The Competition Authority ("Authority") conducted a preliminary investigation against container transporters in Izmir to determine whether they have violated Article 4 of Law No. 4054 on Protection of Competition ("Law No. 4054") via wage fixing arrangements1. The preliminary investigation was initiated ex officio in light of the findings during on-site inspections within the scope of a different investigation concerning price fixing arrangement allegations among container transporters ("Investigation dated 2018-4-036"). The reasoned decision contains written correspondences, mostly WhatsApp group chats but also e-mails, among the investigated container transporters to fix driver salaries.

Before delving into details of its substantial assessment, the Turkish Competition Board (the "Board") first analysed competition law infringements on the buyer side. Within this scope, the Board referred to its Cherry2 decision which emphasized that fixing the purchase price is considered within the same type of agreements such as price fixing and customer allocation; thus, constitutes per se infringements. Likewise, the Board also referred to its Tobacco Leaf3 decision which stated that the existence of certain criteria such as; purchasers purchasing the biggest part in the market and total number of buyers, entry barriers in the purchasing market, positive supply curve, and communication between the buyers are necessary for applying buyer power. While the Tobacco Leaf decision seemed to provide some sort of effect analysis towards the undertakings creating a monopsony power, it also emphasized that Article 4 of Law No. 4054 could be infringed by object. In addition, the Board also referred to cases on buying cartels in other jurisdictions (the EU4 and Germany5) including cases where buying cartels were fined by the relevant authorities.

The Board moved on with assessing violations related to the labour market and acknowledged that, if a productive employee switches to a rival firm in the industry, a considerable loss will occur to the employer6. In this regard, both the transfer of qualified personnel (particularly in innovative markets) as well as unqualified personnel (when the markets are short of employees) could create such considerable loss. The Board also noted that labour is one of the most significant costs which affect the undertakings' way of conduct and thus their market power. Therefore, reducing the employee mobility and suppressing wages would benefit undertakings.

Accordingly, undertakings might enter into wage fixing arrangements or no-poaching agreements7 to eliminate competition in the labour market, since usually employees are "poached" by rival undertakings who offer higher wages (which is the most significant competitive factor in labour markets). Through anti-competitive agreements in the labour market (which are prohibited by Article 4 of Law No. 4054 as much as any in other product / services market, as clarified by the Board from a theory of harm perspective), employers might gain monopsony power which they could not have gained otherwise. On the other hand, with the monopsony power, they can also reduce wages without sustaining significant loss of employees. While disputable, undertakings may pass on the welfare that could increase due to reduced wages to consumers. However, by referring to its BFIT8 decision, the Board emphasized that the focus in such agreements should be on the direct restrictions in the input market, i.e., the labour market, rather than the indirect possible effects in the output market (i.e., on the consumers). Moreover, as confirmed by the Board, there are opposing views in the literature which argue that the consumer welfare may as well decrease due to price fixing and no-poaching agreements.9 Accordingly, when labour is reduced due to wage suppression, this might lead to decrease in production, thus, decrease in input and because of the reduced input, prices might increase which would ultimately result in loss of consumer welfare.10 At this point, the Board also noted that the market's monopsony structure might prevent distribution efficiency similar to a monopoly.11

The Board further explained that wage fixing / no-poaching agreements can restrict competition by effect or by object and emphasized that they are no different from buying cartels. Likewise, it also confirmed that no-poaching agreements have no fundamental difference from customer / market allocation with the exception that the former is on the seller side and the latter on the buyer side as has also been confirmed in the literature12.

After providing detailed insight on the approach concerning the labour market (including no-poaching and wage fixing agreements) in the US13 and the EU14, the Board continued with its relevant precedents on the subject. Accordingly, the Board first referred to its TV Series Producers15 decision which determined that a wage fixing agreement could be defined as an agreement for fixing purchasing prices and thus might have the object of restricting competition. Second, the Board referred to its Private Schools16 decision which set forth that information on wages were competition sensitive information and thus, exchange of such information might lead to competition law violation. Third case that the Board referred to was again the BFIT17 decision where BFIT imposed non-compete obligation and no-poaching obligation on franchisee and franchisee's employees, and required its approval before a franchisee employed other franchisees', BFIT's or competitors' old/current employees. After considering the guidelines of the Federal Trade Commission and the US Department of Justice which state that no-poaching or wage fixing are considered per se illegal, the Board concluded that the non-compete and no poaching clauses should be subject to modification to comply with the conditions of individual exemption which resulted in limiting the relevant clauses with the agreement period and BFIT providing a clear reasoning when its prior written approval is required. 

In light of the above case law, the Board reviewed the information and documents obtained during the preliminary investigation and concluded that the undertakings aimed fixing the wages and preventing the employee mobility. The Board also considered that none of the undertakings objected to the agreement on the employees; on the contrary, they reacted against wage levels and employee transfers to competitors which together pointed to a violation of Law No. 4054.

While wage fixing and no-poaching agreements might lead to interconnected similar results, based on the findings of the case, the Board determined that the mutual understanding among the container transporters seemed to be on fixing wages whereas no-poaching and prevention of mobility was rather a part of the wage fixing agreement or one of the outcomes that are aimed by means of the wage fixing agreement. In any case, the Board stated that wage fixing could be analysed as a competition law infringement in terms of a buying cartel but also from the aspect of their anti-competitive effects in the labour markets as in the abovementioned BFIT decision.

