The Antitrust Division and FTC Issue Statement on COVID-19 and Labor Market Competition

The joint statement recognizes that while the COVID-19 pandemic offers businesses an opportunity for procompetitive collaboration and benefits, it also increases significant risk of anticompetitive conduct in the labor market. Here are some issues and factors that businesses should consider to mitigate antitrust risk as the Antitrust Division and Federal Trade Commission continue to consider enforcement actions for antitrust violations.

Since October 2016, the Antitrust Division of the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) have issued a series of joint and other statements concerning the enforcement of the antitrust laws on labor market issues.[1] The two federal agencies have focused in particular on enforcement actions involving no poach agreements, wage fixing, and the sharing of sensitive information with competitors.[2]

As part of their ongoing focus on labor market issues, the two agencies issued a Joint Antitrust Statement Regarding COVID-19 and Competition in Labor Markets on Monday. The statement recognizes that while there may be some procompetitive benefits from companies collaborating on coronavirus (COVID-19), such collaborative activity can give rise to a risk of anticompetitive conduct. In particular:

The Agencies are on alert for employers, staffing companies (including medical travel and locum agencies), and recruiters, among others, who engage in collusion or other anticompetitive conduct in labor markets, such as agreements to lower wages or to reduce salaries or hours worked. For 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. Moreover, the [Antitrust] Division may criminally prosecute companies and individuals who enter into naked wage-fixing and no-poach agreements. Even absent a collusive agreement, the Bureau [of Competition of the Federal Trade Commission] may pursue a civil enforcement action against companies and individuals that invite others to collude. The Agencies may also use their civil enforcement authority to challenge unilateral anticompetitive conduct by employers that harms competition in a labor market (monopsony power). Companies and individuals involved in the hiring, recruiting, retention, or placement of workers should be aware that anticompetitive conduct runs the risk of civil and/or criminal liability.

Although many individuals and businesses have demonstrated extraordinary compassion and flexibility in responding to COVID-19, and will continue to do so, others may use it as an opportunity to prey on American workers by subverting competition in labor markets. The Division and the Bureau will not hesitate to hold accountable those who do so.

In order to mitigate potential antitrust risk, companies should consider the following issues and implement appropriate safeguards:

• Broader Focus on Employers and Employees: The enforcers will focus not simply on horizontal competitors that compete in the same market but more broadly on employers who do not directly compete on products or services but do compete for common employees. Since the focus is on the labor market, for example, employers in different markets may still compete for common healthcare professionals or computer programmers among other employees.
• Identify Procompetitive Benefits: Information sharing on health and safety issues may result in procompetitive benefits but safeguards should be in place to avoid collusion. For example, best practices to promote safety and address health issues or specific steps to mitigate harm can result in significant procompetitive benefits. Consider the objectives of the information sharing and stay focused on avoiding antitrust risk. Conversely, counsel should consider whether competition is likely to be harmed by the communications.
• Avoid Compensation Issues: Competitors should check with counsel to avoid selected topics before any meetings such as discussions about wages, labor costs, terms and conditions of compensation, agreements not to poach or recruit employees, employee benefits, and related topics.
• Rule of Reason Analysis: As a general matter, information sharing among competitors is considered under a rule of reason analysis assessing “whether the relevant agreement likely harms competition by increasing the ability or incentive profitably to raise price above or reduce output, quality, service, or innovation below what likely would prevail in the absence of the relevant agreement.”[3]
• Per Se Unlawful Conduct: As the joint statement notes, some conduct, such as naked wage-fixing and no-poach agreements, is deemed to be per se unlawful. Any explanations concerning the conduct are disregarded and irrelevant. This conduct may also be subject to criminal prosecution by the Antitrust Division.
• Avoid Wandering: When employers and competitors engage in permissible information sharing on employment issues, there is always a risk that the discussion may wander to impermissible areas that violate the antitrust laws. Safeguards should be implemented to avoid spillover discussions that enhance antitrust risk.
• Expedited Guidance: In another joint statement on March 24, 2020, the two federal agencies provided guidance for an “expedited antitrust procedure and providing guidance for collaborations of businesses working to protect the health and safety of Americans during the COVID-19 pandemic.”[4]
• Fact-Specific Focus: On labor market issues, the facts matter. Experienced antitrust counsel should be consulted to provide guidance to mitigate antitrust risk based on the particular facts.

The latest joint statement by DOJ and the FTC serves as yet another warning that the antitrust enforcers continue to monitor the labor market for potential antitrust violations. In January, Assistant Attorney General Makin Delrahim stated that the Antitrust Division “separately expects to bring its first-ever criminal case accusing employers of colluding not to poach each other’s workers.”[5] Congress is also focused on the issue including recent hearings held last October.[6] We have been actively monitoring these developments in a series of LawFlashes and assisting clients on these antitrust issues,^[7] and will continue to provide updates based on further developments.

Coronavirus COVID-19 Task Force

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, DC
David R. Brenneman
J. Clayton Everett, Jr.
Ryan Kantor
Jon R. Roellke

Boston
Daniel S. Savrin

New York
Stacey Anne Mahoney
Harry T. Robins
Richard S. Taffet

Philadelphia
R. Brendan Fee
Steve A. Reed

San Francisco
Brian Rocca
Sujal J. Shah
Geoffrey T. Holtz