Dear Readers,
Competition law and policy are classically concerned with consumer welfare. In other words, lower prices, regardless of the consequences for other actors in the supply chain, have classically been the primary concern of the rules and their application.
However, there is no reason, in principle, why antitrust rules cannot apply to other aspects of the market process, including labor supply. As such, illegal agreements in labor markets that would prevent competitors from being able to hire each others’ (ex-) employees are not automatically immune from the application of the rules.
Recently, antitrust authorities, litigants, and courts have increasingly shown a tendency to target employers for their actions in labor markets. This typically takes the form of condemning so-called “no-poach” or “wage-fixing” agreements, whereby competitors agree not to attempt to hire each others’ workforces. This can take place in sectors as diverse as fast-food franchises and high technology.
So-called “no poach” agreements have seen greater prominence in recent days. The authors of the pieces in this Chronicle highlight the issues raised by these categories of agreements, in light of current enforcement practice worldwide.
As Dee Bansal, Jacqueline Grise, Beatriz Mejia & Julia Brinton point out, antitrust enforcement of conduct in labor markets has continued to ramp up over the past decade, with particularly intense scrutiny on “no-poach” agreements — agreements between or among employers of different companies not to recruit or solicit each other’s employees. The U.S. DOJ has committed to protect competition in labor markets, and the Biden administration has signaled that competition in the labor markets would be a priority. Specifically, discusses the DOJ’s recent actions and policy statements, and discusses how companies and employees should avoid conduct that may raise red flags and should consider implementing a robust antitrust compliance policy, including antitrust training for employees, and engaging antitrust counsel to review current non-solicitation provisions and non-compete clauses.
Richard May places no-poach agreements in context. In essence, they are a form of of buyers’ cartel in which employers explicitly collude to increase their purchasing power over their employees. In this sense, they are the mirror image of market allocation of customers by sellers. The article makes three key observations: First, depending on market structure, purchasing power can be either monopsony or bargaining power. Second, no-poach agreements are a form of explicit collusion which recent increased enforcement should deter, but strong enforcement may also have increased the risk of tacit collusion. Finally, given competition authorities’ significant experience of sellers’ cartels, there are interesting lessons to learn from them for the enforcement of buyers’ cartels (including no-poach agreements). The article highlights this potential with two examples.
Courtney Dyer, Courtney Byrd & Laura Kaufmann look at the specific issue of President Biden’s 2021 executive order as the clearest signal to date that labor-related enforcement will likely become a centerpiece of U.S. antitrust policy. U.S. antitrust agencies are now focused on updating the Horizontal Merger Guidelines (and they will no doubt include labor-market considerations in merger analysis). This development prefigures the fact that merger review in the U.S. is likely to come with more rigorous investigations into the labor-market effects of proposed transactions and more challenges to transactions on the grounds of substantially lessening competition in labor markets.
Gregory Asciolla & Jonathan Crevier examine the specific area of no-poach agreements in the field of franchising. Franchise businesses in various industries long employed “no-poach” provisions to restrict employees from moving among locations within the same franchise system. While these provisions have not traditionally garnered much antitrust scrutiny; recently they come to the attention of enforcers. attention, Economists increasingly point to them as a possible source of wage stagnation and as potentially illegal restraints of trade. As the article sets out, U.S. Attorneys General (and private litigants) are increasingly putting this theory into practice.
Finally, Tilman Kuhn, Strati Sakellariou-Witt & Cristina Caroppo address the issue from a European perspective. Specifically, the authors shed light on the roots of the discussion, ongoing enforcement activities, and open competition law questions, such as how labor issues should be dealt with in light of the distinction between “by object” and “by effect” restrictions under EU competition rules.
In sum, the contributions to this Chronicle provide timely and key insight to this novel and emerging area of antitrust law and policy.
As always, many thanks to our great panel of authors.
Sincerely,
CPI Team
