fail to adapt their activities to the individual exemption requirements within this period, the said activities may be considered as anti-competitive since undertaking will not benefit from the exemption.

Although there has been no change in essential elements, the most important feature of the reducing the relevant market share upper limit in terms of vertical agreements is the fact that the scope of the application of exemption between undertakings operating at different levels of the production or distribution chain has been narrowed. The importance of this situation in practice requires the review of relevant market definitions and market shares and the evaluation of vertical agreements in order for undertakings to continue to comply with competition rules. Especially (i) being not applied the infringement provision in the transition process, (ii) the possibility of individual exemption and (iii) whether the undertakings can comply with the Amendment Communiqué including the transition process will be at a crucial point for the undertakings.

Should you have any questions or problems regarding this subject, please do not hesitate to contact with our office. 09/11/2021

Kind Regards,

Yüksel / Yerkel & Partners Law Office