Competition in labour markets

OpenAI’s (former) CEO Sam Altman’s leaving and re-joining the company within just a few days has demonstrated that (at least most) companies stand and fall with the people working for them. The importance of human resources is not only expressed in such prominent personnel drama but also reflected in a type of behaviour that has increasingly come to the attention of competition authorities in recent years – so-called “no-poach agreements”.

Last week has brought to light two investigations concerning such conduct, one in France and one by the European Commission. So, here is a refresher on the topic (see our previous blog post here) and new lessons learnt for daily practice.

Anticompetitive conduct in labour markets comes in many different varieties

Anticompetitive conduct in labour markets “traditionally” – as far as this can already be said – seems to occur in markets with staff shortages or among companies with particularly labor-intensive business models. Such conduct mostly appears in the form of agreements to either not solicit and hire each other’s employees or to fix wages.

However, with ongoing changes in working environments and other trends and debates in labour markets, there are basically no limits when it comes to the content of HR-related anticompetitive conduct between companies. In principle, anticompetitive conduct may cover any aspects that have the purpose and effect of reducing competition in labour markets. Besides the rather obvious matters (e.g. non-solicitation and wages), such conduct can also encompass a variety of other topics (obviously depending also on the sector they are set up in).

E.g., it is generally also anticompetitive to exchange HR-related competitively sensitive information. Examples of such information and questions include:

• Does your company, besides the monthly salary, provide for any additional benefits (e.g. (Christmas) bonus, company car, food stamps)?
• Do your employment contracts foresee brake-up fees?
• Is IT-equipment for remote working paid for?
• What are the financial benefits for employees which work abroad?
• Is there (financial) support in terms of day care for children?
• How are parental leaves treated (and financially supported) by the company?

For companies, it is important to bear in mind that exchanges with other companies about what at first glance appear to be merely internal company matters can be regarded as anticompetitive. In this context, it should be noted that, as with any other sensitive information, also the unilateral disclosure and communication of a company’s position on sensitive topics may be considered anticompetitive behavior.

No-poach agreements can be “reason enough”

For a long time, anticompetitive conduct in labour markets was mostly investigated by regulators alongside other anticompetitive conduct – e.g., investigations regarding an information exchange on costs or products would also extend to information exchange on HR-related matters.

Last week’s investigation by the French regulator proves as one of the – so far – rather rare examples of competition authorities going “just” after alleged no-poach agreements. The French competition authority’s investigation was – as far as can be taken from its press release – solely based on the suspicion of no-poach agreements between companies from the engineering, technology consulting and IT services sector aiming at banning each other from solicitating and hiring their respective staff.

“Partners” for no-poach agreements can be found almost everywhere

The French authority’s investigation, however, not only demonstrates that no-poach agreements are of sufficient interest to trigger an inspection. It also proves that no-poach agreements can occur not only between companies competing regarding their products/services, but also between companies that compete only for certain workforce.

The investigation was directed at companies from completely different industries, namely the engineering, technology consulting and IT services sectors. Although the authority’s press release does not provide more insight on the exact content of the alleged no-poach agreements, the fact that companies from different sectors are under investigation indicates that the alleged information exchange and no-poach agreements could possibly be tailored towards workforce which can be employed across sectors (e.g. IT-, HR-, or Accounting-personnel).

It is always better to be first than second

The other inspection of last week was carried out by the Commission and concerned companies, active in the online ordering and delivery of food, groceries and other consumer goods. It followed an inspection of the Commission from last year, which was tailored towards alleged anticompetitive conduct concerning market allocations. Now, last week’s investigation focused on alleged no-poach agreements and the exchange of other sensitive information among the companies. Both inspections were – then and now – directed against German-based Delivery Hero and it’s in July 2022 acquired Spanish subsidiary Glovo.

The case not only demonstrates that HR-related anticompetitive no-poach agreements are on the authorities’ radars more than ever. It also – and completely isolated from the concrete content of the Commission’s inspection at hand – proves that it is also important to analyze “surrounding” areas and related conduct when dealing with alleged anticompetitive behavior concerning a given topic. This could put oneself in the position to apply for leniency and escape a fine for this conduct before a regulator itself might come across evidence while analyzing the initial allegations.

Lessons learned

There a three lesson that deserve particular emphasis:

• HR-related conduct stays fully on the radar of antitrust authorities and more cases are already in the pipeline.
• Companies that have not already done so should train their staff, update their compliance policies and, where advisable, conduct an internal audit.
• When an authority starts an investigation, it is often worthwhile to conduct an even broader investigation internally.

Photo by Timon Studler on Unsplash