JONES DAY TALKS® - Charting the Course: Antitrust's Past, Present, and Future in Labor Markets
Antitrust enforcement in labor markets continues to escalate worldwide. Jones Day partners Kevin Hart and Philipp Werner talk about the continuing crackdown on anticompetitive labor practices in the U.S. and across the EU, review recent developments in case law, and explain what employers need to know.
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Dave Dalton:
Antitrust enforcement in labor markets is ramping up in jurisdictions around the world, and the trend shows no signs of slowing or reversing. We have two Jones Day partners here to talk about recent developments in enforcement and what employers need to know. I'm Dave Dalton, you're listening to JONES DAY TALKS®. A former senior official at the Antitrust Division of the US Department of Justice, Jones Day partner, Kevin Hart, has more than 20 years of government experience involving all facets of criminal antitrust, cartel investigations, prosecutions, and litigations. He's a frequent speaker on criminal antitrust and litigation issues and currently serves as chairman of the Criminal Antitrust Subcommittee for the ABA's litigation section. Kevin is based in the firm's Washington office. And Brussels based partner, Philipp Werner, focuses on German and EU competition and state aid law. He has extensive experience advising clients in EU, German, and multi-jurisdictional merger control matters. He also advises on international compliance and investigation matters, as well as on EU and German cartel and abusive dominance investigation. Philip has been recognized by Who's Who Legal as a global elite thought leader in competition law. Kevin, Philipp, thanks for being here today.
Kevin Hart:
Thanks David. It's my pleasure to be with you.
Dave Dalton:
Yeah, I think this is going to be a great conversation. Let's go to Kevin first. Kevin, before we jump into the subject matter. Talk a little bit about your background. You came to Jones Day earlier this year, because I remember we talked back early summer, I think, correct?
Kevin Hart:
That's right, Dave. Up until a few months ago, I spent nearly 25 years at the Department of Justice, mostly with the antitrust division where I served in many capacities. Most recently as the acting co-director of litigation and during my tenure at DOJ, I managed, supervised or led hundreds of government investigations, many of which were across border and first chaired supervisor led dozens of federal jury trials.
Dave Dalton:
Sure. Sounds complicated and it sounds exhausting, but we're glad you're here at Jones Day. What kind of client work are you anticipating becoming engaged in or what sorts of things are you working on now?
Kevin Hart:
Sure. My practice here at Jones Day is with the antitrust and competition law and the investigations in white collar defense groups. My primary focus is to further build out the firm's criminal antitrust practice and to supplement the criminal litigation capabilities. I counsel clients on potential antitrust risk, I conduct internal antitrust investigations and respond to government investigations, and I litigate matters.
Dave Dalton:
Okay. Okay, real good. Well, welcome to the firm and obviously we're all really, really happy you're here. So let's jump into today's topic. When you think about labor markets, that's not the first thing that comes to mind when we're talking about antitrust issues. Labor isn't the first thing conventionally we think about, here's antitrust, here's labor. That's not a typical intersection, but it seems like antitrust enforcement in labor matters is increasing worldwide, correct?
Kevin Hart:
Absolutely. Especially here in the United States, federal and state enforcers have made antitrust enforcement in labor markets a priority and scrutiny is at an all time high. Now, the reason for this, Dave, is that the antitrust enforcement in the labor market was an important part of President Biden's platform. And under his watch enforcement has shifted away from consumer welfare to really focus on broader measures of competition, specifically embracing antitrust policy and enforcement to influence industrial, economic and social policies. And one of these would be labor. And like I said, you can see it influence throughout every program of the agencies, whether it's in enforcement actions or litigation, whether it's in strategic partnerships, MOUs between and among federal agencies or with policy, the proposed bans on non-competes as well as the proposed changes in both the HSR filings and the proposed revisions to the merger guidelines. Everything is being viewed through this labor lens.
