The basic law of Competition Law is the Law on Protection of
Competition. In accordance with the Law No. 4054 on the Protection
of Competition, the issues prohibited in Article 4 takes place in
practice by gaining compliance with the law via the possibility of
exemption arising from Article 5 of the same law. This article will
discuss the issues of individual exemption and block exemption
within the framework of two relevant provisions of the LPC.
A. TERMS OF THE EXEMPTION
According to Article 5 of the LPC, titled
"Exemption"; "Agreements between undertakings,
concerted practices and decisions of association of undertakings
are exempt from the application of the provisions of Article 4 in
the presence of all the following conditions:
a) Ensuring new developments and improvements in the
production or distribution of goods and the provision of services,
or economic or technical development,
b) The consumer benefiting from this,
c) Non-elimination of competition in a significant part of the
relevant market,
d) The competition not being limited to more than what is
necessary for achieving the objectives of paragraphs (a) and
(b)."
Article 5 of the LPC made four conditions for undertakings to
be exempt from the provisions contained in Article 4 of the law.
These conditions are not optional; all conditions must co-exist. In
individual exemption, the Board will come to a conclusion by
specifically examining whether these conditions have been realized
within the framework of each concrete event. While in block
exemption, the inspection will be made abstractively by reviewing
the conditions as a whole. The Competition Board is the only
authorized body for granting and revoking individual and block
exemptions.
The first two of the four conditions listed in the text of the
law, Paragraphs (a) and (b), specify the positive elements that
should be found in cooperations or undertakings. The conditions
contained in paragraphs (c) and (d) contain negative elements that
should not be present in cooperations or undertakings. If it is
determined that these positive and negative conditions exist; in
accordance with the LPC, it is not at the discretion of the
Competition Board to make an exemption decision. If the conditions
set out in the legislation are met, the exemption will
automatically be provided to the related undertaking.
1. Affirmative Conditions
a. The Usefulness of the Agreement
The first affirmative condition of the LPC is "Ensuring
new developments and improvements in the production or distribution
of goods and the provision of services, or economic or technical
development".
Proof of the relevant provision's existence must be made
by undertakings that want to benefit from the exemption
opportunity. Considering the wording of the provision, it can be
seen that the article of the law consists of two optional elements
in the form of "ensuring new developments and improvements in
the production or distribution of goods and the provision of
services" and "ensuring economic or technical
development". However, it is obvious that there is no clarity
on how to determine the presence of both elements. Therefore, the
relevant enterprise will need to prove that the provision in
question has been provided by them based on concrete facts.
In a decision related to the provision of LPC art.5/1-a, the
Competition Board also examined the requirement of "usefulness
of the current agreement". According to the decision, in
accordance with the review conducted after the notification of the
pool agreement between Airline X and Airline Y to the Board,
although it is believed that it constitutes a violation of LPC
Art.4, due to the fact that the agreement exceeds aviation
legislation an individual exemption for a period of 5 years have
been granted (taking into account that the exemption conditions are
being met). The provisions of the relevant agreement, such as the
determination of the capacities of airline companies together, the
sharing of air traffic together, were considered useful and
exemptions were granted in this context.
b. Consumer Benefit
In accordance with LPC art.5, "Consumer benefit" is
also considered as one of the exemption conditions. In cases where
the consumer does not have a tangible benefit, it will also not be
possible to benefit from the exemption provision.
Although the concept of consumer is included in the provision
of LPC art.5/1-b, a definition of it is not included in the law.
Therefore, at this point, it is necessary to interpret the Law on
Protection of Competition and the Law on Protection of the Consumer
together. According to the provisions of Law on Protection of the
Consumer, the consumer refers to a "natural or legal person
acting for commercial or non-professional purposes". Leading
benefits that the consumer can provide are issues such as reducing
sale prices, introducing quality products to the market, whether
the maximum benefit is provided to the consumer in terms of
price/performance. Therefore, the Competition Board is obliged to
make a comparison of the benefit and harm of the consumer within
the scope of individual or block exemption.
