Online Sales Restrictions and Competition Law: Consumer Health as a New Exception

Türkiye’s Competition Board (“Board”) issued a decision[1] regarding restrictions in online sales practices marking a new approach to issues frequently examined in other sectors. The decision, concerning L’Oréal Türkiye Kozmetik San. ve Tic. A.Ş. (“L’Oréal”), confirmed the exclusion of online sales of a product group from the scope of the commitment due to consumer health concerns.

Previous Decisions Regarding Online Sales

In its BSH[2] and Arçelik[3] decisions, both of which are leading case law on the subject, the Board determined it could not approve the prevention of dealers’ online sales by suppliers, without imposing any criteria, as it constitutes passive sales prohibition.[4] Accordingly, numerous undertakings committed to ending such unconditional restrictions during investigations.[5]

Investigations and the Commitment Process for Cosmetics

During investigations against several cosmetics companies, including L’Oréal, the Board determined that undertakings had imposed online sales restrictions and prohibitions to their resellers.[6]

The Board evaluated commitment applications from the undertakings to eliminate the restrictions in question and issued a ruling in parallel with the BSH and Arçelik decisions. According to the Board, the unconditional prohibition of online sales, either by pressure on the purchasers in practice or under the contractual relationship established with the purchasers, constitutes the prevention of passive sales. As a result, several undertakings have submitted commitments, including:

— No interference in online sales of re-sellers (including marketplaces);

— No special authorization or approval for online sales to be requested;

— Amendments to ensure no discrimination is made between physical and online dealers in the determination of discount rates;

— Notification through all distribution channels that online sales will not be restricted.

L’Oréal Decision: Online Sales Restriction Based on Consumer Health Considerations

The investigation into L’Oréal indicated the firm operates a selective distribution system for certain products and the members of this system may realize online sales; however, these online sales should be approved by L’Oréal.[7] Furthermore, L’Oréal requires prior approval for the authorized seller to place advertisements for online sales. The Board reiterated that undertakings using a selective distribution system may stipulate certain conditions for online sales, but highlighted that these conditions should be objective. It also distinguished the approval mechanism for advertisements from these conditions.

The commitments submitted by L’Oréal covered the following aspects: criteria for all resellers intending to sell online should be transparent and clear, sellers should be authorized to place advertisements, and these matters should be communicated to the sellers explicitly.[8] Thus, the decision is consistent with the Board’s approach that online sales should not be unconditionally restricted and that purchasers should be allowed to sell online if they fulfil the criteria.

On the other hand, within the same commitment package, L’Oréal also stated that the online sale of technical size products would be authorized, provided that the buyer is a professional customer (hairdresser, etc.), however, technical products would be excluded from the scope of the commitments. The exclusion of technical products from the commitment package was approved by the Board.

While the decision provides few details, it states that “technical products” that differ from “technical size” products used in hairdressing services,[9] require special training for their application. Technical products are considered dangerous for human health and safety due to their chemical content, and therefore, the purchase and misuse of such products over the internet by individuals without the necessary training and knowledge may cause harm to consumers. In this respect, L’Oréal’s prohibition of online sales of “technical products” was recognized as reasonable. The Decision is important as it authorizes the prohibition of online sales of an entire product group on the basis of consumer health.

Conclusion

A review of the Board’s practices regarding the restriction of online sales reflects a different approach over time in accordance with the sector and product characteristics. Shaped by the BSH and Arçelik decisions, this approach has evolved in the L’Oréal decision in the direction of excluding a product group from the scope of online sales due to the nature of the product. Hence, we consider that the Board maintains its sensitivity regarding criteria that may be imposed on dealers/buyers in terms of online sales, however, specific conditions arising from the sector and product characteristics will increasingly be included among the restrictions that may be imposed on buyers.

[1] Board decision dated 07.09.2023 and numbered 23-41/808-287

[2] Board decision dated 08.09.2022 and numbered 22-41/579-239

[3] Board decision dated 08.09.2022 and numbered 22-41/579-239

[4] Passive sale prohibition: In the Guidelines on Vertical Agreements, online sales are considered as passive sales, as they are not part of the active marketing and sales activities of the buyer.

[5] Board decisions dated 21.09.2023 and numbered 23-45/852-301, dated 23.03.2023 and numbered 23-15/252-83, dated 23.03.2023 and numbered 23-10/175-43, dated 12.01.2023 and numbered 23-03/29-12, dated 31.08.2023 and numbered 23-40/765-269, dated 19.10.2023 and numbered 23-49/950-339, dated 19.10.2023 and numbered 23-49/934-232, dated 23.03.2023 and numbered 23-15/269-91, dated 06.04.2023 and numbered 23-17/314-104, dated 05.10.2023 and numbered 23-47/890-314, dated 05.07.2023 and numbered 23-29/561-189.

[6] Board decisions listed under footnote numbered 5.

[7] Board decision dated 07.09.2023 and numbered 23-41/808-287

[8] Board decision dated 26.07.2023 and numbered 23-34/638-M

[9] Technical size products are intended for professional end users, while technical products are for professional use.