Competition law concerns in labor markets have been one of the most important issues investigated by various competition authorities around the world in recent years. In the last few years, the Turkish Competition Authority (“TCA”) has initiated investigations against a large number of undertakings operating in different sectors regarding labor markets, and has become one of the leading competition authorities in terms of investigations in this field. In the face of increasing enforcement in labor markets, undertakings and competition law practitioners have expressed on various occasions the need for a guideline on this subject. As a matter of fact, it was known that the TCA had been working on a guideline for some time.
As a reflection of this process, with the announcement published on the website of the TCA on 16.09.2024, the “Draft Guidelines on Competition Infringements in Labor Markets” (“Draft Guidelines”) has published for public consultation.
In this article, we have discussed the highlights of the Draft Guidelines and presented our views.
Article 4 of the Law No. 4054 on the Protection of Competition ("Law No. 4054") and Practices Regarding Labor Markets
Undertakings competing for labor may enter into anti-competitive agreements having the purpose of preventing the free movement of labor in the market or aiming to fix wages and other working conditions. In this context, agreements or concerted practices concluded between employers that have the purpose or effect of wage fixing and other working conditions of employees, and such decisions and practices of associations of undertakings are considered as infringements of Article 4 of the Law No. 4054. Likewise, agreements or concerted practices and decisions and practices of associations of undertakings that have the purpose or effect of causing employers to not to recruit each other's current or former employees will be considered as an infringement of Article 4 of the Law No. 4054. As a matter of fact, in the investigations carried out by the TCA to date, such actions have been treated as cartels.
In the Draft Guidelines, in parallel with the practice to date, three types of violations that fall within the scope of Article 4 of Law No. 4054 have been addressed. These violations are set out below.
A. Wage Fixing Agreements
The Draft Guidelines define wage fixing agreements as “agreements under which undertakings jointly determine the working conditions of their employees, including but not limited to wages, wage increases, working hours, employee benefits, compensation, physical working conditions, annual leave rights, and non-compete obligations”. The Draft Guidelines provide that fee fixing agreements may be concluded directly between undertakings or through a third party. If a third party mediates or facilitates the agreement, the third party may be considered as a party to the infringement depending on the characteristics of the particular case. In this context, the statement in the Draft Guidelines that wage fixing agreements constitute a restriction ‘by object’ is also important.
B. No-poach Agreements
The Draft Guidelines define no-poach agreements “agreements where one undertaking agrees not to offer employment to, or not to recruit, employees of another undertaking, directly or indirectly". In this context, undertakings that are not completely prohibiting from offering employment to or recruiting each other's employees, but receiving consent from each other for employee transfers or employees receiving consent from their current employers signal the existence of no-poach agreements.
Similarly, the Draft Guidelines state that no-poach agreements may be facilitated directly between undertakings or by a third party. It is stated that if a third party mediates or facilitates the agreement, this third party may be considered as a party to the violation depending on the characteristics of the particular case.
Again, the Draft Guidelines emphasize that no-poach agreements constitute a restriction ‘by object’ and would be treated as cartels.
C. Information Exchange
Information exchange is a subject that finds a wide field of application in competition law. Examples of information exchanges that are assessed anti-competitive in the labor market can be expressed as the exchange of strategic information regarding all kinds of working conditions of employees such as wages, wage increases, working hours, fringe benefits, compensation, physical working conditions, and leave entitlements. Any information exchange for the purpose of restricting competition in the labor market will be assessed to restrict competition, regardless of its anti-competitive effect.
In this context, issues such as the source of labor market information, its timeliness, whether it presents individual data, and whether it is aggregated are important.
Undertakings such as independent market research organizations and private employment agencies that exchange information as third parties should also take into account the information exchange concept.
D. Ancillary Restrains
Another important issue covered by the Draft Guidelines is ancillary restrictions. The Draft Guidelines define ancillary restraints as “restrictions that are not intended to prevent, distort or restrict competition and do not constitute the primary purpose of the main agreement, but are directly related to the main agreement, necessary for the implementation or maintenance of the main agreement, and proportionate, similar to the guidelines provided for the assessment of such restraints in mergers and acquisitions”.
In this framework, the Draft Guidelines will assess whether restrictions such as non-transfer of employees for labor force related to the main agreements between undertakings that are not anti-competitive in purpose or effect are ancillary restraints, and whether such restrictions are directly related, necessary and proportionate to the main agreement.
2. Application of Other Articles of Law No. 4054
A. Exemption
The Draft Guidelines state that, by their very nature, wage fixing and employee non-distortion agreements in labor markets and information exchanges for the purpose of restricting competition disproportionately restrict competition and are very unlikely to generate economic benefits that would compensate for their negative effects on competition, and it is considered that they are very unlikely to meet the conditions for exemption.
B. Abuse of Dominant Position
The Draft Guidelines note that exclusionary or market-closure practices in terms of labor markets may arise along two dimensions. Accordingly, the first possibility is that the dominant undertaking in the relevant labor market to be defined in the particular case, takes actions that restrict the movement of labor against the will of the employees. Secondly, the exclusionary behaviour of a dominant undertaking in a relevant market may have negative effects on the labor market.
In this context, in terms of abuse of dominant position, it will be determined whether the undertaking under investigation is in a dominant position both in the relevant product or service market and in the relevant labor market.
C. Mergers and Acquisitions
The Draft Guidelines set out a number of parameters for determining whether a merger and acquisitions result in a substantial lessening of competition in the labor market. These parameters include indicators such as the shares of the parties to the transaction in the relevant labor market and the level of concentration of the market, the similarity of the qualifications of the employees employed by the transaction parties, barriers to entry into the relevant product market, the organization of labor suppliers in the relevant labor market, the costs of relocation, the ability of the transaction parties' competitors to increase capacity utilization or make new investments, potential competitive pressure, whether the transaction increases the possibilities for cooperation between competitors operating in the relevant labor market, whether the transaction has the potential for a killer acquisition.
3. Conclusion
The TCA published the Draft Guidelines on labor markets, one of the most prominent issues on the competition law agenda in recent years, and presented the fundamental principles on the subject. However, we believe that it would be more appropriate to explain some of the issues mentioned in the Draft Guidelines and frequently experienced in practice with specific examples. Although the Draft Guidelines were published following extensive investigations and administrative fines imposed on undertakings, we consider that the Draft Guidelines will be useful for undertakings and practitioners. However, we expect that the Draft Guidelines may be amended following public consultation.