2. Negative Conditions
a. Non-elimination of Competition Completely
In accordance with LPC art.5/1-c, the provision
"Non-elimination of competition in a significant part of the
relevant market" is included. The agreement to be established
between the undertakings should not completely eliminate the
competition that exists and should exist in the relevant market. In
accordance with the Law on Protection of Competition, it was
stipulated that competition should not be eliminated on a product
basis but in a wider environment, that is, in the entire market.
Therefore, it will not be possible to grant an exemption in the
event of an agreement that will eliminate competition in the market
or cause it to be eliminated.
In the doctrine, it is generally accepted that an exemption
will be granted in matters such as joint research and development,
joint sales and advertising due to the fact that competition was
not completely eliminated. In turn, in a relevant decision, the
Competition Board considered the non-competition and production
agreements between two undertakings containing competition-limiting
provisions(such as determining the region), a violation of LPC
art.4 and did not grant an exemption.
b. Limiting Competition No More Than Mandatory
In accordance with LPC art.5/1-d, the provision
"Competition shall not be limited more than mandatory to
achieve the objectives of paragraphs (a) and (b)" has been
introduced. The agreement in question should both be useful in
nature and should not contain more competition-limiting elements
than necessary to ensure that the consumer benefits.
In a decision, the Competition Board decided that the
provision on determining the sales prices of dealers by the company
contained more competition-restrictive elements than was mandatory
in a dealership agreement made by company X and its dealers, and
decided not to grant individual exemptions.
B. TYPES OF EXEMPTIONS
Exemption is divided into individual exemption and block
exemption.
1. Individual Exemption
If all the conditions set out in Article 5 of LPC are met,
individual exemption in cooperations made with the purpose of
undertakings' activities to be exempt from implementation of
the provisions of Article 4 will be set forth. According to Article
5 of the law, the decision to grant an exemption can be conditioned
on the fulfillment of certain conditions or obligations.
In accordance with the provision of the law before the
amendment, it was required to notify the Competition Board in order
for agreements limiting competition to benefit from the exemption.
The amended paragraph includes the following rule: "The
agreement covered by Article 4 shall be notified to the Board
within one month from the date of making the concerted practices
and decisions. Exemption provisions do not apply to unreported
agreements. If an exemption is granted for notices that have not
been made on time, the exemption is valid from the date of the
notice". However, the Law on the Amendment of Some Articles of
the Law on Protection of Competition and the notification
requirement have been abolished. The termination of issuing
administrative fines due to non-notification and the reduction of
the workload of the Competition Board are the results of this
change. Although notifying the Board is no longer mandatory, in
practice, undertakings continue to give notice intentionally to
eliminate hesitation and ensure legal certainty.
The determination that the conditions for the existence of the
exemption in question have been met is made by the Competition
Board. The decisions made by the Board in this regard are decisions
of an administrative nature. Therefore, in the process up until the
Board's decision on the exemption is given, the nature of the
undertaking's practices is the subject of discussion in the
doctrine. The largely agreed opinion is that these practices will
be pending and invalid. If the Competition Board decides to grant
an exemption, it will take on a legal and valid nature from the
date of the transaction. If an exemption decision is not made by
the Board due to non-compliance with the conditions, then the
practice of cooperation will become absolutely invalid. Of course,
the exemption decisions related to the retarder condition will be
valid from the moment the condition is realized.
In individual exemptions, the Board will conduct a formal
investigation and determine the truth. Accordingly, it will be able
to request any document and information from the parties. Granting
the exemption may depend on a certain period of time, as well as
the fulfillment of certain conditions and obligations. Likewise,
the granted exemption can be withdrawn if there is a deficiency in
the existing conditions although they were provided at the
beginning.
If there is a change in any event that was the basis for
making the decision, the decision to withdraw the exemption bears
legal consequences from the date of the change. If the conditions
or obligations related to the decision are not fulfilled, it will
bear legal consequences from the date of the decision on exemption
or negative declaratory. If the decision was made based on
incorrect or incomplete information about the agreement in
question, the decision will be considered not to have been made at
all.
