Competition Law and Labor Markets
31.01.2024
Whether labor markets fall within the scope of competition law has long been controversial. This market is highly regulated due to social protections. In addition, it is economically distinct from other markets for various reasons. For all these reasons, for a long time, competition authorities did not direct their competition protection tools to labor markets. However, in recent years, new concepts and phenomena have emerged that bring competition law and labor markets face to face. This new situation necessitates a review of employee no-poaching and wage fixing agreements between competitors in labor markets. In this article, we will try to explain all these issues in a very short and clear manner.
1. What is the labor market?
Market refers to the environment where buyers (demand) and sellers (supply) meet, and goods and services are offered for sale/provided. Accordingly, the labor supply/labor market can also be called a market. In this market, workers supply their labor, and employers demand this labor. According to the concrete case, the relevant product market can be identified as “labor supply/labor market in health services” or “labor supply/labor market in engineering services”.
According to Article 4 of the Law on the Protection of Competition, agreements between undertakings, concerted practices and such decisions and actions of associations of undertakings that directly or indirectly prevent, distort, or restrict competition in a particular goods or services market, or that have or may have this effect, are unlawful and prohibited. Accordingly, anticompetitive activities of competing companies in the labor market will also be penalized.
2. Actions Restricting Competition
Agreements or concerted practices between employing undertakings are considered to be the most harmful anti-competitive practices in labor markets. Typical agreements in this market are gentlemen’s agreements aimed at fixing wages or working conditions, exchanging information, or preventing the transfer of employees.
3. Wage Fixing Agreements
Wage or working conditions fixing agreements are agreements in the labor market in which employer undertakings agree to pay the same wages to each other’s employees or determine the maximum wage between them. In the Series Producers decision dated 28.07.2005 and numbered 05-49/710-195, the Competition Board imposed fines on the producers who were found to have determined the wages of the actors through agreements on the grounds that they restricted competition. Similarly, in the Izmir Container decision dated 02.01.2020 and numbered 20-01/3-2, the Competition Board imposed a fine on container transportation undertakings that were found to have made agreements to fix employee salaries.
4. No-Poaching Agreements
No-Poaching agreements are agreements in which undertakings agree to refrain from soliciting or hiring each other’s employees, in other words, they cease to compete for the input (labor) in question. The Competition Board considers these agreements as severe and clear violations. In order for no-poaching agreements to be unlawful, the undertakings concerned need not be competitors in the goods or services market in which they operate. For example, a no-poaching agreement concluded by an online marketplace and an IT company would also be unlawful. In this regard, several companies were fined in 2023.
5. Sensitive Information Exchange
The fact that undertakings share information on wages and other working conditions with competitors may indicate implied coordination between undertakings. For example, the French Competition Authority imposed administrative fines on undertakings that exchanged information on employee salaries and bonuses. Information on working conditions and wages that may be raised in trade associations can also be considered in this context.
6. Conclusion
- Wage fixing and no-poaching agreements are clear and gross violations. Therefore, it is not possible to carry out commitment processes for these violations.
- These agreements do not have to be with competitors to be penalized. Provisions attached to any service/supply contract may also be subject to review.
- The Competition Board has imposed several fines in this regard. The Board is also currently conducting investigations.
- The HR policies of employer undertakings and all existing contracts for supply, services, sales, consultancy, etc. should be reviewed in the context of the new labor market practices of the competition authorities.