Restricting Online Sales Under Turkish Competition Law

As e-commerce has become the dominant channel for product distribution across virtually every sector, the question of whether and how a supplier can restrict its resellers from selling online has become one of the most practically significant issues in Turkish competition law. For foreign businesses that supply or distribute products in Turkey through dealer, distributor, or reseller networks, understanding the legal limits on online sales restrictions is not optional: it is a compliance requirement with direct financial consequences.

Turkish competition law prohibits vertical agreements that restrict passive sales, including online sales. The Turkish Competition Board (Rekabet Kurulu) has issued a series of decisions confirming that clauses in distribution agreements that prevent, limit, or make it financially disadvantageous for resellers to sell via the internet constitute anti-competitive restrictions, outside the scope of the applicable block exemption, and subject to administrative fines.

This article explains the legal framework, sets out the distinction between active and passive sales, and analyses the Board's most recent decision on this topic, the Kadioglu Decision of 27 December 2024 (decision no. 24-56/1246-534), as well as two earlier landmark decisions, to draw out the practical implications for foreign businesses operating in Turkey.

1. The Legal Framework: Turkish Competition Law and Vertical Agreements

The primary legal basis for the regulation of vertical agreements in Turkey is Article 4 of the Law on the Protection of Competition (Law No. 4054), which prohibits agreements, concerted practices, and decisions between undertakings that have as their object or effect the prevention, restriction, or distortion of competition in the Turkish market.

Article 4 is broadly equivalent to Article 101(1) of the Treaty on the Functioning of the European Union (TFEU), and the Turkish Competition Board explicitly applies EU competition law principles, including European Commission guidelines and case law, as a reference point in its analysis.

1.1. The Block Exemption: Communique No. 2002/2

Vertical agreements, including distribution agreements between suppliers and resellers, are not automatically prohibited under Article 4. They may qualify for a block exemption under Communique No. 2002/2 on the Block Exemption for Vertical Agreements (the Communique), which is Turkey's equivalent of the EU's Vertical Block Exemption Regulation.

An agreement that falls within the block exemption is deemed compatible with Turkish competition law and exempt from the prohibition in Article 4, without requiring individual assessment. However, certain provisions automatically exclude an agreement from the block exemption, regardless of the parties' market shares. These are known as hardcore restrictions.

1.2. Hardcore Restrictions: What Automatically Falls Outside the Exemption

Article 4(b) of the Communique lists the hardcore restrictions that exclude an agreement from the block exemption. These include restrictions on passive sales into territories or to customer groups allocated to other resellers. Online sales are treated as passive sales by default, and restrictions on online sales therefore fall within this category.

The consequence of a hardcore restriction is significant: the entire vertical agreement loses the benefit of the block exemption, not just the offending clause. The agreement then falls to be assessed under the general prohibition of Article 4, and if it cannot satisfy the conditions for individual exemption under Article 5 of Law No. 4054, it is unlawful.

1. Active Sales and Passive Sales: The Core Distinction

The distinction between active and passive sales is fundamental to understanding what a supplier can and cannot restrict in a distribution agreement. This distinction is set out in the EU Commission's 2010 Guidelines on Vertical Restraints, which the Turkish Competition Board explicitly applies as a reference.

2.1. Active Sales

Active sales are sales to customers in a territory or customer group allocated to another reseller, made through the active efforts of the selling reseller. Active selling involves the reseller proactively targeting customers outside its own territory. Examples include:

• Sending direct mail or making unsolicited visits to customers in another reseller's territory

• Running advertising campaigns specifically targeting another reseller's territory

• Opening a warehouse or sales point in another reseller's territory

Suppliers may, under certain conditions, restrict active sales by resellers into territories or customer groups exclusively allocated to other resellers. This is generally permissible within the block exemption framework.

2.2. Passive Sales

Passive sales are sales to customers who approach the reseller of their own initiative, without the reseller having actively targeted them. Examples include:

• A customer visiting a reseller's website and placing an order

• A customer contacting a reseller directly after finding them through an internet search

• A customer subscribing to a reseller's automated notification system and receiving product updates

Online sales, by their fundamental nature, constitute passive sales. When a customer navigates to a reseller's website and makes a purchase, that is a passive transaction: the customer approached the seller. For this reason, restricting a reseller's ability to sell via its own website is a restriction on passive sales.