The individual exemption, in contrast to the block exemption,
has its provisions and consequences, including but not limited to
enterprises that are parties to these cooperation practices. In
practice, exemptions are widely provided for agreements on
specialization, research, development, patent know-how licenses,
joint ventures. In contrast, agreements that limit competition
related to market sharing and price determination are not
exempted.
The Board's discretion is not absolute. In other words, if
the conditions in the provision of the article are met, the
exemption is required by law. However, it is possible that the
Board may decide not to grant exemptions due to the fact that the
conditions contained in the provision of the article are open to
different evaluation according to the conditions of the period and
the characteristics of each concrete event. However, the concrete
justification for why the exemption was not recognized should be
clearly stated in the decision.
According to Article 125 of the Constitution, the provision
that the judicial path is open to all kinds of actions and actions
of the administration is also applicable to the decisions of the
Board. Therefore, a person or persons whose interests are violated
by the decision may apply for a judicial remedy.
2. Block Exemption
In accordance with Article 5 of the LPC, "If the
conditions set out in the first paragraph are met, the Board may
issue communiqués providing for the granting of block
exemptions to certain types of agreements on certain issues and
indicating their conditions." . It is seen that the provision
authorizes the Competition Board. The block exemption, which the
Board will provide with a communique, will be a general regulatory
act in nature.
In Turkish law, block exemption has been mentioned only in
regards to agreements. Therefore, from the wording of the Law, it
does not seem possible to grant block exemption to concerted
actions and union decisions. In practice, while the Board says that
concerted practices will be covered by the exemption, the decisions
of the association of undertakings have been excluded from the
scope of the exemption.
The block exemption communiqués issued by the
Competition Board to date are as follows:
1. Communiqué on block Exemption on Vertical Agreements
(2002/2)
2. Communiqué on Block Exemption on Technology Transfer
Agreements (2008/2)
3. Communiqué on Exemption on Insurance Sector
(2008/3)
4. Communiqué on Block Exemption on Specialization
Agreements (2013/3)
5. Communiqué on Block Exemption on Research and
Development Agreements (2016/5)
6. Communiqué on Block Exemption on Vertical Agreements
in the Motor Vehicles Sector (2017/3)
In these communiqués, which are issued in general; The
obligations covered by the exemption, the conditions and
obligations outside the scope of the exemption and the situations
in which the exemption will be withdrawn are regulated. It is not
enough that the agreement contains provisions in accordance with
the relevant communique in order for it to benefit from a block
exemption. At the same time, it is also argued in the doctrine that
the prescribed provisions should be obeyed.
1. Communiqué on Block Exemption in Vertical
Agreements
In accordance with The Block Exemption Communiqué on
Vertical Agreements (Communiqué No:2002/2), agreements
(vertical agreement) between two or more undertakings that operate
at different levels of a particular production or distribution
chain with the purpose of purchase, sale or re-sale of certain
goods and services are exempted provided that it meets the
conditions of this Communiqué. It is not obligatory for the
vertical agreements that meet the exemption conditions stipulated
by this Communiqué to be notified to the Competition Board.
However, the party who will benefit from the exemption has the
opportunity to notify the Board. If it is determined that an
agreement recognized as an exemption by this Communique has effects
incompatible with the conditions contained in Article 5 of the LPC,
it may be withdrawn by the Competition Board.
2. Communiqué on Block Exemption on Technology
Transfer Agreements
In accordance with the Communiqué on Block Exemption on
Technology Transfer Agreements (communiqué No. 2008/2),
agreements in which the licensor gives the licensee permission to
use the licenced technology for the production of the products
subject to the agreement and agreements about technology transfer
can benefit from the exemption under this Communiqué. The
exemption will continue as long as the protection granted to
intellectual property rights related to the licensed technology
applies, and in the case of know-how, as long as the know-how
remains confidential.
The competition Board can withdraw the exemption that was
granted with this Communiqué if they determine that the
technology of third parties' entry into the market has been
limited, for example, because of the cumulative effect of similar
networks which prohibit the usage of these persons' technology
by licensees.
