Recent developments in digital sectors and the digital feautures having greater influence on societal tendencies rendered the online sales more prominent than ever; thus, that topic has started to been inquired by the Competition Authorities as the online market places have an impact on the competition within various sectors. [1]

As an illustration of such efforts, the European Commission's published report on the e-Commerce Sector Inquiry highlights the focus on manufacturers and retailers adopting distinct distribution strategies. This has led to a growing shift towards a selective distribution system and stricter regulations on online sales via marketplaces. According to the obtained results, manufacturers tend to place various criteria for retailers in order to gain more control over the distribution system of their own goods and the restraints adopted by manufacturers vary from pricing restrictions and platform bans to the exclusin of pure online players from distribution networks. [2]

Another initative taken by the EU Commission is the reviewed VBER (Vertical Block Exemption Regulations) which has entered into force on June 1 2022 after its predecessor expired in May. It must be stressed that the amended VBER comes with some new rules that are, generally speaking, less stricter than the prior versions. [3]

Throughout this study, the BSH decision of Turkish Competition Authority (TCA) will be firstly be examined since it can be referred to as a ‘landmark decision’ revealing the TCA’s approach on online market places and afterwards, a comparison of the approaches of EU and the Authority’s understanding will be set based on some EU decisions as well as the reviewed VBER provisions.

An overview of the BSH decision

TCA assesed whether the agremeents encountering clauses that prevent the dealers of BSH from selling its products on online market places eventhough they are allowed to sell the latters on their own websites infringe the competition law, in particular article 4 of the Law No.4054 on the Proctection of Competition Law.

BSH, one of the biggest undertakings in the home appliances market, provided several justifications for the imposed restrictions, focusing primarily on preventing counterfeit products, improving customer relationships, enhancing delivery and post-sales services, and preserving the brand image of the products being distributed. However, the Board determined that these restrictions did not adequately address the stated concerns and were ultimately ineffective in achieving BSH's objectives.

TCA’s findings

TCA discussed the conditions for benefiting from the block exemption outlined in the Block Exemption Communiqué on Vertical Agreements numbered 2002/2. Agreements that do not include any restrictions listed in the "black list" of the Communiqué can qualify for the block exemption.

The decision specifically focused on BSH's selective distribution system [4] and the prohibition of passive sales [5], which is considered a "hardcore restriction" under the Guidelines on Vertical Agreements. The Board highlighted that the restriction of sales through online marketplaces, including direct or indirect prohibition of online sales, goes against the principle of equivalency, hinders resellers from using the internet as a distribution channel, and restricts sales to end-users. Based on these findings, the Board concluded that the restrictions on online marketplaces are not objectively justified and lack qualitative criteria, thus disqualifying them from the block exemption under the Communiqué No. 2002/2. [6]

As for the individual exemption, which necessitates to meet the criteria set out in article 5 of the Law No.4054, the Board initially mentioned that the arguments regarding the preservation of brand image via online market place restrictions sound speculative rather than raisonable and such limitations are far from benefiting the customers provided that the online shopping disposes numerous advantages couple of them as being lower prices, wider products range, saving on time. [7] Lastly, TCA determined a distortion of competition on the grounds that aforementioned type of clauses would reduce intra-brand and inter-brand competition, would have an adverse effect on the entry to the online markets, may block the access to a significant part of the internet sales of authorised dealers [8] and would lead to consequences to the detriment of weaker undertakings. [9]

TCA concluded that it was still possible to preserve brand image through alternative ways directed towards online market places. One among the recommandations were to set specific rules for the sales conducted in online marketplaces. [10]

What matters regarding this decision is that the online market sales are purely regarded as hardcore restrictions without assessing the case’s specific features. In other words, the Board examined in its precedent cases, such as Antis-1 and Antis-2 the requirements of the product at the case and found that resale Dermalogica’s products via the Internet could be granted an exception due to the nature of the cosmetic products, and thus to preserve the brand image. [11]

In the recent BSH Exemption decision, the Board deviated from both European practice and its own precedents [12] by failing to differentiate between restrictions on online sales and restrictions on online marketplaces. Consequently, the Board determined that sales made through online marketplaces are categorized as passive sales, leading to the conclusion that restrictions on sales through online marketplaces are considered hardcore restrictions according to Communiqué No. 2002/2.

