AAI Continues Push for Rigorous Scrutiny of Employee No-Poaching Agreements

The American Antitrust Institute (AAI) has submitted public comments to the Antitrust Division of the Department of Justice (DOJ) advocating for rigorous scrutiny of claimed justifications for employee no-poaching agreements.

On September 23, the DOJ hosted a public workshop on competition in labor markets that discussed labor-market harms in complex business settings involving collaborations among competitors, including franchise arrangements.  In the aftermath of a study identifying the pervasive use of no-poaching agreements in franchise contracts, the Attorney General of Washington and numerous private plaintiffs have challenged these agreements as violations of Section 1 of the Sherman Act.  Although the vast majority of franchises have voluntarily agreed to eliminate their no-poaching agreements, those that have litigated have often attempted to justify the agreements as “ancillary restraints” that promote the procompetitive goals of franchising.

AAI’s comments remind agencies and courts to navigate the analytical challenges posed by such agreements by adhering to several well-established principles:

  • First, the antitrust laws protect against upstream harm in input markets, including labor markets, without regard to competitive effects in downstream output markets.
  • Second, harm to competition in upstream input markets is punishable for its own sake, not because it necessarily translates to anticompetitive effects in output markets.
  • Third, courts are neither properly equipped nor properly tasked with determining whether suppressing competition in one market, including a labor market, is tolerable on grounds that it benefits competition a different market.
  • Fourth, the law does not allow two or more restraints to be assessed in tandem, rather than independently, unless their beneficial and harmful effects are so intertwined that neither restraint is capable of being meaningfully evaluated in isolation.
  • Fifth, even where a challenged restraint is sufficiently intertwined with a procompetitive integration and deemed “ancillary,” the rule against balancing effects in different markets continues to apply.

The comments summarize remarks presented by AAI’s Vice President of Legal of Advocacy, Randy Stutz, who was among the invited speakers at the DOJ workshop.  Stutz also has authored two leading papers, including a policy analysis and a legal analysis, on the application of antitrust law in labor markets.