Authors: Corporate Law Departmant, Att. Mustafa Şahin

Introduction

Commercial distribution relationships operate through continuous contractual models that establish the connection between the producer/supplier and the market. Some of these models have been regulated in detail by the legislator as “typical contracts,” while others have evolved through market practice and exist within the legal order as “atypical” relationships, predominantly governed by freedom of contract and resolved through analogy.

The Turkish Commercial Code No. 6102 (“TCC”) reflects this distinction most clearly in the field of agency. While it subjects agency relationships to a comprehensive statutory regime (TCC Articles 102–123), it does not provide a general codification for distributorship or sole distributorship arrangements. It is widely accepted that sole distributorship agreements constitute a contract type not specifically regulated under the applicable legislation, including the Turkish Code of Obligations No. 6098 (“TCO”), and in practice they are also referred to as “general distributorship” or “master dealership” agreements.

Nevertheless, the TCC has not left distributorship and sole distributorship relationships entirely unregulated. Article 122/5 of the TCC creates a normative point of contact, particularly regarding the “customer portfolio value” that arises after the termination of the agreement and the question of who will benefit from it thereafter. This provision provides a statutory basis for goodwill compensation claims and plays an important role in reducing conceptual ambiguity in this area.

I. Agency: The Structure Established by TCC Articles 102–123

The TCC regulates agency as an institution among commercial auxiliaries, with independence as its central element. Pursuant to Article 102 of the TCC, an agent is a person who, without being tied to the enterprise by a position of employment, undertakes, on the basis of a contract, to act continuously within a certain place or region either as an intermediary in contracts concerning a commercial enterprise or to conclude such contracts in the name of the merchant.

This definition demonstrates that agency is not limited to mere “business referral” activities. Rather, it denotes a continuous organizational structure, tied to a specific geographical or customer environment, and professionally contributing to the principal’s contractual relations.

The independent nature of the agency relationship is further reinforced by the supplementary regime under Article 102/2 of the TCC. In cases not governed by specific provisions, brokerage rules under the TCO apply to intermediary agents; commission rules apply to agents authorized to conclude contracts; and where these are also insufficient, the provisions on mandate shall apply. This system both preserves the agency regime under the special provisions of the TCC and ensures that the contractual relationship can be completed within the general framework of the law of obligations.

Article 103 of the TCC provides a framework that may extend the scope of agency provisions to certain persons and relationships. This expansive effect is particularly relevant in practice, especially with respect to post-termination protection mechanisms, since certain consequences attached to agency may also become applicable to relationships falling within the scope of Article 103.

The issue of exclusivity in agency is addressed under Article 104 of the TCC through a rule-based presumption. Unless otherwise agreed in writing, the principal may not appoint more than one agent in the same place or region for the same line of business, and the agent may not act on behalf of competing enterprises in the same place or region. This rule is consistent with the economic logic of agency: while the agent invests effort and resources in a particular territory to increase the distribution of the principal’s products or services and develop the customer base, the presence of multiple agents in the same territory may weaken the agent’s incentives. Article 104 eliminates this risk through a default exclusivity structure, while still allowing the parties to agree otherwise in writing.

With respect to the agent’s authority and liability, Articles 105–112 of the TCC establish a framework that often renders the agent, in practice, the “external face” of the principal. The agent is authorized to make and receive notices, warnings, and protests related to the contracts he intermediates or concludes, and may initiate legal proceedings on behalf of the principal or be sued in that capacity. Where the agent exceeds the limits of his authority, liability may attach to the agent pursuant to Article 108 of the TCC, highlighting the importance of clearly defining representation and contracting authority in external relations.

The agent’s obligations (Articles 109–112 TCC) primarily revolve around two axes: protection of interests/duty of care and the flow of information. The agent must conduct the principal’s business and safeguard the principal’s interests, and must inform the principal in a timely manner about market conditions, customers, and relevant circumstances. In this sense, agency functions not merely as an intermediary relationship but also as a contractual structure supporting the principal’s commercial risk management.

The principal’s obligations (Article 120 TCC) complete this cooperation model, including the provision of documents, necessary information, and payment of the remuneration due to the agent. The most critical part of this system often arises after termination of the contract and revolves around two institutions: the equalization claim (Article 122 TCC) and the post-contractual non-compete agreement (Article 123 TCC).

II. Equalization Compensation

Article 122 of the TCC provides for a special compensation mechanism designed to preserve the economic balance between the parties after termination of the agency agreement. This mechanism does not constitute classical damages; rather, it serves a “balancing” function aimed at preventing the customer portfolio created through the agent’s efforts and organization during the term of the agreement from remaining solely with the principal after termination.

In other words, the equalization claim is a sui generis right intended to ensure that a reasonable portion of the economic value generated by the customer potential acquired by the agent during the contractual term—continuing to produce value for the principal even after termination—is reflected back to the agent.

