Antitrust enforcement against collusion in labor markets is intensifying across the transatlantic region. In this episode of "Fierce Competition," host Bill Batchelor and partners Jim Fredricks, Aurora Luoma and Margot Sève discuss the surge in criminal and civil investigations into wage-fixing and no-poach agreements. From the DOJ’s first criminal wage-fixing guilty verdict to major fines in Europe, they examine why labor markets are now a top enforcement focus and what companies should do to stay compliant.
Episode Summary
Gone are the days when companies could simply agree with a handshake not to poach each other's IT staff. Today, violations in the labor market are receiving heightened scrutiny and are being addressed with greater severity. Host Bill Batchelor is joined by three Skadden colleagues to discuss the rapidly evolving enforcement landscape. Jim Fredricks, antitrust/competition partner in Washington, D.C., breaks down the U.S. prosecution strategy. Aurora Luoma, antitrust/competition partner in London, and Margot Sève, white collar defense and investigations partner in Paris, describe the environment in Europe. Tune in for valuable insights on why it is essential for clients to address labor law issues within their compliance programs.
Speaker 1 (00:01):
Welcome to Fierce Competition, a podcast from Skadden’s Global Antitrust and Competition Group that explores antitrust policy and enforcement around the world. Join our colleagues from across the continent as we discuss the latest developments and what they mean to you in an increasingly complex legal and regulatory landscape.
Bill Batchelor (00:23):
Hello, good morning. Good afternoon, and welcome to Skadden Fierce Competition. I’m your host, Bill Batchelor, a partner in the European antitrust group, and this episode could not be hotter in terms of topics. We are going to look at recent antitrust enforcement in labor markets, an unloved area of antitrust law in times past now, absolutely red-hot with criminal investigations in the US, large triple digit million fines in Europe. What is going on? To answer that question, I’m delighted to be joined by three highly experienced antitrust practitioners. First, Jim Fredricks, partner in our practice in Washington DC.
(01:10):
Before joining Skadden, Jim was chief of the Washington Criminal II Section of the Antitrust Division of the Department of Justice. Aurora Luoma, partner in our competition and antitrust practice in London. And Margot Sève, a partner in our Paris office. Both Aurora and Margot have been advising on just these issues. Jim, what’s been making the head on your side of the Atlantic?
Jim Fredricks (01:37):
Sure, Bill. Thanks. The big headline is in April, the DOJ finally got its first guilty verdict in one of these labor market cases. It was a wage-fixing case. This comes nearly a decade after its announcement that it would begin proceeding criminally against these sorts of cases, these wage-fixing cases or no-poach cases. That announcement came in 2016. It was a pretty big shift. Prior to that, DOJ went after these cases civilly. And so after the announcement between 2020 and 2022, antitrust division indicted six labor market cases, either wage-fixing or no-poach or a mix of both in some of the cases. And none of those yielded a guilty verdict on the antitrust charge. On April 14th though, of this year, a jury convicted a man named Eduardo Lopez of wage-fixing.
(02:32):
He was charged with fixing the wages of nurses in the Las Vegas area, but he was also charged with fraud in connection to the sale of his business. He didn’t disclose and in fact denied the existence, allegedly at least of antitrust investigation in the course of the sale of his home healthcare business. The trial itself unfolded very much like a classic price fixing case. The DOJ, I guess, went back to the playbook on how to try a price fixing and applied it in the wage-fixing context. They had testimony from insiders, a co-conspirator that was now cooperating with DOJ. They had testimony from sympathetic nurses, they had secret recordings with Lopez and they played those for the jury. They also had extensive text messages and other corroborating documents to support the charge.
(03:22):
The jury found Mr. Lopez guilty on all counts. He faces up to 10 years in prison and a million-dollar fine to be sure it’s unlikely he’ll get a sentence of that magnitude. People are watching very closely to see what happens here in terms of sentencing. I would fully suspect DOJ will seek a term of incarceration though. The sentence hasn’t happened obviously, and an appeal is likely to follow. But I’ll tell you that verdict really is sort of a demonstration by DOJ after a long path of getting here that it can prevail in one of these labor market cases.
