The protection of competition in labour markets has increasingly become one of the key areas of scrutiny in the recent practice of the Turkish Competition Board (“Board”). In particular, non-solicitation agreements, which restrict employee mobility between undertakings, and non-circumvention provisions, which indirectly affect labour mobility, have become the subject of significant debate under competition law due to their potential effects on competition in labour markets. Although such arrangements are commonly adopted by undertakings to protect skilled employees, trade secrets, and customer relationships, they may give rise to competition law concerns under Competition Law[1] to the extent that they restrict employee mobility among competing undertakings. This study examines the legal nature of non-solicitation agreements under competition law, the Board’s recent approach to such arrangements, and the conditions under which these provisions may be considered legally permissible.
I. INTRODUCTION
In modern competition law enforcement, the protection of competition is no longer regarded as being limited solely to goods and services markets; rather, preserving the competitive structure of labour markets is also recognized as one of the fundamental objectives of competition law[1]. Accordingly, ensuring that employees are free to move between employers and that wages and working conditions are determined under competitive conditions is of significant importance for the efficient functioning of labour markets.
Nevertheless, in practice, undertakings may resort to various contractual arrangements restricting employee mobility in order to protect their skilled workforce, preserve trade secrets, retain their customer base, or control labour costs. Non-solicitation agreements constitute the most common of such arrangements, while non-circumvention provisions may, in certain circumstances, produce similar effects.
However, such arrangements aimed at preventing employee transfers or restricting employee mobility may constitute an infringement under competition law to the extent that they make it more difficult for employees to access better working conditions, restrict wage competition, or distort the competitive structure of the labour market. Indeed, it is evident from the Board’s recent decisions that there has been an increasing emphasis on the protection of competition in labour markets and that non-solicitation agreements have, in most cases, been assessed as agreements restricting competition.
In this study, the legal nature of non-solicitation agreements and non-circumvention provisions will first be explained, followed by an examination, in light of the Board’s recent decisions on the subject, of the circumstances under which such arrangements are considered to constitute infringements of competition law and the conditions under which they may be regarded as lawful as ancillary restraints.
II. LEGAL NATURE OF NON-SOLICITATION AGREEMENTS
The Guideline[2], define non-solicitation agreements as direct or indirect agreements whereby one undertaking agrees not to offer employment to, or hire, the employees of another undertaking[3]. Such agreements may be set out in the form of express contractual provisions, or may also arise through gentlemen’s agreements, mutual understandings, or de facto practices[4]. For this reason, the decisive factor in relation to non-solicitation agreements is not the form of the agreement, but rather the existence of a common intention to restrict employee mobility[5].
Such arrangements may affect the competitive process in the labour market by restricting the ability of employees to move freely between employers and may reduce employees’ opportunities to obtain better wages and working conditions. For this reason, non-solicitation agreements are significant not only from the perspective of the employer-employee relationship, but also from the perspective of the competitive relationship between undertakings.
From a competition law perspective, non-solicitation agreements are regarded as horizontal restraints of competition concluded between undertakings operating in the labour market. In this respect, it is not necessary for the undertakings to operate in the same product or service market; rather, where they recruit employees from the same labour pool, they may be regarded as competitors in the labour market[6].
The Guideline state that non-solicitation agreements result in the allocation of labour among undertakings and, in this respect, are comparable to supplier- or customer-allocation agreements. For this reason, it is further stated that such agreements are regarded as restrictions by object within the meaning of subparagraph (b) of the first paragraph of Article 4 of the Competition Law.
III. THE BOARD’S RECENT APPROACH
It is evident from the Board’s recent practice that there has been a marked increase in the emphasis placed on the protection of competition in labour markets. The Board regards employees’ ability to move freely between employers as one of the fundamental elements of the competitive structure of the labour market[7] and increasingly subjects inter-undertaking arrangements restricting employee mobility to close scrutiny.
Within this framework, non-solicitation agreements are regarded by the Board not merely as contractual arrangements between employers, but as restraints of competition that directly affect employees’ wages, working conditions, and access to employment opportunities. In particular, gentlemen’s agreements, mutual understandings, and de facto practices aimed at preventing employee transfers have become a significant area of scrutiny in the Board’s recent decisions.
One of the earliest examples of the Board’s approach to the subject is reflected in the İzmir Container Decision dated 02.01.2020 and numbered 20-01/3-2[8], in which it was recognized that agreements concerning employees could form part of cartels established in the output market, and that non-solicitation agreements did not differ substantially from cartels established on the buying side of the market. The Decision further emphasized that non-solicitation agreements bear significant similarities to customer- or market-allocation agreements in terms of their economic effects.
