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 Guideline on Competition Infringements in Labor Markets” (“Draft Guideline”) was published for public consultation.
Finally, on 03.12.2024, the Guideline on Competition Infringements in Labor Markets ("Guideline") was published on the TCA's website.
In this article, we have discussed the highlights of the Guideline in comparison with the Draft Guideline and presented our views.
1. 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.
On the other hand, the Guideline states that undertakings competing in the labor market will be considered competitors regardless of their activities in the output markets, while the Draft Guideline stipulates that undertakings operating in different sectors may also be deemed competitors in the labor market if they exhibit a similar demand structure in terms of employment.
In line with the practice to date, the Guideline addresses three different issues falling within the scope of Article 4 of Law No. 4054. The relevant sections of the Guideline are discussed below in comparison with the Draft Guideline.
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”. In this context, unlike the Draft Guideline, "physical working conditions" are not included among the examples provided for the relevant working conditions.
The Guideline provides 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 Guideline that wage-fixing agreements constitute a restriction ‘by object’ is also important. B. No-poach Agreements The Guideline, in parallel with the Draft Guideline, defines 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.
B. No-poach Agreements
The Guideline, in parallel with the Draft Guideline, defines 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 Guideline states 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 Guideline emphasizes that no-poach agreements constitute a restriction ‘by object’ and would be treated as cartels.
C. Information Exchange
Information exchange is a widely applied concept in competition law. Examples of anti-competitive information exchanges related to labor markets can be described as the exchange of strategic information concerning working conditions—such as disclosed wage increase rates, working hours, fringe benefits, compensation, and leave rights—that impact employees' job choices and overall labor mobility. 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.
Under the heading of information exchange, two significant differences between the Guideline and the Draft Guideline have been identified.
First, the Draft Guideline adopts a more specific approach by stating that information exchanges among undertakings "competing in the labor market" may have the purpose or effect of restricting competition. In contrast, the Guideline outlines a broader framework, stating that competition sensitive information in the labor market likely to produce such effects includes wage-related information or other working conditions that have a clear impact on employees’ job choices or overall labor mobility.
Second, the Guideline specifies that information exchanges meeting all the following conditions are, as a rule, not considered to have a restrictive effect on competition:
The exchange is conducted by an independent third party,
It is impossible to identify the data source or the content of individual data,
The information exchanged pertains to at least three months prior,
The information includes data from at least ten participants,
No single participant's data constitutes more than 25% of the total dataset.
Including such concrete conditions is considered highly beneficial for ensuring legal certainty and addressing practical challenges encountered in implementation.
D. Ancillary Restrains
Another important issue covered by the Guideline 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.
Some differences between the Guideline and the Draft Guideline also emerge in the context of ancillary restraints.
In the Draft Guideline, it is generally stated that restrictions that are not deemed ancillary will be assessed within the scope of the Law on the Protection of Competition. Conversely, the Guideline explicitly states that restrictions not deemed ancillary will be assessed in the context of no-poaching and wage-fixing restrictions and will be considered as per se violations in terms of their purpose.
On the other hand, regarding cases where the proportionality condition is not met, the Guideline provides a broader framework, citing examples such as "the duration of the restriction not being explicitly defined or exceeding what is necessary to achieve the intended objectives of the restriction." In contrast, the Draft Guideline specifies that agreements exceeding "the duration of the main agreement" do not meet the proportionality condition.
2. Application of Other Articles of Law No. 4054
A. Exemption
The Guideline states 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 Guideline notes 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. In the Draft Guideline, exclusionary practices in the labor market are addressed in terms of actions that restrict employee mobility and the effects of exclusionary conduct by dominant undertakings on the labor market. On the other hand, the Guideline states that abuse of dominance in the labor market may manifest in various forms and emphasizes that competition law infringements related to abuse of dominance will be assessed by considering all the unique circumstances and characteristics of the specific case under review.
C. Mergers and Acquisitions
The Guideline sets 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 has published a Guideline on labor markets, which has become one of the foremost topics on the competition law agenda in recent years, establishing fundamental principles on the subject. Within this framework, it is particularly important to define concrete criteria regarding information exchanges that will not have restrictive effects on competition, especially in terms of practice. Similarly, the introduction of tangible criteria for assessing the proportionality of ancillary restrictions frequently applied in practice is noteworthy.
However, following the publication of the Guideline, issues such as how merger and acquisition notifications will be examined, when complementary amendments to other competition law regulations will be implemented, and how anticompetitive agreements or abuses of dominance affecting both the relevant market and the relevant labor market simultaneously will be addressed are expected to emerge in the upcoming period.