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No-Poaching and Wage-Fixing Agreements on Turkish Competition Authority’s Radar

No-Poaching and Wage-Fixing Agreements on Turkish Competition Authority’s Radar

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In recent years, the growing concern that employers’ market power in labor markets has led to reduced or suppressed wages and working conditions has heated up the discussions on the competition authorities’ potential interference over competition violations within labor markets. These discussions have not remained theoretical and the competition authorities have started to launch investigations into labor markets. The Turkish Competition Authority (TCA) has kept pace with this global trend. On April 20, 2021, the TCA announced on its official website that it has ex officio launched a full-fledged investigation against 32 companies, mainly active in digital markets, to determine whether they violated the Law on the Protection of Competition through gentlemen’s agreements in labor markets in Turkey.

In the announcement, the TCA emphasized that employers that compete for labor may prevent the transfer of employees among themselves through direct/indirect agreements – depriving employees of job opportunities that offer higher wages and better conditions. It underlined that such agreements might distort the competitive structure in labor markets due to the decrease in the mobility of labor between undertakings and/or the artificial inability to find the real value of the wages in return for the labor. In this respect, the TCA took practices in labor markets into its agenda by considering the benefits of addressing the concerns in labor markets with competition law enforcement to protect the competitive structure of these markets. This approach was supported by the subsequent statements of the President of the Authority on May 5, 2021, where the President provided insights on the competitive concerns in labor markets to state-run news agency Anadolu Agency. The President explicitly noted the TCA’s future enforcement strategy over labor markets by also signaling the issuance of guidelines to reduce the legal uncertainties that employers may face.

The investigation is very thorough and is the first example of labor markets being the sole focus of the TCA. Indeed, in October 2020, it launched an investigation against eight private hospitals based upon allegations regarding the prevention of personnel transfers among themselves through a gentlemen’s agreement, along with the allegation that they have collectively determined the operating room service fees they demand from freelance doctors. Previously, the TCA had closed cases at the preliminary stage, without finding any violations, or rejected the allegations by concluding that the labor market is outside the scope of competition law.

To exemplify from recent cases, in 2019, the TCA examined an ‘atypical’ no-poaching provision in a franchise agreement in the BFIT Decision. The provision envisages that the franchisees require the franchisor’s (BFIT, a gym chain) written consent before employing personnel who are or were working for the franchisor/a franchisee/a competitor. The TCA found this provision within the scope of competition law. It also concluded that the provision does not benefit from individual exemption based on its potential effect of restricting competition in the labor market based on two reasons: (1) the prohibition covers one or two years post-agreement, without any reasonable grounds; and (2) the scope of the franchisor’s consent is unclear. However, the TCA did not find it necessary to launch a full-fledged investigation after considering BFIT’s low market share, the limited potential effects of the violation, and the lack of effects of the provision, while imposing obligations to amend the relevant provision.

In 2020, the Izmir Container Transporters Decision again fired up the discussions on the applicability of the competition law in labor markets. In the decision, the TCA explained that no-poaching or wage-fixing agreements are, in their essence, buying cartels and may violate the competition law by effect or by object. The TCA analyzed the effects of the wage-fixing agreement between the transporters, which contained no-poaching arrangements, and found no anti-competitive effects. Without launching a full-fledged investigation, it decided to send an opinion to the parties to terminate the potential anti-competitive agreements.

The above decisions are in contrast to the TCA’s earlier stance on the issue, such as in the TMMOB Decision in 2013, in which the Board had concluded that the labor market does not fall within the scope of competition law, based on similar wording in the preamble of the law.

All in all, the recent decisional practice and announcements of the TCA show that no-poaching and wage-fixing agreements are on its radar. The result of the investigation and the prospective guidelines are expected to further shed light on the TCA’s stance on labor markets. 

By Hakan Ozgokcen, Partner and Head of Competition, Esin Attorney Partnership

This Article was originally published in Issue 8.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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