Anticompetitive Employment

• DOI: http://doi.org/10.1111/ablj.12166
• Author: Gregory Day
• Date: 01 October 2020
• Published date: 01 October 2020

American Business Law Journal

Volume 57, Issue 3, 487–535, Fall 2020

Anticompetitive Employment

Gregory Day*

Scholars, antitrust agencies, and policy makers have historically paid little

attention to anticompetitive practices in labor markets. This was largely

due a misconception that antitrust law is meant to govern conventional

markets in which goods and services trade, rather than govern labor mar-

kets. Antitrust law may also offer a poor remedy to redress employers who

enter no-poaching agreements or otherwise impair competition. The pri-

mary tension involves antitrust’s purpose, which is to promote “consumer

welfare.” To identify whether conduct eroded consumer welfare, courts

tend to scrutinize whether prices increased. But here, lessening wages can

enable firms to sell goods at cheaper prices, benefiting consumers.

Another issue is that the typical restraint affects only a smattering of

workers instead of lessening wages throughout the greater market. This

article uses empirical analyses to show that antitrust should promote

labor’s welfare as it does consumer welfare, and it argues that enforcement

must condemn labor cartels as per se illegal. The research demonstrates

that labor cartels are more pernicious than restraints in product markets,

as employers can lessen wages with less effort than in product markets.

Antitrust should even proscribe no-poaching agreements formed for a

legitimate purpose (e.g., to protect trade secrets) because employers could

have achieved the same goals using less coercive means; the noncompete

agreement, at least, provides labor with a semblance of notice and

bargaining power without drawing antitrust scrutiny. The prohibition of

labor cartels would thus promote competition and consumer welfare,

especially in minimum wage labor markets.

*Assistant Professor, University of Georgia Terry College of Business, CourtesyAppointment,

University of Georgia School of Law. The author would like to thank Brian Feinstein,

Nathaniel Grow, Aaron Hill, Menesh Patel, Mike Schuster, Abbey Stemler, Betsey Stevenson,

and Ben Ward for their helpful comments and criticisms. The article also benefited from a

workshop hosted byIndiana University’s Kelley Schoolof Business as well as the Academy of

Legal Scholars in Business’s Annual Conference. The author would also like to thank Bill

Bush of the Universityof Georgia School of Law for tremendous researchassistance.

©2020 The Author

American Business Law Journal ©2020 Academy of Legal Studies in Business

487

INTRODUCTION

A class action lawsuit representing 64,000 employees in Silicon Valley

asserted that a cartel of technology companies conspired to restrict sala-

ries, share labor data, and forebear from hiring each other’s workers.

1

By colluding, the firms allegedly denied workers about $3 billion in com-

pensation.

2

Evidence of their scheme included an email by Google’s

CEO, Eric Schmidt, promising Apple’s Steve Jobs that he intended to fire

a Google recruiter who had sought to hire an Apple employee.

3

Steve

Jobs forwarded this email to Apple’s human resources division with a

smiley face.

4

Following an investigation by the Department of Justice’s

(DOJ) Antitrust Division, Google, Apple, and Adobe agreed to pay $415

million to settle the antitrust claims against them.

5

This settlement

occurred at about the same time that Disney, Pixar, and LucasFilms con-

ceded their joint hiring practices violated antitrust law,

6

as did EBay and

Intuit.

7

1

In re Animation Workers Antitrust Litig., 123 F. Supp. 3d 1175, 1181–82 (N.D. Cal. 2015)

(“Lucas stated in an email that Pixar and Lucasfilm ‘have agreed that we want to avoid bid-

ding wars,’ and that the agreement prevented the two companies from ‘raid[ing] each

other’s companies.’ Pixar and Lucasfilm allegedly agreed to the following terms: (1) not to

cold call each other’s employees; (2) to notify each other when making an offer to the other

company’s employee; and (3) that any offer by the other company would be ‘final.’”).

2

Dominic Rushe, Apple and Google Settle Antitrust Lawsuit over Hiring Collusion Charges,GUARD-

IAN (Apr. 24, 2014, 4:50 PM EDT), https://www.theguardian.com/technology/2014/apr/24/

apple-google-settle-antitrust-lawsuit-hiring-collusion.

3

Id.

4

Id.

