Reconciling Competition Law And Labor Rights: Trade Unions As 'Undertakings' In Comparative Law

I. Introduction

The concept of an “undertaking,” one of the fundamental concepts of competition law, plays a central role in determining the scope of application of competition rules. In competition law, what matters is not the legal status of an entity, but whether it engages in economic activity in the market. Accordingly, not only companies but also individuals, public legal entities, associations, and non-profit organisations may qualify as “undertakings” in respect of certain activities.

This broad approach raises an important question in the context of labour markets: can trade unions, which are established to protect and promote the economic and social rights of employees, be regarded as “undertakings” for the purposes of competition law? In particular, the fact that collective bargaining and collective labour agreements directly affect wages, working conditions and other terms of employment makes it necessary to examine the relationship between trade union activities and competition law.

However, the fact that trade union activities produce economic effects does not mean that all such activities automatically fall within the scope of competition law. Both European Union (“EU”) law and United States (“US”) law recognise that collective bargaining activities aimed at strengthening the bargaining position of employees vis-à-vis employers and improving working conditions should benefit from a certain degree of protection, taking into account the need to strike a balance between the objectives of competition law and broader social policy considerations.

Against this background, two principal issues arise when assessing trade union activities from a competition law perspective. First, it must be determined to what extent trade unions and their activities may qualify as “undertakings” or “economic activities.” Second, where trade union activities produce effects that may restrict competition, it must be determined to what extent such activities may benefit from an exemption from, or immunity under, competition law.

II. The Concept of an Undertaking in Competition Law

In competition law, the concept of an undertaking refers to any entity engaged in an economic activity, irrespective of its legal status. Under the established case law of the European Union, an undertaking is broadly understood as any natural or legal person engaged in an economic activity consisting of the provision of goods or services.¹ This approach is based on the principle that the concept of an undertaking is determined not by the formal legal status of the entity concerned, but by the economic nature of the activity it carries out.

Accordingly, the fact that an organisation does not pursue a profit-making purpose, constitutes a public legal entity, or has been established to pursue a particular social objective does not, in itself, preclude it from qualifying as an undertaking. The decisive criterion is whether the relevant entity engages in an economic activity by offering goods or services on a market.

A similar approach has been adopted under Turkish competition law. Article 3 of Act No. 4054 on the Protection of Competition (“Act No. 4054”) defines an undertaking broadly as natural and legal persons that produce, market or sell goods or services, as well as independent entities that are capable of making decisions and engage in economic activities. Accordingly, the existence of an economic activity constitutes the principal criterion for determining whether an entity qualifies as an undertaking.

This broad definition of an undertaking assumes particular importance in the context of labour markets. Although labour may be regarded as a service supplied in a market, the manner in which employees provide their labour differs materially from the provision of goods or services by independent economic operators. This distinction lies at the heart of the assessment of trade union activities under competition law.

III. The Legal and Economic Position of Trade Unions

Trade unions are organisations established to protect and promote the economic and social rights of employees and enjoy constitutional protection. Collective bargaining and the conclusion of collective labour agreements constitute the principal instruments through which trade unions pursue these objectives. Through collective labour agreements, wages, working hours, leave entitlements, social benefits, retirement rights and other terms and conditions of employment may be determined. Trade union activities therefore undoubtedly produce economic effects in labour markets.

However, the existence of such economic effects does not mean that trade union activities are equivalent to the economic competition that competition law seeks to protect. The principal purpose of trade unions’ collective bargaining activities is to address the structural imbalance in bargaining power between employees and employers and to secure the economic and social rights of employees. Trade union activities therefore operate not merely as a natural component of market competition, but also as a mechanism designed to achieve social balance in labour markets.

This consideration forms the basis of the approach adopted towards trade union activities in both EU and US law.

IV. Trade Unions and Collective Bargaining under EU Competition Law

The established approach under EU competition law is that activities undertaken by employees and trade unions in pursuit of legitimate trade union objectives—namely, the protection and promotion of employees’ economic and social rights, including through collective bargaining on wages and other terms and conditions of employment— are generally considered to fall outside the scope of competition law.

One of the principal foundations of this approach is the distinction between employees and independent economic operators. Under EU law, an employee is not regarded as an undertaking because, unlike an independent economic operator, the employee does not independently carry out an economic activity by assuming the financial risks associated with the provision of his or her services.² The economic dependence of employees on their employers, and the collective nature of the bargaining process through which employees negotiate their terms and conditions of employment, therefore require trade union activities to be assessed differently under competition law.

