Major Labor Market Gentleman’s Agreement Decision of the Turkish Competition Board

Overview

·         The Board deviated from its usual fine methodology by calculating fines based on the share of labour costs in turnover, due to the HR-focused nature of the infringement. In contrast, settling parties were fined based on total turnover, leading to inconsistency.

·         Agreements between vertically related firms (e.g. client–supplier) were still treated as horizontal no-poach cartels, since they competed for the same employees. Vertical ties in product markets didn’t shield them from liability.

·         The investigation began with 3 companies but expanded to 48 after dawn raids, illustrating how labour market infringements can be widespread and uncovered through internal documents.

·         Even formal written non-solicitation clauses were caught, especially when broadly worded to cover all employees or lacking justification tied to a main agreement.

·         The Board skipped product/geographic market definitions, yet still found the undertakings to be competitors, treating no-poach deals as per se market-sharing violations — unless they qualify as narrow ancillary restraints.

·         Phrases like “gentleman’s agreement” and “off-limits” found in internal communications were taken as strong evidence of collusion; related HR data exchanges were treated as part of the single infringement, not separately fined.

Introduction

The Turkish Competition Board ("Board") has published its much-anticipated reasoned decision in the Labor Market Cartel-I case, spanning 445 pages. This decision is significant as it sheds light on the legal treatment of no-poach agreements and competition rules in labor markets under Turkish competition law.

The case began as a preliminary investigation into only three companies active online food delivery and technology service providers supporting digital platforms, but grew substantially following dawn raids, ultimately encompassing 48 undertakings in a number of sectors such as online food delivery (e.g., Yemek Sepeti, Zomato, Getir), e-commerce (e.g., Trendyol, N11, Markafoni, Çiçek Sepeti), digital advertising and media (e.g., 4129 Medya, Havas, NTV, Mynet, Grupanya), software and IT services (e.g., Commencis, Logo, Koçsistem, Etiya), gaming (e.g., Peak), fast food chains (e.g., McDonald’s, Burger King, KFC, Domino’s, Pizza Hut), retail and FMCG (e.g., Migros), classifieds and marketplaces (e.g., Sahibinden), fintech and mobile technologies (e.g., Valensas, Mobven, Zeplin). This demonstrates both the "snowball effect" of competition investigations and the widespread nature of labor market restrictions in various sectors in Turkey. This also reflects the Board’s current practice of systematically reviewing HR departments and employment practices during on-site inspections across almost every industry—including tech, pharmaceuticals, fashion, education, and agriculture.

Fine Calculation and Discrepancy in Penalty Methodology

Unlike the Board’s usual practice of calculating fines based on undertakings’ total turnover, the final decision adopted a novel approach. Specifically, for undertakings that did not settle during the investigation, the Board determined the fine base by considering the proportion of employee costs in total turnover, stating that the subject of the violation concerns the labor market.

While Article 16 of Law No. 4054 on the Protection of Competition authorizes the Board to impose administrative fines of up to 10% of the undertaking’s annual gross revenues, it leaves the determination of the relevant turnover base to the Board’s discretion. Although the Board generally relies on the total turnover of the undertaking, there are some cases where it has based the fine on revenues derived specifically from the affected market or segment in exceptional scenarios. Examples include: Corporate Loans decision (2017) – turnover from corporate and commercial loan services; Turkcell decision (2013) – vehicle tracking services market; UN Ro-Ro decision (2012) – ro-ro transportation services; Dried Figs decision (2012) – revenue from dried fig sales; Sun Express decision (2011) – air transportation revenues on Germany–Turkey routes; Salary Promotions decision (2011) – turnover from salary promotion activities; Industrial and Medical Gases decision (2010) – revenue from industrial/medical gas products; Selçuklu Holding decision (2009) – turnover from printed cardboard packaging; TTNet decision (2008) – revenue from internet services; Enamelled Wire decision (2007) – sales of enamelled winding wire; and Insurance Companies decision (2006) – turnover from fire insurance policies.

Therefore, while the use of affected-market turnover as the fine base is not standard practice, the Board has adopted this approach in a number of cases. In the labor market decision in question, the Board appears to have followed a similar reasoning, determining the fine base by taking into account the proportion of employee costs within the undertaking’s total turnover.

However, undertakings that settled during the investigation were fined based on their total turnover. According to Turkish competition legislation, particularly the Settlement Regulation, parties that settle cannot challenge the fine or the findings of the final decision. This created a somewhat contradictory result: parties that chose to settle were arguably penalized more harshly than those who did not. Despite attempts by some settling parties to appeal, Turkish courts upheld the non-contestability of settlement decisions (which are not publicly available yet). Subsequent Board decisions, including in the pharmaceutical and private school labor investigations, reverted to the usual method of applying fines over total turnover, indicating this employee-cost-based fine was an exception.