Bill Batchelor (03:54):
Now, this is quite a degree of perseverance from the DOJ. Is there a reason for this change why they were successful this time around?
Jim Fredricks (04:02):
There’s several factors though I think that do stand out. Number one, Lopez was a wage-fixing case. Most of the indicted cases have been no-poach cases. Historically, DOJs had much more success trying price-fixing cases than customer-allocation cases. There’s a long line of customer-allocation cases that have yielded acquittals. And I think that same pattern we can see here, it’s had no success, at least to date on the allocation of employee cases, but now it’s prevailed on one of the wage-fixing cases. Another part of it is they had pretty compelling facts here and good evidence. And at the end of the day, that’s what all these cases come down to. Another feature of this case that I think does set it apart is it was a long-running conspiracy.
(04:45):
It went on for years. The first wage-fixing case, the DOJ indicted was a conspiracy probably better measured in months if not weeks. And those cases just don’t generate the same amount of evidence. Juries, I think, perceive them as less harmful, more transient than a three-year conspiracy suppressed the wages of nurses. So I think those things are combined, really made for a better case for the DOJ. Sort of another X factor is the presence of the non-antitrust charge, the fraud charge. It serves, I think, at least two possible purposes, and maybe the jury viewed it this way, at least. One, the fact that he denied the existence of the criminal antitrust investigation. I think perhaps to some jurors suggest that he had a guilty conscience.
(05:28):
He knew what he had done was wrong and he was trying to obscure it. And two, whether fair or not, I think it leaves the impression that perhaps his transgression on the wage-fixing was not an isolated event and that he had a more criminal mentality. I think those things all in combination really made for a better case for the DOJ.
Bill Batchelor (05:48):
No doubt we’ll see some under the new administration as well. I think it’s fair to say we’ve not seen one started right under the new administration so where yet what their policy will be. So Aurora, I think I’m right in saying that the US have been the pioneers here, but we’re catching up quickly, right? We’ve seen developments, policy statements at European and national level that suggest this is now an area of focus.
Aurora Luoma (06:12):
That’s right, Bill. It is fair to say that the US antitrust agencies have been leading the way, but we have been seeing more activity in Europe on this topic, and obviously it’s a space that’s been closely watched by those that are in the antitrust universe. It’s interesting that initially a lot of the enforcement data has really been at a national level, particularly in sporting cases. The Portuguese agency was an early mover. They issued a policy paper in September 2021 and then their first infringement decision the following year for no-poach agreements. But now we’ve seen over 20 member states being active in this area and the number continues to grow as priorities shift to labor markets.
(06:51):
Labor markets are also very much in the radar of the European Commission. Again, around October 2021, we had a speech from the then competition commissioner Margrethe Vestager, which was titled ‘A New Era of Cartel Enforcement’ outlining some of their priorities when it came to pursuing cartels. And in particular, it was interesting as it highlighted, the Commission was not just looking to investigate traditional cartels, but also other types of anticompetitive conduct including wage-fixing and non-poach agreements. And then more recently in May last year, the Commission issued a specific policy paper on this topic called ‘Antitrust in Labor Markets’, which explained that in their view, most wage-fixing and non-poach agreements qualified as hardcore anticompetitive agreements and emphasized the Commission’s commitment to taking enforcement action in these markets.
(07:38):
And what’s particularly interesting is both the speech and the policy paper link the focus on these types of agreements in labor markets to innovation competition, which has always been an area of concern for the Commission to preserve. So then hot on the heels of the policy paper last year, just a couple of months ago, the Commission took its first concrete action. It announced a decision finding two major food delivery companies, €329 million for an infringement, which covered a variety of topics including exchange of sensitive information dividing markets between the two parties, but also notably an agreement not to poach each other’s employees, which is the first major decision we’ve seen coming out of the Commission on this topic following some of the statements I outlined.
(08:22):
What I think was notable about this case is not only that it was part of a broader set of misconduct, but also that it seems to have begun out of an acquisition of minority and non-controlling shareholding. What appears to have started as a quite limited reciprocal no hire clause for certain types of staff seems to have expanded over time into a general understanding not to actively approach each other’s employees. And I should note here, we don’t yet have the full decision on the case, but just the press release.
