Vertical Agreements in Turkey: Distribution, Exclusivity and Resale Price Maintenance

Introduction

Vertical agreements are among the most common commercial arrangements in Turkey. Manufacturers, suppliers, wholesalers, distributors, dealers, franchisees, retailers, online sellers and platform operators frequently enter into contracts that regulate the purchase, sale or resale of goods and services. These agreements are essential for organizing distribution networks, protecting brand value, ensuring supply efficiency, developing after-sales services and expanding market access.

However, vertical agreements may also create serious competition law risks. Under Turkish Competition Law, a distribution agreement may become problematic if it restricts the buyer’s resale price, limits customers or territories unlawfully, prevents internet sales, imposes excessive non-compete obligations, facilitates coordination between competitors or forecloses the market. The main legal framework consists of Law No. 4054 on the Protection of Competition, Block Exemption Communiqué No. 2002/2 on Vertical Agreements, and the Guidelines on Vertical Agreements issued by the Turkish Competition Authority.

Article 4 of Law No. 4054 prohibits agreements and concerted practices between undertakings, as well as decisions and practices of associations of undertakings, that have as their object, effect or likely effect the prevention, distortion or restriction of competition in a market for goods or services. Article 5 provides the exemption mechanism, while Communiqué No. 2002/2 sets out the conditions under which certain vertical agreements may benefit from block exemption.

For businesses operating in Turkey, vertical agreement compliance is not merely a drafting issue. It affects pricing strategy, dealer communications, e-commerce policies, marketplace sales, franchise systems, exclusive distribution, selective distribution, after-sales services and internal compliance training. A poorly drafted clause or an informal pressure campaign on dealers may lead to a Turkish Competition Authority investigation and significant administrative fines.

1. What Is a Vertical Agreement Under Turkish Competition Law?

A vertical agreement is an agreement between undertakings operating at different levels of the production or distribution chain. A typical example is an agreement between a manufacturer and distributor, supplier and retailer, wholesaler and dealer, franchisor and franchisee, or platform and business seller.

Communiqué No. 2002/2 defines vertical agreements as agreements concluded between two or more undertakings operating at different levels of the production or distribution chain, with the purpose of purchase, sale or resale of particular goods or services. The Guidelines also explain that supply agreements, distribution agreements and agreements involving wholesalers and retailers may fall within this definition where the parties operate at different levels.

The distinction between vertical and horizontal agreements is critical. Horizontal agreements are agreements between competitors and are generally more sensitive because they may involve price fixing, market sharing or bid rigging. Vertical agreements, by contrast, may often generate efficiencies. They may improve distribution, support brand investment, increase service quality and strengthen inter-brand competition.

Nevertheless, vertical agreements are not automatically lawful. If a supplier uses a distribution network to control resale prices, restrict passive sales or divide markets, the agreement may fall outside the block exemption and violate Article 4 of Law No. 4054.

2. Why Vertical Agreements Matter for Foreign and Turkish Companies

Vertical agreements are especially important for companies entering or expanding in Turkey. A foreign manufacturer may appoint a Turkish distributor. A luxury brand may use selective distribution. A technology company may use authorized resellers. A food producer may work with regional dealers. A franchisor may appoint franchisees. An online marketplace may impose seller rules. Each of these structures may raise competition law questions.

The main legal risks usually arise from:

• resale price maintenance;
• exclusivity clauses;
• territorial and customer restrictions;
• online sales restrictions;
• non-compete obligations;
• selective distribution criteria;
• franchise network controls;
• most-favored-customer clauses;
• information exchange through suppliers;
• restrictions on marketplace sales;
• excessive control over dealers’ commercial independence.

A supplier may have legitimate business reasons for controlling its distribution system. It may want to protect brand image, ensure quality standards, prevent free riding, encourage investment, organize after-sales services or maintain consumer trust. However, Turkish competition law requires these objectives to be achieved through proportionate and lawful means.

