Competition Law Risks in Turkish Franchise Systems: A Comprehensive Legal Guide

Introduction

Franchise systems depend on uniformity. Franchisors commonly determine the appearance of outlets, quality of products, approved suppliers, operating methods, marketing standards and conditions under which franchisees may use the brand. These controls are commercially understandable because consumers expect every business operating under the same trademark to provide a consistent experience.

However, the commercial need for consistency does not give a franchisor unlimited authority over independent franchisees. Franchisees are normally separate undertakings that bear their own commercial risks and must retain a meaningful degree of independence in matters such as resale pricing, customer selection and market participation.

Competition law risks in Turkish franchise systems arise when contractual or practical controls go beyond what is necessary to protect the brand and begin to restrict competition. A clause that appears to be an ordinary operational rule may constitute resale price maintenance, customer allocation, passive sales restriction, unlawful non-compete obligation or market foreclosure.

The principal legislation is Law No. 4054 on the Protection of Competition. Article 4 prohibits agreements, concerted practices and decisions of associations of undertakings whose object, effect or potential effect is to prevent, distort or restrict competition. Article 5 establishes the conditions under which a restrictive arrangement may benefit from exemption.

Most franchise arrangements are also evaluated under the Block Exemption Communiqué on Vertical Agreements No. 2002/2 and the Turkish Competition Authority’s Guidelines on Vertical Agreements. The Communiqué applies to qualifying agreements between undertakings operating at different levels of the production or distribution chain and currently uses a 30% market-share threshold. It also covers certain agreements containing intellectual property provisions where those rights are directly connected with the use or resale of the relevant goods or services.

Competition-law compliance cannot be achieved by inserting a general clause stating that the parties will comply with applicable law. The complete commercial relationship must be examined, including pricing communications, sales monitoring, incentive schemes, supplier approvals, territorial policies, online sales rules, employment arrangements and communications among members of the franchise network.

This guide examines the principal competition law risks affecting Turkish franchise systems and explains how franchisors and franchisees can structure their agreements and daily practices more safely.

Why Franchise Agreements Are Treated as Vertical Agreements

A vertical agreement is an agreement between two or more undertakings operating at different levels of the production or distribution chain concerning the purchase, sale or resale of goods or services.

A franchisor generally supplies a business method, trademark licence, know-how, operational assistance and, in many systems, products or equipment. The franchisee uses those inputs to offer goods or services to final customers. The parties therefore normally operate at different levels of the commercial chain.

The Turkish Competition Authority recognises that franchise agreements usually contain intellectual property and know-how licences, continuing commercial or technical assistance and various combinations of selective distribution, exclusive distribution and non-compete obligations.

The vertical nature of the relationship is important because vertical restrictions may create both efficiencies and competitive harm.

Franchising may allow a brand to expand rapidly, support investment, improve quality control and create a uniform distribution network. A franchisor may need to protect confidential know-how and prevent free riding by franchisees or competing suppliers.

On the other hand, vertical restrictions can reduce competition between franchise outlets, prevent new suppliers from accessing the market, limit consumer choice and increase prices.

Competition law therefore requires a distinction between restrictions reasonably necessary to operate the franchise system and restrictions that eliminate the franchisee’s commercial independence.

The 30% Market-Share Threshold

Communiqué No. 2002/2 currently provides a block exemption where the provider’s market share in the relevant market does not exceed 30%. If the agreement contains an exclusive-supply obligation, the buyer’s market share in the relevant purchasing market must also generally remain within the 30% threshold.

The threshold is not calculated according to the franchisor’s share of all franchises operating in Türkiye. The relevant product and geographical markets must first be defined.

Where the franchisor supplies a complete business method rather than merely selling goods, the Competition Authority’s Guidelines indicate that the market share should be assessed in the market in which the franchisee uses that method to provide goods or services to consumers. The value of the goods or services supplied by franchisees may be used in calculating the franchisor’s market position. If the franchisor also supplies specific inputs, separate input markets may need to be evaluated.

For example, a fast-food franchisor may need to consider its share of the relevant restaurant or fast-food services market. If it also requires franchisees to purchase proprietary sauces, packaging or equipment, its position in those input markets may also be relevant.