Refreshed EU perspective, in particular new VBER

Even though the EU’s approach remains a bit less restricter as for ban on online sales being hardcore restrictions [13], the two Authorities overlap when it comes to differentiate between products based on their own nature. In this regard, the most important cases brought before ECJ (European Court of Justice) are Pierre-Fabre and Coty decisions.

The Court distinguished between [14] distributors’ sales made through ‘their own websites’ and ‘sales made through online market places’ yet evaluated them under similar categories. Bans on third-party market places are regarded as hardcore restrictions. [15]

That EU’s view explained has become law on June 2022, with the entry into force of long-awaited new Vertical Block Exemption Regulation (VBER) and the new accompanying Vertical Guidelines. Said regulation is primarily revised to reflect the growth of online sales and digital market developments. [16] On the other hand, it aims to clarify the notions to know in order to comply with itself, thus to help undertakings minimise the cost of compliance. [17]

New VBER appears to bring about 2 innovations both of which serve as a positive amendment for the manufacturers. Firstly the VBER qualifies the prevention of effective use of Internet as a hardcore restriction unless the distributor remains free to operate its own online shop and to advertise online. [18] Secondly, more flexibility regarding dual pricing and equivalence was established.

Under 4(e) VBER the prevention of – or having as their object the prevention – the effective use of the internet by the distributor or its customers to sell the contract goods or services is blacklisted and prohibited. Additionally preventing the use of one or more entire online advertising channels is also mentioned in the list. Nevertheless, restrictions that does not amount to ‘prevention of effective use of Internet’ remains out of the prohibited zone despite the difficulty in determining limits of new ‘effectiveness’ criterion. With that possible ambiguity taken into account, Guidelines provide some ground for exemption such as market-specific circumstances, the nature of the product as well as individual characteristics of the contracting parties. [19]

With respect to dual pricing adding to charging different prices for sales with varied features, such an exemption can be granted under the new VBER as long as the supplier does not have the object of preventing the effective use of Internet to sell the products or services to certain territories or customers and aims to reward the investments made online or offline. The overarching criterion should assess whether the variation in wholesale prices corresponds reasonably to the discrepancies in investments and expenses borne by the buyer for selling through each channel.

Lastly the EU has adjusted its approach towards the equality of conditions for online and offline sales. According to the criteria from which ‘not to prevent the effective use of Internet’ threshold can be observed once again, different conditions might be imposed on suppliers within a selective distribution system with regard to online and offline sales. [20]

To evaluate the TCA’s decision on BSH online marketplace restrictions from the European legislations’ scope, it is well established that the Turkish authorities holds a relatively conservative position in terms of the online market players’ measures. Alternatively, it might be noted that the Europe strives to leave more space for the undertakings operating within online platforms as long as their actions are compliant with the essential ‘goal’ of the competition law provided that the effective use of the Internet is the ultimate condition to satisfy for any sort of investigation. However, Turkish competition law is more willing for surveillance rather than letting the undertakings display their strategies more freely. Additionnally, it must be stressed that the Europe holds a more ‘tailored’ examination process compared to the TCA. Indeed the latter is also related to the attempt to ‘comprehend the basis of the measure taken’, as with finding no infringement at prohibition of online sales by the manufacturers of products that have a specific feature to explain or show by an agent of the brand.

Another important development in the field of online marketplaces is Digital Markets Act (DMA) whose final version is approved on 5 July 2022 by European Parliament. DMA merely sets forth rules concerning the ‘gatekeepers’ that has a considerable impact on digital markets, thereby economy. It prevents the gatekeepers from imposing anti-competitive obligations on the undertakings placed in a different level than themselves. It also brings an obligation to notify the EC of any contemplated M&A of ‘core platform services’ [21] which is too a sign of the will to control the balance of market share between the actors of the digital economy.

To summarize, the new VBER, assesed along with the DMA, clearly reveals the intention of the public authorities to take control over the digital economy. However, understanding the mechanism behind the online world remains crucial and as the first step to create rules that genuinely establishes a well-founded/monitored system. Indeed, it would not be wrong to say that even the difference between the interpretation of TCA and EC with regards to the restrictions stems from the differentiated analysis of the online markets’ actors’ influences on both each other and consumers. Steps to be taken by both the Turkish legislation and European authorities enforcement of these new regulations are to be followed in the upcoming days for a deeper comprehension of the current and future path of the competition among the digital market players.