The Competition Authority’s Draft Guidelines on Competition Infringements in Labor Markets Submitted for Public Opinion

On September 16, 2024, the Turkish Competition Authority (“TCA”) published the Draft Guidelines on Competition Infringements in Labor Markets (“Draft Guidelines”) on its website. The Draft Guidelines aim to inform the public and undertakings on the relationship between the labor market and Law No. 4054 on the Protection of Competition (“Law No. 4054”).

While the Competition Board (“Board”) has addressed the issue in its previous preliminary investigations into the labor market, regulating the area has not been a priority and until the last two years no sanctions had been imposed.

Recent decisions have indisputably demonstrated that wage-fixing and no-poaching agreements can be considered cartels by the Board. The Draft Guidelines confirm this view by stating that that these are cartel agreements and provide further information on the types of infringements that may occur in labor markets.

The Draft Guidelines also aim to inform undertakings regarding ancillary restrictions that may apply to legitimate collaborations in the labor market.

Those wishing to comment on the Draft Guidelines should fill out the application form specified in the announcement and send it to [email protected] by Friday September 27.

The Draft Guidelines’ main headings are as follows:

Application of Article 4 of Law No. 4054 to Agreements in Labor Markets

Article 4 of Law No. 4054 prohibits agreements1 between two or more undertakings that have the effect or purpose2 of restricting competition and applies to both sales and purchase markets. The Draft Guidelines emphasize that agreements on wages and other employee working conditions that are an input to the provision of goods and services are also covered by Article 4.

The Draft Guidelines also emphasize various types of labor market violations focusing on (i) wage fixing and other working conditions agreements and (ii) agreements not to recruit another undertaking’s employees (no-poaching agreements).

Wage Fixing Agreements

The Draft Guidelines emphasize that wage fixing should not only be seen in terms of salary; the definition includes any working conditions valued by employees and which affect job choices and overall labor mobility.3 Two or more companies entering into a wage fixing agreement would constitute a violation of purpose. If a third party mediates the agreement it may also be liable.

No-poaching Agreements

No-poaching refers to undertakings not offering employment to another undertaking’s employees either directly or indirectly. This also includes a pre-approval mechanism for such hiring decisions due to a concurrence of will between competitors. Whether or not such a restriction concerns former or current employees does not change the assessment. The key factor to decide is whether there is an agreement between competitors4 to restrict employee mobility.

The Draft Guidelines state that no-poaching agreements will be considered as by-object violations as they constitute an artificial distribution of supply and labor between undertakings. If a third party is involved in setting up or maintaining such an agreement it may also be held liable.

Information Exchanges

In order for information exchanges to constitute an infringement under competition law, the information exchanged should be competitively sensitive and reduce, or potentially reduce, uncertainty in the market. In this respect, the exchange of strategic information may lead to coordination between competitors.

The Draft Guidelines state that these principles also apply in the labor market and the exchange of information regarding salaries, benefits etc., which may be considered sensitive information regarding the labor force, may constitute an infringement. Third parties who mediate this information exchange may also be held liable.

Ancillary Restrictions

The Draft Guidelines define ancillary restrictions as restrictions imposed on the parties to an agreement not having the purpose of preventing, distorting or restricting competition and necessary for the realization of the objectives sought by the agreement and directly related to these objectives.

Such restrictions may be imposed in the form of a provision of the principal agreement or by another agreement separate from, but subordinate to, the principal agreement. These restrictions must be directly related to said agreement and both necessary and proportionate to the implementation of the legitimate collaboration. Ancillary restrictions are exempt from the application of the law. In this context, for example, it may be argued that a no-poaching agreement is made within the scope of a legitimate collaboration provided that the requirements set out in the Draft Guidelines are met.

[1] The concept of an agreement is broadly defined under Turkish competition law and not required to be in writing. Any document demonstrating that two or more undertakings agree to behave in a certain way is considered an agreement (e.g. an e-mail communication).

[2] The definition of by-object violation eases the Board’s burden of proof. Agreements considered to be in violation of competition law by object are subject to a limited procedure and include agreements such as price fixing, market and customer sharing. The Board need not demonstrate harmful effects when faced with an agreement that constitutes a by-object violation.

[3] The Draft Guidelines provide examples of raising rates, working hours, compensations, physical working conditions and leaving rights. As stated in the definition above, this list in not exhaustive and may be added to.

[4] In the labor market all undertakings are considered competitors. For example, a fast-food company and a software company are competitors in the labor market.