December 2024 – The Turkish Competition Authority (“TCA”) announced on 3 December 2024 that the much-anticipated Guidelines on Competition Infringements in Labour Markets (“Guidelines”) were been adopted by the Competition Board at its meeting on 21 November 2024. The TCA had previously prepared the draft version of the Guidelines (“Draft Guidelines”) and submitted it for public comments via its announcement of 16 September 2024. The TCA has now finalised the Guidelines, also taking into account the comments received on the Draft Guidelines.
In its announcement regarding the Draft Guidelines, the TCA stated that it aimed to set out the main principles on the following:
- the place and importance of the practices between undertakings in labour markets within the framework of Law no 4054 on the Protection of Competition (“Law”);
- the types of infringements concerning labour markets within the framework of Article 4 of the Law, how the Competition Board deals/will deal with the said infringements, and the issues concerning the relevant infringements that third parties should be aware of;
- the criteria according to which ancillary restraint assessments concerning agreements between competitors in the labour market will be made; and
- under which scope Articles 5, 6 and 7 of the Act can be implemented to agreements and actions in the labour market.
Given the above issues and the increasing enforcement actions taken by the TCA in the labour markets, the TCA has prepared the Guidelines to further increase legal clarity on labour markets in Turkey. We set out the main points of the Guidelines in our analysis below.
1. Assessment of the Guidelines
1.1 Agreements that restrict competition by object
In line with the positions taken in its recent investigations[1], the TCA has confirmed via the Guidelines that agreements between employers that (i) fix wages or other working conditions (“Wage Fixing Agreements”) or (ii) prohibit each other from employing or soliciting each other’s employees (“No-poaching Agreements”) constitute restriction of competition by object.
According to the TCA, the wages and other working benefits provided to employees by employers constitute the “price” of their labour, and therefore, Wage Fixing Agreements constitute “cartel agreements” similar to other horizontal price fixing schemes. The Guidelines further set out that the scope of the relevant benefits is not limited to wages and other monetary benefits but also encompass non-monetary conditions such as working hours at the workplace, annual leave periods, breaks, social benefits such as wedding, maternity, education, food, etc.
In parallel to the above, No-poaching Agreements are also viewed in a similar manner by the TCA as non-poaching agreements on customers or other market allocation schemes, and thus are also deemed to be cartel agreements. While No-Poaching Agreements may vary in their exact elements (e.g., whether they also encompass past employees, whether they only prohibit cold-calling or all employment, etc.), notwithstanding these differences, the Guidelines set out that all agreements between employers that have as their object the limitation of worker mobility between employers constitute by object infringements of competition law.
The above determinations do not require that the employers also be competitors in the relevant output markets. Undertakings competing to attract employees are deemed as competitors in the labour market regardless of whether or not they compete in the relevant output markets. Indeed, in past decisions of the Competition Board, such as Labour[2], undertakings operating in completely different sectors were deemed to be parties to horizontal infringements in the labour markets.
1.2 Information exchange
The positions taken in the Guidelines regarding information exchanges in the labour markets are in line with the general principles on information exchanges set out in the Guidelines on Horizontal Cooperation Agreements. While the Guidelines accept that information exchange can lead to benefits through diminishing information asymmetries and promoting efficiencies through benchmarking with competitors, it emphasises that exchange of competitively sensitive information can lead to anticompetitive effects.
The Guidelines set out that information pertinent to employee mobility, such as price increases, working hours, fringe benefits, compensations and leave entitlements can be considered as competitively sensitive information for labour markets, and therefore the Exchange of such information may have the object or effect of restricting competition.
The Guidelines also include important explanations for the benefit of third parties such as independent market research organisations and private employment agencies. Indeed, HR departments of many undertakings also utilise reports by such third parties as a matter of course. As such, the third-party organisations, as well as the companies sharing and utilising such reports, need to ensure that the information disseminated in such third-party reports do not result in restrictive effects on competition.
The Guidelines also bring about a safe harbour in this regard. The Guidelines state that the exchange of information that fulfils all of the conditions below will not create anticompetitive effects as a rule:
- The information exchange should be managed by a third party.
- It should not permit the identification of the data source or individual data content.
- The information which is the subject of the exchange should be at least three months old.
- The information should include at least the data of ten participants.
- No single participant’s data should have a share more than 25% of the total data.
1.3 Ancillary restraints and individual exemption assessment
The Guidelines also include explanations on (i) the conditions under which a restriction related to labour markets could be considered as an ancillary restraint and therefore fall outside the scope of Article 4 of the Law and (ii) conditions under which such restrictions could benefit from an individual exemption under Article 5 of the Law.
