TCA Endorses Innovative after-sales Model for TOGG Electric Vehicles Through BOSCH Partnership
Introduction
The rise of electric passenger cars has reshaped global markets, driven by decarbonization policies, growing consumer awareness, and innovative marketing strategies. Turkiye’s sector is also growing rapidly. A significant step in this evolution is the Turkish Competition Authority’s (“TCA”) decision dated December 21, 2023. This decision granted a personal exemption for an after-sales agreement between Turkiye’nin Otomobili Girisim Grubu Sanayi and Ticaret A.S. (“TOGG”) and Bosch Sanayi ve Ticaret A.S. (“BOSCH”), setting the stage for a hybrid system in Turkiye’s emerging electric car market.
The agreement, critical to the future distribution and servicing of TOGG-branded electric vehicles, introduces a dual-distribution framework where TOGG and BOSCH may become competitors, raising concerns about potential information exchange between rivals. This article delves into the TCA’s decision and its approach. The scope of the Agreement
The request made within the scope is for the after-sales service that will be provided by BOSCH to the electric passenger cars launched by TOGG, as well as the service provided by BOSCH to establish this system. The after-sales services that are planned to be provided by BOSCH services include maintenance and repair services, as well as the storage of spares on behalf of TOGG. BOSCH will not sell spare parts that were not part of a contract between TOGG, appointed BOSCH services, and the services. Instead, they will only use them as necessary for the provisioning of repair services. BOSCH services are not an independent distributor of spare parts but a storage company. Accordingly, the TCA defined the relevant product markets by considering the main concepts in the Agreement as “maintenance and repair services market for TOGG brand vehicles” and “spare parts market for TOGG branded vehicles”.
Concerning this particular situation, the TCA analysed the merits of the commercial relation between TOGG and BOSCH, to determine whether BOSCH’s service shops can be considered under TOGG’s economic entity, i.e., whether BOSCH service shops must be considered as an agency in terms of the Competition Law. This distinction is important in the application of the Competition Law. If the agency does no assume any financial or business risks as a result of the agreement that it concludes or mediates then the relationship between TOGG and its client falls outside the scope of Article 4 of the Competition Law. The agreement stipulates that:
BOSCH service shops shall keep TOGG completely indemnified from any damages caused by their fault and/or negligence in the performance of the service services under this Agreement,
The responsibility for storage and provision of spare parts also belongs exclusively to authorized service shops,
- Authorized Service Shops that personally provide this service are also made de facto liable for damages arising during the provision of this However, as it is stipulated in the Agreement that:
- BOSCH service shops shall keep TOGG completely indemnified from any damages caused by its fault and/or negligence in the performance of the service services under the Agreement,
- The responsibility for the storage and provision of spare parts also belongs exclusively to the authorized service shop,
- Authorized service shops that personally provide this service are also made de facto liable for the damages arising during the provision of the service through the obligation to issue liability and other insurance policies,
The price lists sent to the chain services authorized by TOGG are of a recommendatory nature, and there is no obstacle for the maintenance and repair services to provide a more suitable offer to the consumers.
Accordingly, the TCA concluded that, authorized service shops go beyond the intermediary activities of a traditional agency and provide the service themselves and bear the financial responsibility arising from the consequences of this service. The TCA also stated that investments made in the context of the commercial relationship are another factor to be considered when evaluating agency evaluations. The TCA states that it may be necessary to purchase a large amount of equipment in order to be able to operate on the relevant market. In addition, the equipment is provided by service shops, and the investments remain with them in cases like non-renewal of the contract or termination. In this sense, it is also considered that the investments to be made by authorized services are beyond the ordinary investments expected to be seen in the agency activity.
