New Block Exemption Communique in motor vehicles sector
The new Block Exemption Communique No. 2017/3 on Vertical Agreements in the Motor Vehicles Sector was published in the Official Gazette numbered 29989 in February 24, 2017. This communique repeals the previous Block Exemption Communique No. 2005/4 on Vertical Agreements and Concerted Practices in the Motor Vehicles Sector and introduces some fundamental changes, especially concerning the condition of general exemptions, non-compete obligations and the establishment of additional service points.
General exemption conditions
One of these fundamental changes concerns the threshold of the communique’s applicability. The previous communique set out an exemption for agreements if the provider’s share of the relevant market where it provides vehicles, spare parts, maintenance and repair services did not exceed 30 percent. This threshold was 40 percent for agreements where quantitative selective distribution was preferred for the distribution of vehicles.
The new communique sets a single threshold of 30 percent for all agreements. In other words, regardless of the preferred distribution system, agreements are now covered by the new communique if the market share of the provider does not exceed 30 percent. However, similar to the previous communique, the new one does not set a market share threshold for qualitative distribution systems.
Moreover, the requirement of a detailed and reasonable written termination notice to end an agreement between the supplier and dealer or authorized service provider, as well as a requirement to give parties the right to bring disputes before an independent expert or arbitrator is no longer necessary in order for the new communique’s exemption provisions to apply.
Non-compete obligations and restrictions on establishing additional service points
The new communique draws a distinction between the new and after-sales vehicles markets with respect to any non-compete obligation. While the previous communique deemed that, based on the buyer’s purchases in the preceding year any direct or indirect obligation imposed on the buyer to purchase from the provider or another undertaking determined by the provider more than 30 percent of the goods or services in the relevant market as a non-compete obligation, the new communique sets the threshold of 30 percent for the sales of new vehicles market and 80 percent for the after-sales vehicles market.
Moreover, the new communique sets out the exemption conditions for agreements that include non-compete restrictions separately for the distribution of motor vehicles, the distribution of spare parts and the provision of maintenance and repair services.
Accordingly, the new communique exempts non-compete obligations imposed on buyers who do not exceed five years within the distribution of vehicles and is within the term of the agreement concerning distribution of spare parts and/or the provision of maintenance and repair services up to five years. However, similar to the previous communique, the new one does not cover non-compete obligations after the termination of an agreement.
While the new communique allows restrictions on a multi-branded distribution struc- ture and the establishment of additional service points, within the scope of the distribution of new motor vehicles, such restrictions would lead to the inapplicability of the new communique concerning the distribution of spare parts and maintenance and repair services. In other words, the new communique is more flexible regarding the distribution of new vehicles.
Withdrawal of exemption
Another amendment in the new communique is a new legal threshold for the withdrawal of the exemption. According to the communique No. 2005/4, the Competition Board could withdraw a block exemption if the similar vertical restrictions cover a significant part of the relevant market. With the new communique, the Competition Board is able to withdraw the block exemption if the similar vertical restrictions cover 50 percent of the relevant market.
Calculation of market shares
The new communique regulates the rules for the application of a market share threshold of 30 percent, in accordance with the amendments in relation to the unification of the legal thresholds regardless of the preferred distribution system. As a result, the 40 percent threshold has been removed and the existing provision has been revised in accordance with the conditions of general exemption.