Accordingly, when employees collectively determine the remuneration or working conditions they seek from employers through collective bargaining, such conduct is generally distinguished from price-fixing or market-sharing arrangements that may be entered into between undertakings.

This approach is particularly evident in the judgments of the Court of Justice of the European Union (“CJEU”) in Jean Claude Becu and Albany.

Jean Claude Becu Judgment

In the 1999 Jean Claude Becu judgment,³ the CJEU examined the requirement under Belgian law that loading and unloading operations at the Port of Ghent be carried out exclusively by persons holding the status of “recognised dockers,” as well as the competition law implications of the collective conduct of such workers.

The CJEU held that workers could not, in themselves, be regarded as “undertakings” and therefore could not directly be subject to the competition rules. The judgment is significant in demonstrating that, although labour may have economic value, the position of employees vis-à-vis their employers differs fundamentally from that of independent economic operators engaged in economic activity.

The case therefore illustrates that the existence of an economic activity does not automatically result in an entity or individual being classified as an undertaking. The specific characteristics of the employment relationship and the economic and legal position of employees vis-à-vis their employers must also be taken into account.

Albany Judgment

The 1999 Albany judgment ⁴ is one of the most significant decisions concerning the relationship between collective bargaining and EU competition law.

The case concerned the establishment, through a collective labour agreement in the Dutch textile industry, of a single supplementary occupational pension fund and the statutory requirement that employees in the relevant industry participate in that fund.

The CJEU acknowledged that collective labour agreements may, by their very nature, contain elements that restrict competition. Nevertheless, it held that subjecting collective bargaining in its entirety to EU competition law could seriously undermine the social policy objectives pursued by the European Union.

Against this background, the CJEU held that collective labour agreements concluded between trade unions and employers may, under certain conditions, benefit from an exemption from EU competition rules. In particular:

1. the agreement must result from collective bargaining between employers and employees; and
2. the agreement must directly contribute to the improvement of employment and working conditions.

The Albany judgment therefore does not establish an absolute immunity for collective labour agreements. Rather, it recognises a specific form of protection based on the social policy function of collective bargaining and the need to reconcile that function with competition law.

V. The Limits of Protection Afforded to Trade Union Activities under US Law

US law has likewise developed a certain degree of competition law immunity for trade union activities, taking into account their social purpose. However, this protection is not absolute. The US Supreme Court has held in a number of cases that where trade unions go beyond their legitimate union objectives and cooperate with employers or other market participants in a manner that restricts competition, the relevant protection may no longer apply.

Hutcheson Judgment

In United States v. Hutcheson,⁵ the US Supreme Court considered a jurisdictional dispute concerning which union should perform machinery installation work at an Anheuser-Busch brewery in St. Louis. Following the employer’s decision to assign the work to a rival union, the Carpenters’ Union, led by Maurice Hutcheson, initiated strikes, thereby affecting the company’s commercial activities.

The US Supreme Court recognised important limits to the immunity available to trade unions and emphasised that trade unions could not rely on such protection where they acted in cooperation with groups other than employees. Accordingly, activities aimed at protecting the legitimate interests of a trade union must be distinguished from activities that go beyond those objectives and restrict competition through cooperation with other market participants.

Allen Bradley Judgment

In Allen Bradley Co. v. IBEW Local 3,⁶ the US Supreme Court examined a “closed market” arrangement established between electrical equipment manufacturers and contractors in New York and the electrical workers’ union, IBEW Local 3.

The parties had established a system under which only products manufactured by local firms employing union members would be purchased, thereby preventing competing products originating from outside the city from entering the market.

The US Supreme Court held that where trade unions combine with non-labour groups to establish a monopoly or exercise control over markets for goods and services, such conduct falls outside the scope of the relevant union immunity.

The judgment establishes an important distinction: trade union activities aimed at protecting workers’ rights cannot be equated with arrangements through which a union, together with employers or other market participants, seeks to eliminate competition in product or service markets.

Pennington Judgment

In United Mine Workers v. Pennington,⁷ the US Supreme Court considered an arrangement between the United Mine Workers (“UMW”) and large coal operators under which industry-wide wage standards were established at levels intended to drive smaller mines out of the market.

The union argued that the arrangement should benefit from union immunity because it concerned wages and working conditions, which are central elements of collective bargaining.

The US Supreme Court nevertheless held that where workers and their employers agree to establish wage levels for employers that are not parties to the agreement, such conduct constitutes cooperation with non-labour groups and falls outside the scope of the relevant immunity.

