Introduction
In recent years, the Turkish Competition Board (‘TCB’) has increasingly focused on the labour market, especially on the targeting agreements that may hinder competition, such as gentleman’s agreements and no-poaching clauses. In this article, by analysing TCB’s rulings on this matter, we aim to delineate the criteria of the TCB in regulating labour market competition and provide practical recommendations.
Gentleman’s agreements in the labour market
Gentleman’s agreements and informal understandings agreed without being legally binding, can significantly impact competition. The TCB has recently scrutinised such agreements to assess their effect on labour market dynamics.
1. First case study: private hospitals
No-poaching agreements, where firms agree not to hire each other’s employees, aim to restrict employee mobility. In the healthcare sector, such agreements can be particularly detrimental given the high demand in the market post-Covid 19 for specialised medical professionals.
In 2020, the TCB initiated an investigation into price-fixing in health services, extending it to include no-poaching and wage-fixing agreements among several private hospitals in Türkiye. These agreements aimed to prevent hospitals from recruiting each other’s medical staff to maintain stable workforces and reduce turnover costs. In its decision dated 24 February 2022 and numbered 22-10/152-62, similar to the European Commission’s1 and the European Court of Justice’s2 approaches, the TCB ruled that such agreements can be deemed as a buyer’s cartel: ‘agreements to fix the salaries of employees/agreements and not to poach employees, which constitute the main part of competition law enforcement in labour markets, are not different from cartels established on the buyer’s market.’
In its decision, the TCB noted several anti-competitive effects: (i) suppressing wage growth of medical professionals, (ii) reducing labour mobility by restricting career advancement opportunities for medical professionals and thus leading to a less dynamic labour market, and (iii) reducing service quality by limiting hospitals’ ability to improve their services by hiring skilled professionals. Accordingly, the TCB found these agreements unlawful as they distorted competition by artificially restricting the labour market for medical professionals, and imposed severe administrative fines on private hospitals, by emphasising that such agreements could be justified if they were ancillary to a legitimate business transaction, such as a merger or acquisition.
2. Second wave in TCB decisions
Following the private hospitals’ investigation, the TCB has also initiated another investigation into 32 undertakings from various sectors regarding gentleman’s agreements aiming for no-poaching of their employees among themselves. In its announcement regarding its decision dated 26 July 2023 and numbered 23-34/649-218 in respect of the said investigtion, the TCB stated that gentleman’s agreements reduce labour mobility among undertakings and suppress the real value of salaries, and no-poaching clauses in service procurement or cooperation agreements may be anti-competitive if they are too broad. Accordingly, the TCB imposed administrative fines on 16 undertakings, concluding they infringed fair competition with their gentleman’s agreement.
The TCB has further deepened its scrutiny and initiated another investigation on telecommunication entities. In its decision dated 27 February 2024 and numbered 24-10/170-66, the TCB resolved that eight of the relevant undertakings infringed fair competition with a gentleman’s agreement aiming for no-poaching of employees, with similar grounds to its previous decision explained above.
3. Ecoles privées located in Istanbul
The latest TCB decision on wage-fixing by way of a gentleman’s agreement involved four French private high schools in 2022. At the end of the investigation, the TCB found the private high schools determined the salaries of their Turkish professors together and decided that their agreements are anticompetitive and imposed administrative fines to such schools.
Assessment and recommendations
For no-poaching arrangements within service or cooperation agreements, the recent global trends generally accept that they do not infringe fair competition, in case they are necessary for legitimate business interests and are limited to the duration of services without imposing a disproportionate burden on employees.
A pioneer decision accepting such an approach is the eBay decision of the Department of Justice of the United States (DOJ). In the final judgment, the DOJ decided that the no-poaching agreements which are ancillary to the agreements such as service may not infringe fair competition, to the extent that they: (i) identify with specificity the agreement to which it is ancillary, (ii) are narrowly tailored to affect only employees directly involved in the agreement, (iii) identify with reasonable specificity the employees subject to the agreement, (iv) contain a specific termination date or event, and (v) are signed by all parties to the agreement, including any modifications.
Based on the TCB’s general approach, no-poaching clauses related to mergers, acquisitions and joint ventures (concentrations) are considered ancillary restrictions and do not constitute an infringement as they serve legitimate business interests. Nevertheless, in its two recent decisions3, the TCB also argued that no-poaching clauses ancillary to the agreements such as service agreements may also not infringe fair competition, potentially aligning with the DOJ’s approach in its eBay decision.
On the other hand, practices of wage-fixing are always considered anti competitive per se by competition authorities worldwide4, as well as by the TCB5.
The TCB’s thorough review of labour market agreements demonstrates its commitment to competitive labour markets. Therefore, for businesses, it would be crucial to consider the following when entering into no-poaching agreements that might affect employee mobility: legitimacy, transparency, and employee impact.
Notes
- European Commission, Competition Policy Brief, Antitrust in Labour Markets, Issue 2, May 2024.
- Please see European Court of Justice decision EDP – Energias de Portugal, Case C-331/21-EDP.
- In its decision Container Drivers (02.01.2020/20-01/3-2), the TCB indicated ‘it is deemed appropriate to approach labour market restrictions in legitimate cooperation or agreements with impact-based assessments’. Furthermore, in its BFIT decision (07.02.2019/19-06/64-27), the TCB decided that the no-poaching clause may not infringe the fair competition to the extent that it can be justified by a legitimate commercial interest (such as maintaining the service standard provided within the franchise relationship) and its possible impact on the labour market is not disproportionate in terms of its duration and scope.
- Please see United States v Arizona Hosp. & Healthcare Ass’n & AzHHA Service Corp., No. CV07-1030-PHX (D. Ariz. 2007); In the Matter of Your Therapy Source LLC, F.T.C. 171 0134 (2018); Fleischman v Albany Med. Ctr., 728 F. Supp. 2d 130; Conduct in the Modelling Sector, Case CE/9859-14, UK Competition and Market Authority; Décision 16-D-20 du 29 septembre 2016, Autorité de la concurrence (France).
- TV series producers decision (28.07.2005/05-49/710-195); Container Drivers supra; Ecoles Privées decision.