GUIDELINES ON COMPETITION VIOLATIONS IN LABOR MARKETS: CURRENT PRACTICES AND CASE ANALYSES IN LIGHT OF BOARD DECISIONS
GUIDELINES AND RELEVANT LEGISLATION
Competition law enforcement is not limited to classic violations such as cartels or abuse of dominant position in product and service markets; it also extends to areas that were previously relatively neglected, such as labor markets. Indeed, recent investigations and penalties imposed by the Competition Authority in Turkey clearly reflect this broadening enforcement perspective. For example, investigations have been launched against dozens of companies operating in the pharmaceutical sector on grounds of competition violations; in the container transportation sector, 74 (seventy-four) undertakings have been investigated, and 72 (seventy-two) of them have been fined for price fixing and customer sharing. Such examples highlight the Competition Authority’s (“Authority”) increasing regulatory reflex in detecting and sanctioning practices that restrict competition in labor markets.
In this context, the Guide on Competition Violations in Labor Markets (“Guide”) was adopted by the Competition Board (“Board”) with its decision dated November 21, 2024, numbered 24-49/1087-RM(4), and published on the Authority’s website with the aim of regulating labor markets within the framework of competition law.
Structural problems in the labor market, such as supply/demand imbalances, weak unionization, unequal bargaining power, and low job mobility, prevent the emergence of a fully competitive environment. The Guide emphasizes that the risk of employers entering into anti-competitive agreements in the labor market is higher due to these structural problems.
The Guide states that wage-fixing agreements and non-solicitation agreements constitute cartel agreements; it also states that, where the aforementioned conditions exist, ancillary restrictions will not fall within the scope of application of Law No. 4054 on the Protection of Competition (the “Law”).
APPLICATION OF ARTICLE 4 OF THE LAW
Article 4 of the Law prohibits agreements between undertakings, concerted practices, and decisions and actions of associations of undertakings that have the object or effect of directly or indirectly preventing, distorting, or restricting competition in a particular market for goods or services.
Agreements or concerted practices concluded between employers with the aim of determining the wages and other working conditions of employees, or which have this effect, and such decisions and actions of associations of undertakings are considered a violation of Article 4 of the Law.
Wage Fixing Agreements
Wage fixing agreements are agreements made by employers to jointly determine the wages and other working conditions of their employees. This may include all working conditions such as wage amounts, rate of increase, working hours, fringe benefits, compensation, and leave entitlements.
Such agreements eliminate competition among employees and lead to artificially low wages. Under Article 4(1)(a) of the Law, the wages employers pay their employees are considered a cost factor, and agreements between employers on wages or working conditions are considered a violation of Article 4 of the Law and are deemed to constitute a cartel.
If a third party mediates the agreement or facilitates its conclusion, the third party may be considered a party to the violation, depending on the specific circumstances of the case.
Employee Non-Solicitation Agreements
Employee non-solicitation agreements are agreements made by one employer not to make job offers to or hire the current or former employees of another employer. These agreements also cover situations where one party effectively prevents the other from poaching employees, such as indirectly requiring an employee to obtain permission from their current employer before accepting a job offer from the other party.
Employee non-solicitation agreements aim to artificially divide the labor supply among businesses. In this sense, non-solicitation agreements are examined within the scope of the principles set out in Article 4(1)(b) of the Law and are considered cartels.
If a third party mediates the agreement or facilitates its conclusion, the third party may be considered a party to the infringement, depending on the specific circumstances of the case.
Information Exchange
Information exchange may take the form of unilateral disclosure of data or mutual data sharing between undertakings. This exchange may be carried out directly or through third parties such as intermediary institutions, platforms, business associations, research organizations, private employment agencies, websites, media, or algorithms.