Bill Batchelor (08:51):
That’s a super interesting case, right? We’ve had queries from a number of clients saying, “Well, hang on a second. In a minority investment scenario, particularly if it was some sort of joint venture, it would be completely vanilla to have a non-solicitation covenant related to that venture, that minority stake being something that was viable.” It suggests to me the broadening out of the understanding may have a specific role here and the authorities saying, “Well, actually this is something we should investigate.” But I know there’ll be a lot of interest in reading the detail when we see it, and I guess a settled case, right? So we’re not going to see an appeal.
(09:25):
The parties have to pay the money and move on. Not content with that. Margot, I see the French are fast on the heels of the EU coming out this time in the IT sector, I think.
Margot Sève (09:37):
Right? So the week after on June 11th, the French antitrust agency announced its own landmark decision that imposed a fine of almost 30 million euros, three zeroes, on three companies that are, as you said, active in the engineering technology consulting and IT service sectors for entering into no-poach agreements. A fourth company, which was actually the leniency applicant was not fined, not surprisingly, and this was really the first decision by the French antitrust agency that was a standalone decision relating to the labor market infringement, because as opposed to the Commission’s decision, no other conduct was targeted.
(10:21):
The companies involved in the French decision had established two bilateral and informal agreements, so-called gentlemen’s agreements, that prohibited the companies from directly soliciting or hiring each other’s specialized employee in IT consultancy. There was also an agreement to consult the other companies when moves were planned.
Bill Batchelor (10:46):
In the IT sector, if you are advising on an outsourcing agreement or a consultancy agreement with a particular client, it would be completely vanilla to have a non-solicit, right?. I’m sending my employees to try and turn around your organization or to look at your IT systems, make you more productive. The last thing I want to happen is they stay with you, right? I need to have an non-solicit of some sort of protection there for this consultancy to make sense.
(11:12):
So again, it looks like, I mean we don’t know the facts yet, we haven’t seen the decision, but it’s possible that this expanded out from something that we might’ve regarded as quite vanilla into something more serious, particularly the quotes around the gentleman’s agreement and avoiding a hiring war. The UK not quite late to the party, Aurora, but in the zone sort of on the fringes of the party perhaps.
Aurora Luoma (11:34):
Well, the UK in fact got in there a little bit before the Commission in terms of publishing its first decision. So like the Commission, we’ve seen the UK competition authority make statements that tie in enforcement in the labor market to wider policy priorities. So in a recent speech, the CMA’s executive Sarah Cardell emphasized that well-functioning labor markets are widely recognized as an important driver of economic growth. And we all know that economic growth is a big focus area, not just in labor markets, but more generally both for the labor government in the UK and for the CMA at present. So following that, the CMA’s first decision came out in March this year and this decision related to wage-fixing rather than no-poach agreements between five large sports broadcast and production companies.
(12:20):
And what appears to have happened is there was some formal and informal exchange of information through emails, messages, and calls around what fees were being given to freelance employees, such as camera operators runners, sound technicians, make up artists, and that the parties broadly aligned their rates. The evidence does suggest that in some instances the parties were trying to benchmark wages with each other, which to your point, Bill, in some situations is fairly common practice, but that this seems to have slipped into a much wider arrangement around aligning rates given to freelance employees. The CMA made it pretty clear that these kinds of conversations, even if informal or well-intentioned, are illegal when they involve competitors discussing or coordinating pay.
Bill Batchelor (13:04):
Absolutely. You can see in all three of these cases something that you might have thought, “Well, I can see some justification for a non-solicitor around a minority investment around an IT outsourcing agreement. A salary benchmarking that’s operated within safeguards and you make sure that you’ve got protections against reverse engineering.” You could see all of those might’ve had some justification in itself, but it seems that we’ve had side conversations and broader agreements that have gone much too far, I should say. I think we’re seeing in our investigational practice, often the labor market question is tagged onto a broader investigation of cartel-type conduct.