Market definition is often more complex than the parties expect. Relevant questions include:

• Which products or services customers consider reasonably substitutable;
• Whether customers would switch in response to a small but lasting price increase;
• Whether competition occurs nationally, regionally or locally;
• The strength and number of competing brands;
• Barriers to market entry;
• Whether physical and online channels belong to the same market;
• The proportion of sales outlets tied to similar exclusive arrangements.

Falling outside the 30% threshold does not automatically mean that the franchise agreement violates competition law. It means that the agreement cannot automatically rely on the protection of the block exemption and must be assessed individually under Article 5 of Law No. 4054. The parties must then demonstrate economic or technical benefits, consumer benefit, preservation of competition and proportionality of the restrictions.

Franchise-Specific Efficiencies

Franchise agreements are not treated in exactly the same way as ordinary supply agreements. The transfer of know-how, intellectual property and a complete business format may justify restrictions that would be harder to defend in a simple distribution relationship.

The Guidelines state that the more significant the transfer of know-how, the more likely it is that vertical restraints may satisfy the conditions for exemption. A non-compete obligation concerning the goods or services purchased by the franchisee may even fall outside Article 4 where it is necessary to preserve the common identity and reputation of the franchise network. In that situation, the restriction may correspond to the duration of the franchise agreement, provided that it does not extend beyond the agreement itself.

This does not create an automatic “franchise exception” to competition law.

A franchisor should be able to demonstrate that the system involves genuine and substantial know-how, continuing assistance, uniform operating methods and brand-specific investments.

The justification is weaker where the franchisor merely permits the use of a trademark, provides little operational support and imposes restrictions unrelated to quality or network identity.

The legal analysis therefore focuses on substance rather than contractual labels. Calling a commercial relationship a franchise does not make every restrictive clause lawful.

Resale Price Maintenance

Resale price maintenance is one of the most serious competition law risks in Turkish franchise systems.

The franchisee must remain free to determine the price at which it sells goods or services to customers. The franchisor may generally recommend resale prices or establish maximum resale prices, but those prices must not become fixed or minimum prices through pressure, threats, incentives or coordinated implementation.

Article 4 of Communiqué No. 2002/2 expressly excludes from the block exemption agreements that prevent the buyer from determining its own selling price. Recommended or maximum prices are permitted only if they do not become fixed or minimum prices because of pressure or encouragement by either party.

Direct Price Restrictions

A direct restriction may appear in clauses such as:

• “The franchisee must use all prices announced by the franchisor”;
• “Products may not be sold below the recommended price”;
• “Discounts require the franchisor’s prior written approval”;
• “The franchisee shall apply the national price list without deviation”;
• “The resale margin of the franchisee shall be fixed at 20%.”

Such provisions substantially reduce the franchisee’s ability to compete through price and may remove the entire agreement from the benefit of the block exemption.

Indirect Price Restrictions

Competition law risk may also arise where the agreement formally describes prices as recommendations but the franchisor applies commercial pressure to secure compliance.

The Competition Authority’s Guidelines identify several indirect methods, including additional discounts for compliance, delayed or suspended deliveries, threats of termination and actual penalties imposed on franchisees that deviate from recommended prices. Monitoring mechanisms that make deviations visible may reinforce the restrictive effect.

Other high-risk practices may include:

• Automatically warning franchisees whose prices differ from the central list;
• Publishing compliance rankings;
• Reducing marketing support for franchisees offering discounts;
• Refusing access to popular products;
• Requiring franchisees to report other franchisees’ prices;
• Using software that prevents local price changes;
• Conditioning renewal on price conformity;
• Pressuring a franchisee after complaints from another franchisee.

The legal analysis considers actual conduct, not only the written contract. A formally non-binding recommendation may become unlawful if franchisees understand that deviation will result in sanctions.

Promotional Campaigns

Network-wide advertising campaigns are not automatically prohibited. A franchisor may organise short-term promotions and may finance discounts.

However, the campaign should not become a permanent mechanism for dictating minimum or fixed prices. Franchisees should understand whether participation is voluntary, who bears the cost and whether they retain genuine freedom outside the campaign.