The TCA’s Exemption AnalysisFirst of all, the TCA made its analysis regarding the block exemption regime stipulated under Block Exemption Communique on Vertical Agreements in The Motor Vehicles Sector (“Communique No. The agreement’s main purpose is to provide maintenance services and repair for TOGG-branded vehicles. It is therefore determined that the Agreement is within the scope and subject to notification of the Communique no. 2017/3. As the relevant product market’s market structures have not yet begun to serve in the process of emerging independent services, there is no basis to apply the thresholds for the block exemption. Overall, the TCA concluded the contracts did not meet the general requirements for exemption as set forth in Article 5 in the Communique No. In terms of termination period, 2017/3 is the most recent version. 2017/3.
As per the individual exemption regime, the TCA has analysed two positive and two negative conditions for the clearance stipulated under the Article 5 of the Competition Law. The TCA, in accordance with Article 5 of the Competition Law has analysed both positive and negative conditions to ensure that the clearance is granted. Therefore, it is stated that the carbon footprint of Turkiye will be improved, and a significant contribution will be made to the widespread use of electric vehicles with a lower carbon footprint in the transportation and logistics sector, and the sector and consumers will be supported in raising awareness on climate change, renewable energy and alternative solutions to conventional internal combustion engines.
Accordingly, the TCA assessed that in the event that an exemption is granted to the contracts in question, it is seen that TOGG will have a more effective service network throughout the country with the individual BOSCH service to be authorized in addition to the authorized services already within its own structure. The TCA concluded that, even though the quantitative selective distribution system would be implemented with the contracts under review, the primary effect is to create a wider service network. The TCA concluded, therefore, that as more services operate as authorized services for an electric vehicle, their capacity and experience to provide services for electric vehicles of other brands will also increase. The TCA concluded that the increased demand for electric vehicles will allow BOSCH and TOGG to achieve their above-mentioned claims. The TCA also stressed that, when analysing the duration of the contract, it was regulated to allow both contracts to be terminated within a reasonable period of time if notice of termination is given in advance. It is clear that short notice periods for termination will have a positive effect on consumers and system members, both in terms of continuity, improvement of service quality, and reduction of transition costs. They also allow services who are not satisfied with the commercial relationship they have with each other to easily terminate contracts and focus their services on other providers. The TCA stated that when the electric vehicle markets are analysed, the level of knowledge in maintenance and repair is not sufficient. The TCA stated that, except for the limited number authorized services of the market suppliers who have received the necessary services and trainings related to the own brands/models, there is a limited number of multibrand services which can provide electric vehicle service and have the knowledge to provide training in this area. Considering the aforementioned market structure, the TCA highlighted the possibility for evaluating the increase in the number of services that have competence in the market for electric vehicles and provide multi-brand services as a consumer benefit.
Furthermore, referencing another regulatory framework, namely the After Sales Services Regulation, the TCA concluded a presumption regarding possible pro-competitive effects of realization of the Agreement that will result in the benefit of the consumer. The main reason for concluding these contracts is that passenger car manufacturers are required to provide 20 service centres across seven Turkiye regions within the scope the After Sales Services Regulation. The TCA considered that as the aforementioned provision is intended to protect the consumer, it can be said that the fulfilment of the conditions of the relevant provision serves the benefit of the consumer thanks to the service network that will be expanded within the scope of the contracts subject to the application.
It has been stated in the application that short termination notice periods are expected to benefit consumers in terms of continuity and improvement of service quality and reduction of transition costs of system members. The TCA concluded in this way that, since the system under consideration is a new one, it was not deemed necessary to apply strict rules for termination. This is because the benefits expected by consumers are not at odds with the lack of strict rules. The TCA emphasized that there are 44 different brands in the motor vehicle distribution market, and more are being added every day. In recent years, brands have focused on the production and sale of electric vehicles both in Turkiye and around the world. However, data from 2022 shows electric vehicles only have a 1.3% share of total automotive production in Turkiye. The TCA concluded that TOGG’s intention to establish a quantitative selective distribution system aiming to restrict the number of authorized services would not eliminate competition in a significant part of the relevant market. Therefore, the TCA concluded that TOGG’s intention to establish a quantitative selective distribution system aiming to restrict the number of authorized services would not eliminate competition in a significant part of the relevant market.