Elements such as wage levels, fringe benefits, wage increase rates, working hours, additional payments, and leave in the labor market constitute competition-sensitive information. Sharing such information between undertakings may lead to restrictive outcomes such as wage fixing or job sharing. The Guide states that such data sharing may be assessed under Article 4 of the Law. In particular, the sharing of confidential wage information between competing employers may be interpreted as a violation that could constitute a cartel. Therefore, even if done through independent market research organizations or private employment agencies, anonymity must be ensured in the sharing of information, and reports based on a sufficient number of participants should be used.
Ancillary Restrictions
“Ancillary restriction” refers to restrictions that are not the main purpose of the agreement but are deemed necessary for its applicability and sustainability, and are directly related and proportionate. Such restrictions should be exempt from the competition-restricting provisions prohibited under Article 4 of the Law. However, the restriction in question must be directly linked to the main agreement and be of a nature that makes it necessary. The Guide clearly states that for a restriction to be considered a secondary restriction, it must be “directly related, necessary, and proportionate.” Otherwise, such provisions will be considered as competition-restricting arrangements, such as price fixing or non-solicitation of employees, and will constitute a violation under Article 4.
Direct Relevance
The condition of direct relevance means that a restriction only makes sense in the context of the main agreement and is inseparable from it. This is because the relevant restriction cannot be invoked if the main agreement is not concluded. At this point, it must be clearly determined which main agreement the restriction is linked to, and it must play a necessary and functional role in line with the purpose of that agreement. In this context, simultaneity alone is not sufficient; it is essential that the restriction directly contributes to the purpose of the main agreement and ensures its applicability. Uncertain, general, or independent restrictions will not meet this condition.
Necessity
The condition of necessity determines whether a restriction is objectively necessary for the implementation or maintenance of the main agreement. This assessment is made independently of the subjective assessments of the parties, taking into account the nature of the main agreement and the structure of the market. If it is not expected that undertakings in similar circumstances would enter into the main agreement without the relevant restriction, this restriction is considered necessary. Conversely, the mere fact that the agreement becomes less profitable does not, in itself, satisfy the necessity condition. Furthermore, if a less restrictive alternative exists, the current restriction is not considered necessary.
Proportionality
The proportionality condition means that the restriction must be necessary in terms of its scope and extent to achieve the purpose of the main agreement. For this condition to be met, the same purpose cannot be achieved by a means that restricts competition less, and the restriction must be limited in terms of its duration, scope, geographical area, and parties. The Board makes this assessment based on the circumstances of the specific case. The condition of proportionality will not be deemed to have been met if the duration of the restriction is indefinite or unnecessarily long, if it applies to all personnel rather than only key employees, if the geographical scope extends beyond the main agreement, or if it is extended to cover all parties.
The conditions of direct relevance, necessity, and proportionality must be present together in order to be considered as ancillary restrictions. The party claiming that the restriction is truly ancillary bears the burden of proving that all three conditions are present in the specific case. Although there is no written requirement, the Guide states that the restriction should be set out in writing to increase its certainty.
APPLICATION OF OTHER PROVISIONS OF THE LAW
The Guide states that the principles developed for agreements and conduct in the labor market apply not only to Article 4 but also, to the extent appropriate, to the application of Articles 5, 6, and 7 of the Law. In this context, the following points stand out:
- Pursuant to Article 5 of the Law[1], agreements that restrict competition may be exempted from the prohibition in Article 4 if certain conditions are met. Accordingly, all of the following conditions must be met: the agreement must promote new developments and improvements in the production or distribution of goods or the provision of services, or economic or technical progress; consumers must benefit from this; competition must not be eliminated in a significant part of the relevant market; and competition must not be restricted beyond what is necessary to achieve the first two conditions.
- However, severe restrictions on the labor market, such as wage fixing and non-solicitation of employees, are unlikely to generate economic benefits and, as a rule, will not benefit from this exemption.
- Pursuant to Article 6 of the Law[2], it is unlawful for one or more undertakings to abuse their dominant position in the goods, services, or labor markets. In this context, claims of dominance and abuse in both the product/service and labor markets are assessed separately within the framework of the specific circumstances of the case.
