New development
On Friday, 5 November 2021, the Turkish Competition Authority (“Authority“) published in the Official Gazette its Communiqué No. 2021/4 (“Communiqué No. 2021/4“) on the Amendments on the Block Exemption Communiqué (No. 2002/2) for Vertical Agreements (“Communiqué No. 2002/2“). Communiqué No. 2021/4 entered into force on the same date.
Communiqué No. 2021/4 brings about a significant change to the vertical block exemption regime. Henceforth, vertical block exemption will apply on the condition that the market share held by the supplier does not exceed 30% of the relevant market on which it sells the contract goods or services instead of the previous 40% market share threshold. In addition, in terms of vertical agreements that provide for exclusive supply obligations, the exemption will apply insofar as the market share held by the buyer does not exceed 30% of the relevant market on which it purchases the contract goods or services.
This amendment will deprive undertakings that enjoy a market share between 30% and 40% in the relevant market of the safe harbor provided by Communiqué No. 2002/2. Thus, the Authority will grant a six-month transition period to these undertakings. As per provisional Article 3 of Communiqué No. 2002/2, undertakings will have six months to conform their vertical agreements, which now fall out of the ambit of the block exemption, to Article 5 of Law No. 4054 on the Protection of Competition (i.e., individual exemption) (“Law No. 4054“). Provided that these undertakings revise their agreements in the transition period, Article 4 of Law No. 4054, which prohibits anti-competitive arrangements, will not apply to them.
What does the development mean?
Communiqué No. 2021/4 narrows the vertical block exemption’s scope. The vertical block exemption regime exempts certain vertical agreements from the ambit of Article 4 of Law No. 4054 depending on (i) the lack of hardcore restrictions and (ii) the supplier’s/buyer’s market share. Now, the second variable of the block exemption function will catch fewer vertical agreements.
The amendment to the market share threshold also brings about increased alignment with the EU’s vertical block exemption regime (i.e., European Commission Regulation No. 330/2010).
Lastly, the restrictions under the vertical agreements of undertakings that enjoy a market share above 30% in the relevant market will now be subject to an individual exemption assessment, which weighs out the agreement’s efficiencies against its restrictive effects. Undertakings will either conduct a self-assessment or apply to the Turkish Competition Board (“Board“) for an individual exemption decision. As such, Communiqué No. 2021/4 may increase the number of individual exemption applications. This could also provide more room for the Board to intervene, as the Board would have discretion over many questions concerning individual exemption, which is not as static as block exemption.
Conclusion
The Authority lowered the market share threshold for vertical block exemption. From now, a vertical agreement will benefit from the safe harbor on the condition that the supplier does not hold a market share above 30% in the relevant market. Undertakings, which are now deprived of this safe harbor, will have six months to revise their agreements so that their agreements would qualify for an individual exemption. This amendment narrows the block exemption’s scope and, therefore, increases the application of the individual exemption regime, which could potentially enlarge the Board’s playing field in terms of its review of vertical agreements.