(13:45):
And so you can absolutely see that the authority is trying to create a pipeline of cases and saying, “Well, is this also a conversation that you had around other forms of collusion?” What next then in terms of the EU and National Authority Pipeline in Europe?
Aurora Luoma (14:01):
So, I think we can continue to expect this to be an active area. We know the EU has an ongoing investigation looking at alleged no-poach agreements in data construction and potentially more, and the UK has a live ongoing investigation. And of course there’s also continues to be a number of investigations at a national level. What would be interesting to see in addition to that is whether the focus on the investigation side into labor markets will then feed through into an increase in private enforcement in some jurisdictions.
Bill Batchelor (14:29):
Fantastic. Let’s maybe just dive into some of the nitty-gritty of how these cases are prosecuted. Maybe first simple question, we might think that an non-solicit, a non-poach, could that have some sort of beneficial efficiency or could we draw analogies to collective agreements between employees and employers? Could we ever run while there’s no real effect type argument or is this treated as so serious that that’s not you’ll ever win? Maybe Jim, to start off in the US.
Jim Fredricks (14:57):
The United States is very clear in its position that wage-fixing no-poach are irredeemable in the same way as price-fixing and customer allocations. And so the per se rule applies, which means as a matter of law, it’s unlawful regardless of any justification that the participants may offer or whether there is any harm or not. And there’s been some skirmishing on that issue and DOJ is mostly one, but not completely. But there’s more to it though I think, than whether the rule applies or not. DOJ can say, “We don’t need to show harm all day long.” But I think the lesson not only of these labor market cases, but of other cases the department has brought is harm is very important.
(15:43):
It’s very important for them to prevail when you’re in front of 12 lay jurors who are expecting to see something that’s called a federal crime. And no harm, no foul is a very appealing theme for their defense. The government’s first no-poach trial, they tried to show the harm how people’s careers were set back because certain opportunities taken off the table because of the alleged no-poach agreement. The government put on evidence of how people missed out on opportunities, they put on a witness even who wasn’t able to move from company A to company B because of the agreement. But what the defense did, which I thought was very effective, was showing that while that senior executive wasn’t able to move from A to B, he moved from A to C and had a wonderful career after that. Did the jurors think this small little bump in the road for these people on their otherwise successful careers, is that really the kind of thing that we hold people criminally accountable for? Now, the reality is in many instances you’re not going to have conspiracy among all possible employers. So there always are going to be other outlets, and I’m sure DOJ is thinking a lot about this. Doubtlessly, they’re looking for no-poach cases where they can show harm and overcome this hurdle and they will do that all while saying it’s a per se case and therefore we don’t have to show harm at all.
Bill Batchelor (17:00):
I fully understood. So regardless of legal technicalities about categorization, if you’re going to have the sympathy of the jury with something about wage suppression, sympathetic group of employees, that’s definitely the case you want to put in front of them to a criminal standard. No, fully got it. Well, probably a relief to agencies in Europe that we don’t have a jury to play to. So it’s much more about the technicalities, which way are the authorities leaning?
Aurora Luoma (17:26):
The agencies in Europe are unsurprisingly, perhaps taking a similar approach to the US in the sense that they’re making it clear that they view conduct relating to labor markets also subject to the by object standard in Europe, which is very similar to the per se standard that Jim outlined in the US. And of course that means that if that’s established, the European Commission, if it finds a violation, does not need to demonstrate that there’s been any harm as a result. There’s a case involving a Portuguese football club where the Portuguese court has referred the question of whether the conduct should be treated as a by object infringement to the European Court of Justice. Whilst the ruling is currently pending, we do have the advisory opinion already from Advocate General Emiliou.
(18:12):
And whilst in the advisory opinion, he makes it clear that most cases of cartel conduct relating to labor markets ought to be considered prima facie harmful, so a by object infringement. He did also appear to acknowledge that in some cases, in more nuanced view would be appropriate. Whilst it’s clear that he had in mind fairly exceptional circumstances in that case, it was particularly related to preserving the fairness and integrity of competition between football clubs during COVID in a time-limited fashion. It’ll be interested to see how the courts land on that and whether they’ll open a small window to consider that. At least in some cases, infringements relating to labor markets are not by object or per se harmful.
