Labour markets are the markets where wages and employment conditions of employees are determined and which are formed through employment contracts on the axis of supply and demand. In these markets, there are employees at the centre of the supply element on one side, and employers constituting the demand element on the other side. Labour market basically constitutes a dynamic structure that regulates the wages paid for the labour rendered by the employees and their working conditions.
The fact that competition law instruments intervene only in goods or service markets has led to many debates as to whether labour markets should be included in this scope. However, in the recent years, it can be said that there has been a tendency to increasingly include labour markets under the perspective of competition law. The main purpose of these interventions is to curb the anticompetitive effects of restrictions brought over employees.
Although the Turkish competition law legislation does not include specific regulations on labour markets, it is observed that these markets have been addressed and carefully examined by the Turkish Competition Board (“TCB“) in the recent years. Several jurisdictions and competition authorities around the world have started to adopt the approach that the competition provisions can be applicable to those cases where the scope of application of labor law and competition law overlaps.
The TCB’s Approach to the Labour Markets
Before examining the TCB’s scope of intervention in the labour market, it will be useful to determine which types of employment contracts are within this scope. In the preamble of Article 3 of the Law No. 4054 on the Protection of Competition (“Law No. 4054“)1, with respect to the definition of services, it is stated that “Undoubtedly, the labour market where collective bargaining is accepted is excluded from this definition.” The emphasis on the principle of collective bargaining in the preamble reveals that instruments such as collective bargaining agreements and institutions such as trade unions are not examined under competition law.
Although the European Court of Justice’s Albany2 decision on the Dutch textile industry emphasised that the competition law rules may be applied to collective bargaining agreements, it can be said that only behaviours of undertakings in relation to individual labour law relations are under the scrutiny of the TCB in Turkey for the time being. In this context, it is necessary to examine how employer undertakings, which are buyers in labour markets, may restrict competition.
To that end, the below addressed are the some of the most common versions of anticompetitive practices related to the labour markets that constitute examples to the TCB decisions.
a. No-Poaching Agreements
No Poaching Agreements are defined in the Glossary of Competition Terms3 as “Agreements, made by an undertaking directly or indirectly to not offer employment to, or to not recruit the employees of another undertaking.” Considering that employees possess the know how and thus, are one of the most important elements of businesses, in cases where there is a supply constraint, it is certain that there will be a loss for the employer in case the employees transfer to other (especially competing) undertakings. As a result of the transfer of employees to other undertakings, the market power of the undertaking may be affected. In order to prevent the transfer of employees to other undertakings, undertakings may enter into agreements not to entice employees. There is no doubt that these agreements eliminate competition.
In the Private Hospitals decision4 of the TCB, it has been evaluated that the most important factor enabling employee transfers is the wage differences between undertakings, whereas it is noted that the agreements on not luring employees in labour markets are not different from cartels established on the purchase side of the market. In the decision, it has also been mentioned that there are also opinions that accept that agreements, such as wage fixing and no-poaching, may lead to a decrease in the quality or quantity of the product produced or the service provided according to the variables of the sales market, and thus a decrease in consumer welfare might be observed.5
In the relevant decision, it is stated that the prevention of employee transfer for freelance physicians constitutes a violation of competition in terms of purpose, and that a gentlemen’s agreement to prevent the transfer of personnel would result in consequences similar to the sharing of suppliers. As a result, administrative fines have been imposed against the parties to the investigation by the TCB.
In the Aegean Container Transporters decision of the TCB6, it has been assessed that the actions and the agreements in the labour markets may also prevent competition indirectly in the goods and services markets, and the parties to the investigation were advised to cease all actions that may constitute agreements restricting competition in accordance with Article 9/3 (issuance of a written opinion on how to cease infringements) of Law No. 4054. Even though an investigation was not initiated against the parties as a result of the aforementioned decision, it is of great importance to establish that the infringing behaviour between the parties is a violation of competition in terms of purpose.
Finally, in the TCB’s Bfit decision7, it was decided to limit the duration of the provision which stipulates that the franchisee should not employ persons employed by the franchisor, other franchisees or competitors without the approval of the franchisor with the term of the agreement and to amend the agreements accordingly.
