Key takeaways

No poach and wage fixing agreements have been fertile ground for competition agencies in the US, who have expanded their labor guidance to scrutinize restrictive agreements between employers and employees (including non-disclosure agreements, non-compete agreements and exit fees). European regulators are now actively enforcing in this area too, at national EU Member State level as well as at EU level. This case highlights the increasing scrutiny on HR practices and the importance of compliance with antitrust regulations.

In more detail

The Commission issued its fine after conducting an extensive investigation, which was an own-initiative inquiry into possible collusion in the food delivery sector. The investigation - launched following a market monitoring exercise, which itself had been prompted by information received from a national competition authority and via the Commission's anonymous whistleblower tool - uncovered a no-poach agreement between the companies which was deemed to restrict competition in the labor market, as well as anti-competitive information exchange and illegal sharing of geographic markets.

Cartel facilitated by a minority shareholding in a competitor:

The companies involved were a minority shareholder and its (competing) investment business. Through this investment, there were structural links between the competitors at several levels which ultimately enabled anti-competitive interactions. It also allowed the companies to share commercially sensitive information and for the minority shareholder to influence decision-making processes in its competitor.

This is the first time that the Commission has sanctioned anti-competitive conduct between a minority shareholder and its competing investment business. The Commission notes in its press release that it is not illegal to own a stake in a competitor. However, in this case, the structural links between the companies allowed them to access each other's sensitive information and to ultimately align their commercial conduct, and so removing competition between them. The type of information shared between the companies, such as prices, costs, and commercial strategies, is clearly sensitive and goes beyond what a minority shareholder would usually expect to receive to protect its corporate investment.

Competing for talent

Employers are competitors for talent - enforcers have identified the labor market and employers as 'markets' and 'competitors' in which there needs to be healthy competition. In markets where there is fierce competition for talent, for example due to requirements for specialized skills, no-poach agreements and other anticompetitive HR practices can arise. No-poach agreements are one of five categories of employment-related conduct that attract antitrust scrutiny. The others include:

• Wage-fixing agreements
• Non-compete clauses
• Non-solicitation agreements
• Information exchange / benchmarking of employee pay and benefits

What should employers do?

• Identify HR antitrust risk

Employers need to be aware of the risk factors that give rise to no-poach agreements and be ready to manage risks effectively. Our checklist below provides a starting point:

For our full Risk Mitigation checklist, and to learn more about this growing trend, read our article International Onslaught Against HR Practices: Act Now to Stay Ahead of the Game

• Manage information flows

This case highlights that a non-controlling shareholder and its (rivalling) investment can be considered competitors and thus be subject to the full force of antitrust regulations, prompting the need to manage respective risks. Our antitrust experts can advise on appropriate measures to ensure that information flows are carefully controlled and to avoid anti-competitive collusion. Joint ventures and collaboration agreements with competitors (including minority shareholdings) should include strict safeguards to ring-fence commercially sensitive information. In an M&A context, if a company is considering acquiring a stake in a competitor, clean team arrangements and protocols governing access to sensitive information need to be rigorously employed. These steps are essential to ensure compliance during the stages of negotiating an investment and for the duration of holding a minority stake in a competitor.

• Be prepared for a dawn raid

Competition agencies are increasingly utilizing new tools to detect violations without relying on companies reporting antitrust behavior in exchange for immunity/leniency. Aside from encouraging whistleblowing activity, agencies have invested significant resources in developing digital tools to analyze large amounts of data that may provide evidence of anticompetitive behavior. Companies must be prepared to respond swiftly and effectively. Practical measures, such as maintaining clear compliance protocols, training staff on legal obligations, and ensuring rapid coordination with legal counsel, are essential to mitigate risks and ensure a robust response.

How we can help

Our global HR Antitrust Task Force combines our leading Antitrust & Competition expertise with our leading Employment & Compensation team to provide market leading support to companies facing antitrust investigations and enforcement. We provide immediate support during dawn raids, combining investigation expertise, legal guidance, and eDiscovery tools to help clients cooperate with authorities while safeguarding their rights and minimizing disruption. Our strategic approach ensures clients are well-positioned in multi-jurisdictional investigations.