The Guidelines on Competition Violations in Labor Markets ("Guidelines"), adopted by the Turkish Competition Authority on November 21, 2024, were prepared pursuant to Article 167 of the Constitution of the Republic of Türkiye and Law No. 4054 on the Protection of Competition. The Guidelines aim to protect a healthy competitive environment in labor markets while detailing types of competition violations and setting forth assessment criteria for such violations.
- Introduction
The Turkish Competition Authority is tasked with intervening in behaviors that restrict, distort, or hinder competition in the market. In this context, labor markets are subject to the same provisions of the Law as other goods and services markets.
Labor markets are a significant element of competition due to undertakings' efforts to retain their employees or hire those employed by competitors. In competitive labor markets, employers are expected to offer employees attractive wages and working conditions, while employees are expected to find jobs that match their qualifications and expectations.
However, the unique structural characteristics of labor markets can hinder effective competition. These features include:
- A market structure where the number of employers is limited, but the number of employees is high,
- Weak employee organization,
- Legal or practical barriers that restrict employee mobility.
Such characteristics may lead employers to engage in anticompetitive agreements, resulting in employees facing lower wages and unfavorable working conditions. Furthermore, reduced employee mobility can hinder the development of workforce skills and the emergence of innovative ideas.
- Application of Article 4 of Law No. 4054
Article 4 of the Law prohibits agreements, concerted practices, and decisions of associations of undertakings that aim to or result in the prevention, distortion, or restriction of competition. Anticompetitive practices in labor markets are also evaluated under this article.
2.1. Wage-Fixing Agreements
Wage-fixing agreements involve employers collectively determining the wages and other working conditions of their employees. These agreements may cover:
- Wages, raise rates, fringe benefits, severance payments, leave entitlements, and working hours,
- Non-compete obligations imposed on employees.
The purpose of these agreements is to stabilize working conditions at a certain level, thereby eliminating competition. Under Article 4 of the Law, such agreements are unlawful and are generally classified as cartels.
These agreements may occur directly between two employers or through a third party. If a third party facilitates or assists in the agreement, it may be deemed a party to the violation.
2.2. Non-Poaching Agreements
Non-poaching agreements involve employers agreeing not to solicit or hire each other's employees. These agreements:
- May apply to current or former employees,
- Restrict employees' tendency to change jobs and reduce competition in the labor market.
These agreements fall under the prohibition of "market allocation" in Article 4 of the Law, creating a covert collaboration among rival employers and are considered cartels.
2.3. Information Exchange
Information exchange may provide a basis for competition violations in labor markets. Such exchanges involve the sharing of competitively sensitive information and can occur through:
- Direct interaction between rival employers,
- Third parties (e.g., recruitment agencies, market research companies),
- Channels such as algorithms or media.
Competitively sensitive information includes data such as wage rates, working hours, and raise percentages. Sharing such information may have anticompetitive effects and is generally prohibited.
For information exchange to be deemed lawful, the following conditions must be met:
- The exchange must be conducted by an independent third party,
- Shared data must be anonymized,
- Data must pertain to a period at least three months prior,
- The data set must include information from at least ten participants, and no single participant's data should constitute more than 25% of the total data set.
2.4. Ancillary Restraints
Ancillary restraints are one of the most common practices observed in labor markets and are therefore discussed in greater detail in this summary of the Guidelines. Ancillary restraints are defined as restrictions that do not aim to or result in the prevention, distortion, or restriction of competition but are necessary for the implementation of an agreement and directly related to achieving its objectives. These restrictions do not form the essence of the primary agreement but support its implementation.
Ancillary restraints are generally designed to facilitate the implementation of a legitimate and broader primary agreement. They may either appear as a provision within the primary agreement or as an independent arrangement subordinate to the primary agreement. However, such restraints must meet the conditions of being directly related, necessary, and proportionate. If these three conditions are not fulfilled, the restriction is deemed an unlawful violation under Article 4 of the Law.
Assessment of Whether a Restriction is an Ancillary Restraint
Determining whether a restriction qualifies as an ancillary restraint involves a detailed examination of the following three conditions:
2.4.1. Direct Relation
Direct relation refers to the inseparability of the restriction from the implementation of the primary agreement. This means that such a restriction can only exist in connection with the primary agreement. Without the primary agreement, the restriction should not be conceivable.