Where a franchisor fully reimburses a discount, a centrally coordinated promotion may present fewer concerns than a system requiring franchisees to absorb the discount while removing their pricing freedom. Each campaign must still be examined according to its structure and market effect.

Territorial and Customer Restrictions

Franchisors commonly allocate exclusive territories to encourage local investment and prevent excessive internal competition. Turkish competition law permits some territorial protection but places strict limits on customer and regional restrictions.

Communiqué No. 2002/2 generally excludes territorial or customer restrictions from the block exemption, subject to specified exceptions. A franchisor may restrict active sales into a territory or customer group exclusively allocated to itself or another buyer, provided that customers of the restricted buyer are not similarly restricted.

The distinction between active and passive sales is therefore fundamental.

Active Sales

Active sales involve deliberately targeting customers in another exclusive territory or customer group. Examples may include:

• Direct visits to customers;
• Individual marketing letters;
• Unrequested e-mails;
• Territory-specific online advertisements;
• Paying a search engine to target users in another exclusive territory;
• Establishing a sales location in another franchisee’s protected area.

Restrictions on these targeted activities may be permissible in qualifying exclusive distribution structures.

Passive Sales

Passive sales occur when the franchisee responds to unsolicited customer requests without specifically targeting the customer’s territory.

The Guidelines explain that general advertising is normally treated as passive selling. Internet sales are also generally considered passive unless the seller specifically targets customers in another exclusive territory through methods such as unsolicited e-mails or localised advertising. Restrictions on passive sales generally remove the agreement from the block exemption.

A franchise agreement should therefore not require a franchisee to reject an unsolicited customer merely because the customer lives outside the franchisee’s territory.

The franchisor should also avoid indirect restrictions, such as:

• Refusing to supply products sold outside the territory;
• Reducing rebates;
• Withholding marketing funds;
• Applying penalties;
• Limiting product quantities;
• Terminating franchisees that respond to unsolicited orders.

The Competition Authority looks beyond express contractual wording and may examine whether economic incentives or threats effectively divide customers or territories.

Online Sales Restrictions

Digital sales have increased the complexity of territorial protection. A website, mobile application or marketplace account may reach customers throughout Türkiye even when a franchisee operates from a single physical location.

A franchisor may impose proportionate quality requirements concerning the use of its trademark, website design, customer service, cybersecurity and delivery standards. It may also require that online use comply with the general identity of the franchise system.

However, a franchisor should not use quality standards to prevent effective online sales.

The Guidelines identify several problematic practices. Setting a maximum percentage of online sales may constitute a hardcore restriction. Charging the franchisee a higher wholesale price for products intended for online sale may also restrict the franchisee’s choice of distribution channel. By contrast, fixed support payments that do not depend on online sales volume may be permissible.

A franchisor may establish objective quality conditions for the franchisee’s website and may require certain customer services. In selective distribution systems, a physical outlet requirement may be possible, but it should not be designed simply to exclude online-only businesses or suppress internet sales.

High-risk online provisions may include:

• A complete ban on internet sales;
• Requiring all online orders to be redirected to the franchisor;
• Prohibiting the franchisee from operating its own website;
• Blocking customers located outside the allocated territory;
• Automatically terminating transactions based on delivery address;
• Limiting online sales to a small percentage of total turnover;
• Charging higher input prices for online transactions;
• Prohibiting online advertising without an objective brand justification.

The agreement should separately regulate active online targeting, general website accessibility, marketplace sales, mobile applications and delivery platforms.

Central Online Platforms

Some franchise networks operate a national website or mobile application through which all customer orders are received and allocated to individual franchisees.

Such platforms may create efficiencies by providing a unified customer experience, central payment processing and consistent brand presentation.

Nevertheless, the system should be structured carefully. Relevant questions include:

• Who is legally identified as the seller?
• How are orders allocated?
• Can franchisees set their own retail prices?
• Does the platform prevent discounts?
• Are delivery areas used to divide customers?
• Are commissions transparent?
• Can the franchisor favour corporate-owned outlets?
• Can franchisees participate in competing platforms?