The Board also considered whether or not the cooperation among the container transporters has legitimate grounds or is reasonably necessary;  and ultimately  concluded that the agreement among the container transporters constituted a competition law violation by object. Furthermore, the wage fixing was a clear agreement on the buyer side next to the alleged price fixing agreement subject to the Investigation dated 2018-4-036.

Furthermore, the Board considered that an anti-competitive effect in the input market (the labour market) would also gradually lead to loss of consumers' welfare (in the output market) since the labour supply would be decreased due to wage suppression.

As for the effect in the market, after analysing the information and documents obtained in scope of the preliminary investigation, the Board could not deduce that mobility in the market was restricted. Besides, while the wages of the undertakings were parallel to a certain level; as indicated by the undertakings, the wage levels were determined based on minimum wages which was a fact that could be also observed from the wage level graphics prepared based on the date collected from the investigated undertakings. Therefore, the Board determined that the agreement did not create appreciable effect in the market.

Moreover, the Board also determined that the undertakings subject to the preliminary investigation did not cover the biggest part of the market, thus they would not create a significant buyer power. As indicated above, the minimum wage oriented-approach did also contribute to the decrease of the possible effects of the wage fixing agreement. Together with the fact that the scope of relevant geographic market was relatively limited, the Board decided not to initiate a full-fledged investigation; but instead, referred to Article 9(3) of Law No. 4054 pursuant to which the Board may issue an opinion letter to undertakings to terminate the infringement in cases where it is possible to fully shed light on the case during the preliminary investigation phase, and (i) the violation is so minor that initiating an investigation is not required, and/or (ii) it is also possible to eliminate entirely the effects of the violation and compensate the anti-competitive effects of the violation or (iii) the violation is made in markets which are not completely open to competition due to structural and legal barriers.18 On this basis, the Board decided to issue an opinion letter to each of the undertakings subject to the preliminary investigation to terminate their behaviours that could be an anti-competitive agreement as per Article 4 of Law No. 4054; which also indicates that the Board could initiate proceedings within the framework of Law No. 4054 if the undertakings act against the Board's opinion letter.

Nonetheless, the decision of the Board was rendered by a large majority. According to three Board members' dissenting view, there is a wage fixing agreement between the container transporters that violated competition law by object. Thus, the infringement determined in the preliminary investigation should have been included into the Investigation dated 2018-4-036 considering that the wage related violation overlapped with the subject of the Investigation dated 2018-4-036 in terms of purchasing products/services.

Footnotes

1. The Board's decision dated 02.01.2020 and numbered 20-01/3-2.

2. The Board's decision dated 24.07.2007 and numbered 07-06/713-245.

3. The Board's decision dated 19.09.2002 and numbered 02-56/699-283.

4. Case No COMP/AT.40018 (8.2.2017) - Car battery recycling

5. https://www.bundeskartellamt.de/SharedDocs/Meldung/EN/Pressemitteilungen/2019/21_11_2019_Bussgeld_Stahl.html

6. SHY, O. & STENBACKA, R. (2019) "Anti-poaching agreements in labour markets" Economic Inquiry, Vol. 57, No. 1, p.243-263.

7. Other typical forms of relevant anticompetitive practices among competitors in labour markets include fixing working conditions or exchanging sensitive information which are also referred to by the Board via the OECD paper "Competition Concerns in Labour Markets - Background Note" (2019), p.19-21.

8. The Board's decision dated 07.02.2019 and numbered 19-06/64-27.

9. MARINESCU, I. & HOVENKAMP, H. (2018) "Anticompetitive Mergers in Labor Markets" Institute For Law And Economics, Research Paper No. 18-8, p.39.

10. HOVENKAMP, H. (2019) "Competition Policy for Labour Markets" U of Penn, Inst for Law & Econ Research Paper No. 19-29, p.2-3; NAIDU, S., POSNER, E. & WEYL, E. G. (2018) "Antitrust Remedies for Labor Market Power", 132 HARV. L. REV. 536.

11. OECD (2019), "Competition Concerns in Labour Markets - Background Note", p.10.

12. "In re: Railway Industry Employee No-Poach Antitrust Litigation", Civil No. 2:18-MC-00798-JFC, MDL No. 2850 (https://www.justice.gov/atr/case-document/file/1131056/download); United States v. eBay, Inc., 968 F.Supp.2d 1030 (N.D. Cal. 2013); TALADAY, J. M & MEHTA, V. (2017), "Criminalization of wage-fixing and no-poaching agreements" CPI's North America Column, p.1-2; Phillip E. Areeda and Herbert Hovenkamp (2019), Antitrust Law - An Analysis of Antitrust Principles and Their Application, Wolters Kluwer.

13. United States v. Knorr-Bremse AG and Westinghouse Air Brake Technologies Corporation, No. 1:18-cv-00747 (03.04.2018)

14. Décision no 16-D-20 du 29.09.2016 French Competition Council; Competition and Markets Authority, Case CE/9859-14, "Conduct in the modelling sector" (16.12.2016); Case S/DC/0612/17 Montaje y Mantenimiento Industrial; LJN: BM3366 (Court of Hertogenbosch) HD 200,056,331.

15. The Board's decision dated 28.07.2005 and numbered 05-49/710-19.

16. The Board's decision dated 03.03.2011 and numbered 11-12/226-76.

17. The Board's decision dated 07.02.2019 and numbered 19-06/64-27.

18. 13th Chamber of Council of State's Burdur Private Teaching Institutions decision dated May 30, 2014 and numbered 2010/4818 E., 2014/2197 K.

This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in June 2020. A link to the full Legal Insight Quarterly may be found here

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