New Block Exemption Communique in motor vehicles sector

Dünya Executive - - BUSINESS BY LAW - M. TOGAN TURAN / PARTNER PAKSOY ATTORNEYS-AT-LAW [email protected] DERYA GENÇ / COUNSELOR [email protected]

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.

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