A central platform may become a mechanism for resale price maintenance if it technically prevents franchisees from setting independent prices.

It may also create discriminatory or exclusionary concerns where the franchisor gives preferential visibility, order priority or lower commissions to its own outlets.

Non-Compete Obligations During the Agreement

A non-compete obligation may directly or indirectly prevent the franchisee from producing, purchasing or selling competing goods or services.

Under Communiqué No. 2002/2, indefinite non-compete obligations and obligations exceeding five years generally fall outside the block exemption. An obligation that can be tacitly renewed beyond five years is treated as indefinite.

The Guidelines clarify that express renewal may be treated differently where both parties must actively consent and the franchisee remains genuinely free to end the restriction after five years. Automatic renewal structures create greater risk.

Connected contracts must also be examined. A five-year franchise agreement should not be combined with a ten-year equipment loan, lease or financing arrangement that effectively prevents the franchisee from switching suppliers after the permitted period.

The five-year rule contains a limited premises exception. If the franchisor owns the premises or holds a right obtained from an independent third party, the non-compete obligation may continue while the franchisee uses those premises. The exception cannot normally be created artificially by transferring premises from the franchisee to the franchisor and leasing them back.

As noted above, a genuine franchise system may receive more flexible treatment where the non-compete obligation is necessary to protect the network’s identity and prestige. The restriction should nevertheless be linked to the franchised activity and should not extend to unrelated businesses.

Exclusive Purchasing and the 80% Rule

A franchisee may be required to purchase essential products, ingredients, equipment or packaging from the franchisor or approved suppliers.

These obligations may be justified where central sourcing is necessary to protect confidential formulas, product safety or consistent quality.

However, Turkish competition law treats an obligation requiring the franchisee to purchase more than 80% of its relevant requirements from the franchisor or a designated supplier as a non-compete obligation. There is no material distinction between requiring all purchases and requiring more than 80%.

The 80% threshold can also be reached indirectly through:

• Minimum purchase obligations;
• Loyalty rebates;
• Purchase targets;
• Loss of bonuses for buying from third parties;
• Requirements to purchase complete product ranges;
• Technical approval standards that no competing supplier can satisfy;
• Bundled equipment and supply arrangements.

The franchisor should identify which products genuinely require central sourcing. For ordinary products capable of meeting objective quality standards, an approval mechanism may be more proportionate than absolute exclusivity.

Approved supplier criteria should be objective, transparent and applied consistently. The franchisor should not reject an alternative supplier merely to preserve an undisclosed commission or commercial advantage.

Supplier Rebates and Undisclosed Benefits

A franchisor may negotiate rebates, commissions or marketing contributions from approved suppliers.

These arrangements are not automatically unlawful, but they may create contractual, disclosure and competition concerns.

A franchisor should avoid selecting suppliers solely because they provide financial benefits while imposing unnecessarily high costs on franchisees.

If supplier arrangements effectively prevent alternative purchasing, they must be assessed as exclusive purchasing or non-compete restrictions.

The agreement should explain whether the franchisor or an affiliate receives rebates and whether those benefits are:

• Retained by the franchisor;
• Used to support the franchise system;
• Credited to the advertising fund;
• Passed to franchisees;
• Reflected in purchase prices.

Transparency reduces disputes but does not eliminate the need for competition-law analysis.

Post-Termination Non-Compete Restrictions

Post-termination non-compete clauses are subject to stricter conditions.

As a general rule, a restriction applying after the agreement ends does not benefit from the block exemption. A limited exception applies where the restriction:

• Concerns goods or services competing with those covered by the agreement;
• Is limited to the premises or land from which the franchisee operated;
• Is necessary to protect know-how transferred by the franchisor;
• Does not exceed one year.

The Guidelines also recognise that the use or disclosure of know-how that has not entered the public domain may be prohibited for an indefinite period.

A nationwide restriction lasting three or five years will therefore fall outside the block-exemption safe harbour.

The clause does not become automatically lawful merely because it uses a one-year duration. It must also be limited to competing activities, the former premises and protection of substantial know-how.

Confidentiality obligations should be drafted separately. Genuine trade secrets may receive longer protection, but confidentiality should not operate as a disguised permanent ban on competition.

