It´s heating up: EC´s focus on labour markets

The fact that labour markets are currently in the focus of many antitrust regulators is a widespread secret in the antitrust community. Although the European Commission has not yet adopted a decision concerning self-standing labour market agreements, there are indications that the first decision is just around the corner. The latest indication: A Competition Policy Brief (Brief) published last week.

Every now and then, the European Commission publishes antitrust briefs about policy issues and key cases. The latest was published last week, is called “Antitrust in Labour Markets” and provides insight on how the Commission might handle future cases.

The hot topic “labour markets”

The Commission itself has not yet concluded a cartel investigation solely relating to labour markets. However it has recently conducted unannounced inspections on the matter in the sector of online ordering and delivery of food, grocery and other goods (about which we already blogged here). It is therefore not surprising that the Commission also gave the topic some thoughts behind the scenes.

The two main topics in the Commission’s focus are wage-fixing and no-poach agreements. A quick recap:

• Wage-fixing agreements can include agreements between different employers to control, maintain, fix or decrease wages or other benefits.
• No-poach agreements between employers can be horizontal, by agreeing to not (actively or passively) hire each other´s employees, or vertical, e.g. between staffing agencies and the companies they supply workers to.

The Policy Brief

According to the Brief, both wage-fixing and no-poach agreements generally qualify as anti-competitive restrictions by object. The agreements are seen to be comparable to buyer’s cartels, as wage-fixing would be a form of purchase price fixing and no-poach of supply-source sharing.

Furthermore, the Brief does not see legitimate objectives for these kinds of agreements. Potential objectives of wage fixing/no-poach agreements, like addressing investment hold-ups (spending money for training employees while being assured they won’t be hired by someone else) or the protection of companies’ non-patent IP rights as trade secrets, do not change the fact that such agreements are generally to be considered as antitrust infringements.

The Brief emphasizes that “labour is a fundamental factor of production and the ability to attract talent is a key comparative parameter”. While the Brief discusses possible pro-competitive effects as well, there seem to be none for wage-fixing. Regarding no-poach agreements, the Brief claims that net efficiencies “are at best uncertain” and that the alleged efficiencies can often also be achieved through less restrictive measures.

Any ancillary restraints or exemptions possible?

Wage-fixing/no-poach agreements also cannot qualify easily as so-called ancillary restraints, because they often do not meet the very strictly interpreted conditions set by courts. Possible scenarios where ancillary restraints could be discussed are research joint ventures or supply relationships (and there are of course the typical M&A scenarios where no-poach agreements might be necessary). However, the Brief finds that it seems unlikely that companies would be able to demonstrate that no less restrictive measures are possible and that the scope of the agreement is limited to what is strictly necessary. Either way, the willingness to keep salaries low would not be seen as an acceptable justification.

An exemption from the cartel prohibition under so-called Article 101 (3) TFEU seems to be unlikely as well. The main reasons are again the missing pro-competitive effects, which could not be achieved through less restrictive means.

The US as a role model?

For those who keep an eye on Olivier Guersent, the Director-General of the Commission’s antitrust division, the very strict approach outlined in the Brief might not be entirely unexpected. Guersent said roughly two years ago that his agency could learn from the experience of the US antitrust enforcers in using competition policy to tackle no-poach agreements in labour markets.

In the US, in particular the Department of Justice (DOJ) is taking the matter very seriously and already brought cases regarding no-poach and wage-fixing to trial. Although the DOJ has recently been struggling to convince juries to find the defendants guilty (under criminal cases), it did succeed in continuing cases under the theory that no-poach agreements and wage-fixing may be “per se” illegal. Per se illegal means that the conduct itself is so harmful that it is per se illegal and no proposed justification for the agreement will be considered.

At least from the outside, it looks as if the Commission has orientated itself on this approach and it is fair to state that authorities mean business when it comes to antitrust in labour markets.

Outlook

It needs to be recognised (and the Brief does so as well) that due to the geographic scope of labour markets, most cases will likely be brought by national regulators instead of the Commission (which has already happened, see here). As the Brief is not an official guideline by the Commission, it remains to be seen whether the Commission will deviate from it in practice. Nevertheless, as the above hints: The Commission seems to be keen on tackling anti-competitive agreements in labour markets both itself and to send a clear signal to national regulators that they should also tackle these. The antitrust community stands ready to hotly discuss any possible outcome.

Photo by Alexey Demidov on Unsplash