3. Block Exemption Under Communiqué No. 2002/2

The Turkish Competition Authority recognizes that many vertical agreements can produce economic benefits. For this reason, Communiqué No. 2002/2 provides a block exemption for vertical agreements that satisfy certain conditions. The purpose of the Communiqué is to determine the conditions for exempting vertical agreements from the prohibition under Article 4 of Law No. 4054.

The block exemption is particularly important because it allows businesses to structure ordinary distribution and supply agreements without applying for individual exemption each time. However, the exemption is conditional. If the agreement contains certain hardcore restrictions, or if the relevant market share threshold is exceeded, the agreement may fall outside the block exemption and require individual assessment under Article 5 of Law No. 4054.

The current framework applies a 30% market share threshold. In general, the exemption applies if the supplier’s market share in the relevant market where it supplies the contract goods or services does not exceed 30%. For vertical agreements involving exclusive supply obligations, the buyer’s market share in the relevant purchasing market becomes relevant.

This threshold is not merely a technical detail. It requires proper relevant market definition. The Guidelines state that the relevant product market and relevant geographic market must be defined in order to calculate the market share, and the supplier’s market share is assessed in the market where it sells to buyers.

4. Agreements Outside the 30% Threshold

If the 30% threshold is exceeded, the agreement does not automatically become unlawful. Instead, it loses the benefit of the block exemption and must be assessed individually under Article 5 of Law No. 4054. Article 5 requires that the agreement creates economic or technical development, benefits consumers, does not eliminate competition in a significant part of the relevant market, and does not restrict competition more than necessary.

The Guidelines explain that where the 30% threshold is exceeded, the Competition Board conducts a full competition analysis, considering factors such as the market position of the supplier, market position of competitors, market position of the buyer, entry barriers, maturity of the market, level of trade and nature of the product.

Therefore, businesses with high market shares should be particularly cautious. A vertical restriction that may be acceptable for a small supplier could become problematic when imposed by a supplier with significant market power.

5. Resale Price Maintenance in Turkey

Resale price maintenance is one of the most important vertical agreement risks in Turkey. It occurs when a supplier directly or indirectly restricts the buyer’s freedom to determine its resale price.

The Guidelines clearly state that setting fixed or minimum resale prices for the buyer is absolutely prohibited. A supplier may set maximum resale prices or recommend resale prices, provided that these do not transform into fixed or minimum resale prices.

This distinction is central. A recommended resale price is not automatically unlawful. A maximum resale price is not automatically unlawful. However, if the supplier uses pressure, incentives, threats, penalties, monitoring systems or commercial sanctions to ensure that dealers comply with a recommended price, the arrangement may become resale price maintenance.

For example, the following practices may create serious risk:

• telling dealers that they must not sell below a specific price;
• threatening to terminate a dealer that discounts;
• delaying deliveries to dealers that sell below recommended prices;
• reducing bonuses because a dealer applied lower prices;
• monitoring online prices and warning dealers to increase them;
• setting the dealer’s profit margin;
• determining the maximum discount rate;
• linking rebates to compliance with recommended prices;
• asking dealers to report other dealers that sell below list price.

The Guidelines expressly mention indirect resale price maintenance examples such as setting the buyer’s profit margin, setting the maximum discount rate, granting discounts only when the buyer complies with recommended prices, threatening to delay or suspend deliveries, or terminating the agreement when the buyer does not comply with recommended prices.

6. Practical Difference Between Recommended Prices and Price Pressure

Many suppliers use recommended resale prices to maintain brand positioning and inform dealers about market strategy. This may be acceptable if the recommendation is genuinely non-binding. The legal problem arises when the recommendation is supported by pressure or enforcement.

For example, a supplier may circulate a price list stating that the prices are recommended. However, if sales managers later call dealers and say, “You must correct your online price immediately,” the official label may not protect the company. The Turkish Competition Authority will look at the real commercial relationship, not only the written contract.

To reduce risk, recommended price communications should be carefully drafted. They should make clear that dealers remain free to determine resale prices. Sales teams should be trained not to threaten, pressure or punish dealers. Internal emails should avoid language suggesting that the supplier controls dealer prices.

