A Final Burst of Antitrust Guidance
The Justice Department and Federal Trade Commission have published new guidelines on how prosecutors will evaluate companies’ employment agreements, information-sharing arrangements, and other practices that might violate antitrust law, even as the Biden Administration glides out the door.
The two agencies released the guidelines (a slim 13 pages long) on Thursday. The guidelines review the different types of practices that could lead to civil or criminal antitrust investigations, and offer numerous examples to show how the agencies analyze business practices that may violate the antitrust laws. Corporate lawyers, compliance officers, and HR executives can all read the material in less than an hour.
“The antitrust laws protect all Americans, including workers, from illegal monopolization, collusion, and unfair methods of competition,” FTC chairman Lina Khan, who will cease being chairman next week, said in a press statement. “These antitrust guidelines provide clarity to businesses about the practices that can violate the law — from agreements between firms to fix workers’ wages to coercive noncompetes.”
Let’s start with one obvious question: Why are the Justice Department and FTC doing this now? Well, because they can; from a departing regulator’s perspective, there’s little downside to throwing whatever you can against the wall in case something sticks. Crazier things have happened in Washington.
Also remember that these guidelines are only guidelines, not formal rules. The incoming Trump Administration can do whatever it wants with them at any time, such as revising them or discarding them entirely. On the other hand, the new Administration leaders could just as easily leave the guidelines in place to keep companies on their toes, while ignoring the material in practice. Plus, state attorneys general could use the guidelines as a blueprint for similar state-level enforcement, or even plaintiff lawyers could use the material as inspiration for civil litigation. As a certain president-elect likes to say, we’ll see.
Antitrust Practices to Avoid
Anyway, onto what the guidelines actually say. The guidance identifies several practices that will be frowned upon by regulators:
- Agreements among companies not to recruit, solicit, or hire workers, or to fix wages or terms of employment. (This includes agreements among executives at companies, who might engage in this sort of stuff behind their employers’ backs.)
- Similar agreements that franchise companies might try to impose on their franchisees. (“The agreement itself may be illegal regardless of whether it actually harms workers,” the guidelines warn.)
- Sharing competitively sensitive information, including wage information, with competitor businesses.
- Non-compete clauses that companies might try to enforce on their employees.
- Other restrictive agreements such as training repayment clauses, exit fees for departing employees, non-disclosure agreements so sweeping they effectively serve as non-compete agreements, and the like.
The guidelines also warn that all of the above also apply to agreements your company (or a group of companies) might have with independent contractors; or that so-called “platform companies” might have with each other to fix the wages of contractors using their services. So for example, if you’re a platform website to help travel nurses find work, conspiring with similar websites to fix the prices that nurses can charge healthcare companies — that exposes the platforms to criminal liability.
Moreover, a company could stumble into anti-competitive behavior even with businesses that aren’t your direct competitors. For example, even though airplane manufacturers and their part suppliers are in different sectors, they both might hire from the same market for engineers. If the manufacturer and supplier exchange tips about salaries for said engineers, that could draw scrutiny too.
As to when the Justice Department and FTC might take action against a company, the guidelines had this to say:
If the agencies identify an agreement between companies relating to workers, they assess its impact on competition and the competitive process. Some types of agreements are illegal regardless of their effects. In other cases, the agencies perform a deeper analysis, examining the impact of the agreement on workers by impairing the competitive process, suppressing competition, or the actual or likely effects of the conduct in the affected labor market.
In other words, sometimes regulators will know problematic practices when they see ’em; and sometimes they’ll be doing a lot of research while you wait.
One other interesting point: the guidelines stress that sharing competitively sensitive information can be illegal even when companies use a third party for said information sharing, “including a third party using an algorithm.” That sounds to me a lot like the Justice Department’s recent lawsuit against six large landlords and their use of RealPage, an algorithm that helps landlords decide what rents to charge.
Granted, the RealPage lawsuit is about alleged anti-competitive harm to consumers, where today’s guidance is about harm to employees — but the structure of how that harm comes to pass is essentially the same. I wouldn’t be surprised if regulators are itching for some example to make in that employment law context. (Or at least, I’m sure that a Harris Administration would have been; whether the Trump Administration cares about worker rights remains to be seen.)
Compliance Considerations
Compliance officers have a few points to consider here. First, much like the Justice Department’s guidelines for effective compliance programs, regulators will have the luxury of applying these guidelines to a specific set of facts while deciding whether to proceed with an enforcement action. You won’t. Your compliance program will need to anticipate any of the antitrust risks outlined in the guidelines that might reasonably arise at your company.
In that case, a few compliance program capabilities will become more important to get right. For example, you’d want strong policy management capabilities, to be sure that different business units aren’t adopting their own policies that might (deliberately or otherwise) trigger an antitrust concern.
You’d also want training that addresses the broad issue of anti-competitive behavior (tailored for specific roles within your company, of course); and investigation protocols to identify the facts that the FTC or the Antitrust Division will be most interested to know.
And a Word on Whistleblowers
Coincidentally, the Justice Department and OSHA also released a statement this week warning companies that non-disclosure agreements you might sign with employees cannot restrict those employees from reporting suspected antitrust violations to regulators. Doing so violates a whole bunch of whistleblower protection laws, including the Criminal Antitrust Anti-Retaliation Act of 2019.
A company that interferes with its employees’ cooperation would jeopardize its ability to fulfill its obligations under the Antitrust Division’s leniency policy, the statement warns; although that threat should not be news to compliance officers who’ve been paying attention to Justice Department policy over the years.
Still, I continue to be amazed by the number of large companies that struggle to rid themselves of pre-taliation language in their employment agreements, so I guess this warning had to be delivered. Go through your agreements with a fine-tooth comb, find the problematic clauses, and root them out once and for all.