Selective Distribution Risks

Some franchise networks operate as selective distribution systems. Franchisees are selected according to criteria relating to premises, technical capacity, personnel, equipment, product presentation or service quality.

Qualitative selective distribution may fall outside Article 4 where it is objectively necessary because of the nature of the product, the criteria are applied uniformly and without discrimination, and the requirements do not go beyond what is necessary.

Qualitative and quantitative selective distribution systems may benefit from the block exemption up to the 30% market-share threshold, provided that authorised distributors are not prevented from actively selling to each other or to end users where the applicable rules protect those sales.

Competition risks may arise where:

• Approval criteria are vague or discriminatory;
• The franchisor limits the number of franchisees without commercial justification;
• Existing franchisees influence admission decisions;
• Members are prohibited from supplying one another;
• Retail members are prevented from selling to final customers outside their territories;
• Online sales are restricted;
• Specific competing brands are excluded selectively.

In a selective distribution system, the franchisor may require members not to sell to unauthorised distributors. However, it should not prevent authorised members from purchasing and selling among themselves.

Information Exchange Within the Franchise Network

Franchise networks often involve extensive information sharing. Franchisees may submit sales, stock, pricing, wage, customer and cost information to the franchisor.

Some information is necessary for royalty calculations, quality control and network planning. However, the franchisor should not become a hub through which competing franchisees exchange competitively sensitive information.

High-risk information may include:

• Future prices;
• Planned discounts;
• Profit margins;
• Future marketing strategies;
• Wage plans;
• Recruitment policies;
• Supplier negotiations;
• Customer allocation;
• Expansion plans;
• Responses to competing brands.

A franchisor should not circulate one franchisee’s future pricing intentions to other franchisees or organise meetings where independent franchisees agree on prices.

Historical and aggregated information generally creates less risk than current, individualised and forward-looking information. Even aggregated information may be problematic if the network is small enough for participants to identify individual franchisees.

Franchise meetings should have written agendas. Participants should be reminded not to discuss future prices, wages, customer allocation or collective action against suppliers.

Hub-and-Spoke Coordination

A hub-and-spoke infringement may arise where a central undertaking facilitates coordination among otherwise competing businesses.

In a franchise network, the franchisor may act as the hub, while franchisees act as the spokes.

For example, one franchisee may complain that another is applying lower prices. If the franchisor conveys this complaint and pressures the second franchisee to increase prices, the conduct may support an allegation of coordinated resale price maintenance.

Other risky scenarios include:

• Circulating proposed price lists for collective approval;
• Asking franchisees to report price deviations;
• Communicating one franchisee’s future strategy to others;
• Coordinating collective refusal to use a supplier;
• Allocating customers following requests from franchisees;
• Using advisory councils to agree on wages or recruitment.

The fact that communications pass through the franchisor does not necessarily protect the participants from competition-law liability.

No-Poach Agreements and Labour-Market Risks

Franchise agreements sometimes prohibit franchisees from employing workers of the franchisor or other franchisees. These provisions are commonly called no-poach or employee non-solicitation clauses.

The Turkish Competition Authority adopted its Guidelines on Competition Infringements in Labour Markets on 21 November 2024. The Guidelines state that agreements between employers concerning wages or working conditions may violate Article 4. They also treat arrangements under which undertakings refrain from hiring each other’s current or former employees as competition-law infringements.

No-poach arrangements include not only complete hiring bans but also systems requiring the approval of the current employer before an employee may be recruited. The Guidelines describe employee non-solicitation agreements as artificial allocations of labour and state that restrictions by object may be treated as cartels.

A clause stating that no franchisee may hire any current or former employee of another network member for two years throughout Türkiye is therefore highly risky.

A narrowly drafted restriction may be more defensible if it is genuinely ancillary to a legitimate transaction and is limited to:

• Key employees;
• Active solicitation rather than voluntary applications;
• A reasonable duration;
• Persons exposed to specific confidential know-how;
• The parties directly involved in the relevant project.

The restriction must be objectively necessary and proportionate. Administrative convenience or a desire to reduce employee turnover will not alone provide a sufficient justification.

