In the final days of the Biden administration, the FTC and DOJ jointly issued antitrust guidelines on business practices that impact workers that replace the 2016 Antitrust Guidance for Human Resource Professionals, which served as the basis for the DOJ’s wave of criminal enforcement actions targeting labor markets. The new guidelines broaden the agencies’ interpretation of how antitrust laws apply to labor markets and reflect the Biden administration’s philosophy that scrutiny of labor markets is warranted in a variety of contexts. This approach stands in contrast to prior administrations’ more laissez-faire stance on antitrust enforcement in labor markets. Accordingly, under President Trump, new leadership at the FTC and DOJ could choose to quickly revise or retract these guidelines; although antitrust enforcers under the first Trump administration were advocates for labor market enforcement in certain instances—such as criminal enforcement targeting no-poach, no-hire, and wage-fixing agreements—they were more measured in others, such as the evaluation of labor markets in mergers or the use of non-compete clauses. The second Trump administration may look to return to a more traditional approach by either disregarding, modifying, or rescinding the new guidelines.
To understand these revised guidelines, it is important know how they grew out of the Biden administration’s labor market enforcement efforts, the key areas addressed by the new guidance, and the potential implications for enforcement moving forward.
Understanding the Biden Administration’s Focus on Labor Markets
The Biden administration expanded and intensified antitrust enforcement related to labor markets. The strategic shift aimed to address practices that suppress wages and limit worker mobility. Early in his presidency, President Biden issued an executive order on “Promoting Competition in the American Economy,” wherein he aimed to establish a “whole-of-government” approach to enforcement against anticompetitive behavior and directed the antitrust agencies to consider labor market impacts in their enforcement actions. Pursuant to this directive, the FTC and DOJ actively pursued cases against anti-competitive labor practices, including the filing of additional criminal cases targeting “no-poach” agreements and wage-fixing schemes, and scrutinizing mergers for their potential adverse effects on workers. Notable examples of the Biden administration’s emphasis on labor markets included:
- the updated 2023 Merger Guidelines, in which the agencies set out a policy of assessing a merger’s impact on labor markets when deciding whether to challenge a proposed transaction;
- the DOJ blocking Penguin Random House’s proposed acquisition of Simon & Schuster, in part based on claims that the combined company would be able to reduce advance compensation to authors;
- the FTC challenging the Kroger-Albertsons merger, based in part on arguments that the consolidation would diminish unionized workers’ bargaining power and lead to lower wages;
- the DOJ’s pursuit of several criminal actions against employers for the use of wage-fixing and no-poach agreements, such as United States v. Jindal; and
- the FTC’s proposed rule to ban non-compete clauses, which was ultimately struck down in the courts.
Key Issues in the New Guidelines
The new guidelines clarify how the agencies will assess business practices impacting workers under antitrust laws and emphasize that competition among employers leads to better wages, benefits, and working conditions. In the guidelines, the agencies discuss specific types of agreements or practices that may violate the antitrust laws, clarified the applicability of the antitrust laws to independent contractors, and addressed the potential for false claims of potential worker earnings by businesses to constitute a violation. The guidelines also provide information on how, and encourage private parties, to report potential violations to the agencies.
Conduct that May Violate the Antitrust Laws
Although the guidelines do not provide an exhaustive list of examples, they do identify several types of agreements and business practices that may violate the antitrust laws:
- Wage-Fixing and No-Poach Agreements – Agreements between businesses about workers’ terms of compensation, or agreements not to hire, solicit, or otherwise compete for workers. The guidelines note that a violation of this kind could result in criminal liability.
- Franchise No-Poach Agreements – Franchisors and franchisees often compete with one another for workers, consequently, the guidelines specifically call out that no-poach agreements between these parties not to compete with one another for workers could potentially constitute a per se violation.
- Sharing Competitively Sensitive Information with Competitors – The guidelines emphasize that exchanging competitively sensitive compensation or employment information can constitute a violation when the exchange may have an anticompetitive effect.
- Non-Compete Clauses – These clauses restrict workers from switching jobs or otherwise serving as a competitor.
- Other Restrictive, Exclusionary, or Predatory Employment Conditions – This catch-all category includes practices such as non-disclosure and non-solicitation agreements, as well as training repayment, exit fee, and liquidated damages provisions.
Applicability to Independent Contractors
The guidelines underscore that the antitrust laws also apply to how employers engage independent contractors. For example, agreements between platforms to fix the compensation of independent contractors they each offer may constitute a per se violation, which could be prosecuted criminally.
False Earnings Claims
When businesses make false or misleading claims about the potential earnings for its workers, the agencies may investigate and take action against such conduct as an unfair, deceptive, or abusive practice.
How the Guidelines Might Affect Future Enforcement
Although these guidelines purport to provide clarity on the relationship between antitrust laws and labor markets, their effect on future enforcement remains uncertain given the change in administration. The FTC’s vote to approve the new guidelines was split along party lines 3-2. In their dissent, the FTC’s newly appointed Chair Andrew Ferguson and Commissioner Melissa Holyoak claimed that “the lame-duck Biden-Harris FTC should not replace existing guidance mere days before they hand over the baton.”
One area of divergence concerns how the FTC should analyze non-competes and no-hire agreements. While not disputing that antitrust laws should be enforced in labor markets, Commissioners Ferguson and Holyoak repeatedly criticized the former majority for challenging the use of such restrictions without analyzing their actual effects. For example, Commissioners Ferguson and Holyoak dissented from the FTC’s challenge of Guardian Service Industries, Inc.’s no-hire agreement because of the apparent lack of evidence of anticompetitive effects. This stands in contrast to the FTC’s complaint against Planned Building Services, Inc. for its use of no-hire agreements, which Commissioner Ferguson supported because of the evidence of the anticompetitive effects and lack of legitimate business purpose.
During the first Trump administration, DOJ leadership repeatedly affirmed the investigation of potential wage-fixing and no poach agreements as an enforcement priority, which culminated in the first wage-fixing charges in December 2020 and the first no-poach indictment in January 2021. The fact that the DOJ’s first-ever criminal charges for anticompetitive actions in labor markets were brought at the tail end of the first Trump administration suggests that such enforcement actions are unlikely to disappear entirely during the new Trump administration. However, given the struggles in court when it came to actually trying these criminal labor market cases, the Trump administration may shift its focus to cases with greater jury appeal, such as pure wage-fixing.
These new guidelines reflect the Biden administration’s intense scrutiny of the labor markets for antitrust violations but may provide limited insight into how antitrust enforcers will scrutinize conduct under the second Trump administration. Given the comments from the Republican FTC commissioners’ comments, it is unlikely that anything that goes beyond the 2016 Antitrust Guidance for Human Resource Professionals will be enforced. The new leadership at the FTC and DOJ, once confirmed, will consult with each other and could decide to retract, modify, or replace this new guidance. Regardless, clients should be aware of the new guidance and consult with Morrison Foerster antitrust professionals if planning on taking any actions inconsistent with the guidance, as antitrust enforcement in the labor market is not likely to fade away any time soon.
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