Dave Dalton:
I remember, and I think Philipp's going to talk about this with us in a moment too, but I remember hearing about antitrust labor in terms of Silicon Valley. They used to talk about no poaching agreements, that kind of thing, but this has become much broader than that. That might've grabbed a headline here and there because the software geniuses the world. They didn't want anti-poaching going out there. But this has become much broader than just that, hasn't it?
Kevin Hart:
It has Dave. I mean, it has permeated almost every aspect of antitrust enforcement and it touches on many bases, how you recruit employees, how you maintain employees, how you compensate employees. All these things are involved in this and it is a greater priority now, and you see it reflected in the enforcement actions.
Dave Dalton:
Now you're talking about enforcement and DOJ matters and so forth. You and I traded some notes when we were preparing for this program. The Justice Department has experienced some setback at trial recently. Isn't that correct?
Kevin Hart:
There have been some setbacks in antitrust enforcement in labor markets. DOJ has lost every single wage fixing and no poached trial. And while DOJ has been successful in surviving motions to dismiss, courts and juries have had challenges finding that these types of agreements are per se criminal. And what I refer to that, Dave, if I may, is when I talk generally about no poach agreements, that includes wage fixing, it includes no solicitation, no hire, and no poach agreements. In these cases, DOJ has been successful in getting courts to rule that the conduct could be per se legal, but in application, courts and juries have had difficulty or challenges with that.
If I may as sort of a background in terms of what I referenced per se ,is that courts usually use two models of analysis to view whether an agreement between competitors is unreasonable, the rule of reason and the per se rule. In applying the rule of reason, courts conduct a detailed analysis of the challenge conduct weighing the perceived anti-competitive effects against the pro-competitive benefits. The per se rule is different. The per se rule of illegality is an exception, under which courts view this type of conduct as categorically anti-competitive, and therefore illegal. Courts don't sort of perform this weighing balancing test and focus primarily on whether the illegal agreement existed rather than the agreements purpose or effect.
Dave Dalton:
Sure. And I'm going to break one of the rules of good podcast hosting.
Kevin Hart:
I find that hard to believe.
Dave Dalton:
They say don't read things, I'm looking at some notes. Again, I'm going to reference some things we talked about when we were getting ready, and I want to read this to make sure I get it right. You sent me a note that said courts jury instructions reveal that courts view non-wage fixing cases differently and have transformed a general intent crime to a specific intent crime imposing an intent element. Now that's a lot to unpack for a layperson, maybe even people familiar with this area of the law, but what does that mean exactly? What's all that about?
Kevin Hart:
Sure. I just want to make sure we're talking about the same thing when I mentioned sort of non-wage fixing. These are the agreements we just talked about, the no solicit, no hire or no poach agreements. And with respect to the jury instructions, any prosecutor worth their salt will tell you that jury instructions are crucial to trials. And that's because that's the way courts instruct the jury on how to place the facts within the context of the law. So here in no poach cases, the actual or proposed jury instructions imposed another element that the government must prove. Specifically, require the government to prove that the defendant's purpose in entering into the agreement was to allocate the market, in so doing, the court essentially raised the bar for prosecutors by layering in an additional element of proof. This has led to sort of problematic precedent for these no poach cases going forward and could impact enforcement efforts going forward.
Dave Dalton:
Interesting. Probably expect more podcasts from you, Kevin. It sounds like we're going to have a lot to talk about in the months and years ahead. Kevin, we'll come back to you in a couple minutes. I want to talk to Philipp Werner for a second. Philip, welcome again. We weren't ignoring you. We just want to get through some of Kevin's stuff, but I wanted to say hello. We've not really spoken before, and this is your first JONES DAY TALKS® Podcast, so thanks for joining us for sure.
Philipp Werner:
Oh, thanks for having me.
Dave Dalton:
You're based in Brussels. Can you tell us a little bit about your practice and the kind of client work you do?