Franchisees must also avoid discussing wage levels, benefits, working hours or future recruitment plans with one another.

Most-Favoured-Customer Clauses

A most-favoured-customer or most-favoured-nation clause may require a franchisee, supplier or digital platform to offer one party terms at least as favourable as those offered elsewhere.

Such clauses are not automatically prohibited, but they may reduce incentives to discount, facilitate monitoring or support resale price maintenance.

For example, a clause requiring every franchisee to ensure that prices on a central franchise platform are no higher than prices offered through any other channel may restrict competition between platforms.

The risk depends on:

• The market position of the protected party;
• Whether the clause is narrow or wide;
• The number of parties using similar clauses;
• Effects on market entry;
• Effects on discounts;
• Whether the clause reinforces another pricing restriction.

Most-favoured-customer clauses should not be inserted into franchise systems without a separate competitive assessment.

Tying and Bundling

A franchisor may require the franchisee to purchase several products or services together. For example, the franchisee may be required to obtain software, payment systems, equipment, insurance, ingredients and marketing services from the franchisor or nominated suppliers.

Some bundling may be necessary to operate a uniform system.

Competition concerns arise where the franchisor uses its position in one product to force the purchase of unrelated products, particularly where it has market power and competing suppliers are foreclosed.

The agreement should distinguish between:

• Products technically essential to the franchise method;
• Products necessary for quality or safety;
• Optional commercial services;
• Ordinary supplies available from equivalent sources.

A requirement to use proprietary point-of-sale software may be justified if it is essential for royalty reporting and network integration. Requiring franchisees to purchase unrelated office products from an affiliate may be more difficult to defend.

Abuse of Dominant Position

Most franchise competition disputes concern restrictive agreements under Article 4. However, Article 6 of Law No. 4054 may become relevant where the franchisor holds a dominant position in a relevant market.

Dominance is not unlawful by itself. The legal risk arises when a dominant undertaking abuses its market power.

Potential concerns may include:

• Discriminating between equivalent franchisees;
• Refusing essential supplies without objective justification;
• Applying exclusionary rebates;
• Tying unrelated products;
• Using predatory conditions against competing networks;
• Preventing franchisees from switching after the agreement;
• Favouring corporate-owned outlets in a central digital platform;
• Imposing excessive or exclusionary exclusivity.

A dominant franchisor must be particularly careful when terminating supply, approving alternative suppliers or operating platforms that determine access to customers.

Consequences of a Competition-Law Infringement

Competition-law violations can produce administrative, contractual and civil consequences.

Loss of the Block Exemption

A hardcore restriction such as resale price maintenance or prohibited passive-sales restriction may remove the complete agreement from the protection of the block exemption.

Where an excessive non-compete clause is severable, only that provision may lose protection while the remaining agreement continues to benefit. If the restriction cannot be separated, the entire agreement may fall outside the exemption.

Falling outside the block exemption does not automatically establish an infringement, but the parties must then demonstrate that the agreement satisfies the conditions for individual exemption.

Administrative Fines

Under the current fining framework, administrative fines are calculated by reference to annual gross revenue and cannot exceed 10% of the relevant undertaking’s annual gross revenue. The 2024 Regulation also requires the Competition Board to determine a basic fine and then consider aggravating and mitigating factors.

Both the franchisor and franchisees may be exposed where they participate in an unlawful arrangement.

The risk is not limited to contractual provisions drafted by the franchisor. A franchisee that requests, accepts or implements unlawful price coordination may also face liability.

Contractual Invalidity

Agreements violating Article 4 may be invalid to the extent of the unlawful restriction. This may prevent the franchisor from enforcing a price, territory or non-compete clause in court.

Invalidity may also affect related contractual provisions where they cannot be separated from the restriction.

Damages Claims

Persons harmed by a competition infringement may seek compensation. Turkish competition law provides private-law remedies including invalidity and damages, and qualifying intentional or grossly negligent conduct may lead to compensation of up to three times the proven damage or the profit obtained or likely to be obtained by the infringer.

Potential claimants may include franchisees, competing businesses, suppliers and consumers, depending on the infringement and loss suffered.

