Distributor, agent or subsidiary? Entering the Turkish market without incorporating

In short

1. A distributor buys the goods and resells them in its own name and on its own account.
2. A commercial agent (acente) finds or concludes contracts in the principal's name and on its account, and earns a commission.
3. A subsidiary or branch, which is the foreign company's own presence in Türkiye. The main guide covers this route.

Two points surprise foreign principals most often. First, Turkish commercial agency law contains mandatory protections for the agent, and a statutory provision allows the agent's end-of-contract indemnity to be applied by analogy to exclusive distributors as well. Second, exclusivity and non-compete clauses are subject to Turkish competition law, which can make an otherwise standard clause unenforceable.

How do the three routes compare?

What is a commercial agent under Turkish law?

The Turkish Commercial Code (Türk Ticaret Kanunu, Law No. 6102, "TTK") defines an agent (acente) in Art. 102. An agent is a person who, on the basis of a contract and without being an employee or similar, continuously mediates or concludes contracts for a business in a specified place or region as a profession, in the name of that business.

• Foreign principals are covered. The agency rules also apply to persons permanently authorised to conclude contracts on behalf of a domestic or foreign trader, in their own name but for that trader's account (Art. 103(1)(a)), and to persons acting in Türkiye in the name and for the account of foreign traders that have no seat or branch in Türkiye (Art. 103(1)(b)).
• Exclusivity is the default. Unless otherwise agreed in writing, the principal may not appoint more than one agent for the same place or region and the same line of trade, and the agent may not work for several competing businesses in the same region (Art. 104).
• Notice. An agency contract of indefinite duration can be terminated by either party with three months' notice. A fixed-term contract can be ended at any time for good cause. A party that terminates without good cause or without respecting the notice period must compensate the other for loss caused by unfinished business (Art. 121). A fixed-term contract that continues after expiry becomes indefinite.
• Post-term non-compete. The agreement must be in writing, and a document containing its terms and signed by the principal must be given to the agent. It may last at most two years from the end of the relationship and may cover only the territory or customer group assigned to the agent and the types of contracts the agent mediated. The principal must pay the agent appropriate compensation for the restriction (Art. 123).

What is the goodwill indemnity, and does it apply to distributors?

Art. 122 TTK gives the agent a claim for an "appropriate compensation" (uygun bir tazminat; the claim is called denkleştirme, the goodwill or equalisation indemnity) after the contract ends, if three conditions are met:

• the principal continues to get significant benefits from new customers the agent brought;
• the agent loses commission on business with those customers because the contract ended; and
• payment is fair in the circumstances.

The amount is capped at the average yearly commission or other payments over the last five years (or the shorter period if the contract was shorter). The right cannot be waived in advance, and it must be claimed within one year of the end of the contract. No claim exists if the agent terminated without any act of the principal that would justify termination. Nor can the indemnity be claimed if the principal terminated the contract for good cause because of the agent's fault (Art. 122(3)).

Art. 122(5) states that the provision applies, unless it would be unfair, also to the end of sole-distributorship (tek satıcılık) and similar continuing contracts that grant a monopoly right. In practice, an exclusive distributor whose efforts built up the customer base may therefore claim an indemnity on termination, even where the contract does not provide for one. How courts apply this to a specific distributor depends on the facts, for example how closely the distributor was integrated into the supplier's sales network and whether the supplier can use the customer base after the contract ends.

Is a distribution agreement regulated by statute?

No. It is an innominate contract (isimsiz sözleşme): Turkish law has no dedicated chapter for it, and the parties may shape its content within the law (Turkish Code of Obligations, Law No. 6098, Art. 26). Courts fill gaps with the closest regulated contracts (sale, agency, mandate) and apply mandatory rules such as competition law. A good agreement covers territory, purchase targets, exclusivity, brand use, stock, termination and what happens to customers and stock afterwards.

Competition law: how far can exclusivity and non-compete go?