Philipp Werner:
Sure. I'm a German qualified competition lawyer. I'm based in Brussels for the last over 15 years. Given my background, I'm covering both National EU competition matters in Germany with the German regulators and matters in front of the European Commission, both in EU law and German law. I cover a whole range of what we're doing in European competition law, which is less of a litigation enforcement environment, it's really antitrust investigations run by the authorities. But in that area it is all cartel investigations, single firm conduct, what you would call monopolization, merger control and subsidies law in all its varieties that the European Commission is inventing there. My clients are really, again, Brussels is similar to DC in that the regulators are here but not necessarily the clients. So my clients are mostly from the US, from Germany and some Belgian domestic clients, and I'm covering really as a generalist, all kinds of industries, basically from manufacturing, distribution, transport up to high-tech, technology clients.
Dave Dalton:
Sounds exhausting. You're busy.
Philipp Werner:
Luckily, I have a great team and this is really the charm of being at Jones Day, Brussels is already in itself very international, but we are often involved in multinational matters where we provide the European part and then work with our colleagues like Kevin in the US, in Asia, in Australia, in Latin America, on these matters, and that's what really makes this job interesting.
Dave Dalton:
Well, again, I was trying to be funny before, but I know you're busy, so I appreciate your taking the time with us today. So thanks so much.
Philipp Werner:
Germans are not funny. I mean as a German rule.
Dave Dalton:
Yes they are, this is great. All right, let's talk a little bit Philipp. But give us a broad overview of the labor market enforcement in the EU. Is enforcement accelerating or increasing like it is in the US? What's it like right now?
Philipp Werner:
Yeah, I would say you can say that enforcement of antitrust in layman markets is accelerating in Europe as well. Let's face it, the EU and EU member states, in particular, some member states have always taken a tough stance on cartel enforcement. And Europe has always known for, at least the last 10, 15 years, as the regulators who take no nonsense approach. And until very recently, with the Biden administration have also been the regulators with an open eye to new theories of harm really, and new ideas what you could do with antitrust law. It has also always been the case that in theory it was clear that no poach agreements or price fixing cases for wages or other conditions would be in the scope of antitrust law, but nobody really enforced it.
The only enforcement that we saw was about non-solicitation clauses in M&A transactions. Now these are to a very large extent not illegal and that hasn't changed, and that's one of the points that are important to consider. That hasn't changed. So non-solicitation clauses are not in itself illegal. They can be justified in certain contexts. But having said that, very recently in the last three, four years, we have seen a stream of cases in labor markets in Europe due to the way European antitrust enforcement works, where the European Commission focuses on pan-European problems and the national regulators on more locally restricted cases. The avant-garde is really on the member state level and several member states have taken the lead and that's where we are going to see more enforcement as well.
Dave Dalton:
Both you and Kevin mentioned no poach agreements, and I probably should have asked this earlier in the conversation, I think I know what those are and why they could be problematic. But would you take a minute, in case someone listening isn't clear what they are? How common? Where they apply? How would you define a no poach agreement?
Philipp Werner:
There are two answers to these questions. The first is, we use no poach agreement a little bit as a shortcut for all kinds of illegal agreements in labor markets, but it is strictly speaking, what we are talking about are agreements where two or more parties agree not to hire employees from the other parties to the agreement. This is important because it has one, let's say legal consequence. It is really a buyer side cartel if you like. And what does that mean? It means that the agreement is between companies that compete for the labor force. They don't need to compete on the product level.
You can have an illegal agreement in principle if you are, I don't know, producing toys and you're not hiring somebody from a company that's producing cars. It really is the buyer side and that's very important on the no poach agreement. But as I said, we use it as a shortcut. So beyond that, strictly speaking, no poach, we have price fixing, wage fixing, employment condition fixing. We have boycotts of certain types of employees who have or have not done something that employers don't like and they're not being hired. So it's wider than just we are not hiring from you.
Dave Dalton:
Gotcha. Because I remember, I'm sure you both remember and probably Kevin especially, it was Silicon Valley, right? Several years ago, big thing. People were trying to hire away software developers and engineers and whoever else, and that was a huge, I mean, that was front business page type news. That wasn't something hidden in page 15.