Operational and Reputational Effects

An investigation may also result in:

• Document requests;
• On-site inspections;
• Examination of electronic communications;
• Removal or amendment of contractual provisions;
• Disruption to commercial planning;
• Disclosure of internal business practices;
• Reputational damage.

Competition compliance should therefore be treated as part of franchise-system design rather than as a defence prepared after an investigation begins.

Competition Compliance Programme for Franchise Networks

A franchisor should adopt a compliance programme tailored to the actual operation of its network.

The first step is a legal review of the franchise agreement, operations manual, supplier agreements, technology systems, marketing policies and franchisee communications.

The review should identify whether any provision affects:

• Resale prices;
• Discounts;
• Territories;
• Passive sales;
• Online sales;
• Approved suppliers;
• Exclusive purchasing;
• Non-compete obligations;
• Employee recruitment;
• Wage information;
• Data sharing;
• Customer allocation.

Employees involved in franchise management, pricing, supply and digital platforms should receive training.

Franchisee advisory councils and network meetings should use written agendas and competition-law reminders. Minutes should accurately record discussions.

Electronic systems should also be reviewed. Software should not prevent franchisees from changing prices unless the franchisor itself is legally the seller.

Complaint-handling procedures are particularly important. When one franchisee complains about another franchisee’s prices, the franchisor should not intervene to coordinate pricing. Complaints concerning trademark misuse, misleading advertising or quality standards should be separated from complaints concerning legitimate price competition.

Practical Drafting Recommendations

A Turkish franchise agreement should state that each franchisee independently determines its resale prices.

Recommended price lists should be clearly marked as non-binding. The agreement should prohibit retaliation based on price deviation.

Territorial clauses should distinguish active and passive sales. Unsolicited orders should not be prohibited unless a specific lawful exception applies.

Online quality standards should be objective and proportionate. The agreement should avoid total online-sales bans, percentage caps and discriminatory wholesale pricing.

Approved supplier rules should explain the quality criteria and alternative supplier approval process.

Non-compete clauses should distinguish contractual and post-contractual periods. Automatic renewal, connected leases and equipment arrangements should be reviewed together.

Employee non-solicitation provisions should not be included as standard wording. Any restriction should be separately justified and narrowly drafted.

Information-sharing clauses should limit access to data genuinely required for royalty calculations, quality control and system improvement.

Competition-Law Risk Checklist

Before implementing a Turkish franchise system, the parties should verify that:

1. The relevant markets have been identified.
2. The franchisor’s market share has been assessed against the 30% threshold.
3. The franchisee is free to determine resale prices.
4. Recommended prices are genuinely non-binding.
5. Discounts do not require unlawful approval.
6. Territorial clauses distinguish active and passive sales.
7. Unsolicited customers are not improperly rejected.
8. Online sales are not prohibited or artificially limited.
9. Online and offline wholesale conditions are not structured to discourage e-commerce.
10. Approved supplier requirements are objectively justified.
11. Purchasing obligations have been reviewed under the 80% rule.
12. In-term non-compete provisions comply with the applicable duration and necessity requirements.
13. Post-term restrictions satisfy the one-year, premises and know-how conditions where the block exemption is relied upon.
14. Franchisee meetings do not involve future prices, wages or customer allocation.
15. Individual franchisee information is not circulated unnecessarily.
16. No-poach and wage coordination clauses have been removed or separately justified.
17. Central digital platforms preserve franchisee independence where required.
18. Corporate-owned outlets are not unfairly favoured.
19. Contractual provisions are severable where appropriate.
20. The franchise network has an active competition compliance programme.

Conclusion

Competition law risks in Turkish franchise systems arise from both contractual wording and daily commercial practices.

Franchisors may legitimately protect their trademark, know-how, product quality and network identity. Nevertheless, those objectives do not justify fixed resale prices, passive-sales restrictions, excessive exclusivity or coordination among independent franchisees.

Resale price maintenance is one of the highest-risk areas. Recommended and maximum prices are permissible only where franchisees remain genuinely free to determine their own prices. Pressure, incentives, monitoring and threats may convert an apparently voluntary recommendation into an unlawful fixed or minimum price.