The Board’s approach was further clarified in the Getir Decision dated 11.11.2021 and numbered 21-55/765-381[9]. The Decision was rendered upon Getir Perakende Lojistik A.Ş.’s application requesting the reconsideration of the Board’s Decision dated 05.08.2021 and numbered 21-37/526-M, by which the undertaking’s request to submit commitments had been rejected. In its assessment, the Board accepted that gentlemen’s agreements aimed at preventing employee transfers and determining employee wages could constitute clear and hardcore infringements. The Board further stated that such practices could reduce employee mobility, suppress wages, and weaken the competitive structure of the labour market, and accordingly maintained its assessment rejecting the request to submit commitments.
The Board’s first decision imposing an administrative monetary fine in relation to non-solicitation agreements was its decision dated 24.02.2022 and numbered 22-10/152-62[10], which examined anti-competitive agreements aimed at preventing the transfer of physicians between private healthcare institutions and determining employee wages. In the decision, it was held that non-solicitation agreements preventing employees from freely changing employers and eliminating competition between employers constituted restrictions by object. Within this framework, administrative monetary fines totaling 58 million Turkish Liras were imposed on 19 undertakings, making this decision the Board’s first fining decision concerning non-solicitation agreements.
Another significant decision concerning non-solicitation agreements is the Board’s decision dated 12.05.2022 and numbered 22-21/353-151[11], which addressed the competition law liability of undertakings providing human resources services in relation to non-solicitation agreements. The Board examined the e-mails and correspondence exchanged between the parties, as well as the role of the service providers in the employee transfer process, and stated that undertakings which are not direct parties to the cartel may only be held liable where they intentionally participate in the infringement and make a substantial contribution to its implementation or continuation. Accordingly, it was held that third parties which are not parties to a non-solicitation agreement may also be held liable for the infringement, provided that these conditions are satisfied.
In its decision dated 26.07.2023 and numbered 23-34/649-218[12], the Board examined non-solicitation agreements between undertakings operating in different sectors. In its assessment, the Board took into account the mutual understandings aimed at restricting employee transfers and held that the labour market constitutes a distinct market protected under competition law, that non-solicitation agreements prevent wages and working conditions from being determined under competitive conditions, and that, for this reason, they constitute agreements infringing competition.
In its decision dated 27.02.2024 and numbered 24-10/170-66[13], which further reinforced the Board’s approach to labour markets, the Board examined gentlemen’s agreements between undertakings operating in the information and communication technologies sector. In its assessment, the Board took into account the e-mails and correspondence exchanged between the undertakings, the mutual understandings concerning employee transfers, and de facto practices restricting the recruitment of employees from competing undertakings and making recruitment subject to the approval of such undertakings. The Board held that the labour market constitutes an input market protected under competition law and, in this context, that gentlemen’s agreements constitute clear and hardcore restrictions by object.
Taken together, these decisions demonstrate that the Board regards non-solicitation agreements as serious competition law infringements that directly restrict competition in the labour market and produce cartel-like effects. In particular, it is evident that the Board has adopted a strict approach towards arrangements that generally, indefinitely, or without clearly defined limits restrict employee mobility.
IV. ASSESSMENT OF COMPLIANCE WITH LAW UNDER ANCILLARY RESTRAINTS
Whether non-solicitation provisions may be regarded as lawful under competition law is assessed on the basis of whether such provisions constitute ancillary restraints in relation to the relevant commercial transaction. According to the Guideline, for a restraint of competition to be regarded as an ancillary restraint, it must be directly related to the main transaction, necessary for the implementation of that transaction, and drafted in accordance with the principle of proportionality[14].
The Guideline state that the requirement of direct relatedness refers to the existence of a link between the relevant restraint and a specific main transaction, such that the restraint would not exist in the absence of that transaction[15]. As regards the necessity criterion, the restraint must be objectively necessary for the implementation or continuation of the main transaction[16]. In this respect, restraints intended solely to protect the commercial interests of the parties or to render the transaction more profitable are not regarded as necessary.
Furthermore, the relevant restraint must also be proportionate[17]. For this reason, it is important that non-solicitation provisions be drafted in a specific and limited manner with respect to their duration, scope of employees, field of activity, and geographical scope. In particular, provisions of an indefinite or open-ended nature, as well as absolute prohibitions on hiring covering all employees, entail a high risk under competition law, as they excessively restrict employee mobility. By contrast, provisions limited to certain key employees, of reasonable duration, and directly related to the main transaction are more likely to be regarded as ancillary restraints.[18].