The legislator requires the simultaneous presence of three core elements for this claim to arise. First, the principal must continue to derive significant benefits from new customers acquired or customer relationships substantially developed by the agent after termination of the agreement. Second, the agent must lose the commissions or remuneration that he would have earned from those customers had the agreement continued. Finally, considering all circumstances of the specific case, payment of equalization must be equitable. This third element prevents the equalization claim from arising automatically and ensures that the economic realities of each case are taken into account.

The equalization claim lapses if not asserted within one year from the termination of the agreement. This period concerns the exercise of the right rather than its existence and often plays a decisive role in negotiations between the parties at the termination stage.

III. Post-Contractual Non-Compete Agreement (TCC Article 123)

Article 123 of the TCC regulates post-termination non-compete agreements in a clear and detailed manner. The provision establishes a system parallel to European Union regulations, aiming to protect the agent in the post-contractual period.

The legislator has subjected the validity of non-compete agreements to strict formal and substantive requirements. The agreement must be concluded in writing, and a document containing the non-compete provisions and signed by the principal must be delivered to the agent. The non-compete obligation may be limited only to the territory or customer base assigned to the agent and to the subject matter of the contracts in which the agent acted. In terms of duration, the non-compete restriction may not exceed two years; any longer period is deemed invalid.

Furthermore, for the non-compete clause to be valid, the principal must pay the agent appropriate compensation in consideration of the restriction. Non-compete provisions introduced without such compensation do not satisfy the statutory balance and therefore cannot be deemed valid.

IV. Distributorship/Sole Distributorship: Distinguishing Features from Agency

Distributorship relationships constitute continuous cooperation models aimed at increasing the distribution of the supplier’s products or services within a particular market. Sole distributorship represents a form of distributorship in which exclusivity—either as a legal monopoly right or as de facto exclusivity—comes to the forefront with respect to a particular territory or customer base.

Unlike agency, however, the sole distributorship agreement is not subject to a comprehensive regime under the TCC. Consequently, in resolving disputes, the contractual provisions and the nature of the specific case play a decisive role. The sui generis character and lack of statutory regulation of sole distributorship agreements produce two significant practical consequences. The first is that the contractual architecture established by the parties—such as exclusivity arrangements, sales channels, stock obligations, after-sales services, marketing investments, data/CRM usage, brand-related obligations, and termination regimes—determines the outcome of disputes. The second is that, upon termination of the agreement, the issue of the “customer portfolio” emerges on a distinct legal ground, separate from contractual breach damages, and often centers on the fate of the portfolio value after termination. In this context, the distributor’s claim for portfolio compensation is closely connected to a balance of interests, particularly where the customer base continues to generate value for the supplier after termination.

V. TCC Article 122/5: Statutory Basis for Portfolio Compensation in Sole Distributorship

Article 122/5 of the TCC provides that, unless contrary to equity, the equalization claim shall also apply to the termination of sole distributorship and similar continuous contractual relationships granting exclusive rights. This provision is significant because it establishes a direct statutory basis for portfolio compensation claims in sole distributorship relationships.

Prior to the enactment of the TCC No. 6102, portfolio compensation claims in sole distributorship agreements were primarily shaped through doctrine and case law. With Article 122/5, such claims may now be assessed not merely by analogy but also through the explicit guidance of the statutory text, thereby creating a clearer legal basis for disputes concerning customer portfolios after termination.

Nevertheless, Article 122/5 does not grant an automatic right to compensation in favor of the sole distributor. The equity criterion contained in the provision requires a case-by-case evaluation. In this context, it must be examined whether the distributor actually created a substantial customer portfolio, whether the supplier continues to derive significant benefits from it after termination, and whether the distributor suffered an economic loss due to the termination.

Accordingly, portfolio compensation in sole distributorship is not a claim arising solely from the termination of the contract; rather, it is a specific equalization claim that may arise following a concrete assessment of the distributor’s contribution to the customer base, the continuing post-termination benefits, and the principle of equity.

Conclusion

While the TCC subjects agency relationships to a detailed and protective regime, it has not regulated distributorship and sole distributorship agreements as typical contracts, leaving this field largely to freedom of contract and case-specific evaluation. Nevertheless, Article 122/5 of the TCC provides a clear statutory basis for portfolio compensation, one of the most significant post-termination disputes in sole distributorship relationships.

In practice, the correct qualification of agency and distributorship relationships is of decisive importance for structuring the parties’ rights and obligations at both the formation and termination stages of the contract. In particular, issues such as exclusivity, termination regimes, rights relating to the customer base, and post-contractual obligations must be clearly and balancedly regulated within the agreement to prevent future disputes.

Many disputes in practice arise from the failure to correctly determine whether the relationship constitutes agency or sole distributorship, and from contractual architectures constructed without regard to this distinction. Yet the legal nature of the contract determines not only the rights and obligations during the contractual term but also one of the most significant financial consequences upon termination: the risk of equalization or portfolio compensation.