Kevin Hart:
No, absolutely. As Philipp mentioned, it marked for the first time that people can compete for workers just as much as on the buy side that others compete on the sell side in terms of products and services. So it was very, very important and Philipp hit it right on the head as usual. Absolutely, absolutely. Philipp, talk if you can at a high level about some recent or key developments in some of the EU member states when it comes to labor market and antitrust. And again, I keep referring to this, you both were great with your preparation. You sent me a lot of material, but I was hoping we'd at least tick through some of it, higher level stuff with some of the key states and developments there.
Philipp Werner:
Sure. The first important development beyond what's happening in individual countries is that the leadership of the antitrust authorities in Europe have mentioned enforcement in labor markets as one of the important topics. So both the commissioner for competition, Margrethe Vestager, and the director general of Digicom, Olivier Garcon, have mentioned enforcement as a priority. Now up to now, there is no case on the European level, but that's more to do with how labor markets in Europe are structured than the appetite of the European Commission. Having said that, there are press reports that the European Commission may be running a no poach investigation, but the commission hasn't confirmed that yet. If we turn to the member state level, I think you could say that two member states, two states, two countries in Europe have taken the lead a little bit. Portugal and the UK, both have issued guidance and reports on enforcement and labor markets and both have run cases. The cases, but even beyond these two countries, you have cases in a number of other countries, Poland, Lithuania, Belgium, Switzerland, Spain, Romania.
So you see it's not just one or two countries. It is a wider trend. What has helped these authorities to run the case is the COVID-19 pandemia because many of the cases actually relate to behavior that is in some way caused by the pandemia. So for example, many cases concerned sports, if you consider professional sport leagues that were shut down during the pandemia and clubs colluded to fire or not hire or put wage stops to players. We have a whole strand of case law there now. The other thing is the cases cover the whole range of what I said is a wider sense of no poach. So we have no poach agreements, we have agreements not to hire players who terminated unilaterally their contracts during the pandemia, kind of a punishment, a boycott. We have market sharing information types of what kind of salaries are you paying, what kinds of employment conditions are you granting?
We have price fixing really for freelance workers, so putting a cap on wages. What it shows is authorities are aware of the full range of possibilities. What it shows is they're happy to take on these cases. As I said, I alluded to it, the enforcement in Europe is different from the states in that the administrative investigation is much more important. There are appeals procedures before courts, but these are less important for the enforcement than it is in the US. Having said that, we have seen one case where a no poach fine has been annulled because the court found that it hadn't been proven to the required standard.
Two points that I want to make. Although there is a wave of new cases, and although we think this is going to be a very important trend also in Europe, we have the COVID point, not sure that similar cases would arise without such a crisis. So we will see how that goes. And the second point is all these countries are very important, but you don't have the heavy weights of European enforcement in there. You don't have Germany, you don't have France, and you don't have the European Commission yet. Smaller countries can also create a movement, but the big ones haven't jumped on it yet as of now.
Dave Dalton:
That's interesting. And just to be clear and forgive the naive question, I read that to understand that each member state applies its own regulations and does its own rulemaking and so forth, there's no EU wide standard?
Philipp Werner:
In principle, that's correct. We have EU law that is applicable. The standards in principle are the same in all countries in Europe. Now the UK is outside the European Union as we know since Brexit, so they can apply their own standard. Everybody else has the same standard, but we have 26 member states, we have 26 antitrust authorities, and although they should in principle apply the same standard in the same way, that's not always what's happening. And depending on their resources, depending on their appetite for certain type of cases, also depending on public opinion in that country, what is important or not, they take different enforcement priorities, really.
Dave Dalton:
I guess that's just the reality of living in 2023. Potentially a multinational company working across 26 member states could have 26 different sets of regulations in terms of antitrust in the labor markets. That's why you're so busy, Philipp. I just figured it out, I answered my own question, right? That's a heavy lift potentially for a company, isn't it?
Philipp Werner:
If you advise a multinational company and they are subject to an investigation, be it in the labor markets or something else, you always have to take into account that the Portuguese investigation or the Spanish investigation or the Slovenian investigation may spill over to other countries. It may well be that it's not a pan-European behavior that would need to be investigated by the European Commission so that you only have to deal with one regulator. It could be that you have the same kind of behavior, but in national markets, and then you deal with a whole bunch of regulators.