A critical question at this point is whether these agreements may be considered as ancillary restraints, since the reason behind the limitation of an employee’s freedom in choosing a new employer is not always the fact that competing employers get together and agree not to poach in order to stifle competition. There may be other scenarios as well, for example, the non-compete may be introduced between the two undertakings in connection with a joint venture, or a merger and acquisition process, on the other hand, it may be the case of a single undertaking which imposes a general non-compete obligation on its employees in accordance with the Turkish Code of Obligations without addressing to a specific competing undertaking. However, the latter is not among the issues under examination of the TCB in principle, leaving aside some cases that may be exceptional. Therefore, it is necessary to make a distinction between a non-compete clause and a no-poaching agreement. On the other hand, in case the limitation is due to an agreement between the undertakings, it is not possible to say that there is no infringement of competition or that the restriction is lawful based solely on the fact that they are not competitors. At this point, the applicability and the existence of the conditions of the ancillary restraint doctrine in any specific case in question may also gain importance.
b. Wage Fixing Agreements between Employers
Wage and working conditions agreements are agreements whereby employers competing in the same labour market fix the wages and financial rights of any kind (such as insurance payments, housing allowance, fringe benefits and various compensations) or working conditions of employees at a certain level or within a certain range.8 Employer undertakings may enter into wage fixing agreements in order to prevent the transfer of their employees to rival undertakings and attractive wage offers from these undertakings.
Wage fixing agreements may be considered as a competition infringement as it may be deemed that they create a purchasing cartel. As a result of these agreements, employees may be deprived of job opportunities offering higher wages and better conditions and, with a further thinking on the subject, this may even be considered to be in contradiction with the provisions of the Constitution of the Republic of Türkiye, that relates to labour.
The TCB also adopts the view that wage fixing agreements constitute an infringement of competition in terms of purpose.9 In 2005, the TCB analysed a complaint regarding wage fixing and non-transfer agreements between the producers of television series10. The decision has focused on the allegation that the producers determined the salaries of the actors playing in series in consultation with each other. In the decision, it was evaluated that, if the TV series producers determine the actor’s fees by means of an agreement, this would come to mean the determination of the purchase prices mentioned in Article 4 (Agreements, Concerted Practices and Decisions Limiting Competition) of Law No. 4054, and this situation would clearly reflect the purpose of prevention of competition. It was also emphasized that the implementation of such decisions would prevent competition in the market. As a result, it was decided that there was no need to open an investigation against the undertakings since no supporting evidence was found, whereas the fact that there was a possibility of restriction of competition, it was decided to send a written opinion to these undertakings operating in the television series production market in accordance with Article 9/3 of Law No. 4054.
c. Labour Market Related Information Exchanges made by Employer Organisations
Sharing sensitive information of their employees by the employers with their competitors may also constitute a competition infringement in terms of its purpose or effect11. Information such as wages, bonuses, working conditions and labour costs of employees are accepted as sensitive to competition.
The TCB had initiated a preliminary investigation to determine whether foundation schools and associations of undertakings formed by these schools violate Article 4 of Law No. 4054 through agreements, concerted practices and decisions of associations of undertakings regarding wage and personnel policies12. At the end of the preliminary investigation, it was decided that negotiations and information sharing on issues related to school fees, scholarships and salaries could be considered as an infringement and an opinion was issued accordingly. It was emphasised that, even if there is no agreement between the undertakings, exchange of information alone might be of a nature restricting competition.
In the Çimsa Çimento decision13, the TCB considered the exchange of information on overtime, net-gross wages and fringe benefits of white-collar employees as a factor increasing the coordination risk.
Considering the above-mentioned decisions and recent developments, it is observed that the TCB closely examines anti-competitive agreements in the labour markets, in line with the trends followed by competition authorities around the world. The announcement14 published by the Turkish Competition Authority (“TCA“) in 2021 regarding the initiation of a comprehensive investigation for 32 undertakings in the labour markets reveals the TCB’s approach to the labour markets. In its announcement regarding the investigation, the TCA shared the problems in the labour markets, the benefits of intervening in these problems with competition law instruments, and its aim to protect the competitive structure of the labour market with the public. Within the scope of the hearings held in July 2023, major Turkish undertakings operating in the e-commerce and IT sectors had presented their defences. At this stage, it is understood that the TCA’s case handlers claim that there are some findings of infringement of Article 4 regarding some of the undertakings thus the decision of the TCB on the matter has been ruled in this respect.
The short decision has been announced15 on the official website of the TCA on 02 August 2023 in which it is stated that the investigation on gentleman’s agreements in the labour market has been concluded, and to impose administrative fines on some of the undertakings has been decided. In the announcement, it is also stated that no-poaching agreements reduce the mobility of the labour factor between undertakings and may artificially cause wages not to find their real values, thus, competitive structures in labour markets may be affected with inefficiency in the distribution of employees.
