Competition Boards Doğuş Otomotiv Decision on Vertical Restrictions in Labor Markets

Assessment of the Relevant Product Market and Geographical Market

The agreement which is the subject of the application relates to the recommendation by Doğuş to its authorized dealers and distributors, regarding the monthly salary to be paid to the employees of dealers working under different titles in the job families designated as sales management, service, spare parts, management and operational support. In this context, the Board evaluates Doğuş’s distribution network system. Having a quantitatively selective distribution network in vehicle sales and a qualitatively selective distribution network in after-sales services, Doğuş carries out the sales and sales services activities of the brands it distributes through its subsidiary Doğuş Oto Pazarlama ve Tic. A.Ş. (Doğuş Oto) and its dealers.

In the assessments made by the Board regarding the automotive sector, it is emphasized that for many consumers, after-sales services are as important as the automobile purchase process. It is accepted that the quality of after-sales services has a direct impact on consumer loyalty to the brand from which they receive service. In this respect, after-sales services such as maintenance, repair and spare parts are considered to be as important as price, quality and brand perception in gaining customer loyalty and increasing brand loyalty. Considering the role of quality sales and after-sales services provided in the automotive sector in gaining customer loyalty, the Board, emphasized the relationship between the quality of the service provided and the wages of the employees who provide this service first-hand. In fact, it is believed that if employees are not satisfied with their pay, their motivation may decline and which could have a detrimental impact on quality of service and the continuity of customer relationships and, ultimately, customer loyalty. 

In light of the above, it can be seen that the automotive sector is among one of the sectors where after-sales services play a pivotal role, and in this respect, companies operating in the automotive sector try to differentiate themselves in after-sales services, in addition to the physical characteristics of their products, to gain a competitive advantage. As the base wage applied to employees constitutes an important input in the automotive sales and after-sales services, the relevant product market is defined as “the labor market in automotive sales and after-sales services” upon the determination that the effects of the application will arise on employees in the automotive sales and after-sales services market.

In addition, it is accepted that the geographical market may be determined according to personal characteristics such as workers’ preferences, family status, and health status and may be narrowly defined according to provinces and regions depending on changes in living conditions/regional conditions. However, given that the application may affect the personnel employed in Doğuş's dealers and authorized dealers across the country, the relevant geographical market is defined as Turkey. 

Assessment on Block Exemption

In its statement, Doğuş indicated that the agreement will result in the recommendation of a basic wage for the sales and after-sales personnel employed by dealers and authorized dealers that will be above the industry average. In addition, it is argued that the recommended base wage will vary across provinces and regions and will not include premium pay or side benefits. It is also stated that the lists of base wage to be recommended will not be shared with the dealer’s employees, but will be announced with a table attached to the email sent to the dealer’s senior management at the same time. In evaluating the aforementioned practice, , it is determined that the practice may provide better quality service to the customers as a consequence of personnel satisfaction with regard to improved wages. Therefore, it is concluded that the practice of imposing restrictions on the labor force element is attributable to the main activities of the parties, namely automotive sales and after-sales services, and therefore, the relationship between Doğuş and its dealers should be considered as a vertical relationship. 

Since there is no specific regulation or precedent on whether Doğuş’s publication of the list of recommended wages for the employees of dealers and authorized dealers constitutes a restriction of competition, an analogy is drawn between the circumstances listed in the relevant provision and those not listed in order to determine the abstract norm to be applied to this case. In this context, the Board considers that Doğuş’s publication of the recommended wage list for the personnel of dealers and authorized dealers is similar to determining the purchase price for dealers and dealers. Although the violation of resale price determination, which excludes agreements from the group exemption under Article 4/1(a) of the Communiqué No. 2002/2, only includes a regulation on the buyer's selling price, Article 4/1(a) of Law No. 4054 prohibits the determination of both the purchase and selling prices of goods or services. Therefore, it is concluded that the provisions of Communiqué No. 2002/2 regarding the selling price may also be applied to the buying price to the extent possible.

The Decision contains important conclusions about the projection of the resale price maintenance practice on the labor market. In this context, since the infringement in terms of the determination of employee wages will take place in the input market, the determination of maximum and fixed prices is considered an infringement, unlike the regulation in Article 4/1(a) of Communiqué No. 2002/2. In this context, it is emphasized that if a supplier sends a list of fixed or maximum wages to be applied to the employees of dealers or authorized dealers, and if, as a result of pressure or incentive, the advisory wages to the dealer turn into fixed or maximum wages, the practice will constitute a vertical infringement arising in the labor market.  

For the above-mentioned reasons, although the application has an advisory nature, it may lead to the solidification of employee wages by affecting wages, and in this context, the transfer and mobility of labor may be restricted. Therefore, it has been assessed that the agreement subject to the application is within the scope of Article 4 of Law No. 4054, and therefore, a negative clearance certificate cannot be issued for the agreement. 

On the other hand, in the assessment made within the scope of the group exemption under Communiqué No. 2002/2, a supplier’s market share should not exceed 30% in order to implement the recommended price practice. In this context Doğuş's market share in the automotive sales and after-sales services market was analyzed based on the number of employees. Consequently, it is determined that Doğuş’s market share calculated on the number of employees for each business family does not exceed 30%.

In addition, the market position Doğuş’s is also analyzed by indicating that in instances where the provider has significant market power, maximum and recommended prices can be regarded as reference wages among dealers without the existence of any pressure or incentive. 

In this context, the recommended base wages proposed by Doğuş are compared with the wages paid by its subsidiaries and dealers to employees in similar positions across different provinces and branches. As a result, it is concluded that dealers tend to refrain from adhering to recommended base wage list to be published by Doğuş.

Conclusion 

In light of the above, the Authority has asked the opinion of Doğuş's dealers about the base wage practice and it has been assessed that the majority of the dealers independently determine the salaries for the employees and that the practice is guiding in terms of facilitating access to qualified personnel and independent salary reports. 

In consideration of the aforementioned circumstances, the Authority has sought the counsel of Doğuş’s dealers regarding the practice of recommending of base wages. In this context, the majority of dealers considered that employees' wages are set independently and that this practice is leading in terms of facilitating access to qualified staff and independent wage reports. As a result, as a result of the evaluations made within the scope of Communiqué No. 2002/2, group exemption was granted to the practice of recommending base wages to be considered in the wages of employees based on each province. The Decision contains noteworthy findings in terms of eliminating the precedential gap in the assessment of vertical infringements in labor markets and determining the abstract norm to be applied to these violations. It is considered that the Decision will have an impact in terms of drawing the boundaries of agreements containing restrictions on labor force by undertakings and adopting interpretative principles in the Board’s future evaluations of such agreements.