- Article 7 of the Law[3] prohibits mergers and acquisitions that would create or strengthen a dominant position and significantly reduce effective competition. In this context, when assessing whether the transaction weakens competition in the labor market, numerous factors are taken into account, such as the market shares of the parties, employee profiles, market concentration, the organization of labor suppliers, and potential competitive pressure.
CONCLUSION
Labor markets are becoming increasingly important not only in terms of labor law but also in terms of competition law. The Competition Board’s recent practices and the Guidelines it has published clearly show that violations in this area are being closely monitored and subject to sanctions. Wage fixing and non-solicitation agreements are considered to be restrictive of direct competition between undertakings and are classified as cartels under Article 4 of the Law. However, provisions that may constitute ancillary restrictions will only be exempt from this scope if they meet all of the conditions of direct relevance, necessity, and proportionality.
Finally, competition violations related to the labor market are not limited to Article 4; they are also examined in detail under Articles 5, 6, and 7. In this context, it has become both legally and economically imperative for undertakings to review their behavior in the labor market from a competition law perspective and to develop proactive compliance mechanisms against structural risks.
COMPETITION BOARD DECISIONS
Competition violations have serious consequences not only in the goods and services markets but also in the labor markets. In Turkey, the Competition Board has focused on agreements that restrict the right of employees to freely change jobs in recent years and has made some noteworthy decisions in this regard. This section analyzes the Competition Board’s approach to “no-poach” agreements[4] and similar practices in labor markets in terms of decisions, legal grounds, and economic impacts.
Investigation Concerning Hospitals and Business Associations Providing Private Health Services (Decision No. 22-10/152-62 dated February 24, 2022)
The Competition Board’s decision dated 24.02.2022 and numbered 22-10/152-62 is one of the most comprehensive and precedent-setting decisions issued in Turkey regarding competition violations in the labor market. In its investigation into both the coordination of employee wages (price fixing) and no-poaching practices, the Board ruled that many private healthcare institutions had violated Article 4 of Law No. 4054 on the Protection of Competition and imposed substantial administrative fines on these institutions.
The Board conducted a comprehensive investigation into allegations that private healthcare institutions in the provinces of Samsun and Bursa, in particular, had collaborated in a manner that restricted the free movement of employees. The findings focus on two key competition violations:
- Price fixing: Competitive healthcare institutions operating in the same geographical area jointly determining the wages to be paid to physicians and other healthcare workers.
- No-poach agreements: Written or tacit agreements between undertakings not to transfer employees from each other.
The Board assessed these behaviors as a direct restriction of competition in the labor market. In particular, “no-poach” agreements had an aggravating effect on the grounds that they led to lower wages for employees, the elimination of alternative job opportunities, and the creation of a de facto market sharing among employers in the market.
Investigation Concerning French High Schools (Decision dated April 24, 2024, No. 24-20/466-196)
The Competition Board’s decision dated 24.04.2024 and numbered 24-20/466-196 was issued as a result of an investigation conducted on five French private high schools operating in Istanbul (Saint-Joseph, Saint Benoît, Notre-Dame de Sion, Saint-Michel, and Sainte Pulchérie). The Board determined that these schools jointly set school registration fees, fee components, scholarship rates, and Turkish teachers’ salaries, thereby violating Article 4 of Law No. 4054 on the Protection of Competition. It was stated that the aforementioned behaviors were restrictive of competition in terms of their purpose, constituted a cartel, and included wage fixing and no-poaching practices in the labor market. Therefore, a total administrative fine of 21,324,909.09 TL was imposed on the relevant undertakings.
Izmir Container Transporters Decision (Decision dated 02.01.2020 and numbered 20-01/3-2, para. 32)
A preliminary investigation conducted on approximately 47 undertakings engaged in road container transport in Izmir and its surroundings revealed that these undertakings had coordinated to fix driver salaries and prevent drivers from moving to other companies. However, the Board decided not to open an investigation on the grounds that the impact of the violation was limited and for reasons of procedural economy, and only sent a warning letter to the companies informing them that they must cease such practices.
