Antitrust

S H E A R M A N & S T E R L I N G L L P | 6 3 and employees located internationally and hired to work in the United States. The DOJ brought this case under its civil enforcement authority because the conduct both began and ended prior to the issuance of the HR Guidance. However, the breadth of the consent decree reflects that the DOJ views its enforcement authority to extend to no-poach agreements between all employers with any connection to the United States. More recently, Antitrust Agencies, including at the state level, have taken a close look at franchisee-franchisor agreements. While companies may not think this intra-brand relationship can create antitrust risk, given the Antitrust Agencies' broad view that all companies compete for employees, this has been a significant area of investigation for many companies. More than a dozen franchisors have reached settlements with government bodies with respect to intra-brand no-poach agreements. These settlements have also spawned follow-on private litigation for damages. PRIVATE LITIGATION INCREASING As with nearly all government antitrust enforcement efforts, private class actions have quickly followed and exposed defendants to significant liability, including treble damages, under the Sherman Act. In June 2017, a class of plaintiffs reached a US$169 million settlement with several animation studios. The DOJ agreed to a June 2011 civil consent decree with two of these companies over an alleged T H E D O J H A S R E P E A T E D LY W A R N E D O F P O T E N T I A L C R I M I N A L L I A B I L I T Y A N D H A S B E E N A C T I V E LY I N V E S T I G A T I N G P O T E N T I A L N O - P O A C H P R O S E C U T I O N S agreement not to solicit each other's digital animation employees, including an agreement that they would not make a counteroffer higher than the initial offer from the other company. The private class action mirrored the DOJ's claims as to those companies, but also added a number of other studios as alleged co-conspirators. Private class actions have generally set forth a market-wide theory of impact to claim that these clauses commonly suppress industry wages of all employees — not just specific employees directly implicated by no-poach agreements. NEXT STEPS No-poach or non-solicitation agreements can arise in a variety of contexts throughout a business. While the DOJ has not publicly filed criminal charges in a case to date, it has repeatedly warned of potential criminal liability and has been actively investigating potential no-poach prosecutions. The Antitrust Agencies learn about these agreements in many different ways. For example, the Antitrust Agencies may become aware of a no-poach agreement through documents produced in a merger review, and investigations and litigation of these agreements are likely to increase. Companies should be proactive and diligent in identifying the existence of any no-poach agreements. Doing so will allow a company to determine and assess whether they create any litigation or investigational risk.

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