No poach agreements: It’s getting expensive

Every now and then, one gets the impression that certain topics are identified as an enforcement trend early on, but in practice fail to meet “expectations”. Antitrust issues in labour markets garnered attention for a while as an increasing number of investigations have gradually come to light. Last week, the Turkish regulator ended a major cross-sector case with fines on various companies. Can more of that be expected in the future?

Almost two years ago, shortly after we flagged this upcoming trend, Margrethe Vestager announced in a speech that the European Commission had a particular interest in anti-competitive conduct relating to HR, highlighting that “there are [markets] where the key to success is finding staff who have the right skills.” She said that in these cases, “a promise not to hire certain people can effectively be a promise not to innovate, or to enter a new market”.

Since then, we blogged about no-poaching and wage-fixing agreements mainly in the context of sports (see here and here). Whilst the Commission has not announced a major case in this area, the Turkish regulator just ended an extensive investigation. Enough to give an overview of recent developments, lessons learnt thus far and expectations for the future:

Competitors are everywhere

The Turkish Competition Authority’s investigation into no-poach agreements ended with fines totalling over EUR 5 million on 16 companies. The regulator found that these companies entered into various bilateral agreements with the promise not to hire each other’s employees. The durations of these agreements varied from less than one to more than five years.

Three aspects stand out:

One, the initial investigation encompassed 48 companies, yet a significant portion avoided fines due to insufficient evidence or through settlements with the regulator.

Two, the decision was limited to no-poach agreements and did not include wage-fixing elements.

And three, the companies ultimately fined include well-known names active in various industries such as ready-to-wear fashion, telecommunication, footwear, restaurant operators and many more. So, the Turkish case illustrates that regulators are willing to put effort into cases where companies are not competitors in the traditional sense but still compete for personnel.

A truly global trend

The Turkish case was not the only case which made it to the public recently. On the contrary, similar agreements seem to keep regulators around the globe busy these days. Some examples:

In China, the regulator met with four pig breeder companies after it became aware that these companies agreed not poach each other’s employees. After the meeting, the companies announced that they would cancel their agreement whereas the regulator took the chance to emphasize that it would continue to closely scrutinize competition in labour markets. The overall expectation seems to be that the regulator will not impose fines for similar conduct in the near future for political and economic reasons, but the case might indicate that the regulator has put the topic higher on its agenda.

Peru’s regulator recently fined six construction companies for entering into a no-poach agreement regarding construction and administrative workers. It is worth highlighting that the conduct was implemented by the companies HR staff and that some of the HR managers were also fined individually.

At the end of last year, the Swiss regulator confirmed its investigation into regular exchanges of information about salaries of certain categories of employees in the banking sector. Overall, the regulator is investigating 34 banks in the German-speaking part of Switzerland.

More in the pipeline?!

Going through official statements by antitrust regulators, it should be clear that more cases are in the pipeline. The British regulator published official guidance for employers on “how to avoid anti-competitive behaviour” shortly before declaring its intention to prioritize addressing unlawful agreements in labour markets over the next year. Likewise, the Czech authority released information regarding anticompetitive agreements within labour markets, clarifying that parties may gain advantages through the leniency program and receive immunity from fines upon approaching the authority. Finally, the French regulator affirmed its ongoing investigation and its stance on treating labour markets as a high-priority area for enforcement.

And the Commission? Based on recent reporting, the Commission also seems to be targeting labour market issues at least in one ongoing case, but has not confirmed anything yet.

Photo by Saad Salim on Unsplash