The Turkish Competition Authority Publishes Guidelines on Competition Infringements in Labor Markets

Introduction

The Turkish Competition Authority (“TCA”) published its “Guidelines on Competition Infringements in Labor Markets” (“Guidelines”) on its website on 3 December 2024. These Guidelines were initially announced in early May 2021, and their draft version was made available for public consultation on 16 September 2024.

Competition law enforcement in labor markets has increasingly become a hot topic in recent years, marked by significant investigations and public announcements. Although the theoretical framework was provided in the early days of 2020 with the decision regarding allegations of wage-fixing among employees in the container transportation sector, the wave of TCA investigations that directly focused on anti-competitive agreements in labor markets started with the private hospitals investigation[1] launched in November 2020. Although the Competition Board (“Board”) had addressed competition law practices in labor markets long before 2020, this issue mostly remained secondary until then, or was treated as an ancillary element within investigations examining other matters.

After 2020, competition law enforcement in labor markets has rapidly climbed to the top of the TCA’s priorities. The adoption of an “infringement by object” approach (close to per se illegality under Turkish competition law), particularly concerning no-poaching and wage-fixing agreements or exchange of competitively sensitive information between competitors, put almost all private sector stakeholders who had not previously encountered such practices into the potential risk zone within their compliance sensitivity across several industries. In light of this relatively new area of enforcement and the elevated compliance risks posed for all sectors, there was an expectation for the development of secondary legislation aimed at enhancing legal certainty.

The key points of the Guidelines are outlined below:

No-Poaching and Wage-Fixing Agreements

The Guidelines provide legal definitions of no-poaching and wage-fixing agreements (on wages, social rights, side benefits, other working conditions, etc.) and clarify that such practices constitute “by object infringements” and are classified as cartel agreements.

The assessment that no-poaching agreements correspond to customer allocation agreements within the scope of Article 4 of the Turkish Competition Act remains upheld. Given that no-poaching agreements aim to prevent the artificial allocation of labor between undertakings, they constitute infringements by object and should be classified as cartels.

Abuse of Dominant Position

The Guidelines highlight that abuse of dominance in labor markets can take various forms and should be assessed by considering the unique circumstances and characteristics of each case. However, they do not offer specific guidance on addressing potential questions that may arise in practice.

The Guidelines’ key insight on abuse of dominance is the need to evaluate an undertaking’s dominance in both the product/service market and the labor market when assessing such behavior, as its anti-competitive effects may impact either market.

Information Exchange

The Guidelines particularly emphasize the exchange of competitively-sensitive information  in labor markets (salary, benefits, social rights, workplace practices, work and working conditions, etc.) can lead to anti-competitive effects not only between undertakings that are competitors in the labor market, but also by undertakings such as independent market research organizations and private employment agencies as third parties, which may facilitate such exchanges. The Guidelines suggest that independent organizations conducting market research on working conditions, particularly in terms of wages, should aggregate the data obtained from different companies to prevent from directly disclosing the source of the relevant data or increasing transparency on this front. It would be plausible to perceive such suggestion as guidance and a warning on how undertakings, specifically those providing benchmarking services on employment conditions, should serve their clients with market research data. The Guidelines explicitly state that sharing individualized, up-to-date, or future-facing non-public data that could enable the identification of the source or individual content of the data can have anti-competitive effects.

In addition, the Guidelines provide a guiding framework by stating that information exchange is, as a rule, unlikely to have anti-competitive effects if all of the following conditions are met:

• ▪️ The information exchange is conducted by an independent third party;

• ▪️ It must not be possible to identify the source of the data or the content of individual data;

• ▪️ The information exchanged must relate to data that is at least three months old;

• ▪️ The exchanged data must include input from at least ten participants;

• ▪️ No single participant’s data should account for more than 25% of the total dataset.

Mergers and Acquisitions

The Guidelines indicate that the Board may conduct a separate assessment for labor markets independent from the relevant product markets affected directly or indirectly by the notified transaction, particularly in terms of significant impediment on effective competition.

To assess the impact on labor markets, the following factors may be considered:

▪️ Shares of the transaction parties in the relevant labor market and the level of concentration of the market;

▪️ Similarity level of the qualifications of the transaction parties’ employees;

▪️ Barriers to entry into the relevant product market;

▪️ Level of organization of labor market participants;

▪️ Cost of transfer to another employer;

▪️ The ability of competitors to increase capacity or make new investments;

▪️ Potential competitive pressure;

▪️ Whether the transaction facilitates cooperation between competitors in the  labor market;

▪️ Whether the transaction could result in a "killer acquisition."

Although such a list of assessment criteria has been provided, it remains unclear for now how such an amendment to the Guidelines will affect merger control review, whether the notification form will need to be amended, whether impacts on labor markets will become a standard consideration in the notification process, and how it will extend the review period.

Ancillary Restraints

The Guidelines also extend applicability of the "ancillary restraint" doctrine, which is commonly seen in the evaluation of agreements regulating mergers and acquisitions, to practices in labor markets. The concept of “ancillary restraints” is not covered in the Turkish Competition Act, but was introduced into Turkish competition law through secondary legislation by deriving from European Union law, and refers to restrictive agreements that are necessary to protect another agreement’s legitimate objectives and are permissible under competition law if they are proportionate and directly related to the main agreement.

The Guidelines suggest that labor restrictions related to the main agreements between undertakings that are not anti-competitive by object or effect may be considered as an ancillary restraint. In evaluating such restrictions, criteria similar to those used in merger control review should be applied to determine whether the restriction is directly related, necessary, and proportionate to the main agreement. The Guidelines also emphasize that labor restrictions that fail to meet the criteria for ancillary restraints will instead be evaluated under no-poaching or wage-fixing agreements and are likely to be considered infringement by object.

However, the criteria for making such assessments remain unclear. Therefore, it appears that no concrete guidance has been provided on the issues that cause difficulties in practice, such as under what conditions the no-poaching obligations imposed between the contracting parties within the framework of contractual relationships such as services, supply, distribution, project development, etc. may constitute ancillary restraint.

Exemption Regime

According to the Guidelines, agreements restricting competition in labor markets, as with any agreements covered by Article 4, may theoretically benefit from the exemption regime under Article 5 of the Turkish Competition Act, if they contribute to new developments in the production of goods or the provision of services, increase consumer welfare, and secure the maintenance of competition in a significant portion of the market. However, the Guidelines explicitly state that wage-fixing and no-poaching agreements in the labor market cannot practically benefit from the exemption regime, as they excessively restrict competition.

Conclusion

The Guidelines appear to consolidate the main principles emphasized by the TCA’s recent precedents after 2020 and aim to provide a more precise theoretical framework for labor market-related infringements. Although the Guidelines do not have the function of increasing the legal certainty over competition law enforcement in labor markets through practical guidance, they aim to consolidate the theoretical framework set forth in the scattered case law and reveal that labor markets, which have been mostly addressed within the framework of Article 4 (anti-competitive agreements) of the Turkish Competition Act until now, will be on the agenda of the Competition Board in the upcoming period in terms of Articles 6 (abuse of dominant position) and 7 (control of concentrations).