Paragraph 32 of the decision reads as follows:
“These discussions are included primarily to shed light on impact-based analyses, as they relate to the use of monopsony[5] power in the labor market. As will be stated in the following section, it is also possible that agreements and/or concerted practices creating competition violations in terms of purpose may exist on the purchasing side of markets. Essentially, agreements to fix employees’ salaries/not to poach employees, which constitute the main part of competition law enforcement in labor markets, are no different from cartels established on the purchasing side of the market. Indeed, apart from the difference in whether they are on the purchasing or selling side of the market, it has been established both in doctrine and in decisions that there is no fundamental difference between non-solicitation agreements and customer/market sharing agreements, or between wage-fixing agreements and price-fixing agreements.
Investigation Regarding Undertakings Operating in the Pharmaceutical Sector (Decision No. 23-53/1004-M dated November 9, 2023)
The Competition Board has initiated investigations into numerous undertakings, most of which operate in the pharmaceutical sector, to determine whether they have engaged in anti-competitive behavior within the scope of Article 4 of Law No. 4054 on the Protection of Competition. Within this scope, it has been determined that various pharmaceutical companies have engaged in concerted practices and/or agreements on the grounds of sharing competition-sensitive information and entering into gentlemen’s agreements regarding the labor market.
As part of the Competition Board’s investigation into the pharmaceutical sector, a total of six undertakings involved in practices such as sharing competition-sensitive information and entering into gentlemen’s agreements regarding the labor market were subject to settlement procedures and administrative fines. In this context, the total amount of administrative fines imposed on the undertakings on the grounds that they were involved in restrictive agreements or concerted practices was 481,637,111.42 TL.
Regarding Information Exchange 2—50/687-301 Decision Number
In its decision dated 19.11.2020 and numbered 20-50/687-301, the Competition Board evaluated the statistical reports planned to be shared by İSDER with its member undertakings in terms of competition law. The Board concluded that these reports have the potential to restrict competition, particularly because they contain individual (enterprise-based) and current sales volume information, this information is detailed at the regional or provincial level, and the data is not publicly available. Although it was assessed that information sharing contributes to enterprises better analyzing the market and making more effective decisions, thereby promoting economic and technical development and potentially providing indirect benefits to consumers, it was concluded that these benefits could also be achieved through less restrictive means. Furthermore, the fact that the information sharing would be carried out directly by association employees rather than an independent organization was also considered a factor increasing competition concerns. For these reasons, the application in question was not found sufficient for the issuance of a negative determination certificate or for the granting of individual exemption pursuant to Article 5 of Law No. 4054, and the Board concluded that the information exchange application subject to the notification restricted competition more than necessary.
INTERNATIONAL APPLICATIONS
United States v. Lucasfilm Ltd. Case: Restriction of Labor Competition in Creative Industries
In a lawsuit filed against Lucasfilm Ltd. in 2010 before the Washington D.C. District Court, the United States Department of Justice alleged that the company was party to a labor restriction agreement that constituted a violation of competition law. According to the complaint, under a secret agreement between Lucasfilm and Pixar, the parties committed not to “cold call” each other’s employees, to notify each other in advance of job offers, and not to make counteroffers. The Department of Justice concluded that such conduct violated Section 1 of the Sherman Antitrust Act. The parties settled this case before it went to trial with a proposed final judgment. Under the final judgment, Lucasfilm was prohibited from entering into similar no-poach agreements, and employees’ right to freely change jobs was protected.
United States v. eBay Inc. Case: No-Poach Agreements in the Technology Sector
In a case filed in the Northern District Court of California in 2012, eBay Inc.’s anti-competitive agreements with software company Intuit came to light. According to the complaint filed by the U.S. Department of Justice, eBay and Intuit committed not to hire each other’s senior employees and refrained from making job offers to them. It was stated that such “no-poach” agreements reduce competition in the labor market and limit employees’ opportunities for salary negotiations and job changes. A notable development in the case was the court’s rejection of eBay’s motion to dismiss the case. This decision clearly established that no-poach agreements are subject to antitrust scrutiny. Ultimately, a Final Judgment was issued in 2014, requiring eBay to refrain from entering into such agreements.