7. Exclusive Distribution Agreements in Turkey

Exclusive distribution is a common vertical structure. A supplier may appoint one distributor for a certain territory or customer group. In principle, exclusive distribution may be lawful and commercially justified. It may encourage the distributor to invest in marketing, stock, personnel, training and customer relationships.

However, exclusivity must be structured carefully. Turkish competition law distinguishes between active sales and passive sales. A supplier may, under certain conditions, restrict active sales by one distributor into an exclusive territory or customer group allocated to another distributor. However, restrictions on passive sales are much more problematic.

The Guidelines state that restricting passive sales to an exclusive territory or customer group is an infringement that excludes the agreement from block exemption. Active sales include direct marketing methods such as visits, letters, targeted advertisements or establishing a sales point in another distributor’s territory. Passive sales involve responding to unsolicited customer demand.

This distinction is especially important for distribution networks. A supplier may be tempted to “protect” each distributor’s territory completely. But if a customer from one territory independently contacts a distributor in another territory, the distributor generally should not be prohibited from fulfilling that demand.

8. Customer and Territory Restrictions

Territorial and customer restrictions are among the most sensitive clauses in vertical agreements. Communiqué No. 2002/2 excludes certain territorial and customer restrictions from block exemption unless they fall within specific exceptions. The relevant rule covers restrictions on regions or customers to whom the buyer may sell the contract goods or services.

In practice, risk may arise not only from written clauses but also from indirect conduct. A supplier may not explicitly write that a dealer cannot sell outside its region, but it may reduce bonuses, limit supply, block orders or threaten termination if the dealer serves customers from another territory. Such indirect measures may also be treated as territorial or customer restrictions.

Businesses should therefore review both contract wording and actual commercial behavior. Distribution agreements should clearly distinguish lawful restrictions from unlawful passive sales restrictions. Sales teams should understand that territory management cannot be used as a disguised market partitioning mechanism.

9. Online Sales Restrictions

Online sales are a major enforcement area in Turkish vertical agreement practice. The growth of e-commerce has made internet sales central to distribution strategy. Suppliers may want to protect brand image, prevent unauthorized sellers, ensure product quality or manage online channels. However, Turkish competition law generally treats internet sales as passive sales.

The Guidelines state that internet sales or sales through similar means are generally passive sales. They also state that restricting distributors, dealers or buyers from selling through their own websites is a type of passive sales restriction. In principle, each dealer must have the right to make sales over the internet.

The Guidelines identify several online restrictions that may remove an agreement from the block exemption, including blocking customers from another distributor’s territory from accessing the website, redirecting those customers to another website, terminating transactions based on customer address, restricting the ratio of internet sales to total sales in a way that prevents online sales, and charging higher wholesale prices for products resold online than for products sold in physical stores.

This does not mean that suppliers can never impose online sales standards. Suppliers may require quality conditions, platform standards, customer service rules, brand presentation criteria, secure payment systems or after-sales obligations. However, the conditions must be objective, reasonable, proportionate and should not directly or indirectly prevent online sales.

10. Marketplace and Platform Sales

A particularly important issue is whether a supplier may restrict sales through third-party marketplaces. The Guidelines allow suppliers to require that buyers sell only through sales platforms or marketplaces that satisfy certain standards and conditions. However, the restriction should not aim to prevent the distributor’s online sales or price competition. A general platform ban without objective and uniform conditions may be assessed as a violation.

This is highly relevant for sectors such as electronics, cosmetics, luxury goods, fashion, home appliances, pharmaceuticals, medical devices, automotive spare parts and consumer goods. A brand may have legitimate concerns about counterfeit goods, product safety, customer experience or brand image. But these concerns should be translated into objective platform standards rather than broad and unjustified marketplace prohibitions.

For example, a supplier may require marketplace sellers to meet criteria on product authenticity, authorized seller identity, customer service, delivery standards, warranty information, brand display and complaint handling. However, a blanket ban on all marketplace sales may create competition law risk unless it is objectively justified.

