"All wealth is the product of labour" - John Locke
November 5th will mark the 1.5-year anniversary of Turkish Competition Authority ("TCA") President Birol Küle's statements1 on the competition concerns surrounding the labour market. His statements underline that prohibiting workforce mobility between undertakings decreases the motivation to innovate, and inherently, the trend for underpayment and flight of human capital increases. It is, of course, no coincidence that the acceleration of TCA's scrutiny in labour markets and Mr. Küle's speech overlap.
For a while now, TCA closely scrutinizes labour markets. Regardless of their sector, each undertaking can be investigated for their recruitment practices, even those once considered standardized sector practices. Indeed, any understanding in the sense of no-poaching agreements (i.e., agreements imposing obligations not to hire each other's employees), fixing the workforce competition parameters, or sharing such information may lead to an infringement decision under the Competition Act2. As a result, the infringing company may face administrative monetary fines of up to 10% of its annual gross revenues.
This article will first provide a brief summary of the Turkish Competition Board's ("Board") precedent and the latest investigations launched into the labour markets. Finally, we will use the takeaways from past decisions and investigations to provide you with a Dos and Don'ts List.
A Quick Recap of Board's Precedent
The early 2000s and 2010s witnessed a handful of cases relating to labour markets, yet the Board's take on this particular issue was more flexible at the time. It would not be wrong to say that the Board utilized its first decisions to publicly present its assessment of competition law rules' applicability to labour markets.
TV Series Producers decision (2005)3: TCA launched a preliminary examination against TV series producers based on a potential non-solicitation agreement and fixing transfer fees between producers. Although the Board did not initiate an investigation due to lack of proof, it emphasized that wage-fixing is considered as fixing purchase prices - a direct infringement of the Competition Act.
Private Schools decision (2011)4: The Board examined whether private schools and private school associations exchanged information about sensitive workforce competition parameters. Again, there was no investigation at the end, but a lesson for all. The Board stated that information exchange on main competitive parameters (e.g., tuition fees, salaries, and scholarships) might restrict competition.
Henkel decision (2011)5: At the end of a preliminary examination against an alleged no-poaching agreement between undertakings applicable for employee's non-compete terms, the Board stated that non-compete obligations imposed on employees are not within the scope of the Competition Act. The Board also expressed that certain no-poaching obligations may benefit from the exemption in sectors where technical knowledge, expertise, and innovation pose great importance.
Bfit decision (2019)6: This time, the Board reviewed the restrictive effects of broad non-compete obligations and no-poaching restrictions stipulated in franchise agreements. The ban for hiring any employee, who has worked for the franchisor, franchisee, or any rival company, without the formerly written approval of Bfit, was found to be within the scope of Article 4 of the Competition Act. The Board also stated that the relevant no-poaching obligation might benefit neither from the block nor individual exemption. However, the Board requested the revision of no-poaching obligations in scope and duration rather than initiating an investigation.
Ege Container Transporters decision (2020)7: In its decision, the Board analyzed no-poaching practices and wage-fixing agreements. It first explained that wage-fixing agreements are no different than the creation of buying cartels. In the same decision, the Board clarified that no-poaching agreements might restrict competition by-effect or by-object. Again, an investigation was not initiated against undertakings.
We regret to inform you that... the Board has changed its perspective
However, by late 2020, the Board's rather "understanding" approach left its place for a stricter and more aggressive one. Investigations were launched, all being multi-partied cases concerning different markets. Although several investigations are ongoing, the Board rendered one decision where it imposed administrative fines on undertakings for their labour market-related behaviour.
Private Hospitals Investigation (November 2020)8: The Board launched an investigation against several private hospitals, which have allegedly entered into no-poaching agreements for doctors. The investigation concluded with fines imposed on 18 companies and one association of undertakings.
32-Undertaking Investigation (April 2021)9: The full-fledged investigation against 32 undertakings for gentlemen's agreements in labour market includes, among others, some of the major e-marketplaces in Turkey and it is still ongoing. Considering the wide scope of the investigation, it is anticipated that the TCA can be inclined towards considering all undertakings recruiting the same workforce in the labour market as competitors, despite their relationship in their main markets of operation (i.e., vertical or horizontal relations).
IT & Telecommunications Investigation (May 2022)10: TCA announced the investigation against 7 companies active in the IT & Telecommunications sector to investigate a "gentlemen's agreement" concerning recruitment procedures. This investigation is a spin-off that originated from the 32-undertaking investigation. The findings at one undertaking presumably caused the initiation of a second investigation focusing particularly on the IT & Telecommunications sector. The TCA is currently reviewing the case.
Don't worry, guidance is on its way!
At first, the steep turn in TCA's approach took many undertakings by surprise. But now, it is hard to argue that a new investigation into labour markets would have any surprise effect. Thus, adopting preventive measures is now more important than ever. Fortunately, the TCA also announced that they would provide employers with a guideline and clear any legal uncertainties regarding which behaviour, practice or policies can breach competition law.
Until the TCA publishes its guidelines, the following can be considered as a non-exhaustive and non-binding list of recommended Dos and Don'ts:
Footnotes
1 Turkish text of Birol Küle's statements can be accessed from this link: https://www.rekabet.gov.tr/tr/Guncel/rekabet-kurumu-baskani-birol-kule-isgucu-704d8ab983adeb11812e00505694b4c6 (last accessed on October 10, 2022).
2 Act No. 4054 on the Protection of Competition.
3 Board's decision dated 28.07.2005 and numbered 05-49/710-195. (See. https://www.rekabet.gov.tr/Karar?kararId=f5bc9343-0d9c-47c1-abe0-d83163b28ca7 (last accessed on October 10, 2022).
4 Board's decision dated 03.03.2011 and numbered 11-12/226-76. (See. https://www.rekabet.gov.tr/Karar?kararId=7557b1b6-700b-4ffc-858b-bc832991cadd (last accessed on October 10, 2022).
5 Board's decision dated 26.05.2011 and numbered 11-32/650-201. (See. https://www.rekabet.gov.tr/Karar?kararId=a03b47cd-8ac3-49af-aaab-cf7b2e632f08 (last accessed on October 10, 2022).
6 Board's decision dated 07.02.2019 and numbered 19-06/64-27. (See. https://www.rekabet.gov.tr/Karar?kararId=4fa090f5-bdc3-4041-b8fc-953e97476ded (last accessed on October 10, 2022).
7 Board's decision dated 02.01.2020 and numbered 20-01/3-2. (See. https://www.rekabet.gov.tr/Karar?kararId=beedfbe9-c183-4a7f-890b-774ccb8f0839 (last accessed on October 10, 2022).
8 Announcement made by the TCA can be accessed from the this link: https://www.rekabet.gov.tr/Dosya/nihai-karar-aciklamalari-tefhim-duyurulari/ozel_hastaneler_nihai_karar-20220302180015477-pdf (last accessed on October 10, 2022).
9 Announcement made by the TCA can be accessed from this link: https://www.rekabet.gov.tr/tr/Guncel/isgucu-piyasasina-yonelik-centilmenlik-a-d8bc3379bea1eb11812e00505694b4c6 (last accessed on October 10, 2022).
10 Announcement made by the TCA can be accessed from the this link: https://www.rekabet.gov.tr/tr/Guncel/etiya-bilgi-teknolojileri-yazilim-sanayi-80c5fac49ccfec11a22000505685ee05 (last accessed on October 10, 2022).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