Turkish competition law (Law No. 4054) prohibits agreements that restrict competition, but vertical agreements between a supplier and a buyer can be exempt under the Block Exemption Communiqué on Vertical Agreements (No. 2002/2). The key conditions for exclusive distribution are these:

• Market share threshold of 30%. Since the amendment published in the Official Gazette on 5 November 2021 (No. 31650), the exemption applies only if the supplier's share in the relevant market does not exceed 30%. For some supply obligations the buyer's share counts. Agreements that are outside the exemption are not automatically illegal; they are assessed individually.
• Non-compete limits. The exemption does not cover a non-compete obligation on the buyer that is indefinite or longer than five years. Tacit renewal beyond five years makes it indefinite. A non-compete that applies after the agreement ends is, as a rule, outside the exemption. A narrow exception exists: the restriction must relate to goods or services competing with the contract goods or services, be limited to the premises and land from which the buyer operated, be indispensable to protect know-how transferred to the buyer, and not exceed one year after the agreement ends.
• Resale prices. Fixing a fixed or minimum resale price for the buyer is a serious restriction that the exemption does not protect. A maximum price and a recommended price are possible, provided they do not in practice amount to a fixed or minimum price through pressure or incentives. See the Competition Authority's Guidelines on Vertical Agreements.
• Genuine agency. Competition law treats a genuine agent, who acts in the principal's name and account and bears no significant commercial or financial risk, differently from a distributor, so the vertical rules above may not apply in the same way. See the Competition Authority's explanation of agents. Whether the agent really bears no risk depends on how the relationship works in practice.

Whether the 30% threshold is met should be examined before the contract is signed.

Which law and which forum should the contract choose?

In a contract with a foreign element, Turkish private international law lets the parties choose the governing law (Law No. 5718, Art. 24). Two cautions apply:

• Turkish mandatory rules and competition law may still apply to conduct in Türkiye, and the mandatory agent protections in the TTK may be raised before a Turkish court, which will decide whether they apply.
• Where a judgment can be enforced matters as much as where it is obtained. A distributor's assets are in Türkiye, so, as a rule, a foreign court judgment can be enforced there only after a competent Turkish court has granted an enforcement order (tenfiz; Law No. 5718, Art. 50). Mere "recognition" (Art. 58) lets the judgment be accepted as conclusive evidence or res judicata but does not by itself allow compulsory enforcement. Many foreign principals therefore prefer arbitration. The International Arbitration Law (Law No. 4686) applies to disputes with a foreign element where the seat is in Türkiye. Foreign arbitral awards are not enforced directly either: they require an enforcement order from the competent Turkish court under the New York Convention and Art. 60 of Law No. 5718.

Who is the importer?

Customs is a specialist topic. The structural question is: who is the importer of record? With a distributor, it is usually the distributor, who then carries the import formalities, product conformity duties and local registrations. With an agent, the principal sells directly, so the importing party must be identified for each sale. A subsidiary can import itself. Settle this in the contract, and review customs and tax consequences with a Turkish customs broker and a Turkish certified public accountant (mali müşavir).

When does it make sense to set up a company?

Distribution or agency often works well at the start. Signs that it may be time to move to a local presence include:

• the Turkish market now represents a significant share of group turnover;
• the group wants to control customer relationships, pricing, service and brand directly;
• the distributor's exclusivity is blocking other options, or the relationship is under strain;
• customers or public tenders require a local contracting party;
• the group plans to invest in a local site, for instance in the Antalya free zone (serbest bölge) or an organised industrial zone (organize sanayi bölgesi), which calls for a permanent local presence. See Setting up in Antalya.

The choice between a limited company, a joint-stock company, a branch and a liaison office is covered in the main guide. A subsidiary also brings ongoing duties, outlined in yearly legal obligations, and intra-group contracts, outlined in intra-group agreements and data transfers.

Moving from a distributor to a subsidiary: what are the risks?

• Read the exit terms first. Notice periods, minimum terms, exclusivity, stock and customer-data clauses should be checked before anything is communicated to the distributor.
• Indemnity claim. Ending an exclusive relationship and taking over the customers the distributor built is the situation in which an Art. 122 TTK claim is most likely. The one-year limit runs from the end of the contract.
• Termination. Ending a contract without good cause or proper notice can lead to damages (Art. 121 for agents). A phased handover or negotiated settlement is often cheaper than a dispute.
• Post-term non-compete. Limited by competition law and, for agents, by Art. 123 TTK.
• Customer data. Handing customer data to the new subsidiary raises personal-data questions under the Personal Data Protection Law (KVKK, Law No. 6698); see intra-group agreements and data transfers.