Characterization of No-Poach Agreements as Cartels

Although many of the no-poach agreements were between undertakings that also had vertical commercial relationships (i.e., client-service provider arrangements that are concluded with e.g., software and IT companies, advertising and media companies, and HR companies), the Board nonetheless qualified these agreements as horizontal cartels. This confirms that companies may be considered competitors in the labor market even if they operate at different levels of the value chain in the output market. If undertakings are competing for the same pool of talent, they will be considered horizontal competitors in the context of labor markets.

Nonetheless, the presence of a vertical relationship may still be relevant under Article 4 of Law No. 4054, particularly in the context of "ancillary restraints." That is, a non-solicitation clause might not violate competition law if it is indispensable and proportionate to the implementation of a legitimate main agreement.

Contractual Clauses Deemed Problematic

The Board scrutinized several standard non-solicitation provisions, noting that even seemingly legitimate clauses could constitute hardcore restrictions when they cover all employees or are not narrowly tailored. For instance, the following clauses were highlighted as examples of anti-competitive conduct:

"Each party agrees, declares, and undertakes not to employ any personnel who previously worked for the other party. However, a person who has voluntarily terminated their employment contract may be employed by the other party at least three (3) months after the termination date."

"The SUPPLIER and its personnel shall not attempt to employ or entice any employee of [Company A] or its affiliated or related companies within 12 (twelve) months following the termination of this agreement. During the term of the agreement and for 12 months thereafter, [Company A] shall not employ, directly or indirectly, the personnel of the SUPPLIER or engage their services via any third party."

"[Company A] shall not employ or even offer to employ any personnel of [Company B] for 2 years, whether on its payroll or otherwise, regardless of whether such companies are directly related. Otherwise, [Company A] undertakes irrevocably to pay the penalty stipulated in [Company B]’s contract without requiring a further legal ruling."

"The Supplier undertakes not to enter into an employment relationship with or offer employment to any personnel of Company X involved in the relevant Work Order, during the duration of the Work Order."

"The Client shall not employ or offer to employ, directly or indirectly, any personnel of [Company A] involved in the services provided under this agreement for a period of 3 years."

Emails and Internal Correspondence Indicating Informal Agreements

The Board also found various examples of informal "gentleman's agreements", “off-limits”, “blacklists” which further confirmed collusive behavior. Examples include the following:

"By the way, we also have a gentleman's agreement. I kindly request that no transfers occur from [Company A] to you, or vice versa."

"This is something we've been sensitive about since day one. If someone has left your company voluntarily, they might be hired, but we won't hire your current employees."

"The agreement is at least for three months. If someone leaves voluntarily, both sides wait at least three months before hiring."

"Due to our gentleman's agreement, we do not hire from [Company A]. Please inform the team accordingly."

"We have off-limits companies that we avoid due to such gentleman's agreements. One of them is [Company A]."

"Please note that we have an informal blacklist. We've respected this mutual understanding for years."

"Although we informed [Company A] not to hire our staff, they have hired someone without notice."

"Here is our updated list of off-limits companies. Do not engage with candidates from these firms."

These communications provide insight into the systematic and sometimes normalized nature of labor market collusion among undertakings.

Market Definition and Theory of Harm

Interestingly, the Board chose not to define a relevant product or geographic market. In typical cartel cases, a market definition is critical to determine the existence of a competitive relationship. The absence of this step raises questions but suggests the Board viewed the conduct as per se unlawful.

In its reasoning, the Board emphasized that in labor markets, undertakings may be competitors regardless of their output market activities. That is, companies operating in entirely different industries can still be considered rivals if they compete for the same pool of employees.

The Board further cited theoretical and practical difficulties surrounding labor market definitions. It referred to the “small but significant and non-transitory decrease in wages” (SSNDW) test as a parallel to the hypothetical monopolist test (SSNIP) commonly used for product market definitions. It also addressed the challenges in applying such tests in labor markets, including the two-sided matching nature of employment relationships, switching frictions, and the broader social and legal factors that influence employee mobility, such as healthcare benefits, employment regulations, and non-compete clauses. The Board also noted the potential inadequacies of standard occupational classifications (e.g., the U.S. “Standard Occupational Classification”) in capturing relevant labor markets.

From a comparative perspective, the Board cited various foreign precedents. In U.S. case law, it referenced the DOJ’s Knorr-Bremse and Deslandes cases, where courts refrained from segmenting labor markets by job types, particularly when the no-poach agreements broadly covered all employees. In contrast, in Surgical Care and Arizona Hospital, the labor markets were defined more narrowly based on employee types (e.g., senior-level vs. per diem vs. traveling nurses). In the EU context (in particular in the decisions of the French and Spanish competition authorities), the Board noted that labor-related agreements were often investigated within the broader scope of buyer cartels involving product markets and therefore did not necessitate a separate labor market definition.

