Guidelines for Competition Law Infringements in Labor Markets
Introduction
Agreements and information exchanges between undertakings in labor markets have recently been examined in various preliminary investigations and investigations initiated by the Turkish Competition Authority (“Authority”). Following the investigations in which some undertakings were subject to administrative fines, a need for a guideline on the subject has arisen. Accordingly, the Guideline on Competition Law Infringements in Labor Markets (“Guidelines”), which was adopted by the Competition Board’s (“Board”) decision dated 21.11.2024 and numbered 24-49/1087-RM(4), was published on the Authority’s website on 03.12.2024. The Guidelines include explanations and assessments regarding wage fixing, no-poaching agreements, and competitively sensitive information exchange between undertakings.
Wage Fixing Agreements
The Guidelines define wage-fixing agreements as agreements where undertakings jointly determine the working conditions of their employees, such as wages, pay raises, working hours, side benefits, compensations, leave entitlements, and non-compete obligations. Accordingly, it is stated that wages and other working conditions of the employees are considered as cost and/or purchase conditions that constitute the price within the scope of Article 4 of the Law on the Protection of Competition No. 4054 (“Law No. 4054”) Therefore, agreements to fix wages or other working conditions of the employees constitute competition law violation to restrict competition due to their nature. In addition, it is clearly stated that such agreements will be regarded as cartels, which have the highest administrative fines as a consequence of competition law.
If such wage-fixing agreements are executed through the intermediation of a third party and not directly between the undertakings, it is stated that although the characteristics of the case will be examined, the relevant third party may also be recognized as an infringing party.
Non-Poaching Agreements
Unlike wage-fixing agreements, non-poaching agreements are defined in the Guidelines as agreements made directly or indirectly by one undertaking not to offer or recruit the employees of another undertaking. It is stated that these agreements are intended to share the labor supplied between undertakings artificially, and accordingly, they will be evaluated in the same framework as the supplier or customer allocation agreements under Article 4 of Law No. 4054. Similar to wage-fixing agreements, it is explicitly stipulated that non-poaching agreements will also constitute a violation to restrict competition and will be regarded as a cartel. Similarly, under the Guidelines, a party that is an intermediary to an employee non-poaching agreement may also be considered as an infringing party according to the case.
Information Exchange
In the Guidelines, it is explicitly stated that even if there are no explicit wage-fixing or employee non-poaching agreements between undertakings, the exchange of information relating to labor markets between undertakings may also constitute a violation of competition law. It is stated that the exchange of competitively sensitive information regarding the working conditions of employees in labor markets, such as pay raises, working hours, benefits, compensation and leave entitlements, between undertakings may facilitate anti-competitive cooperation in the market.
Various rules are also stipulated regarding exchange of such information through market research companies’ or private employment agencies’ reports. In this context, it is explained that the exchange of non-aggregated, current and/or forward-looking, non-public information between undertakings that makes it possible to determine the source or the content of the data individually may lead to anti-competitive effects. Having said that, it is stated that the exchange of information through such reports shall not in principle constitute anti-competitive effects if (i) the information exchange is conducted by an independent third party, (ii) it is not possible to understand the source or the individual content of the data, (iii) the exchanged data is at least three months old, (iv) the information contains data of at least ten participants, and (v) no participant’s data has a weight of more than 25% in the aggregate data.
Ancillary Restraints
Ancillary restraints are defined as restrictions imposed on the parties to an agreement that does not have the purpose or effect of preventing, distorting or limiting competition, and while not constituting the essence of this agreement, are necessary for and directly related to objectives of the agreement. In other words, restrictions that do not constitute the primary objective of the principal agreement, but are directly related, necessary and proportionate to the execution and maintenance of the agreement are considered as ancillary restraints. Therefore, restrictions determined to be ancillary restraints are not evaluated within the scope of Article 4 of Law No. 4054.
Under the Guidelines, when assessing whether a restriction is an ancillary restraint, whether the restriction is directly related, necessary and proportionate to the principal agreement shall be examined.
Direct Relevance
The condition of direct relevance implies that the restriction is inseparable from the principal agreement and is subject to the application of that agreement. Accordingly, for a restriction to constitute an ancillary restraint under the Guidelines, it must be intended to support or facilitate the purpose of a broader principal agreement and serve the purpose sought to be achieved by the principal agreement.
Necessity
The condition of necessity refers to the situation where it is impossible to realize or maintain the original agreement without the relevant restriction. Whether the restriction is necessary or not will be analyzed according to objective circumstances and not according to the subjective assessments of the parties. Accordingly, as stated in the Guidelines, if undertakings in a similar situation would not be a party to the principal agreement without the relevant restriction, the restriction may be regarded as necessary. On the other hand, in cases where the principal agreement can be concluded without the relevant restriction, the restriction shall not be deemed necessary.
Proportionality
For the restriction to be deemed proportionate, the objective to be reached by the restriction in question must not be achieved by any other less anticompetitive means and the scope of the restriction must be limited to the purpose, geographical scope, duration and parties of the principal agreement. Under the Guidelines, the relevant restriction shall be deemed not proportionate in the following circumstances:
- The duration of the restriction is not specified or the duration is longer than necessary to fulfil the purpose of the agreement,
- The restriction shall be applied to employees other than key employees or it is not clear to which employees it shall be applied,
- It exceeds the geographical area of the principal agreement,
- Applies all parties to the principal agreement.
It is clearly stated in the Guidelines that restrictions that do not fulfill the conditions of direct relevance, necessity and proportionality at the same time cannot be considered as an ancillary restraint and that the burden of proving that the relevant restriction meets these criteria is on the parties.
Conclusion
The framework regarding agreements and information exchanges in the labor markets, which cause undertakings to face administrative fines in various preliminary investigations and investigations, has been determined with the Guidelines. In this context, the wage fixing and non-poaching agreements and information exchanges between employer undertakings regarding the working conditions of employees in the labor markets that may constitute a violation of competition law have been addressed in detail.
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