Bill Batchelor (18:54):
Yes, the sporting exception, something on which we’ve already had a Fierce Competition podcast before. So from one technicality to another, who’s my competitor in a non-poach situation? Now I understand if I’m producing widgets or nuts and bolts out of my factory, then I understand who my competitors are. But at any company with an engineer, should I be considered an extremely broad competitive sets upstream? Jim, has the US had to think about this?
Jim Fredricks (19:25):
Sure. I think one should be cautious when they think about it. It’s in some ways easier to think about who your competitors are for customers, but who are your competitors? For employees, it could be a very broad group. There’s likely overlap, especially in industry where there’s a lot of specialized skills, but not necessarily. That overlap may not be the entire set. It may be much broader. The first, no-poach indictment actually alleged more than one conspiracy. The first conspiracy was between two companies that provide the same healthcare service, and so they were competitors for customers and employees. People moved back and forth between them, and the conspiracy was alleged to suppress that.
(20:05):
But another count in that indictment charged the company with conspiring with another healthcare company, which provided a completely different service. So no overlapping customers, but still an overlap in the employment market. And so I don’t think one can count on a narrow view of who are competitors for employees in this context. The other aspect of it, and to take another one of the charge cases that was tried, the court had to think about market definition and it was a per se case, so they didn’t do the sort of market definition you might encounter in a civil case, in a rule of reason case. But rather it was enough that the companies, the alleged conspirators were actual competitors for employees or in a very specific way, potential competitors for employees.
(20:51):
And when the jury was charged at the conclusion of the case, it wasn’t a market that consisted of all the places these workers could potentially work or reasonably work or all of the employers, what workers they might be looking for. It was much narrower. The charge was that these two companies were competing for the same senior level employees that were already employed at each company. So in the court’s words, the market was senior level employees at each other’s companies, and there are other companies in the healthcare industry and other industries that potentially would hire these very same senior level employees, but it is not the market that has the subject of this case. It was this artificial construct of a market that consisted only of the employees at these two companies.
(21:43):
That kind of artificiality is just not how a civil world reason case would be approached. It would be much more tethered to the economic realities of the marketplace. But in a per se case, this is much more the norm.
Bill Batchelor (21:57):
I think I’m right in saying that in Europe, Aurora, that would be similar, right? You’d look as to who you’re competing with for that talent. You’re not necessarily looking at whether you’re competing downstream.
Aurora Luoma (22:08):
I think that’s right. I think in Europe we expect the authorities to take a pretty traditional approach to the way they think about that and think about substitutability between employees and not necessarily competition in the downstream market.
Bill Batchelor (22:18):
I mean maybe one other technicality, just thinking through, so we’ve got one of these issues. We’ve done an internal review, we think that we could have concerns, how should I think about my exposure? Do I think about, “Well, is it my HR bill for these employees? Is it competition harmed in whatever the product markets are? Should I think about penalties potentially calculated off that base of commerce?” How has it been working out in the case law?
Aurora Luoma (22:47):
It’s a good question, and I think not entirely settled from what we’ve seen yet. And the answer could well depend on the nature of the misconduct, whether it’s a no-poach or whether it’s a wage-fixing case, for example. The one example we have recently from the CMA is the case I mentioned earlier around freelancers in the broadcasting space. And in that case, the CMA used as its starting point, all the expenditure that the company spent on hiring the relevant freelancers, which appeared to be broader than just the salaries, but nonetheless resulted in a relatively modest fine of around 4 million pounds and would be less one imagines than if you took the relevant revenues in the downstream market associated with those employees.
(23:26):
In the French case that Margot outlined, we see something broadly similar to this. The starting point again was more narrow than looking at revenues in the related downstream markets and seemed to relate to the staff expenses for the business managers in the upstream market that were relevant to the non-poach agreement, which related to the recruitment of business managers. So again, in terms of exposure, this appears to be a narrower approach than the regulators might take. We will have to wait to see how the Commission tackles this issue when the public infringement decision is released in relation to the food delivery sector. And many of the early cases didn’t impose fines, so we don’t get much guidance from those.
