This decision is a serious defeat for the DOJ’s labor-market enforcement agenda because the court did not even let the jury consider the government’s allegations and evidence.
On April 28, 2023, the U.S. Department of Justice’s (DOJ) labor-market enforcement efforts suffered a major loss when a Connecticut federal court ruled that no reasonable juror could convict six executives for violating antitrust laws. In United States v. Patel, the DOJ alleged that an executive orchestrated a no-poach agreement among five companies and their executives relating to the hiring of skilled engineers. But the judge granted the defendants’ joint motion for acquittal at the close of the government’s case, holding that the evidence did not establish the existence of an agreement to allocate the market for skilled engineers. The defeat is the latest and most significant setback in the Antitrust Division’s efforts to prosecute alleged deals to harm competition in labor markets.
The loss is notable in two important respects:
- The court dismissed criminal antitrust charges mid-trial under Federal Rule of Criminal Procedure 29(a)—a rare procedure that removed the case from consideration by the jury.
- The court concluded that the DOJ’s evidence did not establish actual labor market allocation and found as a matter of law that the alleged no-poach agreement did not deserve per se condemnation.
This decision is a serious defeat for the DOJ’s labor-market enforcement agenda because the court did not even let the jury consider the government’s allegations and evidence. Federal Rule of Criminal Procedure 29(a) mandates “enter[ing] a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction.” The court found that, based on the evidence the DOJ presented at trial, no rational juror could have found beyond a reasonable doubt that the essential elements of a crime were proven.
The court also concluded that the DOJ failed to establish that the no-poach arrangement amounted to a per se violation of Section 1 of the Sherman Act. The per se rule permits certain business practices, such as agreements to fix prices or allocate markets, to be considered categorically illegal under Section 1. Under the per se approach, the DOJ does not need to establish a relevant market or actual harm to competition in that market. Here, the court concluded that the alleged arrangement between the parties was not an agreement “to meaningfully allocate the labor market of engineers” because “many engineers or other skilled laborers were hired between and among the supplier companies during the relevant time period.” Far from being an agreement to allocate, “[t]he alleged agreement… allowed for exceptions that were regularly used even during periods of hiring freezes, such as the exception that a supplier company could hire engineers and other skilled laborers if they separated from their prior employer.” Because there was no actual market allocation, there was nothing to be treated as a per se violation.
The court appeared particularly skeptical of applying per se treatment in this scenario, noting that “[t]he per se rule is applied and a criminal prosecution is warranted only if courts have had considerable experience with the type of restraint at issue and can predict with confidence that it would be invalidated in all or almost all instances under the rule of reason.” The court noted that, contrary to the Antitrust Division’s allegations, courts “presumptively apply rule of reason analysis… and mere talismanic invocation of the term market allocation is not sufficient to bring the per se rule to bear on the actions of the alleged conspirators.” The court went so far as to accuse “the Government [of trying] to expand the common and accepted definition of market allocation in a way not clearly used before.”
What’s the Impact?
In 2016, the DOJ and the Federal Trade Commission issued joint guidance for human resources professionals, taking the position that the DOJ would criminally prosecute no-poach and wage-fixing agreements that were not ancillary to a legitimate business collaboration. Several civil settlements in no-poach cases followed. In 2019 testimony to the House Judiciary Committee, Doha Mekki, then counsel to the assistant attorney general and now the principal deputy assistant attorney, revealed that “a number of active criminal investigations into naked no-poach and wage-fixing agreements” were ongoing. However, it was not until December 2020 that the first criminal indictment for a wage-fixing agreement came. That was quickly followed by the first criminal indictment for a no-poach agreement in January 2021. Since then, the DOJ has brought several other no-poach and wage-fixing indictments, and several have gone to juries. Nevertheless, no jury has found that the DOJ proved a criminal antitrust violation in a labor market. The only jury conviction in any of these cases involved a charge of lying to government investigators, and the only convictions for harm to competition in labor markets came in two plea deals that many commentators believe could have been entered on alternative grounds that did not involve antitrust violations.
The fact that the DOJ did not win the Patel case on the merits is unlikely to be as significant as the finding by the court that, after hearing the evidence presented by the DOJ, the alleged no-poach arrangement did not warrant per se treatment. The DOJ has consistently taken the position that naked no-poach and wage-fixing agreements are per se illegal―and some courts in denying motions to dismiss (where all allegations are taken to be true) have left open the notion that certain no-poach agreements could be per se illegal. Here, the court looked at whether the no-poach agreement actually constituted a labor market allocation and concluded that the evidence showed that competition still existed for skilled labor among the firms. It is not enough for the DOJ to survive a motion to dismiss, as it has been touting; the DOJ must produce good evidence sufficient to establish elements of the crime pled consistent with the laws as established in the courts or the judge or jury will throw the case out.
The DOJ has remained steadfast in its desire to pursue criminal enforcement of the antitrust laws with respect to alleged harm to competition in labor markets, but it needs wins to bolster the credibility of its criminal enforcement program. Otherwise, it may soon need to modify its focus back to civil enforcement of such alleged violations, which still carries the hammer of treble damages to deter anticompetitive conduct. Regardless of whether the DOJ changes its policy, companies should still tread carefully when considering entering into agreements in labor markets that could be found to violate the antitrust laws and seek experienced antitrust counsel before doing so.
For More Information
If you have any questions about this Alert, please contact Sean P. McConnell, Christopher H. Casey, Brian H. Pandya, Melissa S. Geller, any of the attorneys in our Antitrust and Competition Group, any of the attorneys in our White-Collar Criminal Defense, Corporate Investigations and Regulatory Compliance Group or the attorney in the firm with whom you are regularly in contact.
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