The limitations that exclude technology transfer agreements
from the scope of block exemption are listed in Article 6 of this
Communiqué. In this article, the conditions such as
determining the sales price by one party, limiting the production
and sales quantities, sharing customers and sharing the market are
specified. If a technology transfer agreement includes any of the
limitations set out in the relevant article, the entire agreement
will not benefit from the block exemption.
3. Communiqué on Block Exemption on Insurance
Sector
In accordance with the Communiqué on Block Exemption on
Insurance Sector (Communiqué No: 2008/3), some categories of
agreements in the insurance sector are exempted as a block.
Agreements limiting competition made by undertakings in the
insurance sector for the purpose of determining, promoting and
distributing calculations and tables have been exempted as a block.
If it is determined that there are effects incompatible with the
exemption conditions provided, it is possible for the Competition
Board to withdraw this recognized exemption.
4. Communiqué on Block Exemption on
Specialization Agreements
In accordance with the Communiqué on Block Exemption on
Specialization Agreements (Communiqué No: 2013/3),
specialization agreements concluded between undertakings are
evaluated within the scope of block exemption. In general,
agreements made between undertakings that have economic assets and
activities that are subsidiary, regarding specializing in
production or distribution or concerns market share(in cases where
the parties' total market share does not exceed 25% share in
any of the relevant markets), can benefit from exemption under this
Communiqué. If it is determined that there is an effect
incompatible with the exemption conditions, the recognized
exemption may be removed by the Competition Board.
5. Communiqué on Block Exemption on Research
and Development Agreements
In accordance with the Communiqué on Exemption on
Research and Development Agreements (Communiqué No: 2016/5),
there is a block exemption for R&D agreements. R&D
agreements which are about the acquisition of technical
information, product, technology or production processes being
subjected to tests, making theoretical analyses and observations,
making experiments including experimental productions, establishing
the appropriate facilities for these issues and acquiring of
intellectual property rights about the results are considered
exemptions. The exemption is valid for the duration of the
agreement. In case of joint use of the results of R&D, the
exemption is valid for another seven years, starting from the date
when the products subject to the contract are first introduced to
the market within the borders of Republic of Turkey. If it is
determined that the necessary exemption conditions have not been
met, the exemption may be withdrawn by the Competition Board.
6. Communiqué on Block Exemption on Vertical
Agreements in the Motor Vehicle Sector
In accordance with The Block Exemption Communiqué on
Vertical Agreements in the Motor Vehicle Sector (Communiqué
No. 2017/3), it has been regulated that vertical agreements about
purchase, sale or re-sale of motor vehicles, purchase, sale or
re-sale of spare parts and supplying repair and maintenance
services for motor vehicles will benefit from block exemption.
Vertical agreements concluded between competing undertakings
operating in the motor vehicle sector cannot benefit from the
exemption. Agreements between the parties in which the provider is
the manufacturer and distributor of the goods or services subject
to the agreement, while the buyer is the sole distributor, may
benefit from the recognized exemption. The Competition Board may
withdraw the exemption if the vertical limitations provided for in
the vertical agreement benefiting from the exemption cover more
than 50% of the relevant market. In addition, the exemption may be
withdrawn if it is determined that the conditions set out in
Article 5 of LPC have not been met.
CONCLUSION
Competition law contains the necessary regulations to ensure
that economic decisions can be made freely between undertakings of
goods and markets. Rules governing competition between undertakings
are being developed within the framework of the Law on Protection
of Competition. As a result of the fact that the competition of
undertakings with each other in the market is subject to audit;
some applications of undertakings are evaluated within the
framework of the ban and sanctions are applied to the relevant
undertaking. However, if the conditions specified in accordance
with Article 5 of the LPC are met, the practices deemed to be
contrary to the law will be evaluated within the scope of the
exemption and will take on a legal outlook. In this regard, an
exemption may be granted to certain undertakings individually, as
well as to various blocks collectively, within the framework of the
communiqués to be issued by the Competition Board.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.