2.3. Online Sales as Passive Sales: The Established Position

The treatment of online sales as passive sales is firmly established in both EU and Turkish competition law. The EU Commission's Vertical Guidelines confirm that every distributor must be free to use the internet to sell its products. A supplier that restricts a reseller's use of its own website for sales is restricting passive sales, which constitutes a hardcore restriction.

The Turkish Competition Board has applied this principle consistently across its decisions. The relevant passage from the Vertical Guidelines, as applied by the Board, provides: 'a supplier's restriction on distributors/dealers/buyers from selling through their own websites constitutes a type of passive sales restriction.'

1. What Suppliers May Legitimately Require: Permissible Quality Conditions

The prohibition on restricting passive sales, including online sales, does not mean that suppliers have no ability to set standards for how their products are sold online. Paragraph 28 of the Vertical Guidelines (as incorporated into Turkish practice) makes clear that a supplier may impose certain conditions on the use of the internet as a sales channel, in the same way that it may impose conditions on the operation of physical retail outlets.

Permissible conditions include:

• Quality standards for the reseller's website (design, presentation, and functionality requirements)

• Minimum service requirements for customers who purchase online (for example, pre-sales advice, after-sales support, or returns handling)

• Requirements that the reseller maintain at least one physical retail outlet (in certain selective distribution contexts)

• Restrictions on using specific third-party online platforms or marketplaces, where the supplier can demonstrate objective justification

The critical requirement is that any such conditions must be objectively justifiable, proportionate, and no more restrictive of competition than necessary to achieve a legitimate objective, such as protecting the brand's quality image or ensuring an appropriate standard of customer service. Conditions that effectively make online sales commercially unviable, or that place online-selling resellers at a systematic financial disadvantage compared to those who sell only through physical outlets, will be treated as indirect restrictions on passive sales.

1. The Kadioglu Decision (27 December 2024): Key Findings

The Turkish Competition Board's decision of 27 December 2024 in the Kadioglu case (decision no. 24-56/1246-534) is the most recent and most instructive decision on online sales restrictions. The case involved Kadioglu Kirtasiye Pazarlama Ticaret A.S., a stationery and office supplies distributor, and its reseller network.

4.1. The Contractual Clause

The Board examined the reseller agreement between Kadioglu and its dealers, which included the following clause:

'Kadioglu may at any time temporarily suspend or completely terminate the operation of the Kadioglu web environment. Kadioglu shall bear no responsibility toward Kadioglu web members or third parties for any temporary suspension or complete termination of the environment.'

This clause gave Kadioglu the right to suspend or shut down the online sales system used by its resellers, including the XML system, at any time and without liability. The XML system was a product information and order management system that facilitated online sales by resellers and was widely used by the dealer network.

4.2. The Board's Analysis

The Board found that the combination of the contractual clause and the actual use of the XML system constituted a restriction on online sales, on the following grounds:

First: indirect financial disadvantage to online-selling resellers. The Board found that Kadioglu did not provide the same level of discounts and support to resellers who sold online as it did to those who did not sell online. This made online-selling resellers systematically worse off than their non-online counterparts, and reduced their incentive to use the online channel. The Board's finding was:

'In this context, it is understood that although Kadioglu does not completely restrict internet sales, it does not provide the same support and discounts to resellers who sell online as it provides to other sellers. This situation will place resellers who sell online at a disadvantage compared to those who do not, and will negatively affect the motivation of resellers to sell through the online channel. As a result, it is assessed that Kadioglu has indirectly restricted resellers' online sales through this practice.'

Second: the XML system as an instrument of restriction. The Board found that the ability to shut down the XML system, which was the primary technical tool enabling resellers to conduct online sales, was itself a form of online sales restriction. The relevant finding was:

'Under normal circumstances, for a distributor that opens the XML system to its dealers to close this system to dealers who sell online, and to expose dealers to difficulties and costs that they would not bear in the event of physical sales, is also a type of internet sales restriction.'

4.3. The Block Exemption and Individual Exemption Analysis

The Board confirmed that the online sales restrictions found constituted passive sales restrictions within the meaning of Article 4(b) of Communique No. 2002/2, and therefore fell outside the block exemption.

