DOJ and FTC on Alert for Anticompetitive Conduct in Labor Markets for COVID-19 Essential Workers

On April 13, 2020, the Department of Justice’s Antitrust Division (DOJ) and the Federal Trade Commission (FTC) issued a joint statement stressing the importance of competition in the labor market for America’s frontline responders to the COVID-19 pandemic. While the statement acknowledges that the pandemic has made some collaboration among government entities, businesses, and individuals necessary, the agencies plan to monitor the marketplace for—and if necessary, put an end to—anticompetitive conduct in employment, including “agreements to suppress or eliminate competition with respect to compensation, benefits, hours worked, and other terms of employment, as well as the hiring, soliciting, recruiting, or retention of workers.” The Assistant Attorney General for Antitrust, Makan Delrahim, explained that the DOJ will not allow employers to use the present circumstances to harm competition for “doctors, nurses, first responders, and those who work in grocery stores, pharmacies, delivery and distribution networks, and warehouses, among other essential service providers on the front lines of addressing the crisis.”

The agencies warned that “companies and individuals involved in the hiring, recruiting, retention, or placement of workers should be aware that anticompetitive conduct involves the risk of civil and/or criminal liability.” In particular, the DOJ expressed that it “may criminally prosecute companies and individuals who enter into naked wage-fixing and no-poach agreements,” which the agency considers to be per se antitrust violations on par with price-fixing, bid-rigging, market allocation, and other forms of “horizontal” collusion among direct competitors.

The agencies emphasized that they would pursue broad enforcement efforts not limited to anticompetitive agreements. For example, the FTC stated that it would pursue even invitations to collude—which, while not constituting an unlawful agreement under the Sherman Act, may violate Section 5 of the FTC Act as an “unfair method of competition.” The agencies said they would also be on the prowl for “unilateral anticompetitive conduct by employers that harms competition in a labor market,” which can be challenged as monopolization or attempted monopolization under Section 2 of the Sherman Act.

This is not the first time the agencies have stressed their willingness to use the antitrust laws to challenge anticompetitive conduct in labor markets. The DOJ has been vocal about its intent to prosecute labor market violations; in a Spring 2019 Update, the DOJ detailed its past and ongoing efforts to “protect[] labor markets and employees” from antitrust violations, which include bringing civil enforcement actions, entering consent decrees, and filing statements of interest in labor-related private antitrust cases. The DOJ has taken aim at healthcare labor markets specifically: in Seaman v. Duke Univ., No. 1:15-CV-462, 2018 WL 671239 (M.D.N.C. Feb. 1, 2018), a certified class of certain Duke University healthcare professionals challenged an alleged “no poach” agreement between Duke and the University of North Carolina, which prohibited lateral hiring of certain medical employees between the two universities’ health systems. The DOJ filed a statement of interest emphasizing that the no-poach agreement was per se unlawful unless Duke proved that it was reasonably necessary for legitimate collaboration. See Statement of Interest of the United States, Seaman v. Duke University, No. 1:15-CV-462, 2018 WL 671239 (M.D.N.C. Feb. 1, 2018). The case ended with Duke and its health system paying a sizable settlement to the plaintiffs. Notably, the DOJ joined in the settlement agreement and has the authority to enforce its injunctive relief and compliance provisions.

The agencies’ latest statement builds on existing antitrust guidance for employment practices. Although the COVID-19 pandemic has brought unprecedented turmoil to labor markets, including an urgent need for additional workers in grocery stores, delivery services, and healthcare, employers must take care not to engage in anticompetitive conduct to meet demand. O’Melveny has robust antitrust and employment practices, and employers with any questions about the potential antitrust implications of their employment activity should contact the undersigned attorneys.