Bill Batchelor (24:07):
And just thinking how we’re talking to clients about their exposure, are there obvious starting points in the organization, bigger risk areas than others? So should I think about this being a problem for highly talented engineers? Is it a problem for perhaps blue collar workers, technicians? Is there anything to be learned from the decision or practice about where the authorities are focusing?
Jim Fredricks (24:31):
I think in the United States there’s this pattern in a lot of healthcare cases, not entirely, but there’s cases involving clinicians like nurses or administrators like business folks. But I think in many ways it’s sort of a happenstance that the healthcare seems to be prominent because there are other sectors. Specialized engineering, there’s a case involving that. There are pending investigations involving an array of things. So I think the government, the DOJ is going to be opportunistic and not sort of rule anything in or out. I think it’s kind of interesting is what the state attorneys general have done and private litigants in connection with the fast food chains.
(25:06):
Apparently many of their franchise agreements had sort of no-poach restraints as provisos, and they’ve been challenged pretty broadly and some large settlements have been reached. So even when we’re dealing with something that’s part of a collaboration or a broader enterprise, courts have been today somewhat skeptical, even dealing with relatively low skilled workers working in fast food places.
Bill Batchelor (25:29):
I think it’s safe to say, we’re not seeing any safe harvests in Europe, right? There’s broad range of service areas involved.
Margot Sève (25:34):
That’s right. I do think that we also see a range in Europe. So on the one hand, it’s true that there have been a number of cases in specialized sectors such as engineering, healthcare, sport, IT, and tech. So yes, having specialized staff is a risk factor, but in its recent decision, for example, the French agency called out the fact that HR is a key competitive parameter in the engineering technology consulting and IT services sectors because HR is strategically important and also experience high employee turnover.
But we also see on the other hand that some agencies have pursued conduct that affect blue collar staff such as delivery drivers in the EU, security firms in Belgium, private schools in Spain, telecoms in Turkey, and even pig breeding in China. So I agree with Jim, I agree with Bill. There’s no sector or employee that appears to be immune.
Bill Batchelor (26:37):
Completely agree there. Maybe then just to ask the obvious question, is anything safe? So in the M&A context, if we’re selling a business, part of ensuring that the buyer gets full value for what we’re selling them is to say, “Well, we promise not to solicit back those same employees that form part of the business we’ve just sold to you.” Really hard to see a buyer taking a risk on receiving a business without the talent needed to execute it. That’s still good law, right? We’re still, if within appropriate bounds, focused on the not undermining the value of the business transferred, then those kinds of non-compete non-solicits are still appropriate.
Jim Fredricks (27:20):
I think that’s correct, but there’s some nuance of where the boundaries lie. In the United States, we would approach it under the ancillary restraints’ doctrine, which basically provides that something that otherwise would be per se unlawful like a customer allocation. A no-poach is subject to the rule of reason and therefore a balancing test, whether it’s pro-competitive or not. If it’s reasonably related to some broader transaction, some broader collaboration that has some legitimate purpose and pro-competitive purpose. So the classic example is exactly what you’ve honed in on, Bill. It’s a transaction to take a hypothetical, put some flesh on it. If a law firm was selling itself, “I’m selling my law firm to another group and they’re going to integrate it.”
(28:05):
That other group is going to want some kind of assurance that I’m not going to put up a new shingle the next day and recruit all my associates back and recruit all my clients back. So that kind of transaction typically would have some sort of non-compete proviso so that you can’t go after your customers or you can’t go after your former employees. And in that way, it makes the transaction work. Now, if you have an agreement like that where this proviso lasts 30 years, people are going to wonder whether that’s reasonably necessary for the transaction to work. So a shorter time period might be reasonable, an extremely long one might not be. And so I think that’s where the challenge is. Where are those lines drawn?