Dave Dalton:
Okay, real good.
Kevin Hart:
Just to sort of dovetail on what something that Philipp pointed out is just, when we talk about labor markets and antitrust scrutiny in labor markets, it sort of paints with a very broad brush and that it touches upon almost every facet of the employee-employer relationship, how a company compensates employees, whether it enters into agreements with others to limit wages, whether it uses industry benchmarking to determine salaries or whether it shares compensation information, whether there's an industry, all of that will be under a microscope. In addition, how a company recruits potential employees, whether it enters agreements not to solicit to hire, or to poach away these employees, and it also bleeds into how a company may interact with others in the industry at trade associations, job fairs, or benchmarking groups.
So there's sort of the lens by which enforcers are looking at this is very broad and even on a policy front to sort of put a point on this, is that recent proposed changes in the HSR filing requirements and the proposed revisions in the merger guidelines reveals that enforcers are taking a close look on acquisitions, strategic ventures and collaborations on how they may affect what Philipp defined as the buy-side labor markets. So to provide more color on exactly what we're talking about, the breadth of what scrutiny could be in not only the US, but certainly in all the, in the EU and the member states, for sure.
Dave Dalton:
That segues nicely into how I was hoping to wrap up the program. If there's one thing a listener needs to remember, having heard this conversation, we've covered a lot of ground in 30 minutes. It's been great, but is there one, don't miss this, Mr. Listener or Mrs. Listener, we got to hear that. So let's start with Kevin. Give us a takeaway, then we'll go to Philipp and we'll say goodbye.
Kevin Hart:
Sure. I think the takeaway would be, understand what agreements your company may have in this space. If they relate to compensation, tread very, very carefully, those are the ones that are probably going to get criminal scrutiny. If they're no poach, no solicit, no hire agreements, those in of themselves are not illegal, but consult with a lawyer in terms of understanding the scope, make sure that they're narrowly tailored in scope, duration, or geography. Those are all very good lessons learned and that there's going to be more activity in this space for sure. And make sure you got Philipp on speed dial. That would be the other takeaway.
Dave Dalton:
There you go. We'll put that in the text when we introduce the podcast for sure. Philipp, what do you have for us? Give us a takeaway and one thing people ought to know.
Philipp Werner:
I would say looking at, in particular European companies, where this may not be as well known as it is already in the United States. If you are a business person or an in-house council, you should have antitrust in labor markets as part of your compliance programs. If you don't have it already in there, it should be part of your compliance, antitrust compliance training, and you should make sure that when you draft these policies and these trainings that you look at the US where there's more experience to draft this properly and not have just some general statement that doesn't help anybody and doesn't provide guidance.
Dave Dalton:
Well said. Kevin, Philipp, we will leave it right there. Hey, thank you both so much for being here today. I hope you enjoyed it. I enjoyed talking to you, and I have a feeling we're going to be talking again real soon. So thanks for being here today.
Kevin Hart:
Our pleasure. Thanks so much Dave and Philipp, always good to see you.
Philipp Werner:
Yeah, thank you. Likewise. It was fun.
Dave Dalton:
For complete biographies and contact information for Kevin Hart and Philipp Werner, please visit jonesday.com. And while you're there, check out our insights page for more podcasts, videos, publications, newsletters, blogs, and other timely content. Subscribe to JONES DAY TALKS® at Apple Podcasts, or wherever else you find your podcast programming. JONES DAY TALKS® is produced by Tom Kondilas. As always, we thank you for listening. I'm Dave Dalton. We'll talk to you next time.
Thank you for listening to JONES DAY TALKS®. Comments heard on JONES DAY TALKS® should not be construed as legal advice regarding any specific facts or circumstances. The opinions expressed on JONES DAY TALKS®. Are those of lawyers appearing on the program and do not necessarily reflect those of the firm. For more information, please visit jonesday.com.
