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European Commission makes no-poach enforcement a priority


The European Commission insists no-poach agreements are an enforcement priority with ongoing investigations taking place.

The Commission has work to do with its member states to match the US stance on no-poach agreements and the mood music in Europe suggests regulators are increasingly active with predictions that it is only a matter of time before the Commission brings its first no-poach case.

In Turkey, the Competition Authority recently fined 16 companies EUR 5 million ($5.6 million) and said the companies, including Turkish Telecom, were found to have made gentlemen’s agreements to refrain from hiring each other’s employees and violated the Law on the Protection of Competition.

With increasing action by national bodies, European businesses need to ensure their anti-trust compliance and risk assessment strategies are up to speed with the changing regulatory landscape.

A decade ago, the US Department of Justice Antitrust Division started vigorously pursuing antitrust enforcement against no-poach agreements among competing employers. The DOJ Antitrust Division investigated a number of high-tech companies for anti-competitive and allegedly "naked" no-poach agreements among the companies to prevent poaching of high-tech animators and other sophisticated engineers.

The agreements potentially restrict competition by preventing companies from recruiting or competing for employees by offering more competitive remuneration or employment terms.

In Europe, national competition authorities began a number of investigations concerning no-poach agreements and salary agreements in Hungary, Lithuania, Poland and Portugal involving recruitment, basketball and football. Other European nations have investigated no poach deals in the freight forwarding, hospitals and IT employment sectors.

No-poach agreements are likely be characterised as cartel-type violations and fines could be significant -up to 10% of worldwide group turnover. Firms found guilty of a competition law infringement could also suffer substantial reputational damage. In the UK, individual criminal liability and individual director disqualifications create additional risks.

In 2022, the UK’s Competition and Markets Authority launched an investigation into alleged wage-fixing for freelance staff by various sports broadcasters, and more recently published guidance on how employers can avoid anticompetitive behaviour.

Currently, no-poach agreements cannot be criminally prosecuted under EU competition law which treats information exchanges, and the unilateral disclosure of information, more harshly than US antitrust law. The collection of information on prevailing wage levels in an industry sector must be structured carefully in order to minimise risk.

In terms of Mergers & Acquisitions,  no-poach agreements may be considered legitimate  with parties having to ensure the length and scope of no-poach/no-hire obligations imposed on a seller can be objectively justified by the need to preserve the value of the acquired business.

Company boards should seek the assistance of a specialist insurance broker, with in-depth technical knowledge and full market access, in order to procure the most suitable Directors and Officers and Mergers & Acquisitions liability insurance. If you would like to discuss this insurance, or obtain a competitive quotation please contact Vida Jarasiunaite or Mark Dutton

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