10 key themes
Antitrust in labor markets — key compliance issues for employers, employees and the self-employed
An emerging area of antitrust enforcement
The focus of antitrust enforcement has traditionally been on price-fixing and other anticompetitive conduct in sales markets, with labor markets relatively untouched by antitrust enforcers globally. However, growing recognition that antitrust has a role to play in labor markets has led antitrust authorities around the world to enhance their scrutiny of labor markets.
Individual accountability, particularly in the post-pandemic world of hybrid working, continues to be relied upon as an important instrument in the authorities’ enforcement toolbox. Respectively, reliance on individual compliance and self-reporting of potentially anticompetitive conduct remains crucial for businesses. This expansion of antitrust into previously “overlooked” areas brings with it increased antitrust exposure for companies, highlighting the need for new and specialized compliance measures.
When competition is lacking in labor markets, employer market power robs workers of the benefits of their time and energy. That’s what makes promoting competition here so fundamental.
Jonathan Kanter, Assistant Attorney General
US Department of Justice Antitrust Division, December 6, 2021
The US DOJ has expressed its commitment to enforcing antitrust laws against employers engaging in anticompetitive conduct in US labor markets, culminating most recently in a series of criminal wage-fixing and no-poach cases. Labor markets are a clear focus of the current administration: President Biden recently tweeted, “... companies should have to compete for workers just like they compete for customers. We should get rid of non-compete clauses and no-poaching agreements that do nothing but suppress wages,” a theme reflected in the Executive Order on Promoting Competition in the American Economy of July 2021.
Accordingly, both the US DOJ and FTC have made labor-related issues a priority: “Put simply, employees, like consumers, are entitled to the benefits of competition that the Sherman Act afford and protects” (Jonathan Kanter, Assistant Attorney General, US DOJ Antitrust Division, combined DOJ and FTC workshop on promoting competition in labor markets).
Under pressure from both the Trump and Biden Administrations and Congress, the DOJ has actively been looking for these cases and is now bringing them. Companies are now facing more scrutiny than in the past.
While the EC has not yet pursued or prohibited wage-fixing or no-poach agreements as standalone violations of competition law, there are clear indications of its intention to do so: “… some buyer cartels do have a very direct effect on individuals, as well as on competition, when companies collude to fix the wages they pay; or when they use so-called ‘no-poach agreements’ as an indirect way to keep wages down, restricting talent from moving where it serves the economy best” (Executive Vice-President Margrethe Vestager, speaking at the Italian Antitrust Association Annual Conference).
National competition authorities have also shown a willingness to flex their enforcement muscle in this context. In her farewell speech, the President of the French Competition Authority, Isabelle de Silva, said that the French authority must continue to focus on competitive harm in labor markets. Independent antitrust proceedings have been initiated and fines imposed in respect of mutual no-poach agreements and wage-fixing arrangements in Lithuania, Hungary, Poland and Portugal. Similar initiatives have been adopted in Brazil, Mexico, and Turkey.
It is almost certain that antitrust authorities outside the United States will follow the DOJ’s lead. Companies should be prepared for ‘copycat enforcement’ and follow-on litigation around the world.
Antitrust and HR compliance
Businesses cannot afford to wait and see how this new wave of antitrust enforcement plays out; they should be proactively looking to audit their HR practices now. Significantly, in the labor context, “competitor” includes any business that competes to hire the same employees, irrespective of whether that business makes similar products or provides similar services. This contrasts with the competitive analysis in other antitrust contexts, which focuses on current, future or potential competition for goods sold and services offered.
This differentiating feature on the “buy-side” of competition for employees presents risks to businesses across industries, all of whom compete for the same type of employees (e.g., engineers, accountants), even though the employers for whom they work may not outwardly appear to be competitors in the common use of the word. This is an important distinction for businesses.
In the wake of this renewed interest in labor markets, companies should assess whether their HR practices are antitrust compliant to ensure they are not exposing themselves to possible claims. If potentially anticompetitive arrangements are identified, not only should they be terminated immediately, but companies must also consult with legal counsel quickly to consider whether they should seek leniency to avoid prosecution.
Impact on labor markets as a new theory of harm?