- It must be clearly demonstrated which primary agreement the restriction relates to.
- Restrictions that lack a connection to the primary agreement or are ambiguous in nature do not fulfill the condition of direct relation.
- The restriction must support the purpose of the primary agreement and facilitate achieving that purpose.
The timing of the restriction is also considered. The mere fact that the restriction is introduced simultaneously with the primary agreement does not suffice for it to be considered directly related. However, if the restriction satisfies other conditions, it can still be deemed directly related even if introduced after the primary agreement.
2.4.2. Necessity
The necessity condition requires that the restriction be indispensable for the implementation or continuation of the primary agreement. If the primary agreement cannot be realized or sustained without the restriction, it is considered necessary.
- The nature of the primary agreement and the characteristics of the market are taken into account.
- If undertakings in similar circumstances would not be willing to enter into the primary agreement without the restriction, the necessity condition is deemed satisfied.
- Subjective evaluations of the parties are not considered; instead, objective conditions are assessed.
- The fact that the absence of the restriction would make the agreement less profitable or harder to implement does not render the restriction necessary.
- The existence of less restrictive alternatives undermines the necessity condition.
2.4.3. Proportionality
Proportionality requires that the restriction is the least restrictive means to achieve the objectives of the primary agreement. Furthermore, the scope of the restriction must be limited to what is necessary in terms of its duration, geographical area, and the parties involved.
- Purpose Appropriateness: The restriction must serve a purpose that cannot be achieved through a less restrictive method.
- Scope Limitation: The restriction must:
- Not exceed the duration necessary to achieve the objectives of the primary agreement.
- Be confined to the geographical area where the primary agreement applies.
- Only apply to the necessary parties.
Restrictions that fail to meet these criteria include:
- Indefinite restrictions that lack a clear time limit.
- Restrictions that do not specify which employees they apply to.
- Restrictions that unnecessarily apply to all parties rather than just the required ones.
The Turkish Competition Board evaluates the proportionality of a restriction based on the specific circumstances of each case. Restrictions that fail to meet the proportionality condition are not considered ancillary restraints and are deemed unlawful under Article 4 of the Law.
Burden of Proof for Ancillary Restraints
Restrictions that do not fulfill the conditions of direct relation, necessity, and proportionality cannot be considered ancillary restraints.
- For a restriction to qualify as an ancillary restraint, all three conditions must be satisfied simultaneously.
- The burden of proof for demonstrating that the restriction meets these conditions lies with the parties to the agreement.
- Written arrangements are recommended to reduce ambiguity during the evaluation process.
Restrictions qualifying as ancillary restraints are not subject to Article 4 of the Law. However, wage-fixing or non-poaching-related restrictions that do not meet these conditions are considered competition violations and are subject to penalties.
- Application of Other Provisions of Law No. 4054
The principles outlined in the Guidelines also apply to Articles 5, 6, and 7 of the Law.
Article 5 – Exemption Assessment
Agreements that restrict competition may be exempted under Article
5 of the Law if they promote economic or technical progress and
benefit consumers. However, wage-fixing and non-poaching agreements
generally fail to meet these conditions.
Article 6 – Abuse of Dominance
Undertakings that are dominant in labor markets may also violate
the Law by abusing their position. For example, suppressing wages
or restricting employee mobility may be considered abuses of
dominance.
Article 7 – Mergers and
Acquisitions
The assessment of whether mergers and acquisitions significantly
reduce competition in labor markets involves factors such as market
concentration, employee qualifications, and the likelihood of
increased collaboration among competitors.
- Conclusion and Evaluation
The Guidelines represent a significant step in defining the fundamental principles of competition violations in labor markets. While the document provides a general framework for protecting competition in these markets and offers guidance to relevant stakeholders, certain areas for improvement remain apparent.
The lack of concrete examples, sectoral variations, and practical guidance limits the effectiveness of the Guidelines as a comprehensive reference. Given the Turkish Competition Board's rich case law, certain Board decisions often provide more in-depth analyses and detailed guidance than the Guidelines themselves. Enriching the Guidelines with various authority decisions, concrete case studies, and market-specific analyses could substantially enhance their utility in addressing the competitive dynamics of labor markets.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