Territorial protection must distinguish active sales from passive sales. A franchisor may restrict targeted active sales into a properly allocated exclusive territory in qualifying circumstances, but it should not generally prevent franchisees from responding to unsolicited customer requests.

Online sales require a separate and modern analysis. Quality requirements may be imposed, but the franchisor should not prohibit effective internet sales, impose percentage limits or apply discriminatory wholesale prices.

Non-compete and exclusive purchasing clauses must be proportionate. The 30% market-share threshold, five-year rule, 80% purchasing threshold and one-year post-term safe harbour should be considered together with the franchise-specific need to protect substantial know-how and common network identity.

Competition compliance now extends clearly to employment practices. Broad no-poach arrangements and wage coordination among franchisees may be treated as serious infringements.

Information exchange, franchisee councils and central digital platforms also require safeguards. A franchisor must not become a hub through which competing franchisees coordinate prices, customers, wages or commercial strategy.

An infringement may result in loss of exemption, contractual invalidity, damages claims and administrative fines of up to 10% of annual gross revenue.

The safest franchise agreement is not the agreement giving the franchisor maximum theoretical control. It is the agreement that protects legitimate brand interests while preserving the independent competitive decisions that Turkish law requires each franchisee to make.

Frequently Asked Questions

Are franchise agreements subject to Turkish competition law?

Yes. Franchise agreements commonly contain vertical restrictions and are generally assessed under Law No. 4054, Communiqué No. 2002/2 and the Guidelines on Vertical Agreements.

What is the block-exemption market-share threshold?

The provider’s market share must generally not exceed 30%. In agreements containing exclusive-supply obligations, the buyer’s market share in the relevant purchasing market is also relevant.

Can a franchisor set resale prices?

A franchisor may recommend prices or establish maximum prices, but it may not impose fixed or minimum prices directly or indirectly.

Can franchisees be required to participate in promotions?

Promotions may be organised, but their structure must not become a permanent mechanism for fixed resale pricing. Cost allocation and franchisee independence should be clearly addressed.

Can a franchisee receive an exclusive territory?

Yes. However, territorial provisions must distinguish between active and passive sales and comply with the conditions of Turkish competition law.

Can passive sales be prohibited?

As a general rule, restrictions on passive sales remove the agreement from the block exemption unless a specific exception applies.

Are internet sales considered passive sales?

Internet sales are generally treated as passive sales. Targeted electronic marketing directed at another exclusive territory may constitute active selling.

Can the franchisor ban online sales?

A complete ban creates serious competition-law risk. Objective quality standards may be imposed, but they must not prevent effective use of the internet.

Can the franchisee be required to purchase from approved suppliers?

Yes, where the obligation is justified and proportionate. However, purchasing more than 80% of relevant requirements from the franchisor or designated suppliers is treated as a non-compete obligation.

How long may an in-term non-compete obligation last?

The general block-exemption rule limits non-compete obligations to five years, subject to limited exceptions and franchise-specific necessity analysis.

How long may a post-termination non-compete last?

The block-exemption safe harbour generally permits a maximum of one year, provided the restriction is limited to competing activities, the former premises and protection of transferred know-how.

Are no-poach clauses lawful?

Broad arrangements preventing franchisees from hiring each other’s employees create serious competition-law risks and may be treated as cartel-type restrictions.

Can franchisees share pricing information?

Independent franchisees should not exchange future prices, planned discounts, margins or other competitively sensitive information.

What is the maximum competition fine?

The administrative fine imposed on an undertaking may reach up to 10% of its relevant annual gross revenue.

Can a competition-law clause be invalid?

Yes. A clause violating Article 4 may be legally unenforceable. Depending on severability, the invalidity may affect only the restriction or broader parts of the agreement.

Can harmed franchisees claim damages?

Yes. Parties harmed by a competition infringement may seek compensation, and qualifying intentional or grossly negligent infringements may create increased damages exposure.

This article provides general legal information and does not constitute legal advice. Every franchise system should be assessed according to its market position, contractual restrictions, digital structure, supply chain and the legislation in force at the relevant time.