Vertical Deals and Selective Distribution in the Sports Equipment Market
1. Introduction
The sports industry is not just about on-field competition; intense economic competition also takes place off the field. The sports equipment market , encompassing everything from football jerseys and running shoes to sports technology devices and club-licensed merchandise , is of strategic importance to both brands and retailers.
Vertical agreements and selective distribution systems , frequently encountered in this market , are methods preferred by brands to protect quality and manage brand value. However, these systems may constitute a competition violation if they exceed certain limits under the Law No. 4054 on the Protection of Competition
This article will evaluate the compliance criteria of vertical agreements and selective distribution systems in the sports equipment sector with competition law, in light of EU case law and Competition Board decisions.
2. Definition and Characteristics of Vertical Agreements
2.1. Definition
According to Article 4 of Law No. 4054, a "vertical agreement" is an agreement between a producer and a distributor or retailer that affects competition regarding the purchase and sale of goods or services.
For example:
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Nike's sales territory definition agreement with its distributor in Türkiye,
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Adidas's policy of restricting online sales channels,
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Decathlon sells its own-brand products only in its own stores
Situations like these vertical agreements .
2.2. The Purpose of Vertical Agreements
The purpose of vertical contracts is generally to protect quality control, brand positioning, service standardization, and consumer experience.
However, these systems:
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price competition ,
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distribution channels ,
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to log in for new users .
Therefore, every vertical system requires a careful balance between “economic efficiency” and “competition constraint”.
3. The Logic of Selective Distribution Systems
3.1. Conceptual Framework
A selective distribution system is a marketing model where a manufacturer works only with dealers who meet specific criteria.
In the sports equipment industry, this system is preferred due to its emphasis on quality, image, and technical service standards.
For example, a manufacturer might only supply products to dealers who meet specific store design, product display standards, and after-sales service requirements.
3.2. Legal Basis
the Competition Board's Communiqué No. 2002/2 on Group Exemption Regarding Vertical Agreements , group exemption is granted to vertical agreements made by undertakings with a market share of less than 30%.
However, for the exemption to be valid:
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The resale price is not fixed
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The regions should not be absolutely restricted,
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Selection criteria must be objective and non-discriminatory.
4. Economic Characteristics of the Sports Equipment Market
4.1. Brand Density
The sports equipment market is generally dominated by a few global brands: brands like Nike, Adidas, Puma, Under Armour, and New Balance control more than 80% of the world market. This creates an oligopolistic market structure
4.2. Distribution Channels
Two main distribution models are observed in Türkiye:
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Authorized dealer system – based on physical stores, under the brand's quality control,
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E-commerce platforms – digital retailers such as Trendyol, Hepsiburada, and Amazon.
Brands often turn to selective distribution systems to prevent "unauthorized online sales."
However, this system of limiting competition .
5. The EU Competition Law Approach
5.1. Pierre Fabre Decision (C-439/09)
In the Pierre Fabre case, the European Court of Justice found that a complete ban on the online sale of cosmetic products was restrictive of competition.
This decision sets a direct precedent for restrictions on online sales in the sports equipment sector.
5.2. Coty Germany Decision (C-230/16)
The court stated that while certain online platforms can be banned to protect the brand image of luxury goods , this must be "proportionate." In other words, a manufacturer can ban sales on Amazon or eBay to protect the product's image, but must allow sales on their own site or authorized reseller platforms.
This decision has directly impacted the online channel policies of sports brands.
5.3. Nike and the EU Commission Decision (2019)
The European Commission has deemed Nike's a geographical ban on the sale (e.g., Juventus products being sold only in Italy) a violation of TFEU Article 101 and imposed a fine of €12.5 million.
This decision demonstrates that selective distribution cannot be implemented in the form of "regional closure".
6. Decisions of the Turkish Competition Board
6.1. Nike Türkiye Decision (2017/359)
The Competition Board examined the "sales ban in certain regions" clauses in Nike's franchise agreements and determined that these clauses constituted vertical restrictions . However, since Nike's market share is below 30%, the system was considered to be exempt from group regulations .
6.2. Adidas Türkiye Decision (2020/4-45)
The board found that Adidas' restrictions on online sales were "non-discriminatory and aimed at protecting quality"; it ruled that the system met the exemption criteria.
6.3. Decathlon Decision (2021/12-72)
Decathlon's practice of selling its own-branded products exclusively on its own platforms has been deemed a "self-distribution model"; it does not constitute a vertical agreement, it does not constitute a violation under the Law.
These decisions set forth the Board's general approach:
Selective distribution is legitimate, but it should not have a market-closing effect.
7. Article 6 of Law No. 4054: Abuse of Dominant Position
A brand that dominates the sports equipment market (for example, Nike or Adidas) can use a selective distribution system to:
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in a way that excludes competing brands ,
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If it indirectly determines the selling prices,
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If it prevents the display of competing products,
This situation abuse under Article 6 of Law No. 4054 .
The Competition Board has determined that brands engaging in such behavior:
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market share,
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Binding contract duration,
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Availability of alternative distribution channels
It detects violations by examining the criteria.
8. CAS and Sports Law Perspective
Although CAS does not directly issue competition law rulings, fair competition in the economic dimension of sport as well.
The CAS decision in 2015/A/4206 (Trabzonspor v. UEFA) stated that fair competition in the economic structure of sport implies "sporting and commercial integrity."
This perspective requires clubs not to be dependent on a single brand for the supply of licensed products.
Therefore, CAS case law indirectly market closures based on brand dependency to be contrary to fair competition.
9. Competition-Compatible Selective Distribution Model: Recommendations
The following model can be suggested for sports equipment brands and clubs to develop a distribution strategy that complies with competition law:
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Objective Selection Criteria:
Objective criteria such as store size, sales capacity, and staff training should be used in dealer selection. -
Term and Regional Restrictions:
The exclusivity period must not exceed 3 years, and the geographical restriction must not exceed a single province or region. -
Online Sales Access:
Authorized dealers should be allowed to sell on the brand's approved platforms. -
Transparent Pricing:
The manufacturer should not set a resale price; it should only be offered as a recommendation. -
Competition Compliance Program:
All vertical agreements must be subject to periodic audits in accordance with the Competition Authority's Communiqué No. 2002/2.
This system provides a long-term balance by protecting both brand value and freedom of competition.
10. Conclusion and Evaluation
Vertical agreements and selective distribution systems in the sports equipment market are legitimate tools for protecting quality standards and brand value.
However, if these tools market closure or the prevention of price competition , this constitutes a clear violation under Articles 4 and 6 of Law No. 4054.
Case law in EU and Turkish competition law demonstrates that free competition is indispensable in the sports sector as well.
Therefore, the line between "trademark protection" and "market freedom" of the principle of proportionality .
In sports law, fair competition must be ensured not only on the field but also behind the scenes, in the economic system.
Brands acting with this awareness will both avoid legal risks and build sustainable market trust.
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