- Introduction
While the traditional scope of application of competition law has mostly focused on classical cartel behavior such as price, production quantity and territorial allocation in goods and services markets, competition violations on the “buy-side” such as labor markets have remained a gray area for many years. However, with the decisions of the Competition Board, especially in the last five years, and finally with the “Guidelines on Competition Violations in Labor Markets” dated 21.11.2024, the legal framework in this area has been clarified and new obligations have emerged for employers to take into account.
With this guideline, the Board accepted that wage fixing, employee non-transfer agreements and information exchange practices for employees are within the scope of Law No. 4054 on the Protection of Competition by characterizing labor as a production input.
- Expanding Sphere of Competition Law in Labor Markets
The labor market has a large number of actors on the supply side (employees) and a limited number of enterprises on the demand side (employers), which concentrates bargaining power in favor of the employer. At the same time, low labor mobility among employees due to the costliness of changing jobs, family and social ties, etc. makes it easier for employers to engage in anticompetitive behavior.
Importantly, the Board emphasized that agreements between employers that directly or indirectly restrict employee mobility worsen working conditions, undermine innovation and productivity, and thus have negative consequences not only for employees but also for consumers in output markets.
- Wage Fixing Agreements
In cases where employers jointly determine the wages, increase rates, social rights and fringe benefits to be paid to their employees, this practice is considered as a wage fixing agreement and is considered a direct violation. As in the Board’s decision dated 24.02.2022 and numbered 22-10/152-62, these practices, which are in the nature of price fixing on the procurement side, are deemed to be violations in terms of purpose and are subject to serious administrative fines.
In such agreements, elements such as wages, raise rates, working hours, benefits, compensation, leave rights, non-competition obligations are jointly determined. These elements are the most fundamental and determinative conditions in the employee’s employment contract and are among the main parameters of competition in the labor market. According to the Guidelines, such agreements constitute a “breach of purpose” and are cartels.
These agreements may be concluded directly between the two undertakings or through a third party such as a human resources consulting company, industry association or chamber of commerce. If the third party plays an active role in this process, it may be liable as a party participating in the infringement.
- Employee Non-Transfer (Non-Solicitation) Agreements
As defined by the Competition Authority, no-poach agreements are direct or indirect commitments by an undertaking not to hire or offer employment to an employee of another undertaking. In this context;
- Not offering jobs to each other’s employees,
- Making employee recruitment subject to the approval of the current employer,
- Practices such as retroactive employment bans for former employees are also within this scope.
The Guidelines state that such agreements are also infringements in terms of purpose and are considered similar to the prohibition of market sharing. This is because it leads to an artificial division of the market in which labor is supplied.
In particular, the following situations clearly constitute a violation:
- Agreeing verbally or in writing to “take this person”,
- Linking hiring decisions to prior approval by the other undertaking,
- Extending the employment ban to workers outside the parties to any agreement.
According to the Guidelines, employee non-discrimination agreements are enforceable not only between undertakings operating in the same sector, but also between all undertakings that compete in the labor market, even if they are not competitors in the output market. In this respect, companies that do not operate in the market but target the same workforce are also covered by this provision.
The Competition Board emphasizes that such agreements artificially restrict the allocation of labor, especially in highly specialized sectors, which has negative effects on innovation, productivity and employee motivation.
- Competitive Information Exchange
Another critical issue addressed in the Guidelines is the exchange of information. The exchange of data related to the labor market, such as wage averages, raise rates, fringe benefits, bonus policies between undertakings, either directly or through third parties, is considered as competition-sensitive information exchange.
If the exchange of information is of a nature that may directly affect the job preferences of employees, and if the exchange involves non-aggregated, non-anonymized and up-to-date data, the Board considers this exchange as a practice that directly restricts competition.
According to the Guidelines, the following five conditions must be met for the exchange of information to be considered lawful:
- Conducted by an independent third party,
- Failure to understand the source of the data or individual data content,
- Data must be at least 3 months old,
- Include data from at least 10 participants,
- No participant’s data has more than 25% of the total.
- Ancillary Restrictions and Exemption Regime
The Guidelines state that some limitations may be considered as “ancillary limitations”, in which case they will not be considered within the scope of Article 4 of the CPL. However, for such limitations to be valid, they must be directly related, necessary and proportionate.
For example, in the case of a takeover, a temporary employment restriction on key employees of the acquired company may only be valid if it is limited in duration, geographical scope and number of parties.
On the other hand, unlawful practices such as wage fixing and employee transfer prohibition agreements cannot be considered among the practices that may be granted exemption under Article 5 of the LPC. This is because such violations are deemed to have direct anti-competitive consequences rather than leading to economic or technical progress.
- Conclusion and Evaluation
This Guideline issued by the Competition Board shows that personnel policies in labor markets should now be evaluated not only in the context of labor law, but also in the context of competition law. Wage policies, recruitment strategies and information sharing processes will henceforth be subject to strict competition law scrutiny.
It is of great importance for employers to prevent such violations, especially by coordinating between human resources and legal departments, in order to avoid direct administrative fines and reputational damage.