In the short decision16, it is indicated that certain undertakings under the investigation infringed Article 4 of the Law No. 4054 by becoming a party to anti-competitive agreements and that the practices in question cannot benefit from individual exemption. The relevant practices of the undertakings were evaluated within the scope of cartel and it has been decided to impose a total fine amount of approximately TRY 151,000,000 to 16 undertakings. It has been decided that no administrative fine shall be imposed on 21 other undertakings under the investigation as no infringement of Article 4 of the Law No. 4054 has been found.
As awareness of the competition law dimension of recruitment processes is just beginning to emerge in Turkey, the decision rendered as a result of this investigation will be effective in channelling the attention of undertakings to the issue, and it may be useful for the TCA to publish a guideline that explains the behaviours to be avoided or which includes certain criteria that are recommended to be taken into consideration, in order to increase such awareness. This short decision created a serious repercussion and enthusiasm in the labour markets in terms of competition law. It shall be clearly possible to observe the TCB’s approach on this issue following the announcement of the reasoned decision.
Approach of the USA and the European Union to the Labour Markets
In US competition law, explicit no-poaching agreements, together with explicit wage fixing agreements, are deemed as per se violations of the competition (DOJ/FTC 2016; Wage Fixing Agreements). In 2016, the US Federal Trade Commission (the “FTC“) and the US Department of Justice jointly published a guidance document17, which states that the agreements between competitors not to solicit each other’s employees or not to compete on wages shall be deemed as per se violations.
In the announcement published by the US Department of Justice regarding the agreement of technology companies18 not to recruit employees from each other, it has been stated that they agreed not to offer jobs to each other’s employees, and claimed that the agreement constituted a per se violation.
In another case in the US, an Arizona hospital association’s agreement with agencies providing nurses to its members was examined, and it has been decided that this agreement violated the law on the grounds that it reduced competition among hospitals to provide nurses.19
Certain competition authorities of the European Union member states have also ruled decisions regarding infringements in the labour markets. For example, the Spanish Competition Authority conducted an investigation20 on the suspicion that the working conditions such as wages, occupational safety and overtime arrangements were determined by competitors. The Lithuanian Competition Authority also initiated an investigation against the Lithuanian Basketball League and the sports clubs for exchanging information on the salaries of basketball players at a meeting.21 The Portuguese Competition Authority also published a report on the labour markets, stating that the employee no poaching agreements may have downstream consequences for consumer prosperity.22
The Gemicro decision rendered by The Croatian Competition Agency, which was concluded with the acceptance of the commitment to remove the anticompetitive effects, also has interesting aspects such as the fact that no-poaching clauses were within the context of the contracts related to the provision of specialized IT support services given by Gemicro, a company about which there are significant indices of dominant position, to the customer leasing companies.23
Finally, another dimension of competition in the labour market is non-compete clauses in individual labour contracts, that post-termination covenants restricting employment by a competitor, which can also be expressed as “the most powerful weapon in an employer’s armoury”.24 In this respect, after the consultation on measures to reform post-termination non-compete clauses, the UK Government, has announced its intention to limit the length of these clauses to three months in May 202325. Similarly, in the US, the FTC announced in January 2023 its proposal to ban the non-compete clauses completely. According to the announcement published on the official website, it is estimated that the newly proposed rule could increase wages between $250 billion and $296 billion per year, which reveals the extent of the phenomenon.26 In sum, it may take time for these planned amendments to be implemented and the final outcome will be decisive, however, it would not be wrong to say that there is a global tendency to regulate the issue.
Conclusion
Like all over the world, the TCB signaled that it will intervene more in this field with its focus of the labour markets. Thus, it is obvious that the competition problems in labour markets will be mentioned more frequently. This approach is expected to support the rights of the human capital and increase the labour productivity, which will ultimately lead to improve consumer prosperity. In Turkey, it can be said that the TCB’s approach of considering labour problems outside its scope of work has been completely abandoned, and a new era has begun. In this respect, it is obvious that competition law compliance programs should not overlook human resources practices.
1. https://www.rekabet.gov.tr/tr/Sayfa/Mevzuat/4054-sayili-kanun/madde-gerekceleri (last access 03.08.2023).
2. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61996CJ0067 (last access 03.08.2023).
3. https://www.rekabet.gov.tr/tr/Sayfa/Yayinlar/rekabet-terimleri-sozlugu/terimler-listesi?icerik=88f2f59c-5eb8-458e-8fd5-00c1fa2ac709 (last access 03.08.2023).