In parallel with TCA’s other guidelines touching on the concept of ancillary restraints[3], the Guidelines state that, for the assessment whether restrictions on labour in the main agreements that are not anti-competitive by object or effect constitute “ancillary restraints” for competition law purposes, the TCA will assess whether the restraints in question are (i) directly related, (ii) necessary and (iii) proportional in terms of the main agreement.
To be directly related, the restriction should be an indispensable part of the main agreement and
subject to the implementation of that agreement. In other words, it should be the case that the relevant restraint would not exist in the absence of the main agreement.
As for necessity, the restriction should be a necessary condition for the proper implementation and sustainability of the main agreement. In other words, it should not be possible to implement or maintain the agreement in the absence of the relevant restraint. The assessment of necessity will be made on objective conditions as opposed to the subjective positions of the parties on the issue.
Regarding proportionality, the Guidelines set out that a restraint can be proportional only where (i) it is not possible to reach the same objective through less restrictive means, and (ii) the scope of the restraint is limited to the objective and scope and the main agreement. The Guidelines provide that a restraint will not be deemed proportional in the following cases where:
- the duration of the restraint is not clearly defined, or the duration of the restraint is longer than necessary to attain the objectives with the restraint;
- restraints are imposed on employees other than those who have key importance for implementing the main agreement, or it is not clear upon which employees the restriction is imposed;
- the restraint exceeds the geographic region where the main agreement is implemented;
- the restraint covers all of the parties to the agreement or more parties than necessary, in cases where it is sufficient to impose the restriction only on one party or a few parties to the main agreement.
Regarding duration, there seems to be an important difference between the Draft Guidelines and the Guidelines. In particular, whereas the Draft Guidelines referred to the duration of the restraint being “longer than the duration of the main agreement or longer than necessary to attain the objectives with the restraint”, the revised text simply refers to the duration of the agreement being “longer than necessary to attain the objectives with the restraint”. This revision points towards a position that at least some cases where the duration of the restraint exceeds that of the main agreement can still constitute ancillary restraints.
While the Guidelines also provide that restraints which satisfy the relevant conditions set out under Article 5 of the Law can also benefit from an individual exemption, this mainly refers to the general principles set out in the Guidelines on the Main Principles of Exemption as opposed to including detailed explanations on this issue. With that said, the Guidelines clarify that, in line with other by-object restrictions, agreements such as Wage Fixing Agreements and No-poaching Agreements that restrict competition in the labour market by object would not benefit from an individual exemption as a rule.
1.4 Explanations on the application of Articles 6 and 7 of the Law
The Guidelines confirm that Articles 6 and 7 of the Law can also be applied in the labour markets. In other words, (i) the TCA can investigate conduct that could constitute an abuse of dominance in the relevant market for labour, and (ii) concentrations can be assessed with a view to whether they lead to a significant lessening of competition in the relevant market for labour.
Regarding the application of Article 7 of the Law, the Guidelines provide that the TCA will take the following non-exhaustive variables into consideration when assessing whether a concentration results in significant lessening of competition in the labour market:
- the market shares of the parties in the labour market and the concentration level of the market;
- the similarity of the qualifications of the employees employed by the parties to the transaction;
- barriers to entry to the relevant market;
- the organisation of labour suppliers in the relevant market;
- the cost of changing jobs;
- the ability of the competitors of the parties to the transaction to increase capacity or make new investments;
- potential competitive pressure;
- whether the transaction increases the opportunities for competitors operating in the market to cooperate;
- whether the transaction is a “killer acquisition”.
Notwithstanding the above, the Guidelines do not include explanations on how relevant labour markets are to be defined. Given the centrality of market definition and the market shares and concentration levels arising as a result, we believe that this diminishes the likelihood of potential actions that the TCA could take in labour markets through the application of Articles 6 and 7 of the Law.
2. Conclusion
Through the promulgation of the Guidelines, the TCA has set out the main points in its past decisions regarding the labour market and has sought to promote greater legal clarity to prevent potential competition law violations in this area. The Guidelines also provide greater legal forseeability on assessment of information exchanges and potential ancillary restraints, through providing additional detailed explanations as well as safe harbours.
The promulgation of the Guidelines also signals that the TCA will sustain its enforcement efforts on potential violations occurring in the labour markets, which has seen a significant uptick in recent years. Therefore, employers are advised to carefully observe the principles set out in the Guidelines and structure their compliance programs with a view to avoid competition law violations in this area.
For more information, please contact the authors of the article, Sinan Diniz and Osman Tuğberk Çakırca.