Ultimately, the Board concluded that a precise definition of the relevant product market was not necessary in this case since the no-poach agreements covered nearly all employee categories across undertakings operating in diverse sectors such as e-commerce, software, retail, logistics, advertising, and telecom, the labor market was sufficiently affected regardless of how narrowly or broadly it would be defined.

Ancillary Restraints Doctrine

The Board reiterated that while no-poach agreements and non-solicitation clauses are generally considered "by object" restrictions of competition, they can under certain conditions qualify as ancillary restraints. To be considered an ancillary restraint, the provision must:

• Be directly related to and necessary for the implementation of a main agreement;

• Be clearly and specifically defined in writing;

• Not cover all employees indiscriminately;

• Be proportionate in terms of scope, duration, and geography.

The Board emphasized that broad, blanket non-solicitation clauses covering all personnel are unlikely to be deemed ancillary unless tied to specific transactions such as mergers or asset transfers. Even then, the duration and employee group must be narrowly defined.

Information Exchange Considerations

The Board did not treat information exchange (e.g., wages or recruitment data) as a separate violation. Instead, such exchanges were viewed as facilitating the main anti-competitive conduct—namely, labor market collusion—and thus part of a single infringement.

Under Turkish competition law, the exchange of competitively sensitive information—particularly relating to prices—is considered high-risk conduct due to its potential to restrict competition. In the context of labor markets, the equivalent of the price information is employee compensation, including base salaries, bonuses, side benefits, and recruitment strategies. The secondary legislation (i.e., Guidelines on Competition Infringements in Labor Markets) recognizes that the exchange of such information among employers may amount to a competition law violation, either by its object or effect. This is because employers who are party to such exchanges may align their behavior and refrain from offering competitive wages, thereby harming labor market competition. Accordingly, sensitive information exchanges may serve as a facilitating practice to explicit wage-fixing or no-poach agreements, or they may constitute a stand-alone anticompetitive practice in their own right.

Nevertheless, in the decision at hand, it was found that two undertakings, namely FLO (a footwear and fashion retailer) and LC Waikiki (a leading clothing retailer) were engaged in systematic exchange of sensitive information concerning employee wages, benefits, and human resource policies. However, the Board assessed that the information exchange served to facilitate and monitor the no-poach arrangements and was thus functionally and temporally connected to a no-poach agreement.

It was further clarified that this is not a safeguard though. The decision clarifies that, had the information exchange occurred independently—i.e., outside the framework of a broader anticompetitive agreement—it could have been deemed an independent violation of Article 4 of Law No. 4054.

This analytical framework is consistent with Turkish competition law precedent, which allows it to assess multiple forms of collusive conduct (agreements and information exchanges) as a single infringement when they pursue the same anticompetitive objective. It also reflects a growing understanding that labor market collusion can arise not only through explicit agreements but also through systematic and intentional coordination via information exchange.

Rejection of Commitments and Fines Imposed

11 undertakings submitted commitments during the investigation process. However, all were rejected on the basis that the alleged conduct constituted a “hardcore restriction” within the meaning of Turkish competition law, and therefore fell outside the scope of the commitment mechanism.

Pursuant to the secondary legislation regarding commitments, the following are explicitly excluded from the commitment procedure:

“(a) Naked and hard-core cartels: agreements and concerted practices as well as decisions and practices of associations of undertakings which have as their object or effect or likely effect the prevention, distortion or restriction of competition directly or indirectly in a particular market for goods or services, made for the following purposes:

1) Price fixing, sharing customers, suppliers, territories or trade channels, restriction of supply or imposing quotas, bid rigging, sharing competitively sensitive information such as price, production or sales volumes planned for the future between competitors,

2) In the relationship between undertakings operating at different levels of the production or distribution chain, determining the fixed or minimum price for the buyer.”

Accordingly, the Board concluded that the no-poach agreements and non-solicitation clauses at issue qualified as “by object” restrictions and amounted to hardcore infringements, making them ineligible for commitment mechanism. This approach is also consistent with the Board’s previous decisions concerning labour market restraints.

Ultimately, the Board imposed fines totaling TL 151 million (~EUR 3.2 million) on 16 undertakings. An additional TL 101 million (~EUR 2.2 million) in fines has already been imposed via settlements with 11 other undertakings. The Board concluded that 21 undertakings were not part of the infringement.

This case sets a critical precedent for labor market enforcement in Turkey and clarifies the legal risks associated with gentlemen’s agreements and non-solicitation agreements. Undertakings are strongly advised to review their contracts and HR practices to ensure compliance with competition rules.