The judgment demonstrates that immunity cannot be invoked merely by characterising an arrangement as relating to “wages and working conditions.” Where a union cooperates with employers with the objective or effect of excluding competitors or smaller operators from the market, conduct cannot be protected solely on the basis that it concerns employment terms.

Jewel Tea Judgment

In Local 189, Amalgamated Meat Cutters, AFL-CIO v. Jewel Tea Co.,⁸ the US Supreme Court examined a collective labour agreement between a meat cutters’ union and grocery retailers under which the sale of fresh meat after 6:00 p.m. was prohibited in order to protect the working hours of employees.

The US Supreme Court recognised that trade union activities may benefit from protection on account of broader social policy considerations, while emphasising that such protection is not absolute. In determining whether the conduct falls within the scope of the relevant protection, consideration must be given to the union’s “legitimate interest” and to the causal connection between the restriction and that legitimate interest.

The Jewel Tea judgment therefore demonstrates that the scope of union immunity must be determined not solely by reference to the form of the conduct, but also by considering its purpose and its connection with legitimate trade union activities.

VI. Comparative Assessment of the EU and US Approaches

Although the EU and US legal systems are based on different legal frameworks, they display significant similarities in their approaches to the treatment of trade union activities under competition law.

In both systems, collective negotiations between employees and employers concerning wages and working conditions are treated differently from agreements between undertakings that restrict competition in the traditional sense. The principal rationale is that collective bargaining is intended not to distort economic competition, but to address the structural imbalance in bargaining power in labour markets and to protect the economic and social rights of employees.

At the same time, neither system recognises an unlimited immunity for trade union activities. A distinction is drawn between legitimate trade union activities aimed at protecting workers’ rights and conduct through which trade unions cooperate with employers or other market participants to restrict competition in product or service markets.

This distinction is particularly evident in the US Supreme Court’s decisions in Hutcheson, Allen Bradley, Pennington and Jewel Tea. Under EU law, meanwhile, the Albany judgment constitutes a key reference point for balancing the social policy objectives of collective bargaining against the requirements of competition law.

The table below summarises the relevant EU and US cases on trade unions and collective bargaining, highlighting the respective approaches of the two legal systems.

Table 1 – Authorities’ Approaches to the Undertaking Status of Trade Unions and Trade Union Activities

VII. Assessment under Turkish Competition Law

Turkish law does not currently have case law on the status of trade unions as undertakings and the treatment of collective labour agreements under Article 4 of Act No. 4054 that is as established and comprehensive as the jurisprudence developed under EU and US law. Nevertheless, certain principles may be derived by considering the broad approach adopted by Act No. 4054 to the concept of an undertaking together with the principles developed under EU competition law.

First, given that Article 3 of Act No. 4054 defines the concept of an undertaking primarily by reference to economic activity, the legal status of a trade union alone cannot determine whether it qualifies as an undertaking. It is necessary to assess whether the specific activity carried out by the trade union is economic in nature.

At the same time, collective bargaining conducted by a trade union on behalf of employees and the conclusion of collective labour agreements constitute, in principle, trade union activities aimed at strengthening employees’ bargaining power vis-à-vis employers and improving terms and conditions of employment. Accordingly, in line with the approach developed under EU law, collective labour agreements should not be equated, merely because they determine wages and working conditions, with conventional price-fixing or market-sharing arrangements between undertakings.

In particular, having regard to the approach adopted in Albany, where a collective labour agreement genuinely results from collective bargaining between employers and employees and directly contributes to the improvement of employment and working conditions, it may be argued that such activity should benefit from protection under competition law.

From the perspective of Turkish law, therefore, the purpose, parties, subject matter and economic effects of the relevant trade union activity should be assessed together. The mere fact that an arrangement concerns wages or working conditions may not, in itself, be sufficient to bring it within the scope of protection. Conversely, the existence of an economic effect on competition should not automatically result in the application of Act No. 4054 without considering the social and collective bargaining context in which the conduct takes place.

VIII. The Limits of Trade Union Immunity

The most significant conclusion that may be drawn from the EU and US approaches is that trade union activities do not fall entirely outside the scope of competition law. The protection afforded to trade union activities is limited to their legitimate and core functions.

Three principal limitations may be identified in this regard.

First, the relevant activity must have a genuine and direct connection with collective bargaining. Negotiations concerning wages, working hours, social benefits and other terms and conditions of employment may fall within this category, whereas economic activities outside this sphere require separate assessment.

Second, cooperation between trade unions and non-labour groups in a manner that restricts competition may exceed the boundaries of the relevant immunity. The Allen Bradley and Pennington judgments demonstrate that where a union cooperates with employers or other market participants to prevent third parties from entering a market or to drive competing businesses out of the market, the conduct cannot be protected merely by invoking trade union objectives.