United States v. Arizona Hospital & Healthcare Association Case
In a complaint filed in Arizona District Court in 2007, it was alleged that AzHHA Service Corporation, a service company affiliated with the Arizona Hospital & Healthcare Association (AzHHA), engaged in anti-competitive behavior with regard to travel and temporary nursing services. According to the complaint, under the “registry program” run by AzHHA, coordination and information sharing regarding nurse fees took place among healthcare organizations. It was alleged that this structure led to both artificially fixed prices and the prevention of independent hiring decisions.
As a result of the joint complaint by the U.S. Department of Justice and the Arizona Attorney General’s Office, a settlement was reached between the parties, and the practices in question were terminated in accordance with the proposed final decision. In addition, it was ruled that institutions affiliated with AzHHA must cease sharing price information and similar workforce coordination activities and establish an internal compliance program.
United States v. Bremse AG and Westinghouse Air Brake Technologies Corporation
The final judgment against Knorr-Bremse AG and Westinghouse Air Brake Technologies Corporation (Wabtec) in the case brought by the U.S. Department of Justice Antitrust Division (“DOJ Antitrust Division”) found that “no-poach” agreements, which restrict competition in the labor market, violate competition law. Both companies entered into years of tacit and unwritten agreements not to hire or make job offers to each other’s qualified employees, thereby limiting workers’ ability to change jobs and bargain, and suppressing wage levels. With the final judgment, the parties are prohibited from entering into, maintaining, or implementing such agreements with each other or with other undertakings. This prohibition covers all agreements, whether verbal or written, direct or indirect.
However, the ruling permits regulations limiting employee mobility in relation to operational cooperation between the parties under specific and limited conditions. Such agreements will only be valid if they are linked to concrete projects, are written, time-bound, specific to the employees concerned, and are necessary due to the nature of the cooperation. The decision also requires companies to take serious steps to comply with competition law: Both companies must appoint an “Antitrust Compliance Officer”[6]; annual training must be provided to managers and human resources personnel; violations must be reported; and compliance must be reported to the DOJ in annual written statements.
SECTORAL IMPACT AND COMPLIANCE POLICIES:
LOOKING AHEAD IN COMPETITION LAW
Competition law practices relating to labor markets are not limited to sanctioning past violations; they also create a normative effect that shapes the future behavior of undertakings. The decisions of the Competition Board, particularly in the health, education, and pharmaceutical sectors, show that “no-poach” agreements restricting the right of employees to freely change jobs and wage coordination are now being systematically examined. These decisions establish a body of precedent that closely concerns not only the relevant sectors but all sectors based on skilled labor.
In the coming period, certain sectors with high labor mobility are likely to come under close scrutiny by competition authorities. These sectors include:
- Information and communication technologies (ICT),
- Digital platforms and software development,
- Finance and banking,
- Professional services (law, consulting, auditing),
- Logistics and transportation,
- Education and private teaching institutions.
A common feature of these sectors is that, due to their highly skilled and mobile workforce structure, competition among employers takes place not only over products or services, but also over qualified employees. In this context, direct or indirect coordination efforts in employee recruitment are assessed similarly to cartel structures formed by enterprises in the buyer position.
GRC LEGAL Commentary on Compliance Policies
To avoid competition law violations and develop a proactive compliance culture, it is important for enterprises to take the following steps:
- Training human resources departments specifically on competition law risks,
- Avoiding information exchange regarding employee mobility in sectoral associations and platforms,
- Strictly refraining from collusive hiring or non-hiring practices between companies,
- Restructuring competition law compliance programs to cover the labor market,
- Making the behavior of senior managers and HR specialists auditable and transparent.
