The government’s voluntary dismissal of the case—the first criminal no-poach indictment brought by the DOJ in early 2021—could signify the beginning and end of DOJ’s quest to enforce no-poach agreements as per se violations of the Sherman Act.

On November 15, 2023, the U.S. District Court for the Northern District of Texas granted a motion by the U.S. Department of Justice (DOJ) to dismiss indictments in its last remaining criminal no-poach antitrust case, United States of America v. Surgical Care Affiliates, LLC, et al., No. 3:21-cr-00011-L (N.D. Tex. Nov. 15, 2023). The government’s voluntary dismissal of the case—the first criminal no-poach indictment brought by the DOJ in early 2021—could signify the beginning and end of DOJ’s quest to enforce no-poach agreements as per se violations of the Sherman Act.

Takeaways

• The voluntary dismissal by DOJ of its first-ever criminal no-poach antitrust case could signal that DOJ is acknowledging that courts and juries have not accepted DOJ’s theory that such arrangements should be treated as per se violations of the Sherman Act.
• After several high-profile defeats, DOJ may have been concerned that its attempts to obtain per se treatment for certain labor market restrictions could have the unintended effect of raising the bar for the application of per se treatment generally.
• DOJ could be shifting its focus to other areas of enforcement, such as challenges to private equity roll-ups, consolidation and concentration of data ownership or to competitors’ use of pricing algorithms.

Case Background

In early January 2021, DOJ alleged that SCA, the operator of hundreds of surgical facilities, entered into arrangements with other unidentified healthcare companies not to solicit each other’s senior-level employees. Defendants moved to dismiss the case, arguing that it could not be brought as a criminal matter because the government can only bring criminal antitrust charges over conduct that courts have previously found to be per se illegal, like price-fixing or market allocation. DOJ opposed the motion by arguing that certain no-poach or nonsolicitation agreements, like the one in the SCA case, effectively divvy up the labor market and constitute per se market allocation schemes. The defendants’ motion to dismiss was still pending when DOJ moved to dismiss the indictments.

Analysis

DOJ rarely moves to dismiss its indictments, and the reason for the dismissal motion in SCA is unclear. But the DOJ’s program to criminally prosecute labor market violations has not gone well. Around the time that DOJ charged SCA, DOJ officials forecasted a continuing push to police labor markets and indicated that DOJ was committed to prosecuting anticompetitive agreements that limit worker mobility and reduce wages. Thereafter, DOJ brought and lost four other criminal prosecutions of alleged no-poach agreements in DaVita, Jindal, Manahe and Patel. The court in Patel held that a no-poach arrangement must amount to a “cessation of meaningful competition” in a particular labor market to receive per se treatment. DOJ may have been concerned that the court in SCA would affirm the holding in Patel and lead to even wider acceptance of a high standard for courts to apply per se treatment to labor market restrictions.

What’s Next?

DOJ is an organization of limited resources, and the voluntary dismissal of the SCA case may mean that DOJ will be directing its resources to enforcement of other conduct that potentially violates the antitrust laws, like private equity roll-ups or the use of algorithms by competitors to allegedly fix prices. Companies―in particular private equity firms in the healthcare and life sciences industries―should consult with experienced counsel to help them navigate this ever-changing enforcement landscape.

For More Information

If you have any questions about this Alert, please contact Sean P. McConnell, Christopher H. Casey, any of the attorneys in the Antitrust and Competition Group or the attorney in the firm with whom you are regularly in contact.

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