4. The Turkish Competition Board’s decision no. 22-10/152-62 dated 24.02.2022 (https://www.rekabet.gov.tr/Karar?kararId=f3cfc3f9-2e1d-40bc-9d28-639341c72743) (last access 03.08.2023).
5. MARINESCU, I. and HOVENKAMP, H. (2018) “Anticompetitive Mergers in Labor Markets” Institute For Law And Economics, Research Paper No. 18-8, p.39.
6. The Turkish Competition Board’s decision no. 20-01/3-2 dated 02.01.2020 (https://www.rekabet.gov.tr/Karar?kararId=beedfbe9-c183-4a7f-890b-774ccb8f0839) (last access 03.08.2023).
7. The Turkish Competition Board’s decision no. 19-06/64-27 dated 07.02.2019 (https://www.rekabet.gov.tr/Karar?kararId=4fa090f5-bdc3-4041-b8fc-953e97476ded) (last access 03.08.2023).
8. KIRAN, N.F.: Competition Law Applications in the Labour Market, Competition Authority Expertise Thesis, (July 2022).
9. The 237, 242, 334 and 367th paragraphs of the decision stated in footnote 4.
10. The Turkish Competition Board’s decision no. 05-49/710-195 dated 28.07.2005. (https://www.rekabet.gov.tr/Karar?kararId=f5bc9343-0d9c-47c1-abe0-d83163b28ca7) (last access 03.08.2023).
11. Herbert Hovenkamp, “Competition Policy for Labour Markets”.
12. The Turkish Competition Board’s decision no. 11-12/226-76 dated 03.03.2011. (https://www.rekabet.gov.tr/Karar?kararId=7557b1b6-700b-4ffc-858b-bc832991cadd) (last access 03.08.2023).
13. The Turkish Competition Board’s decision no. 11-44/979-329 dated 03.08.2011 (https://www.rekabet.gov.tr/Karar?kararId=54c736d7-9aeb-419f-a480-ea80366c8f4b) (last access 03.08.2023).
14. https://www.rekabet.gov.tr/tr/Guncel/isgucu-piyasasina-yonelik-centilmenlik-a-d8bc3379bea1eb11812e00505694b4c6 (last access 03.08.2023).
15. https://www.rekabet.gov.tr/tr/Guncel/isgucu-piyasasina-yonelik-centilmenlik-a-eabd47edff30ee118ec500505685da39 (last access 03.08.2023)
16. https://www.rekabet.gov.tr/Dosya/isgucu-nihai-karar.pdf (last access 03.08.2023)
17. DOJ-FTC Antitrust Guidance For Human Resource Professionals, 2016.
18. Adobe Systems Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc. and Pixar.
19. U.S. and State of Arizona v. Arizona Hospital and Healthcare Association and AzHHA Service Corp. CV 07-1030-PHX.
20. Montaje y Mantenimiento Industrial, Case S/DC/0612/17 (2017).
21. https://kt.gov.lt/en/news/konkurencijos-taryba-launches-investigation-into-suspected-anti-competitive-agreement-among-lithuanian-basketball-league-and-basketball-clubs (last access 03.08.2023).
22. Labour market agreements and competition policy
(https://www.concorrencia.pt/sites/default/files/Issues%20Paper_Labour%20Market%20Agreements%20and%20Competition%20Policy.pdf) (last access 03.08.2023).
23. The announcement on the official website of Croatian Competition Agency: “In the proceeding against the undertaking Gemicro the Croatian Competition Agency (CCA) accepted the committments made by Gemicro for the removal of anticompetitive effects and restoration of competition in the provision of specialised IT support to leasing companies, particularly involving implementation and maintenance of specialized business software necessary for the work of leasing companies in the territory of the Republic of Croatia. In addition, there have been strong indices that Gemicro holds a dominant position in this market.” (https://www.aztn.hr/en/gemicro-committments-accepted/) (last access 03.08.2023).
24. Pat Systems v Neilly [2012] EWHC 2609 (QB) (https://employmentcasesupdate.co.uk/content/pat-systems-v-neilly-2012-ewhc-2609-qb.c7f26244985a46ddb8fe381de8ea3752.htm) (last access 03.08.2023).
25. Response to the Government consultation on measures to reform post-termination non-compete clauses in contracts of employment (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1156211/non-compete-government-response.pdf) (last access 03.08.2023).
26. https://www.ftc.gov/legal-library/browse/federal-register-notices/non-compete-clause-rulemaking (last access 03.08.2023).
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