In 2021, the US Department of Justice Antitrust Division (“DOJ”) obtained an indictment charging six executives in the aerospace industry with conspiring to restrain trade and alleging that the defendants entered into a no-poach agreement with the purpose of allocating the labor market for engineers and specialized employees. The defendants filed a joint motion to dismiss the indictment, which the court denied. The case proceeded to trial in the US District Court for the District of Connecticut.
On 28 April 2023, after the DOJ rested its case-in-chief, the defendants filed a joint motion for a judgment of acquittal under Federal Rule of Criminal Procedure 29 (“Rule 29”). Under Rule 29, after the prosecution presents its evidence, a defendant may move for a judgment of acquittal if the prosecution’s evidence is insufficient to sustain a conviction. In assessing a defendant’s Rule 29 motion, the court must view the evidence presented at trial in the light most favorable to the prosecution to determine whether any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Motions for judgment of acquittal following a Rule 29 challenge are rarely granted given the high burden and deferential standard that defendants must overcome.
Nonetheless, in this case, the defendants argued successfully that DOJ failed to meet Rule 29’s burden. The defendants challenged the sufficiency of DOJ’s evidence by arguing that it had failed to prove a single, unified labor market allocation as alleged in the indictment. The defendants highlighted that they “had no ability to allocate the relevant market for aerospace engineering services”. If anything, the defendants argued, the evidence showed that there were “ever-shifting hiring restrictions between a customer and its suppliers, subject to myriad exceptions,” all of which was consistent with independent decision-making during the alleged conspiracy period.
The defendants further asserted in their Rule 29 motion that DOJ could not proceed under a per se theory of criminal liability because it had not proven that the alleged agreement was a naked and non-ancillary restraint. The court agreed.
Generally, courts review antitrust violations under either the “rule of reason” or “per se” framework. The rule of reason analysis takes into consideration the economic circumstances of the alleged restraints on trade (e.g., market power, intent, and anticompetitive effects). Agreements among competitors that restrain trade but are ancillary to legitimate business collaborations are analyzed under the rule of reason framework. The per se rule, however, recognizes that some restraints of trade—namely, price fixing, bid rigging, and market allocation—are categorically unlawful without regard to legitimate business justifications or economic effects because they almost always tend to restrict competition and decrease output. Notably, the per se rule is applied in criminal prosecutions and DOJ’s long-standing policy is to only prosecute per se restraints of trade criminally.
In granting the defendants’ Rule 29 motion in this case, the court emphasized that not all hiring restrictions or no-poach agreements constitute market allocation subject to the per se rule—a view it previously expressed in its order denying the defendants’ motion to dismiss. Instead, the court held that the per se rule does not apply unless the alleged agreement allocated the relevant labor market to a “meaningful extent,” which the court noted and defendants argued was a highly fact-specific inquiry.
The court then underscored the evidence that had come in at trial showing that the alleged agreement between the defendants did not meaningfully allocate the labor market for aerospace engineers and skilled employees. For example, during the alleged conspiracy, the evidence showed that (1) there were various exceptions to the hiring restrictions between the defendants; (2) constant changes to the restrictions sometimes allowed for broad-scale hiring; and (3) many engineers and skilled employees had been hired between and among employers.
Accordingly, the court held that “[a]s a matter of law, this case does not involve a market allocation under the per se rule”. The court granted the defendants’ joint Rule 29 motion and ordered that judgment of acquittal be entered for each defendant. The court’s ruling and the resulting acquittals cannot be appealed.
- In cases where DOJ alleges a novel theory of market allocation, defendants will likely continue to challenge the broad application of the per se rule. In response, courts may examine the specific facts admitted as evidence at trial to assess whether the alleged agreement resulted in market allocation to any “meaningful extent” before treating it as a per se violation. In this case, the well-developed factual record supported the court’s analysis on this issue. Therefore, a Rule 29 challenge can highlight evidence elicited during trial that undermines the efficacy or existence of the alleged anticompetitive agreement even when DOJ prevails over a defendant’s motion to dismiss.
- This acquittal marks the fourth consecutive loss at trial for DOJ in cases involving alleged labor market collusion. In three prior DOJ prosecutions alleging no-poach and wage-fixing agreements, juries in US district courts in Maine, Texas, and Colorado acquitted individual defendants facing antitrust charges.
- It remains unclear to what extent this holding will impede plaintiffs’ claims in private follow-on litigation in other no-poach or wage-fixing cases because the court’s analysis was fact-dependent.
- Organizations should ensure that their compliance programs address potential antitrust risk around any implicit or explicit restrictions on hiring practices, even if such restrictions come at the direction or request of key customers.
- We will closely monitor subsequent developments in DOJ’s criminal prosecutions involving the labor market for insight on how DOJ will respond and calibrate its enforcement strategy.