COMPETITION AUTHORITY LOWERS THE MARKET SHARE THRESHOLD DETERMINING BLOCK EXEMPTION IN VERTICAL AGREEMENTS
The Communiqué Amending the Block Exemption Communiqué on Vertical Agreements (Communiqué No: 2002/2) on 05.11.2021 (Communiqué No: 2021/4) was published in the Official Gazette No. 31650 and brought significant changes with it.
Within the scope of the 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 Turkish Law on the Protection of Competition numbered 4054.
With the amendment made in the Communiqué, the market share threshold sought to be included in the scope of block exemption was reduced from 40% to 30%. The market share of the supplier in the market where the product or service is the subject of the vertical agreement should not exceed 30%. In addition, in terms of vertical agreements that include an obligation to supply to a single buyer, the exemption will be applied unless the buyer’s share in the relevant market from which the goods and services subject to the vertical agreement does not exceed 30%, unlike the 40% threshold in the old regulation.
This change is in compliance with the European Union regulations. With the block exemption regulation of the European Union Commission dated 20 April 2010 and numbered 330/2010, the market share threshold sought for block exemption in vertical agreements was reduced from 40% to 30%.
1.What Does This Change Mean?
Article 4 of the Law on the Protection of Competition prohibits agreements, concerted practices and decisions limiting competition. Article 5 of the Law, on the other hand, determines the exemption conditions that make an exception to the rule in Article 4. Undertakings whose share in the relevant market is within the limits specified in the communiqué are exempted as a group on the condition that competition does not disappear in a significant part of the relevant market in paragraph 3 of Article 5.
With the Communiqué No. 2021/4, the scope of block exemption in vertical agreements was narrowed and undertakings with a share of 30% to 40% in the relevant market were excluded from the scope of the communiqué. With the entry into force of the regulation within 6 months following the publication of the communiqué, undertakings with a market share between 30% and 40% will lose the assurance given to them in terms of vertical agreements. 6 months after the publication of the amending communiqué, undertakings with a market share of 30-40%, with the entry into force of the new regulations regarding the block exemption will have to comply with the conditions in Article 5 of the Turkish Law No. 4054 on the Protection of Competition in order to benefit from the block exemption.
However, if the market share is initially not more than 30% and then rises above the threshold, not exceeding 35%, the exemption will continue to apply for the next two years following the year the market share threshold was first exceeded. For those whose market share is not more than 30% at the beginning but then rises above 35%, the exemption will continue to be valid throughout the year following the year in which the market share threshold was first exceeded.
2. What should those affected by the change do?
Undertakings with a market share between 30% and 40% that do not meet the conditions listed above will be deemed to have violated Article 4 of the Turkish Law on the Protection of Competition No. 4054 if they do not align themselves with the individual exemption conditions. For this reason, it is necessary to ensure compliance with the conditions by evaluating the individual exemption until 6 months after the publication of the communiqué, that is, until 5 May 2022.
The undertakings affected by the change can make an individual exemption assessment themselves, or they can also apply for an exemption decision individually to the Competition Authority. Due to the possibility of not granting an exemption in the individual exemption examinations to be made by the Competition Authority, it is necessary to be careful about the restrictions imposed. In the recent individual exemption decisions, the Competition Authority attaches particular importance to proving the existence of the activity to occur and ensuring this efficiency with the restriction introduced, and does not grant exemption to the restrictions that do not provide this. Undertakings that fall below the block exemption threshold are expected to pay attention to the compliance of their vertical agreements with competition law, and in hesitant cases, they are expected to evaluate this while there is an opportunity to apply for an individual exemption. For this reason, it is foreseen that the amendment made in the communiqué will increase the individual exemption applications made to the Authority and the role of Article 4 of the Law on the Protection of Competition for vertical agreements will increase in practice.
3. Conclusion
The Competition Authority has lowered the market share threshold that determines the block exemption in vertical agreements. With the amendment brought by this communiqué, the share of the supplier in the relevant market must not exceed 30% in order to benefit from the block exemption in terms of vertical agreements. With the new communiqué, undertakings that are outside the scope of exemption will be able to make their own individual exemption assessments within 6 months and be sure that they are within the scope of exemption according to the legislation, and they will also be able to apply to the Authority for an individual exemption decision. In order to avoid unexpected claims of violation and investigations, it is recommended that undertakings make the exemption assessments carefully, and in hesitant cases, they should apply for an exemption to the Competition Authority without continuing the action in question.
REFERENCES
Turkish Block Exemption Communiqué on Vertical Agreements, (2002).
Turkish Communiqué Amending the Block Exemption Communiqué on Vertical Agreements, (2021).