Enforcers are increasingly aware of merger transactions leading to increased monopsony power (i.e., where a market has few buyers and many sellers), particularly in heavily concentrated labor markets, and we are starting to see labor market-related questions from regulators during their merger reviews. In the US, the FTC and DOJ are reviewing their merger guidelines as a result of President Biden's Executive Order, for example, noting that the update will provide “an opportunity to directly analyze mergers affecting critical areas of our modern economy, such as … labor markets” (Lina Khan, Chair US FTC).
Updating antitrust law
In many antitrust systems, self-employed contractors are considered economic entities in and of themselves, meaning any form of collective bargaining by the self-employed (especially in relation to compensation arrangements) is considered to be a wage/price-fixing cartel and is therefore illegal. This has led many, including antitrust enforcers, to conclude that antitrust law needs updating to take account of new and developing working practices.
In September 2021, the Chair of the US FTC, Lina Khan, released a memo in which she urged Congress to consider passing legislation to protect gig workers who organize. The EU has already taken some measures toward the same end, culminating in the EC’s platform workers protection package published in December 2021, which proposes a rebuttable presumption of employee status; a softer way of improving the rights of platform workers. As a framework directive proposal, it would be up to Member States to establish the presumption in accordance with their national legal and judicial systems. Companies engaging self-employed workers need to remain cognizant of these changing dynamics.
Continued emphasis on individual accountability and whistleblowing
The trend for individual accountability as a tool to support antitrust compliance remains. The UK government, for example, has proposed extending director liability through the imposition of civil penalties for the provision of false declarations.
Whistleblowing continues to be a cornerstone of antitrust compliance. In the US, the Criminal Antitrust Anti-Retaliation Act (CAARA) affords protection from retaliation for antitrust whistleblowers who report possible criminal violations. Employers should review those internal reporting mechanisms to ensure reports do not result in retaliatory measures that could trigger a CAARA complaint. The UK government is proposing to make improvements to the current legal framework and give greater certainty over the handling of a whistleblower’s identity across the enforcement process in order to bolster use of this tool. This follows publication of whistleblowing guidance by the CMA in July 2021. More broadly, following implementation of the 2019 EU Whistleblower Protection Directive, which protects reporting persons who acquired information on breaches in a work-related context, EU employers will need to keep in mind the requirement for confidentiality and compulsory feedback to whistleblowers following a report.
New challenges in the hybrid workplace
The pandemic has had a revolutionary effect on working practices such that the hybrid workplace seems here to stay. Businesses need to remain alive to the increased risks posed by remote and hybrid working, including inadvertent disclosure of confidential and/or privileged information and careless document creation/retention, as well as the enhanced risk of anticompetitive conversations due to less formal “office supervision.” Businesses should be revisiting their compliance policies and practices to determine whether they are actually fit for purpose in the longer term if hybrid working is here to stay.
Antitrust enforcers are also aware of the changes brought about by increased home working; the UK government has put forward proposals to extend the CMA’s seize and sift power under warrant to domestic premises, presumably with a view to being able to retrieve evidence from the “home office.”
Most global employers have moved beyond the idea that remote or hybrid working is a temporary state. If the move to hybrid is permanent (or at least long term), it’s important to step back and consider whether long-standing policies and procedures remain fit for purpose, whether training needs to be revisited, and whether the oversight arrangements that have operated successfully in an entirely office-based environment translate effectively to a hybrid model.
With thanks to Meredith Mommers, Amy Rentell and Karen Slaney for their contributions to this theme.
Looking ahead in 2022:
- Companies need to be alert to the increased scrutiny of compensation and hiring practices and proactively prepare for further restrictions in light of the anticipated growth of antitrust enforcement in this area. HR professionals, particularly those responsible for recruitment, should be included in antitrust compliance programs, which themselves should address specific HR and hiring practices so that these individuals understand the limits for communicating with competitors.
- Merging parties can expect to see augmented consideration of the impact of horizontal mergers on labor markets and will need to be prepared to address any such perceived concerns in the same way as they do currently for traditional anticompetitive theories of harm.
- Businesses should continue to carry out risk assessments regularly to ensure they have proper and effective oversight over their employees as hybrid and remote working becomes more established. And they should also ensure that their whistleblowing and compliance procedures are sufficiently agile to adapt to regulatory and workplace evolutions to remain antitrust compliant.