11. Selective Distribution Systems

Selective distribution is used where suppliers appoint distributors based on certain qualitative or quantitative criteria. It is common in luxury products, technology products, cosmetics, pharmaceuticals, medical devices, automotive products and branded consumer goods.

Selective distribution may be justified where product quality, technical support, brand reputation or customer experience requires a controlled sales environment. However, the criteria must be objective, transparent, proportionate and applied uniformly.

The Guidelines state that members of a selective distribution system may not be prevented from making active or passive sales to end users, including through internet channels. A supplier may prevent a system member from changing the location of a physical point of sale or opening a new physical point of sale, but launching a website for online sales is not considered the opening of a new physical point of sale.

This principle is especially important for brands that want to control online sales. A selective distribution system can include online quality standards, but it cannot be used simply to eliminate internet sales or protect offline dealers from online price competition.

12. Non-Compete Obligations and Exclusivity

Non-compete obligations may appear in distribution, dealership, franchise and supply agreements. A supplier may require a distributor not to sell competing products, or a buyer may require exclusive supply. Such clauses may be lawful in certain circumstances, but they can also restrict market access and foreclose competitors.

Under the block exemption framework, non-compete obligations are subject to strict conditions, especially regarding duration and market share. Long-term or indefinite non-compete obligations may fall outside the block exemption. Post-term non-compete obligations are also sensitive and usually require narrow scope, limited duration and strong justification.

From a practical perspective, businesses should ensure that non-compete clauses are proportionate. A non-compete clause should not be broader than necessary in terms of duration, territory, product scope and business purpose. If the purpose is to protect know-how, brand standards or investment, the clause should be drafted accordingly.

13. Franchise Agreements

Franchise agreements often contain vertical restrictions because the franchisor needs to protect brand identity, know-how, operational standards and uniform customer experience. Franchise systems may include rules on store design, product range, service standards, suppliers, marketing methods, quality controls and use of intellectual property.

Many franchise restrictions may be legitimate. However, franchise agreements may still create competition law risks if they impose fixed resale prices, prevent online sales, restrict passive sales, impose excessive non-compete obligations or divide territories too broadly.

Franchisors should distinguish between brand protection and price control. It may be lawful to require quality standards, approved suppliers, uniform presentation and operational rules. But forcing franchisees to sell at fixed or minimum prices may amount to resale price maintenance.

14. Most-Favored-Customer Clauses

Most-favored-customer clauses, also known as most-favored-nation clauses, require one party to offer terms at least as favorable as those offered to another party. These clauses may appear in supply agreements, online platforms, marketplace contracts, hotel booking platforms, distribution agreements and retail relationships.

The Guidelines note that most-favored-customer clauses may reinforce the impact of resale price maintenance by reducing incentives to offer better prices or conditions to other buyers, although such clauses do not automatically amount to resale price maintenance on their own.

In online platform markets, these clauses may be particularly sensitive. A platform requiring sellers not to offer lower prices on other platforms or their own websites may restrict price competition. The competition law risk depends on market power, scope of the clause, affected market structure and actual effects.

15. Hub-and-Spoke Risks in Vertical Relationships

Vertical relationships may sometimes facilitate horizontal coordination. This is known as a hub-and-spoke arrangement. In such a case, a supplier, distributor or platform may act as a hub through which competing retailers or sellers exchange sensitive information or coordinate prices.

For example, competing retailers may complain to a supplier about another retailer’s discounts, and the supplier may pressure the discounting retailer to increase prices. If this creates alignment among retailers, the vertical relationship may produce horizontal anti-competitive effects.

Businesses should be careful when dealers complain about other dealers’ prices. A supplier should not become a price enforcer for the dealer network. Complaints may be recorded, but the supplier should not use them to coordinate resale prices or eliminate discounting.

16. Interaction with Abuse of Dominance

Vertical agreements may also raise abuse of dominance concerns under Article 6 of Law No. 4054 if the supplier or buyer holds a dominant position. Communiqué No. 2002/2 expressly states that the exemption granted under the Communiqué does not prevent the application of Article 6 of Law No. 4054.