(28:46):
When DOJ decided to start going after wage-fixing and no-poach criminally, it had its eyes open to the fact that these ancillary restraint type issues were going to arise more frequently. I mean, they had arisen in normal price fixing cases every once in a while and they would be assessed whether it’s a valid argument, whether this was legitimate or a smokescreen or a roost, but they predicted more of that and they were absolutely right. It’s come up in a lot more investigations of this kind of conduct because I think protecting employees in the course of transactions, both the classic sale of a division or of a business unit or what you alluded to earlier where there’s sort of a consulting type arrangement where people are deployed in another business and don’t want to put their best people there if they’re at risk of being poached.
(29:30):
So you reach some sort of a no-poach type or no solicitation type agreement. So I think the bottom line is yes, that stuff is okay, but there are boundaries that are not completely clear, and therefore caution should be exercised and those things should be reviewed.
Margot Sève (29:46):
I think, in the EU, it’s kind of the same. The Commission generally allows restricting the seller from hiring employees of a divested business for up to three years under certain conditions, and these are called ancillary restraints because they’re ancillary to the main agreement. So standard non-solicitation covenants could also be justified in a cooperation agreement such as a subcontracting or consortium agreement. Even if criteria are met, the conditions are very strict. So for example, a clause in question must be narrowly tailored in terms of personal covered, geography, and duration. That said, case law in different jurisdictions can be stricter or can vary, so non-solicitation clauses should be closely reviewed by companies from an antitrust perspective.
(30:39):
National agencies are also likely to expect companies to have explored those issues and considered whether they were potentially less restrictive alternatives before they resorted to no-poach clauses such as confidentiality agreements with employees or non-competes. And in the French case that I mentioned, in addition to looking at no-poach clauses, the French agency also looked at non-solicitation clauses that were written into partnership contracts. That was the first time that they had looked at that type of contracts, and the agency ultimately found that the clauses did not amount to an antitrust violation by object, and it also took the view that they did not have any anticompetitive effects.
(31:29):
That said, the agency did not consider whether the clauses could be treated as ancillary to the partnership agreements because it analyzed the partnership agreements separately, the non-solicitation clauses.
Bill Batchelor (31:42):
Got it. Right. A lot to think about. Let me try and capture what we’ve discussed in a couple of key takeaways. I think for me, the big lesson is labor law issues have to be part of our client’s compliance programs, right? It’s something that is a little bit off-topic in terms of our usual compliance. The messages around price fixing, market sharing, you’ve got to put it into a labor law context. You can’t agree wage-fixing, you can’t agree mutual non-solicits, not to poach staff from other companies. All of those will be treated almost as severely, if not just as severely as traditional cartel site conduct. Second up, we’ve got to bring the HR team into the compliance program. It’s not an obvious target for compliance when you’re talking about bid rigging cartels.
(32:35):
They don’t have a sales function as such, but you do need to say to them, “Hey, it really matters. What kinds of things are you attending with peer companies? Do you exchange best practices? Are there opportunities for side conversations? Could that be an area of antitrust risk for the company?” You need to know your do’s and don’ts when you might attend that HR circle or that conference on best practice. Beyond the straight out, no wage-fixing, no-poaches, I think from everything we’ve seen today, there will be some grey area issues where you need to have legal eyes on the minority investment that has ancillary provisions around non-solicits, the benchmarking survey that has to go through the legal team.
(33:21):
They need to make sure appropriate safeguards are in place. The consultancy agreement that has what you might’ve thought to completely standard non-solicit in it, make sure appropriate scope, appropriate duration, and perhaps just as crucially that the individuals involved know you can’t go further than what’s written there. There can’t be a broader gentleman’s agreement, a handshake about not poaching each other’s IT staff. With that, I think you’re all up to date on labor Law conduct and antitrust. Thank you once again to our fantastic presenters, Jim, Aurora, and Margot. I can’t think of a safer pair of hands to have your back if ever any one of these things breaks.
(34:06):
I hope that’s been another great edition of Fierce Competition for you all.
Speaker 1 (34:12):
Thank you for joining us for today’s episode of Fierce Competition. If you like what you’re hearing, be sure to subscribe in your favorite podcast app so you don’t miss any future conversations. Additional information about Skadden can be found at Skadden.com.
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