The Board then assessed whether the restrictions could qualify for individual exemption under Article 5 of Law No. 4054, which requires that the agreement:

• Contribute to improving the production or distribution of goods or the provision of services, or to promoting technical or economic progress

• Allow consumers a fair share of the resulting benefit

• Not eliminate competition in respect of a substantial part of the relevant market

• Not impose restrictions that are not indispensable to the attainment of objectives (a) and (b)

The Board found that the restrictions failed the individual exemption test, particularly on the indispensability criterion. Referencing the EU Commission's approach, the Board noted that where a supplier has concerns about brand image or free-riding, there are less restrictive alternatives available, such as imposing quality standards on online sales channels, rather than restricting or dis-incentivizing online sales altogether.

As a result, the Board found a violation of Article 4 and imposed an administrative fine on Kadioglu.

1. Earlier Landmark Decisions: Yatas and Yatsan

The Kadioglu decision follows a line of Board decisions confirming the same principles. Two earlier decisions are particularly instructive for foreign businesses.

5.1. Yatas Decision (6 February 2020, No. 20-08/83-50)

Yatas Yatak ve Yorgan Sanayi Ticaret A.S. included the following clause in its reseller agreements:

'The dealer may not, without Yatas's written permission, display, market, or sell the relevant goods at any location other than the store (including virtual environment sales and sales over the internet), even temporarily. The dealer may not, without Yatas's written permission, change the store in which it operates or move to a new address.'

The Board found that this explicit internet sales prohibition failed both the block exemption and individual exemption tests. However, given the undertaking's limited market power and the correspondingly limited competitive impact of the restriction, the Board chose to issue a compliance recommendation rather than a fine, requiring Yatas to remove the infringing provision.

5.2. Yatsan Decision (23 September 2010, No. 10-60/1251-469)

Yatsan Sunger ve Yatak Sanayi Ticaret Ltd. Sti. included the following clause in its reseller agreements for Tempur-branded products:

'Sales of Tempur-branded products via the internet will under no circumstances be permitted.'

The Board found that this constituted both a block exemption-excluding hardcore restriction and a restriction on competition under Article 4. Importantly, the Board's decision in the Yatsan case noted that the prohibition on online sales restricted consumers' freedom of choice and could not be considered legally legitimate. A fine was imposed.

1. Selective Distribution Systems: A Specific Note

Selective distribution is a distribution model in which a supplier selects its resellers based on defined qualitative or quantitative criteria, and restricts resale to non-selected distributors. It is commonly used for luxury goods, branded products, and technically complex merchandise.

Under Article 4(c) of Communique No. 2002/2, restrictions on both active and passive sales by members of a selective distribution system to end users are treated as hardcore restrictions. This means that even within a selective distribution system, a supplier cannot prevent its authorized resellers from making passive sales to end users, including sales made through the resellers' own websites.

The principle is straightforward: the existence of a selective distribution system does not give the supplier the right to restrict online sales by authorized resellers. Authorized resellers in a selective distribution system may sell to any end user in any territory, including through the internet, unless the restriction satisfies the narrow conditions that would apply outside selective distribution.

1. Practical Compliance Guidance for Foreign Businesses

For foreign businesses that supply or distribute products in Turkey through dealer or reseller networks, the following compliance framework is essential.

1. What Happens if a Violation Is Found: Consequences

Where the Turkish Competition Board finds a violation of Article 4 arising from an online sales restriction in a vertical agreement, the consequences may include:

• Administrative fine: the Board may impose a fine of up to 10% of the Turkish turnover of the infringing undertaking in the preceding financial year. The Kadioglu decision resulted in a fine. The Yatsan decision also resulted in a fine. The Yatas decision, reflecting limited market power, resulted in a compliance recommendation.

• Obligation to remove the infringing clause: the Board will require the removal of any infringing provisions from the distribution agreements. This obligation applies to all existing agreements, which may require renegotiation with the entire reseller network.

• Third-party damages claims: resellers or other parties harmed by the restriction may bring civil damages claims before the Turkish courts.

• Reputational consequences: Board decisions are published and publicly accessible, creating reputational risk particularly for well-known foreign brands.

Frequently Asked Questions About Online Sales Restrictions and Turkish Competition Law

1. Can a supplier in Turkey prohibit its resellers from selling online?
2. Can a supplier in Turkey prohibit its resellers from selling online?

