Vertical Agreements and Online Sales Restrictions in Competition Law
Entrance
Competition law is one of the most important building blocks of the modern market economy. Protecting free competition, increasing consumer welfare, and ensuring that market actors operate under equal conditions are priority goals of both national legal systems and international economic integration. In Turkey, competition rules regulated by Law No. 4054 on the Protection of Competition, and in European Union law, those regulated within the framework of Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFE), aim to prevent the disruption of market balance. In this context, vertical agreements and online sales restrictionshave become one of the most controversial areas of competition law in recent years.
Vertical agreements are contracts between undertakings operating at different levels of the production and distribution chain. These agreements typically regulate how goods or services are marketed, pricing methods, and distribution channels. For example, the relationship between a manufacturer and its dealer, distributor, or retailer is considered a vertical agreement. These agreements can have both encouraging and restrictive effects on competition. On the one hand, they can increase the efficiency of distribution and strengthen inter-brand competition; on the other hand, they can create the risk of market closure, price fixing, or limiting access channels to consumers through certain restrictions.
With the acceleration of digitalization in recent years, online commerce, or e-commerce, has shown extraordinary growth in the global economy and in Türkiye. The ease with which consumers can access goods and services online has led to new issues for competition law. In particular, practices aimed at restricting manufacturers' online sales channels are being meticulously examined by competition authorities. "Online sales restrictions" stand out as one of the most frequently encountered problems on the competition law agenda of the digital age. While these restrictions are sometimes introduced to protect brand value, sometimes to balance sales channels, and sometimes to improve the consumer experience, they carry the potential to contradict the fundamental principles of competition law.
In Türkiye, the Competition Board has issued significant rulings regarding online sales restrictions, particularly in the electronics, gaming software, and cosmetics sectors. The European Court of Justice (ECJ) and the European Commission have also issued numerous landmark rulings on online sales restrictions. The Coty Germany GmbH decision, in particular, is a landmark ruling that determined under what conditions an online sales ban, within the framework of selective distribution systems, violates competition.
This article will examine in detail the conceptual and legal framework of vertical agreements, the importance of online sales, the evaluation of online sales restrictions from a competition law perspective, application examples in light of the decisions of the Competition Board and the European Union, a comparative law perspective, and recommendations for the future.
I. Conceptual Framework of Vertical Agreements
1. Definition of Vertical Agreement
In competition law doctrine, vertical agreements are defined as "agreements between two or more undertakings operating at different levels of the production or distribution chain that regulate the terms of the purchase and sale of goods or services." While Article 4 of Law No. 4054 on the Protection of Competition prohibits agreements that restrict competition, Article 5 may grant exemptions to certain agreements. Vertical agreements hold a special place here, as they can have both restrictive and competitive enhancing effects.
2. The Difference Between Vertical and Horizontal Agreements
Horizontal agreements are agreements between competitors operating at the same level of production or distribution. For example, a price-setting agreement between two manufacturers is a horizontal agreement. In contrast, a contract between a manufacturer and a distributor is a vertical agreement. Vertical agreements are subject to different legal assessments than horizontal agreements because they do not reduce direct price competition between rivals.
3. Vertical Agreements in European Union Law
Article 101(1) of the ECHR prohibits agreements that restrict competition. However, there are special group exemption regulations for vertical agreements. Most importantly, Regulation 330/2010 on Group Exemption for Vertical Agreements. This regulation grants exemptions under certain conditions, taking into account the potential benefits of vertical agreements on competition.
4. Vertical Agreements in Turkish Law
In Turkey, vertical agreements Communiqué No. 2002/2 on Group Exemption for Vertical Agreements . This Communiqué, in parallel with regulations in EU law, defines the conditions for granting exemptions to vertical agreements. Exemptions are granted, in particular, taking into account market share thresholds (usually 40%) in the relevant market. However, vertical agreements containing "hard core restrictions" (e.g., resale price determination) are excluded from the scope of the exemption.
II. The Place of Vertical Agreements in Competition Law
(Here, Articles 4 and 5 of Law No. 4054, group exemption regulations, EU Regulations, and the established case law of the Competition Board are examined in detail. For example, the Competition Board's Aral Oyun – Sony decision, the Philips and Coty Germany decisions will be illustrated with examples.)
III. The Importance of Online Sales in Competition Law
(The benefits of e-commerce for consumers, its impact on traditional distribution channels, the EU Commission's review of the e-commerce sector, and the place of e-commerce in Türkiye within the framework of Law No. 6563 on the Regulation of Electronic Commerce will be explained in detail.)
IV. Online Sales Restrictions
(Types of online sales bans, passive sales bans, price restrictions, platform bans, etc.; EU case law, Competition Board decisions, Supreme Court opinions will be discussed at length. The Coty Germany decision will be analyzed.)
V. The Relationship Between Vertical Agreements and Online Sales Restrictions
(Selective distribution systems, arguments for protecting brand image, and a comparison of Turkish and EU practices will be discussed. The Competition Board's decisions, particularly in the cosmetics, electronics, and gaming sectors, will be addressed.)
VI. Evaluation in Light of Competition Board Decisions
(Specific examples of court decisions will be explained at length here: Aral Gaming-Sony, Philips, Pierre Fabre, Nike decisions. The reasoning behind the decisions and their consequences will be examined in detail.)
VII. Legal and Economic Consequences
(The effects of online sales restrictions on consumer welfare, their impact on innovation and price competitiveness, and the balance between freedom of contract and competition will be analyzed in detail.)
VIII. Comparative Law Perspective
(The approach in US antitrust law, the differences with the EU, Türkiye's EU accession process, and examples from China and other countries will be discussed at length.)
IX. Recommendations for the Future
(The development of digital markets, new competition issues arising from the platform economy, the future role of the Competition Board, and legislative updates will be proposed.)
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