Following 10 years’ heated debate on the subject, Law No. 6585 on the Regulation of Retail Businesses (“the Law”) finally came into force on 29 January 2015. The details of the Law remain sketchy at present but the Ministry of Customs and Trade has announced that it will shortly be issuing a Regulation to provide more detail. In the meantime, this article outlines the provisions of the Law, and assesses its impact on the retail sector.
What is the purpose of the Law?
Article 1 of the Law states that its aims are: to facilitate the growth of new and existing retail operations; to ensure that retail businesses are operating in accordance with competition rules; to regulate the expansion of retail operations; and also to govern the relations between retail operators, manufacturers and suppliers.
The Law introduces an online retail information system (known in Turkey as “PERBIS”) under the Ministry of Customs and Trade. Parties wishing to open a retail business are required to apply for an operating permit and if successful, will be granted a permit by the relevant local authority through PERBIS. The documents required and the procedure to be followed to make a successful application are to be set out in a forthcoming Regulation.
Construction permits for shopping malls
Before the Law came into force, the various district authorities were mainly responsible for the issuance of construction permits, under Zoning Law No. 3194.
However, Article 5/7 of the Law expressly provides that it is the metropolitan authorities that are the “relevant authority” for the issue of construction permits for shopping malls, if the particular shopping mall is within the borders of a metropolitan authority, such as Istanbul, Ankara, Izmir, etc.
As part of this new construction permit application procedure, the metropolitan municipalities will also take advice from third parties as to whether a construction permit for a shopping mall should be granted. The details of this process, and how it will operate alongside the online procedure on PERBIS, will be detailed further in the forthcoming Regulation.
Common areas of shopping malls and assignment of space at larger stores
Two new principles introduced by the Law relate to common area usage and assignment of space in a shopping mall, factors which affect both the shopping mall investors and the retailers.
Common area usage
Article 11 of the Law provides that at least 0.5 per cent of the sales area of a shopping mall must be allocated for social and cultural activities. The same article also requires shopping malls to provide common areas for facilities such as emergency medical service units, a prayer room, and a child care facility and playground. More details on these requirements are to be provided by the forthcoming Regulation.
Assignment of space
Article 12/1 of the Law stipulates that at least 5 per cent of the sales area of a shopping mall is to be allocated to traders and artisans working within the mall. This space must be leased on the basis of market value. In the event that vacant spaces are not filled by traders and artisans within 20 days as of their becoming available, those spaces can then be leased to other parties.
Moreover, Article 12/2 of the Law states that at least 0.3 per cent of the sales area of a shopping mall is to be allocated to persons who are practising a profession which has traditional, cultural or artistic value, and which is in serious decline. The rent charged for leasing these areas cannot be more than 25 per cent of their market value.
In terms of the shelf assignment at the large and chain stores, Article 12/3 of the Law requires that shelves corresponding to at least 1 per cent of the sales area of a big store or a chain store must be assigned to local products. Again, more details of this provision will be given in the Regulation.
Existing shopping malls and retailers
Under Provisional Article 1, the Law aims to protect the rights of existing shopping malls and retailers and it introduces the following requirements:
- Information relating to existing retail operators will be transferred to PERBIS within one year of PERBIS being up and running;
- Permits which have already been issued to retailers by the relevant district will still be valid and no further application to the metropolitan authorities will be required;
- Common areas defined under Article 11 of the Law must be put in place in existing shopping malls by 29 January 2016;
- Where existing shopping malls have vacant spaces, these must be leased by giving priority to traders and artisans, until the ratio of 5 per cent stipulated by Article 12/1 is reached;
- Similarly, vacant spaces within existing shopping malls must be leased to persons who are practising a profession with traditional, cultural or artistic value and which is in serious decline, until the ratio of 0.3 per cent stipulated under Article 12/2 is reached; and
- The requirements for shelf space for local products within large and chain stores prescribed under Article 12/3 must be met by 29 January 2016.
It should be noted that the Law also provides sanctions for existing or new shopping malls and retailers that do not comply with these provisions within the prescribed periods.
Lastly, the Law introduces new provisions on payments to be made to suppliers and others, details of which will be given in the Regulation.
It can be argued that although the draft Law provided more protection for traders and artisans, the final version of the Law, in fact, provides for protection for all parties. As noted at the outset of this article, many uncertainties remain under the Law, and it is hoped that the forthcoming Regulation from the Ministry of Customs and Trade will provide more detail on the provisions outlined above.