Moreover, as the authorized service network that TOGG is trying to establish is still in its early stages, the primary effect of the contract will be to increase the number of service providers for TOGG-branded vehicles. The TCA stated that the electric vehicle market is still relatively new and there are only a few authorized services who can service electric vehicles. The TCA stated that a similar situation exists when it comes to spare parts sales. The TCA stated that a similar situation exists in terms of spare parts sales. This is because independent service providers have not yet begun to provide maintenance and repairs for TOGG brand cars and the number vehicles entering the services TOGG has an arrangement with is limited. The spare parts market is therefore viewed as a market in formation. The services included in the contract under consideration ensure that the spare parts are only kept on behalf of TOGG and that no independent sales transactions are possible. The TCA concluded that BOSCH and TOGG have the right to contract with other partners and/or providers, including regional distributors and workshops, workshop providers, OEMs and/or workshop providers, and that no exclusivity or noncompetition obligations are stipulated. On the other hand, it is stated that TOGG may conclude similar agreements with other third-party maintenance and repair chains, meaning that there is no non-competition or exclusivity obligation for the after sales services.
Within the framework of the Agreement, TOGG will reserve the lifts (the lifts that will be provided by BOSCH) in the services for TOGG vehicles and will pay the services for the lifts in standby status. The TCA concluded that the risk of exclusivity will be minimal. Therefore, the TCA concluded that a de facto exclusivity risk will be minimal.
In conclusion, the TCA said that the motor vehicle market is dynamic, the electric vehicle market and therefore the after-sales maintenance/repair market is a newly developing market, the average age of the vehicle park has been increasing over the years and therefore the demand for after-sales services is increasing.
In addition, there is no exclusivity or non-competition obligation in the Agreement. The TCA concluded that the fact TOGG, as a new player in the electric vehicle industry, would combine its technical knowledge and know-how to BOSCH’s network of after-sales services is likely increase competition. In addition, although it can be said that there are de facto barriers to entry in terms of providing after-sales services due to the establishment and operation of services and the realization of certain investments in terms of having sufficient technical staff, related equipment, spare parts and products, it is considered that this entry barrier can be compensated considering that the investment cost is considered reasonable and the return on investments can be obtained in a short time.
Restricting Competition No More Than Necessary
Under this section, the TCA’s main focus is information exchange. BOSCH and TOGG both provide maintenance and repairs and are competitors on this market. This results in a dual-distribution system. TOGG will share certain documents and information with BOSCH, including sales volume planning, vehicle production milestones, regional launch timelines, vehicle deliveries, vehicle service histories and TOGG diagnostics. These documents and information can only be used for the provisioning of services and no other purpose, in accordance with the Global Agreement. After evaluating all of these explanations, it was determined that sharing vehicle development and planning and making diagnostic information available to the services would be necessary to meet TOGG’s service needs. The fact that BOSCH is not privy to the transactions made via the software program UEP will also help to prevent information being shared beyond what’s required. Considering the confidentiality undertaking signed between TOGG and the services stating that all information and documents related to the service request provided by TOGG will be considered as confidential information and will not be disclosed under any circumstances, it is assessed that such information sharing will not create competitive concerns.
Conclusion
The TCA once again made a sector specific exemption analysis, pointing out the electric vehicles sector’s unique dynamics. As this sector is still young, Article 5 is applied in this way. The potential benefits of the Agreement will be sufficient to counteract any minor anti-competitive incidents. This reasoned decision also shows that the TCA can take into consideration other regulatory embodiments, such as the case where it analysed consumer benefits arising out of the Agreement’s realization. The TCA has repeatedly emphasized the importance of the time limit for terminating the agreement. The TCA was assured that exclusivity concerns were not raised by TOGG and BOSCH, as they eliminated the possibility of de facto exclusivity.