No. A supplier cannot prohibit resellers from selling online through the resellers' own websites. Such a prohibition is a restriction on passive sales, which is a hardcore restriction under Communique No. 2002/2. It falls outside the block exemption and constitutes a violation of Article 4 of Law No. 4054, regardless of the parties' market shares.

1. Are online sales always classified as passive sales?
2. Are online sales always classified as passive sales?

Online sales made through a reseller's own website in response to customer visits are treated as passive sales, since the customer approaches the reseller rather than the other way around. Targeted online advertising specifically directed at customers in another reseller's allocated territory may be treated as active sales, which can be more easily restricted. The distinction turns on who initiates the contact.

1. Can a supplier impose quality standards on how its resellers sell online?
2. Can a supplier impose quality standards on how its resellers sell online?

Yes, subject to conditions. A supplier may require its resellers to maintain a website that meets certain quality and presentation standards, to provide defined levels of customer service to online buyers, and to comply with specific service conditions. These conditions must be objectively justified, proportionate, and no more restrictive of online sales than necessary. Conditions that in practice make online sales commercially unviable will be treated as indirect restrictions on passive sales.

1. What if the supplier does not prohibit online sales outright but makes it financially less attractive to sell online?
2. What if the supplier does not prohibit online sales outright but makes it financially less attractive to sell online?

This is exactly what the Kadioglu decision addressed. The Board held that providing lower discounts or less support to resellers who sell online, compared to those who do not, constitutes an indirect restriction on online sales. A systematic financial disadvantage for online-selling resellers is treated as equivalent to a direct prohibition.

1. Can a supplier prevent its resellers from selling on third-party online marketplaces (such as Amazon or Trendyol)?
2. Can a supplier prevent its resellers from selling on third-party online marketplaces (such as Amazon or Trendyol)?

This is a contested area in both EU and Turkish competition law. Restrictions on selling through specific third-party platforms may be permissible where the supplier can demonstrate objective justification, provided the reseller is still free to sell through its own website. The assessment is fact-specific and depends on the nature of the restriction, the supplier's market position, and the availability of alternative online channels. Specific legal advice should be obtained before including such restrictions in distribution agreements.

1. My company distributes products in Turkey through a selective distribution network. Are the same rules on online sales restrictions?
2. My company distributes products in Turkey through a selective distribution network. Are the same rules on online sales restrictions?

Yes. Under Article 4(c) of Communique No. 2002/2, restrictions on both active and passive sales by members of a selective distribution system to end users are hardcore restrictions. Even within a selective distribution system, authorized resellers must be free to make passive sales to end users, including sales through their own websites, in any territory. The existence of a selective distribution network does not create additional flexibility to restrict online sales.

1. Our existing distribution agreements contain a clause restricting internet sales. What should we do?
2. Our existing distribution agreements contain a clause restricting internet sales. What should we do?

You should remove the infringing clause as promptly as possible and renegotiate the relevant agreements with your resellers. If you wish to impose any conditions on the manner in which resellers sell online, those conditions should be reviewed by competition law counsel to ensure they are compliant. Waiting for the Board to identify the issue is significantly more costly than proactive compliance: fines can reach 10% of Turkish annual turnover, and all existing agreements may need to be revised in any event.

Conclusion

The Turkish Competition Board's approach to online sales restrictions is clear, consistent, and aligned with EU competition law. Online sales are passive sales. Restricting them, whether directly through contract clauses, indirectly through financial disincentives, or technically through the withdrawal of tools that enable online selling, is a hardcore restriction that falls outside the block exemption and constitutes a violation of Turkish competition law.

The Kadioglu Decision of December 2024, together with the earlier Yatas and Yatsan decisions, establishes that the Board will scrutinize not only explicit contractual prohibitions but also indirect mechanisms that systematically discourage online sales. For foreign businesses that distribute through reseller networks in Turkey, this is a compliance area that requires active legal review.

At Bayraktar Attorneys, we advise foreign businesses on Turkish competition law compliance, including the review and drafting of distribution agreements, selective distribution systems, and e-commerce compliance frameworks. If you have questions about whether your existing distribution arrangements comply with Turkish competition law, please contact us.