Turkey's Competition Board Sets The Rules For Online Sales Restrictions

Turkey's Competition Board (the "Board") rendered two significant decisions¹ last year concerning online sales restrictions that provide a view forward for many undertakings. In its decisions, the Board scrutinised the commitment packages offered by BSH and Arçelik, two of the major small and large household appliances manufacturers in Turkey. The investigations against the companies (the "Investigations") concerned whether Arçelik and/or BSH violated Article 4 of Law No. 4054 on the Protection of Competition ("Law No. 4054") by preventing their authorised resellers from selling online and/or interfering with resellers' resale prices. The Board accepted the commitment packages, which Arçelik and BSH revised after an initial review of the Board, and thus closed the Investigations with respect to the online sales restrictions contemplated by Arçelik and/or BSH.

A. Competitive Concerns Relating to the Investigations

Regarding the parties to the Investigations, BSH carries out its activities in the market of large and small household appliances under many recognised brands such Bosch, Siemens and Profilo, while Arçelik is active in the markets of consumer durables, consumer electronics and small household appliances, trading under various brands (e.g., Beko, Arçelik, Grundig). Due to exclusive distributor agreements, the dealers of both companies sell only certain brands determined by their suppliers (i.e., Arçelik or BSH).

As a brief overview, the Guidelines on Vertical Agreements ("Guidelines") allows suppliers to offer certain conditions relating to resellers' online sales, provided that such conditions do not prevent resellers' online sales altogether. Furthermore, under the Guidelines, the online sales of resellers are generally regarded as passive sales, and passive sales restrictions will likely be in violation of Law No. 4054 unless they are considered under the exceptions stipulated by the relevant legislation.

It should also be noted that with regards to the sales of the Bosch, Siemens and Profilo brands for BSH and the sales of the Beko and Arçelik brands for Arçelik, a selective distribution system is established. Suppliers are able to set up a selective distribution system, especially in cases where the brand image and the overall market perception of the product may be damaged if it is sold by unauthorised sellers. While the Board has high standards for products and brands to satisfy the necessity for establishing selective distribution, suppliers may prohibit distributors in such a system from selling the relevant goods to unauthorised distributors. Nonetheless, the active or passive sales, including online sales, of members of a selective distribution system may not be prevented.

B. Assessments Regarding Sales on Online Marketplaces

The conditions to be introduced for online sales do not have to be exactly the same as the conditions applied for physical sales. However, the principle of equivalency dictates that any condition that may be offered by a supplier for the online sales of resellers may be deemed reasonable provided that it (i) serves the same purposes of the conditions imposed for the authorised sellers' sales via brick-and-mortar stores, (ii) provides comparable results and (iii) confirms the differences between the nature of physical and online sales channels. In this vein, the following provisions are found legitimate considering their compliance with the principle of equivalency.

B.1. Provisions Assessed Based on the Principle of Equivalency

The conditions to be introduced for online sales do not have to be exactly the same as the conditions applied for physical sales. However, the principle of equivalency dictates that any condition that may be offered by a supplier for the online sales of resellers may be deemed reasonable provided that it (i) serves the same purposes of the conditions imposed for the authorised sellers' sales via brick-and-mortar stores, (ii) provides comparable results and (iii) confirms the differences between the nature of physical and online sales channels. In this vein, the following provisions are found legitimate considering their compliance with the principle of equivalency.

"Authorised sellers must have authorised seller badges on their platform stores."

Considering that BSH's authorised sellers are not allowed to sell any competitor products in brick-and-mortar stores in accordance with agreements between BSH and its authorised sellers, the Board considered that the application of similar criteria to online sales, including the authorised seller's webpage on a platform, is reasonable in the context of the principle of equivalency.

• "The authorised seller may only sell the brands and products that it sells in its physical store on its platform store."

An authorised seller who sells on an online platform will be able to sell the products in alignment with the contract with BSH. The Board recognised this condition, which is consistent with the characteristics of the selective distribution system, serves the same purpose as the criteria required for physical channels, and produces comparable results.

