HR and CCOs Watch Out!! — The Antitrust Division Doubles Down on Labor Market Criminal Cartel Activity
The Justice Department’s Antitrust Division has targeted collusion in labor markets for criminal prosecution. This was not unexpected. Indeed, the Antitrust Division gave plenty of warning to companies that criminal prosecutions were on the horizon.
Over ten years ago, DOJ brought civil cases to stop illegal labor market collusion. Out of an abundance of caution, DOJ recognized that it wanted to provide “fair warning” of its intention. As a theoretical matter, DOJ quickly realized that cartel conduct in the labor markets was no different in competitive harm than illegal price-fixing and customer allocation agreements. DOJ has now pushed the position that collusion, wage-fixing, no-poach and other anti-competitive agreements were illegal. It is hard (if not impossible) to identify pro-competitive justifications for such blatant anti-competitive conduct.
In a recent speech, the Acting Assistant Attorney General for the Antitrust Division, Richard Powers, double-downed on the Antitrust Division’s position. The Antitrust Division’s position is an important warning shot and reminder to human resource professionals and chief compliance officers on the importance of antitrust compliance in hiring of executives and employees.
Antitrust enforcement does not have history in labor markets. DOJ viewed such enforcement as complicated by legal collective bargaining and labor union activity.
This has changed in recent years. The Antitrust Division has become concerned by business conduct, such as wage-fixing among competitors, in the labor market. As stated by AAG Powers, it is “essential” to protect competition for working people. Powers cited the importance of protecting competition for workers in the aftermath of the pandemic recession. As workers rebuild and recover, competitive labor markets are important to restoring financial security.
Looking back on the Antitrust Division’s history of enforcement, between 2010 to 2012, the Antitrust Division filed civil enforcement actions against Adobe, Apple, eBay, Google, Intuit, Lucasfilm and Pixar for entering into noncompete agreements for each other’s workers. These were important enforcement actions because they acknowledged that the companies did not sell products or services in the same markets but competed against each other in the labor markets. Thus, each company had an incentive to collude in labor markets. The Antitrust Division concluded that agreements to price-fix or allocate labor among competitors was no different than illegal agreements to allocate markets by territory and/or customers.
To reiterate its view of anti-competitive activities in the labor market, the Antitrust Division and the Federal Trade Commission issued the Antitrust Guidance for Human Resource Professionals that explained how the antitrust laws apply to hiring and compensation decisions. The Guidance underscored the importance of avoiding “no-poach” agreements, wage-fixing agreements, and information sharing.
In 2016, the Antitrust Division reiterated its position that, it plans to criminally prosecute “naked labor market allocation and wage-fixing agreements. To carry out this mission, the Antitrust Division has devoted resources and time to investigate and prosecute illegal collusion agreements in the labor market. Since the 2016 public relations campaign, the Antitrust Division has received numerous complaints alleging illegal labor market conspiracies.
The Antitrust Division has charged four criminal cases for collusion in labor markets.
In another case, the Antitrust Division entered into a deferred prosecution agreement (DPA) with the Florida Cancer Specialists for its participation in a long-running market allocation scheme for cancer treatment services. As part of its remediation requirements, the Antitrust Division prohibited FCS from enforcing its non-compete provisions among cancer physicians.
The Antitrust Division’s aggressive criminal enforcement program benefits all workers, especially women, racial and ethnic minorities and rural Americans. The Antitrust Division also intends to use its civil enforcement authority to challenge non-compete agreements, mergers that result in monopsony power in labor markets.
The Antitrust Division’s enforcement program has international dimensions – illegal conspiracies affecting U.S. workers sometimes are initiated outside the United States. In United States v. Knorr-Bremse et al., in 2018, the Antitrust Division entered into a consent decree with Knorr-Bremse and Westinghouse Air Brake, two of the world’s largest rail equipment suppliers, to resolve unlawful agreements not to compete for each other’s employees. As remote work arrangements increase, geographic boundaries on illegal labor agreements are likely to increase.