In April 2020, as the world retreated behind webcams, Portuguese football club presidents hopped on a series of video calls. Their goal? Stability. Their method? A collective agreement to freeze the labour market. The result: A hefty fine from the local antitrust regulator and a legal odyssey. The European Court of Justice now handed down a landmark ruling that has implications for antitrust in the HR space far beyond the pitch.
Our regular readers know that we keep a particular eye on developments in “HR antitrust” (e.g., here, here and here). It is a fitting world for this blog, as labour market issues are inherently political, and when sports come into play, you have the perfect mix of Antitrustpolitics.
The facts: A pandemic “Gentleman’s Agreement”
During the 2019/2020 season, COVID forced the indefinite suspension of Portuguese professional football. In response, the football league and its clubs reached a consensus: No club would hire a player who unilaterally terminated their contract by citing difficulties caused by the pandemic or the extension of the sporting season.
The Portuguese antitrust regulator was unimpressed by this defensive wall, finding that the no-poach pact constituted a restriction of competition by object and imposing fines totalling approx. EUR 11.3 million. The clubs appealed, arguing their agreement was necessary to preserve the integrity of the league during a global crisis.
The key legal questions
The local court then referred the case to the European Court of Justice (CJEU), in essence asking whether a no-poach agreement qualifies as a “by object” infringement of the EU’s cartel prohibition (Art. 101 TFEU) and whether the particularities of the sporting context could justify such an agreement.
The CJEU delivered a remarkable play and laid out a roadmap for how regulators should consider no-poach agreements:
- Sport is business: The CJEU reaffirmed that sports constitute an economic activity that fall in scope of the cartel prohibition. Agreements related to hiring players relate to activities on a market and are not exempted from antitrust just because of the particularities of sports.
- No-Poach equals market-sharing: The court held that an agreement not to recruit players is equivalent to a horizontal agreement for the sharing of “sources of supply”. Such agreements are typically harmful because they lead to an artificial partitioning of resources.
- Context to “by object”: According to the court, no-poach agreements are generally “by object” antitrust infringements. However, context matters: If a specific examination of the agreement’s content, its objective aims, and the unique economic and legal context provides specific reasons why the agreement is not sufficiently harmful to competition, it is also not a “by object”-infringement.
The latter will ultimately be for the Portugues court(s) to determine, but the CJEU notes the particular context of the COVID pandemic and the potentially pro-competitive goal of having stable team structures once games are resumed as potential reasons.
When does context matter?
One might think that where an infringement qualifies as “by object”, context is irrelevant. This would basically mean that we would have a list of conduct that constitutes “by object” infringements, and a list of conduct that can only infringe the EU’s antitrust rules “by effect”.
While it often feels that way in practice, such a black and white approach would be a misunderstanding and not in line with legal principles. Jurisprudence has shown time and again that the legal and economic context has to be taken into account as an initial filter before putting conduct in the “by object”-box. Funnily enough, two more recent examples also stemmed from Portuguese cases decided on by the CJEU – Banco BPN and Super Bock. It is noteworthy how many recent prominent rulings by EU courts have ties to Portugal.
Key Implications: No-poach = no problem?
When the Super Bock ruling was handed down in 2023, some got their hopes up that resale price maintenance was going to be permissible going forward. Those hopes were misled. The same will probably apply to hopes that no-poach agreements will no longer be an issue for antitrust compliance:
- The new CJEU judgement actually confirms that no-poach agreements are basically no different from other forms of cartels between competitors.
- While the judgement indicates that particular circumstances might justify not qualifying a no-poach agreement as an infringement, circumstances like a pandemic bringing an entire industry – in this case football – to a halt are (hopefully) very rare.
- This also means that normal employee fluctuations or the “war for talent” is unlikely to qualify as context that would be sufficient to escape a “by object” categorisation of a no-poach agreement.
The bottom line:
- If you engage in conduct that would generally qualify as an antitrust infringement under EU law, but the circumstances are unique and the key objective of the conduct is not a restriction of competition, there is room to take the context and ultimately the effects of the conduct into account.
- Unless you operate under such circumstances, be very cautious with no-poach agreements and keep HR antitrust on your radar!
Picture by Roger Starnes Sr on Unsplash
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