These principles concerning non-solicitation provisions are also important for the assessment of non-circumvention provisions, which are frequently used together with non-solicitation provisions in practice. Non-circumvention provisions refer to arrangements that restrict the parties from bypassing one another in order to establish direct commercial relationships with customers, suppliers, or certain business contacts.
Although such provisions may, to a certain extent, be regarded as legitimate where they are intended to protect trade secrets, customer relationships, and business opportunities, they may give rise to competition law concerns where they are drafted so broadly as to result in customer allocation or market foreclosure. For this reason, non-circumvention provisions should also be limited with respect to a specific field of activity, geographical scope, and duration, and should not exceed what is necessary to protect the underlying commercial relationship[19]. By contrast, provisions that are indefinite, open-ended, or restrict the parties’ freedom to conduct their economic activities beyond what is necessary may be regarded as directly restrictive of competition, thereby giving rise to the risk of unenforceability under competition law and administrative monetary fines[20].
V. CONCLUSION
Competition law enforcement in relation to labour markets has developed significantly through the Board’s recent decisions and the Guideline, and inter-undertaking arrangements restricting employee mobility have become a distinct area of review under competition law. Within this framework, non-solicitation agreements are regarded as arrangements that directly affect competition in the labour market and, in most cases, constitute restrictions by object.
Nevertheless, the Board’s practice does not adopt an absolute approach whereby non-solicitation and non-circumvention provisions are regarded as unlawful in all circumstances. Such provisions may be regarded as ancillary restraints where they are necessary for the implementation of a particular commercial transaction, directly related to that transaction, and drafted in a proportionate manner.
For this reason, non-solicitation and non-circumvention provisions used in practice should not be treated as standard contractual provisions; rather, they should be assessed separately in each individual case with respect to their scope, duration, employee group, field of activity, and geographical scope. Otherwise, such provisions may be characterized as serious infringements of the Competition Law and may give rise to the risk of administrative monetary fines.
[1] Mert KARAMUSTAFAOĞLU, Nil Zeren ÖZDEMİR, Rekabet Hukuku Açısından Çalışan Ayartmama Anlaşmaları, On İki Levha Yayıncılık August 2024 p. 427-428
[2] The Guideline on Competition Infringements in Labour Markets numbered 24-49/1087-RM (4), published by the Turkish Competition Authority on 24.11.2024
[3] Turkish Competition Authority, The Guideline on Competition Infringements in Labour Markets, dated 21.11.2024, p. 7
[4] KARAMUSTAFAOĞLU, ÖZDEMİR, p. 437-441
[5]Suna ÖZER, Rekabet Hukuku Açısından Rekabet Yasakları, Kadir Has Üniversitesi Sosyal Bilimler Enstitüsü Özel Hukuk Yüksek Lisans Tezi, 2009 p. 128
[6] Turkish Competition Board, dated 08.12.2021, and numbered 21-59/842-414
[7] Assistant Professor Ahmet Fatih ÖZKAN, Türk Rekabet Hukukunda De Minimis Kuralı, Hacı Bayram Veli Üniversitesi Ticaret Hukuku Bilim Dalı Yüksek Lisans Tezi, June 2024, p. 36-37
[8] Turkish Competition Board, dated 02.01.2020 and numbered 20-01/3-2
[9] Turkish Competition Board, dated 11.11.2021 and numbered 21-55/765-381
[10] Turkish Competition Board, dated 24.02.2022 and numbered 22-10/152-62
[11] Turkish Competition Board, dated 12.05.2022 and numbered 21/353-151
[12] Turkish Competition Board, dated 26.07.2023 and numbered 23-34/649-218
[13] Turkish Competition Board, dated 27.02.2024 and numbered 24-10/170-66
[14] ÖZER, p. 36-39
[15] Guideline, p. 10
[16] Guideline, p. 11
[17] Guideline, p. 11-12
[18] Hikmet KOYUNCUOĞLU, Duygu BALKAN, Rekabetin Korunması Hakkında Mevzuat ve Sözleşme Sonrası Rekabet Yasağı, On İki Levha Yayıncılık, August 2024 p. 254
[19] Court of Cassation. 11th Chamber, Dated. 27.05.2013, Numbered. 2012/12408, Decision. 2013/10972 (www.lexpera.com.tr)
[20] Turkish Competition Board, dated 09.03.2023 and numbered 23-13/216-71
[1] The Act On The Protection of Competition (Competition Law) numbered 4054