5

In re High-Tech Emp. Litig., 856 F. Supp. 2d 1103, 1109–10 (N.D. Cal. 2012). Press

Release, U.S. Dep’t of Justice, Justice Department Requires Six High Tech Companies to

Stop Entering Anticompetitive Solicitation Agreements (Sept. 24, 2010), https://www.justice.

gov/opa/pr/justice-department-requires-six-high-tech-companies-stop-entering-

anticompetitive-employee; Ted Johnson, Animation Workers Reach $100 Million Settlement with

Disney in Wage-Fixing Suit,VARIETY (Jan. 31, 2017, 8:45 PM), https://variety.com/2017/biz/

news/disney-settlement-wage-fixing-anti-poaching-animation-1201975084/.

6

In re Animation Workers Antitrust Litig., 123 F. Supp. 3d at 1180; Johnson, supra note 5.

7

United States v. eBay, Inc., 968 F. Supp. 2d 1030, 1033 (N.D. Cal. 2013); Press Release,

U.S. Dep’t of Justice, Justice Department Requires eBay to End Anticompetitive “No Poach”

Hiring Agreements (May 1, 2014), https://www.justice.gov/opa/pr/justice-department-

requires-ebay-end-anticompetitive-no-poach-hiring-agreements.

488 Vol. 57 / American Business Law Journal

As in the above cases, some firms deny workers a fair wage by secretly

agreeing to fix wages,

8

trade salary data,

9

or forego hiring each other’s

labor.

10

When employers collude, the effects can be profound, given the

inequalities thought to animate the employment market.

11

While labor’s

productivity was traditionally tied to compensation—as labor’s efficiency

increased, so did salaries

12

—hourly wages froze in the 1970s despite

climbing productivity (Figure 1). Because workers in competitive mar-

kets should gain leverage as they create value, employers seem to be

doing something pernicious.

Despite the anticompetitive effects of labor cartels, federal agencies,

legislators, and scholars have traditionally paid scant attention to

8

See, e.g., Nitsch v. Dreamworks Animation SKG Inc., 315 F.R.D. 270, 274 (N.D. Cal. 2016)

(“Plaintiffs contend that Defendants engaged in a conspiracy to fix and suppress employee

compensation and to restrict employee mobility.”).

9

See, e.g., Cason-Merenda v. Detroit Med. Ctr., 862 F. Supp. 2d 603, 606 (E.D. Mich. 2012)

(“Defendants have routinely engaged in substantial exchanges of information about how

they compensate their RN workforces.”).

10

See, e.g., Todd v. Exxon Corp., 275 F.3d 191, 197 (2d Cir. 2001) (noting the restraints

placed on employees likely lowered employee salaries). See also Cesnik v. Chrysler Corp.,

490 F. Supp. 859, 862–63(M.D . Tenn. 1980); C. Scott Hemphill & Nancy L. Rose, Mergers

that Harm Sellers,127YALE L .J. 2078, 2083 (2018) (“Part of the workers’ loss takes the

form of wages transferred to the firm as extra profit. Additional deadweight loss arises as

workers whose great est productivity is working for the firm are instead pushed to less

productive employment or out of the labor market.”); Jeff Stein, Booker, Warren Take Aim

at Chains that Use ‘Non-Poaching’ Deals to Keep Workers Stuck at One Store,WASH.POST (Mar.

1, 2018, 1:06 PM EST), https://www.washingtonpost.com/news/wonk/wp/2018/03/01/

booker-warren-take-aim-at-businesses-that-promise-not-to-poach- each-others-workers/?

utm_term=.4284c7fbe889 (discussing nonpoaching agreements).

11

See, e.g., Charlotte S. Alexander, Anticipatory Retaliation, Threats, a nd the Silencing of the

Brown Collar Workforce,50AM.BUS.L.J. 779, 779 (2013) (explaining some of the inequal-

ities potentially pre vailing in the labor market); Leora F. Eisenstadt & Jeffre y R. Boles,

Intent and Liability in Employment Discrimin ation,53AM.BUS.L.J. 607, 623–24 (2016) (trac-

ing discrimination in labor markets); Ale x Reed, NAFTA 2.0 and LGBTQ Employment Dis-

crimination,57AM.BUS.L.J. 5, 6 (2020) (describing discrimination and inequality in the

LGBTQ context).

12

See Gillian B. White, Why the Gap Between Worker Pay and Productivity Is So Problematic,

ATLAN TIC (Feb. 25, 2015), https://www.theatlantic.com/business/archive/2015/02/why-the-

gap-between-worker-pay-and-productivity-is-so-problematic/385931/ (explaining changes

in productivity and pay par tially through an historical lens).

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