No-Poach Agreements: Purchasing Power Type, Explicit v. Tacit Collusion, and Lessons From Sellers’ Cartels

From near obscurity just over a decade ago, no-poach agreements are now in the crosshairs of several competition authorities worldwide, including the U.S. and EU.  No-poach agreements are a type of buyers’ cartel where employers explicitly collude to increase their purchasing power over their employees. They are the mirror image of market allocation of customers by sellers. This short article makes three observations in relation to no-poach agreements. First, depending on market structure, purchasing power can be monopsony or bargaining power. It appears that no-poach agreements could be either and that this is worth some consideration when prioritizing enforcement. 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. At the same time however, if the prevalence and enforceability of non-compete clauses in employment contracts decreases, employer incentives to collude explicitly may increase. 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.

By Richard May^[1]

I. INTRODUCTION

Traditionally, purchasing power has been in the shadows of competition policy. This may be changing, at least for purchasers in labor marke