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HR issues in antitrust – competing or cheating?
HR issues in antitrust – competing or cheating?
8 December 2023
Series
Blogs
8 December 2023
Anti-competitive practices relating to human resources are once again under the spotlight following recent dawn raids targeting no-poach arrangements. The European Commission recently revealed unannounced inspections at the premises of companies active in the online food delivery sector for alleged no-poach agreements and exchanges of commercially sensitive information – conduct which is seen as restricting competition for workers in the labour market.
This marks a change in Europe, where enforcement of labour market restrictions has primarily been pursued by national competition authorities (publicly, at least). It also follows a ramp up in investigations and fines in relation to no-poach arrangements on both sides of the Atlantic.
No-poach agreements are agreements between competitors not to solicit or hire each other’s employees. They are one of a number of collusive HR practices of concern for certain competition authorities, along with:
The affected employees often won’t know about the agreements, which may be informal, as they are made between companies, rather than between employers and employees.
All these agreements are considered to have a negative impact on employees, both financially and personally. But their impact on the labour market has also become of greater concern for some enforcers in recent years, who link them with stagnating wages, stifling innovation and restricting the movement of talent.
As mentioned in our previous post, the current cost of living crisis has redoubled efforts to boost economic growth through competition but also focus on anti-competitive practices in markets which impact “household expenditure”. Competitive labour markets are widely seen as key on both fronts – healthy competition means better wages for individuals. This has placed labour markets fully in the limelight.
Europe has seen increasing enforcement of no-poach agreements in recent months. The Commission’s raids were swiftly followed by an announcement by the French Authorité de la Concurrence of an investigation into no-poach agreements between engineering, technology consulting and IT services companies. The Czech Republic launched its first probe earlier this year, and fines have been issued in Turkey and Belgium for no-poach arrangements in recent months.
The US has traditionally dominated headlines on no-poach agreements, where they have been prosecuted criminally since 2016 (they were previously treated as civil infringements). However, with no criminal convictions to date, despite numerous attempts by the Department of Justice (thirteen defendants have been acquitted in four jury trials), there are suggestions that the DoJ has overreached by trying to criminalize matters that should be treated civilly. Yet DoJ does not seem to be backing down at all, with Assistant Attorney General Jonathan Kanter calling the failed prosecutions “righteous cases,” and Deputy Assistant Attorney General Manish Kumar describing them as “extremely important cases”.
In the UK, the Competition and Markets Authority is currently investigating alleged anti-competitive behaviour relating staff involved in the production and broadcasting of sports content. This investigation was originally focused on freelance workers, but was extended earlier this year to include employed staff. This follows guidance published by the CMA in February 2023 warning employers about anti-competitive labour agreements, specifically citing no-poaching and wage-fixing agreements.
Non-competes are also dominating headlines. The Federal Trade Commission is expected to vote in April on its controversial proposal to ban non-competes entirely, while the UK government has issued a proposal to cap non-competes to three-months.
In contrast, other jurisdictions have been reluctant to embrace the intervention of competition law into employment arrangements. In Australia, for example, certain labour issues have been explicitly carved out under the Competition and Consumer Act 2010. However, as concern around the economic impact of restrictive labour market practices spreads, there are signs that this may change – as suggested in a speech earlier this year by Australia’s competition minister.
Recent enforcement has made clear that restrictions on competition in labour markets will be treated severely by enforcers. And while the sports sector has traditionally seen most activity, the most recent investigations suggest the scope of enforcement is widening.
Companies should be alive to HR-related competition risks, particularly given the purported prevalence of such arrangements as a matter of standard HR practice within a number of industries. Compliance policies should be updated to fully reflect these risks. In particular, given the significance of potential sanctions, including fines, disqualification of directors and/or criminal liability (depending on the jurisdiction), HR teams need to be aware of the potential antitrust consequences arising from routine business activities like recruitment and retention.
Particular care should be taken when participating in benchmarking activities, which are common in labour markets. While benchmarking against others can be beneficial for both employers and employees, companies should ensure that benchmarking activities are carefully managed to avoid inappropriate exchanges of competitively sensitive information.
We set out our key HR dos and don’ts below.
| Dos | Don'ts |
| Update compliance policies to cover HR-related antitrust risks. | Avoid exchanging sensitive employee compensation information at industry events. |
| Review benchmarking policies and terms with third party firms to ensure that sensitive information is sufficiently protected (for example via aggregating and anonymising participant data). | Refrain from entering into any agreements or informal practices with another company to not hire or solicit one another’s employees. |
| Offer targeted training to HR teams on identifying and reporting suspected competition law violations. | Refrain from entering into any agreements or informal practices with another company to not match offers of employment. |
| Ensure internal reporting arrangements are in place and your procedures are fit to handle antitrust investigations. | Do not share commercially sensitive information with competitors, for example terms and conditions of staff contracts. |
| Consider competition risks in any M&A due diligence processes. |