Corporate compliance is not merely a matter of fulfilling legal obligations; it also plays a decisive role in terms of a company’s reputation, the relationship of trust it builds with its employees, and its sustainable competitive advantage. The increasing focus of competition law on labor markets clearly shows that maintaining healthy competition among employees is not only an ethical choice but also a legal obligation.
[1] Article 5 – Inter-enterprise agreements, concerted practices, and decisions by associations of undertakings shall be exempt from the provisions of Article 4 if all of the following conditions are met:
- a) The achievement of new developments and improvements in the production or distribution of goods or the provision of services, or economic or technical progress,
- b) The consumer benefits from this,
- c) Competition is not eliminated in a significant part of the relevant market,
- d) Competition is not restricted beyond what is necessary to achieve the objectives in subparagraphs (a) and (b).
The relevant undertaking or association of undertakings may apply to the Authority for a determination by the Board that the agreement, concerted practice, or association of undertakings decision falls within the scope of Article 4 and meets the conditions for exemption.
Exemption may be granted for a specific period, and the granting of exemption may be subject to the fulfillment of certain conditions and/or obligations. Exemption decisions shall take effect from the date on which the agreement or concerted practice was made, the association decision was taken, or, if subject to a condition, the condition was fulfilled.
The Board may issue notifications providing for the exemption of certain types of agreements as a group and setting out the conditions thereof, provided that the conditions set out in the first paragraph are met.
[2] Article 6 – It is unlawful and prohibited for one or more undertakings to abuse their dominant position in a market for goods or services throughout the country or in a part thereof, either individually or through agreements or concerted practices with others.
Abuse includes, in particular:
- a) Actions aimed at directly or indirectly preventing another undertaking from entering the field of commercial activity or hindering the activities of competitors in the market,
- b) Direct or indirect discrimination by imposing different conditions on buyers in the same situation for the same and equal rights, obligations, and performances,
- c) Imposing restrictions on resale conditions, such as requiring the purchase of another product or service together with a product or service, or requiring the display of another product or service by buyers who are intermediary enterprises, or prohibiting the resale of a purchased product below a certain price,
- d) Actions aimed at distorting competition in another goods or services market by exploiting the financial, technological, and commercial advantages created by dominance in a specific market,
- e) Restricting production, marketing, or technical development to the detriment of consumers.
[3] Article 7 – Mergers of one or more undertakings that would significantly reduce effective competition in any goods or services market throughout the country or in a part thereof, primarily by creating a dominant position or strengthening an existing dominant position, or the acquisition by any undertaking or person of all or part of the assets or shares of another undertaking or of instruments conferring the right to participate in the management of another undertaking, except in cases of inheritance, is unlawful and prohibited. management rights, except in cases of inheritance, is unlawful and prohibited.
The Board shall announce, through its circulars, which types of mergers and acquisitions require notification to the Board and approval in order to be legally valid.
[4] No-Poach Agreements (also known as Non-Solicitation of Employees Agreements) are agreements between two or more undertakings whereby they undertake not to directly or indirectly hire or attempt to hire each other’s employees. Such agreements may constitute a violation of competition law on the grounds that they restrict employees’ freedom to change jobs and hinder competition in the labor market. Article 4 of Turkey’s Law No. 4054 on the Protection of Competition prohibits such horizontal restraints. Similarly, in the US, some no-poach agreements have been deemed per se violations under the Sherman Act.
[5] A monopsony is a market with a single buyer. Buyers are generally considered to have monopsony power when they can influence the price of their inputs. However, not every influence buyers have on input prices is considered monopsony power, but every monopsony does influence input prices. While a market being a monopsony (or oligopsony) indicates a lack of competition, monopsony is generally not the subject of competition policy on its own; it becomes more relevant to competition policy when combined with monopoly or oligopoly, i.e., monopoly power. (See OECD 1990)
[6] Refers to the person responsible for ensuring that a company complies with competition law (antitrust/competition law) rules.
