Admittedly, we blogged about a similar topic only two weeks ago. And while we try not to repeat ourselves too often keep things varied here, two recent decisions – by the French regulator and the European Commission – relating to no-poach agreements are simply too important and far-reaching not to examine them more closely. This is in particular true as they might answer some pressing questions, though others arguably remain open.
Since at least mid-2021, regulators around the world have increasingly flagged labour markets, no-poach, and wage-fixing agreements as priorities in antitrust enforcement. A major case from the European Commission had been long anticipated – and has now arrived. Yet, this decision may have been even topped by a decision from another major European regulator: The French Competition Authority (FCA). Both cases centre on the illegality of no-poach agreements, though each has its own nuances and implications worth a closer look.
Fast food
Earlier this month, the Commission announced fines on Delivery Hero and Glovo for infringements dating from 2018 to 2022, totalling EUR 329 million.
According to the Commission’s press release, the conduct began in July 2018, when Delivery Hero acquired a 15% minority stake in Glovo. As part of this investment, the parties included a reciprocal no-hire clause in the shareholders’ agreement. But it did not stop there – the Commission found that this originally limited clause evolved into a broader agreement not to actively solicit each other’s employees.
This conduct was accompanied by two – more traditional – elements: Firstly, the parties exchanged competitively sensitive information on their current and future pricing, strategy plans and operational capabilities. Again the Commission found that the starting point for the exchange could have been some intersections in the board and other bodies of Glovo, but that the exchange went way beyond the business needs. Secondly, the parties allocated markets by avoiding entering into each other’s key markets.
While the no-poaching aspect was central in press coverage and official statements (including from Commission Vice-President Ribera), it remains uncertain whether the Commission would have imposed the same fines in the absence of these elements.
Key takeaways:
- Investments in competitors and being represented in their board is not per se illegal but carries significant risks. Those constellations should be closely accompanied and monitored.
- Antitrust rules in particular apply when invested with a non-controlling minority interest only.
- No-poaching agreements are taken seriously by the Commission but to what extent the regulator would have penalized the conduct without the well-known elements (information exchange, market allocation) remains somewhat unclear.
IT services – more important than ever
Even more recent is a case from France: This week, the FCA has fined two separate anticompetitive arrangements for introducing general no-poach agreements in the engineering, technology consulting and IT services sectors.
These arrangements amounted to informal understandings (“gentlemen’s agreement”) designed to prevent the companies involved from approaching or employing each other’s staff, which according to the FCA undermined a key dimension of competition in the labour markets where they operate. The agreements, which were not limited in duration, applied to all business managers. The decision explicitly mentions that this was done to avoid engaging in a hiring war.
Interestingly, the FCA dismissed part of the case involving non-solicitation clauses in partnership contracts. It concluded that these clauses could not be deemed anticompetitive “by object”, particularly given their limited temporal and material scope. However, the FCA warned that this finding was case-specific and did not mean that such clauses are always permissible.
The FCA imposed fines of nearly EUR 30 million and, in a creative twist, ordered the companies to publish a summary of the decision on LinkedIn.
Key takeaways:
- One company received full immunity from fines, confirming that leniency programmes apply to no-poach agreements in France.
- No-solicitation clauses in partnership agreements may be permissible, but require careful, case-by-case analysis.
- Unlike the Commission case, the FCA clearly demonstrated that no-poaching agreements alone (without additional cartel elements) can trigger enforcement and substantial fines.
Everything clear?
With these two landmark decisions, even the most sceptical observers should now understand that labour market agreements are being taken very seriously. But does this mean that the legal framework is now defined clearly? In my view, two major questions remain:
- Will the Commission pursue no-poach agreements even when the companies involved are not competitors on the product market, or will this be left to national regulators?
- How are fines being calculated? What is in the public domain does not provide clarity on this. In buyer cartels, the “affected turnover” often refers to purchasing costs. Will this logic apply here (meaning cost for employees), or will overall sales be used? Once they are published, the full decisions might shed light on this.
In the end, I fear this might mean we cannot promise not to blog about this topic in the near future again.
Antitrustpolitics.com 