This means that a vertical arrangement may need to be assessed not only under Article 4 and block exemption rules but also under dominance rules. A dominant supplier’s exclusive dealing, refusal to supply, discriminatory conditions, loyalty rebates or online restrictions may be examined as potential abuse of dominance.

Companies with strong market positions should therefore apply a higher level of caution. Even where a clause appears acceptable in ordinary vertical agreement analysis, it may become problematic if imposed by a dominant undertaking.

17. Investigations and Administrative Fines

The Turkish Competition Authority may investigate vertical agreement violations through complaints, ex officio inquiries, dawn raids, information requests, dealer submissions, customer complaints, digital evidence and internal company documents.

If the Competition Board finds a violation of Articles 4, 6 or 7 of Law No. 4054, it may impose administrative fines of up to 10% of the relevant undertaking’s annual gross revenues. Managers or employees who had decisive influence in the infringement may also face personal fines of up to 5% of the fine imposed on the undertaking.

In resale price maintenance and online sales restriction cases, evidence often includes emails, WhatsApp messages, dealer warnings, price monitoring reports, internal sales instructions, discount approval systems, dealer complaint records and termination correspondence. Therefore, competition compliance must address not only contracts but also daily commercial communications.

18. Competition Compliance for Vertical Agreements

A strong compliance program is essential for suppliers, distributors, retailers, franchisors and online platforms operating in Turkey. The program should be practical and tailored to the company’s distribution model.

A Turkish vertical agreement compliance program should include:

• legal review of distribution and franchise agreements;
• clear rules on recommended prices and maximum prices;
• prohibition of fixed or minimum resale price pressure;
• training for sales teams and regional managers;
• internal guidance on dealer complaints;
• objective criteria for online sales and marketplace sales;
• review of exclusive territory and customer clauses;
• monitoring of non-compete duration and scope;
• competition review of bonus, rebate and discount systems;
• dawn raid preparedness;
• document retention and communication rules.

Sales teams should be trained with concrete examples. They should know that they must not say, “You cannot sell below this price,” “Correct your online price immediately,” “We will stop supplying you if you discount,” or “Do not sell to customers from another region.” They should also avoid indirect pressure, such as reducing stock allocations or bonuses because a dealer applied lower prices.

19. Drafting Tips for Distribution Agreements in Turkey

Distribution agreements in Turkey should be drafted with competition law in mind. The agreement should clearly state that the distributor remains free to determine resale prices. If recommended prices are used, the agreement should specify that they are non-binding. If maximum prices are used, they should not operate as minimum prices in practice.

Exclusive territory clauses should be carefully drafted to avoid unlawful passive sales restrictions. Online sales rules should be objective and proportionate. Marketplace restrictions should be based on uniform quality standards rather than broad bans. Non-compete clauses should be limited in duration, scope and purpose.

A well-drafted agreement is not enough by itself. The company’s conduct must match the written contract. If the agreement says dealers are free to set prices but sales managers pressure them in practice, the company may still face liability.

20. Conclusion

Vertical agreements in Turkey are essential commercial tools, but they must be structured carefully under Turkish Competition Law. Distribution, franchise, dealership, exclusive supply and online sales arrangements may benefit from the block exemption under Communiqué No. 2002/2 if the relevant conditions are satisfied. The 30% market share threshold, absence of hardcore restrictions and compliance with active/passive sales principles are central to this analysis.

The most serious risks include resale price maintenance, unlawful territorial or customer restrictions, restrictions on passive sales, online sales bans, unjustified marketplace prohibitions, excessive non-compete obligations and hub-and-spoke coordination. Turkish competition law allows suppliers to organize distribution efficiently, protect brand quality and impose objective standards, but it does not allow them to control independent resale prices or eliminate lawful sales channels.

For companies operating in Turkey, the safest approach is proactive compliance. Contracts should be reviewed before signing, sales teams should be trained, online sales policies should be tested, dealer communications should be monitored and pricing practices should remain independent. A legally sound distribution system can support growth, protect brand value and reduce investigation risk in the Turkish market.