Third, there must be a causal connection between the trade union activity and the legitimate social objective relied upon. In line with the approach reflected in Jewel Tea, it should be assessed on the facts of each case whether the union’s conduct is genuinely connected with the protection of the legitimate interests of employees.

Accordingly, it would equally be incorrect to conclude that every form of cooperation between trade unions and employers necessarily constitutes a competition law infringement. The decisive question is whether the cooperation genuinely falls within the scope of collective bargaining and whether it pursues a legitimate social policy objective aimed at improving employees’ employment and working conditions.

IX. Concerted Practices among Employers

The protection afforded to trade union activities should not be interpreted as legitimising arrangements through which employers use trade unions as a means of restricting competition among themselves.

In other words, a distinction must be drawn between collective bargaining conducted by employers with trade unions and coordination among employers facilitated through trade unions. Employers’ negotiations with trade unions concerning wages and working conditions may constitute legitimate activities in the context of labour and social policy law. By contrast, where competing employers use trade unions as a vehicle for coordinating prices, wages, customers, markets or other competitively sensitive parameters, the protection afforded to trade union activities should not automatically apply.

The mere existence of a trade union or a collective labour agreement therefore cannot provide an automatic legal justification for concerted practices among employers. In particular, arrangements that fall outside the core subject matter and purpose of collective bargaining, coordinate the economic decisions of competing undertakings, or seek to prevent market entry should be assessed separately under competition law.

X. Conclusion

The concept of an undertaking in competition law is generally determined by reference to economic activity, irrespective of the formal legal status of the relevant entity. However, the particular characteristics of labour markets and the structural imbalance in bargaining power between employees and employers require trade union activities to be assessed within a distinct competition law framework.

The approaches developed under EU and US law demonstrate that legitimate collective bargaining activities carried out by trade unions to determine wages and working conditions should not be treated in the same manner as conventional agreements between undertakings restricting competition. The Becu and Albany judgments provide key principles concerning the position of workers and collective bargaining under EU competition law, while the US Supreme Court’s decisions in Hutcheson, Allen Bradley, Pennington and Jewel Tea illustrate the boundaries of the protection afforded to trade union activities.

These cases demonstrate that the protection afforded to trade union activities should not be characterised as an absolute immunity from competition law, but rather as a limited mechanism designed to reconcile social policy objectives with the protection of competition.

Although Turkish law does not yet have well-established case law on this issue, having regard to the economic-activity-based approach to the concept of an undertaking under Act No. 4054 and the principles developed under EU law, it may be argued that collective labour agreements should, in principle, be distinguished from the conventional application of competition law. In particular, where a collective labour agreement genuinely results from collective bargaining between employers and employees and directly contributes to the improvement of employment and working conditions, it should benefit from protection under competition law.

Such protection, however, depends on trade union activities remaining within the boundaries of legitimate trade union objectives and collective bargaining. Where trade unions cooperate with employers or other market participants to restrict competition in goods or services markets, exclude competitors from the market, prevent market entry, or coordinate competitively sensitive matters falling outside the scope of collective bargaining, the relevant activities should not benefit from trade union immunity.

Ultimately, the competition law assessment of trade union activities should take into account the nature and purpose of the activity, the parties involved, its connection with collective bargaining, and its effects on the market. Such an approach provides a balanced legal framework capable of safeguarding employees’ rights to organise and bargain collectively while preventing trade union structures from being used as a vehicle for restricting competition.

Bibliography

1. N.F. Kıran, İşgücü Pazarında Rekabet Hukuku Uygulamaları (2022).

2. Ibid.

3. Court of Justice of the European Union, Criminal proceedings against Jean Claude Becu, Annie Verweire, Smeg NV and Adia Interim NV, Case C-22/98 (1999), ECR I-5665.

4. Court of Justice of the European Union, Albany International BV v Stichting Bedrijfspensioenfonds Textielindustrie, Case C-67/96 (1999), ECR I-5751.

5. U.S. Supreme Court, United States v. Hutcheson, 312 U.S. 219 (1941).

6. U.S. Supreme Court, Allen Bradley Co. v. IBEW Local 3, 325 U.S. 797 (1945), p. 812.

7. U.S. Supreme Court, United Mine Workers v. Pennington, 381 U.S. 657 (1965).

8. U.S. Supreme Court, Local 189, Amalgamated Meat Cutters, AFL-CIO v. Jewel Tea Co., 381 U.S. 676 (1965).

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