[co-author: James Lamberth]*

On April 13, the Federal Trade Commission’s Bureau of Competition and the Department of Justice’s Antitrust Division (the Agencies) issued a joint statement reiterating that antitrust laws protect U.S. labor markets even during a pandemic like COVID-19. The statement is focused on the potential for collusion by employers and seeks to make abundantly clear that the Agencies will enforce the antitrust laws to protect employees. The statement follows the Agencies’ March 24 guidance that they would enact expedited antitrust review procedures and provide guidance for legitimate business collaborations to protect the health and safety of American workers. Notably, the Agencies’ joint statement cites to their years of work challenging what they believe are unlawful agreements, including wage-fixing and no-poach agreements (information on legal challenges to no-poach and wage-fixing provisions by these Agencies and private plaintiffs can be found in our prior articles of April 4, 2018, January 8, 2019 and January 25, 2019).

The joint statement serves as a strong reminder that, even though COVID-19 may be calling for unprecedented business collaboration, antitrust laws have not been suspended and the Agencies have not abandoned their enforcement missions to root out anticompetitive conduct in the labor markets.

FTC/DOJ Joint Statement

The joint statement is titled “Joint Antitrust Statement Regarding COVID-19 and Competition in Labor Markets: Antitrust Enforcers Closely Monitoring Employer Coordination to Disadvantage Workers.” This title and the tone of the statement indicate that the two government antitrust enforcement agencies are providing employers with a warning — anticompetitive practices impacting U.S. labor markets will not be tolerated.

The Agencies state that they “wish to make clear to the public that although there are many permissible ways that firms can engage in collaboration, COVID-19 does not provide a reason to tolerate anticompetitive conduct that harms workers.” The Agencies further inform the public that they are on “alert” for employers that engage in collusion to lower wages or reduce salaries.

In the joint statement, the agencies also remind the public of their authority to enforce the antitrust laws to protect U.S. labor markets and employees. The statement notes that, “[f]or years, the Agencies have challenged unlawful wage-fixing and no-poach agreements, anticompetitive non-compete agreements, and the unlawful exchange of competitively sensitive employee information, including salary, wages, benefits, and compensation data.”

Further, even without an agreement to collude, the Agencies can take action if companies invite others to collude. The Agencies can also bring civil actions against companies that engage in unilateral anticompetitive practices that harm competition in labor markets, known as monopsony power. The joint statement warns companies that “individuals involved in the hiring, recruitment, retention, or placement of workers” should be aware of the civil and criminal liability that exists for failure to follow the antitrust laws. In terms of criminal action, the Agencies pointed out that companies that engage in “naked wage-fixing and no-poach agreements” may be subject to criminal prosecution.

The Agencies closed out the joint statement by expressing concern that businesses might leverage COVID-19 “as an opportunity to prey on American workers by subverting competition in labor markets” and called on the public to report information about anticompetitive harm in the labor markets to the Agencies. The Agencies are particularly concerned about workers and their wages. Regarding the joint statement, FTC Chairman Joe Simons said, “[m]any American workers are under a tremendous amount of stress because of COVID-19, and that includes essential workers and first responders” and “[w]e will not stand for any collusion among employers that would deprive workers of competitive compensation for their work.” The DOJ had similar remarks, with the Assistant Attorney General Makan Delrahim stating, “[t]he Antitrust Division will not tolerate companies and individuals who use COVID-19 to harm competition that cheats payroll and non-payroll workers.”

Takeaways

The joint statement does not create new law, but it does strongly warn companies about the antitrust laws that exist and the Agencies’ enforcement powers. These powers have not diminished in the wake of COVID-19. Rather, the Agencies appear laser-focused on enforcement efforts that may help employees. The Agencies also suggest that COVID-19 has created an environment ripe for potential collusion that could harm U.S. labor markets if left unchecked.

At the same time, nothing in the joint statement contradicts or adds to the 2016 HR Guidance or Statement of Interests by the DOJ concerning no-poach and wage-fixing agreements. The FTC and the DOJ initially responded to no-poach agreements by issuing the October 20, 2016 Antitrust Guidance for Human Resource Professionals. This guidance explained that “naked” no-poach or wage-fixing agreements were per se unlawful violations of Section 1 of the Sherman Antitrust Act and that “the DOJ intends to proceed criminally against” such agreements. The joint statement reiterates this by stating that naked no-poach and wage-fixing agreements may face criminal prosecution. “Naked” agreements are those that are “separate from or not reasonably necessary to a larger legitimate collaboration between the employers.”

The guidance also indicated that no-poach agreements entered into as part of a legitimate joint venture or otherwise ancillary to a larger legitimate collaboration would not be subject to the per se rule. The DOJ has since filed Statements of Interest in various no-poach litigations that helps to clarify the 2016 HR Guidance. For example, the DOJ took the position that no-hire provisions in franchise agreements are vertical restraints not subject to the per se rule (e.g., the Arby’s, Auntie Annie’s and Carl Jr. cases). By contrast, the DOJ argued that hiring restraints between certain university entities were per se unlawful unless the defendants could prove that the restraint was ancillary to a legitimate collaboration (the Seaman v. Duke University case).

While the joint statement does not present new law, it provides a lens into the Agencies’ current thought process. The Agencies are concerned that employers may take advantage of the COVID-19 environment and cause anticompetitive harm to the U.S. labor markets and/or that employers may have misunderstood the Agencies’ earlier guidance on business collaboration as meaning they would stay their enforcement missions during the COVID-19 pandemic. Companies would be wise to heed the warning provided and proceed cautiously, with an eye toward the antitrust laws when collaborating with others or considering changes to their employee policies.

The antitrust lawyers of Pepper Hamilton and Troutman Sanders regularly advise clients on potential no-poach and wage-fixing issues as well as litigation and enforcement actions related to alleged anticompetitive activity affecting labor markets. If you have any questions regarding these issues or the FTC/DOJ joint statement, please reach out to the authors or any member of the Pepper Hamilton or Troutman Sanders teams.

** Troutman Sanders