• "The authorised seller's platform store must comply with BSH's relevant corporate standards for the brand."

This condition was applied to both platforms and authorised sellers in the initial commitment package, but in the revised text, it has only been applied to authorised sellers only. The Board considered the condition in alignment with the principle of equivalency and found it acceptable.

• "The types of campaigns announced by BSH should also be applied in the platform store to the extent possible."

Authorised sellers agree to participate in all kinds of campaigns and promotional activities regarding BSH branded products in their physical stores. Therefore, to ensure that the functioning of the selective distribution system is also preserved in the marketplace, the Board concluded that it is acceptable to impose similar conditions to online sales.

"Authorised sellers will use the trade name as registered in the Arçelik system while selling in the online marketplace, will not sell under different store names, and will send the application form containing its request regarding sales in the marketplace to the e-mail address specifically allocated for this issue and to be determined by Arçelik." (in Arçelik's commitments)

"Authorised sellers must not use any pseudonyms other than their commercial name on platforms, and the store name of the authorised seller must be the same on all online channels." (in BSH's commitments)

The Board concluded that not selling under different store names serves to protect the brand image as well as the quality of the distribution system and therefore deemed that the relevant provision is reasonable.

Likewise for Arçelik, the Board concluded that the visibly indicated title of the authorised seller on the product/information page of the seller is a rational and feasible application that is also supported by marketplaces. Accordingly, the Board determined that this condition serves the same purpose and produces comparable results with the criteria required in the physical channel, and thus accepted the condition. With regards to the application sent to the e-mail address set by Arçelik, the Board stated that this will not serve as a pre-approval mechanism, but aids with the signing of the relevant protocols and their submission to Arçelik by the authorised dealer.

"Authorised resellers will only sell the brands and products of Arçelik/Beko that are provided by Arçelik, in the online marketplaces." (in Arçelik's commitments)

"There should be no practices in the authorised sellers' stores on platforms that direct consumers to competitor brands." (in BSH's commitments)

The Board deemed both provisions as reasonable in the context of the principle of equivalency, since the provisions carrying similar purposes are also applied by Arçelik and BSH for the sales made through brick-and-mortar stores of their resellers.

"The authorised seller will sell the products from the marketplace only to final consumers. Resellers shall not engage in bulk sales (more than 2 products from the same product group shall be considered as bulk sales) and corporate sales." (in Arçelik's commitments)

"The authorised seller may sell on platforms that provide technical solutions that prevent the sale of more than four units of the same product to the same buyer at once." (in BSH's commitments)

Regarding Arçelik's commitments, the Board concluded that authorised resellers are also refrained from selling to unauthorised resellers through physical channels. In this vein, the Board deemed the relevant provision in line with the principle of equivalency.

With respect to the provision brought by BSH, the Board denotes that BSH has also the faculty to detect the sales to any unauthorised seller through the data indicating resellers' sales made through brick-and-mortar stores. In light of this, the Board concluded that the sale of products to unauthorised sellers can be prevented in online environment, since BSH can also prevent the sales made via brick-and-mortar stores to unauthorised sellers.

"The authorised seller who exclusively carries out the sale will be responsible for the supply and delivery of the product to the buyer and the seller will clearly inform the final consumer in this regard."

Authorised sellers are also held responsible for the delivery of the products sold in brick-and-mortar stores as per the provisions relating to the sales via physical channels. In this respect, the Board deemed that the condition, which aims to protect the functioning of the selective distribution system in online marketplaces, serves the same purpose as the conditions imposed for the physical sales channel, and thus acceptable.

"Authorised sellers may sell on platforms that allow and enable them to determine product prices exclusively."

The Board assessed that the relevant provision also applied with respect to sales via brick-and-mortar stores and serves the same purpose applied to such sales. In light of this, the Board deemed the relevant provision acceptable as it ensures that authorised sellers are independent in determining their resale prices.

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Footnote

1. Turkish Competition Board's Arçelik decision dated 08.09.2022 and numbered 22-41/580-240, Turkish Competition Board's BSH decision dated 08.09.2022 and numbered 22-41/579-239.

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