Non-Compete Clauses for the Post-Contract Period in Exclusive Distribution Agreements
An exclusive distribution agreement gives a distributor the sole right to sell the product in a defined territory. During the term, the distributor is expected not to compete. Producers often want to extend that obligation into the post-contract period, to protect the successor distributor and the residual goodwill. The question is: under Turkish law, how far can that obligation actually go?
Validity under Turkish Law
Article 123 of Law No. 6102 — the Turkish Commercial Code — regulates post-contract non-compete obligations for commercial agents. Its application to exclusive distribution relationships is accepted by Turkish practice.
Conditions for Validity
1. Scope of the Non-Compete
The non-compete may only be limited by reference to:
- Customer base
- Territory
- Concluded contracts
For example, if a distributor is authorised only for Istanbul, the producer cannot prohibit it from operating in Ankara.
2. Time Limit
- The maximum enforceable term is two years.
- A longer term written into the agreement is automatically read down to two years.
3. Timing of the Agreement
The non-compete must be entered into during the term of the exclusive distribution agreement. Agreements signed before, or simultaneously with, the distribution agreement are invalid.
4. Written Form
- The non-compete must be in writing.
- It must be delivered to the distributor within a reasonable period.
- Keep records of delivery.
5. Compensation
The distributor must receive adequate compensation for the losses caused by the non-compete. If the compensation is not specified or is inadequate, the distributor may sue for it.
The Competition Law Lens
Exclusive distribution agreements are vertical agreements. The Turkish Competition Authority’s Block Exemption Communiqué No. 2002/2 governs them.
Article 5 of the Communiqué
A post-term non-compete restriction can pull the agreement out of the block exemption — unless it satisfies all of the following:
- Maximum one year from contract end;
- Limited to the goods and services covered by the contract;
- Limited to the premises or land on which the distribution business operated;
- Necessary to protect transferred know-how.
Interaction Between the Two Laws
The Commercial Code allows up to two years; the Competition Authority Communiqué allows one. The better view is that Article 123 of the Commercial Code is a special private-law rule and should not be displaced by the competition law framework. In practice, deals frequently calibrate to one year to retain block-exemption coverage, and use the second year only where the wider commercial picture justifies it.