CPI Antitrust Chronicle: No poach agreements - an economic perspective

Economists Helder Vasconcelos and Pedro Pereira contributed to the recent edition of Competition Policy International’s Antitrust Chronicle, discussing the rising scrutiny of no poach agreements in Europe.

This article was originally published by Competition Policy International here. The views expressed in this paper are the sole responsibility of the authors and cannot be attributed to Compass Lexecon or any other parties.

Abstract

No-poach agreements, wherein competing firms agree not to hire each other’s employees, are potentially illegal under European competition law. This paper examines the rising scrutiny of these agreements in Europe. While the European Commission has not formally investigated any cases, antitrust authorities in Belgium, Portugal, France, Hungary, and Spain have initiated investigations into this type of agreements.

The Portuguese Competition Authority's action against Portuguese Football League Clubs is a notable example discussed. The economic literature acknowledges that no-poach agreements can foster efficiencies by encouraging investments in human capital, reducing labor costs, and enhancing service quality. However, they may also pose significant risks by increasing firms' bargaining power over workers, resulting in inefficient labor market allocations and stifling innovation. Consequently, assessing the impact of no-poach agreements requires a balanced consideration of both their anti-competitive and pro-competitive effects. Our analysis therefore suggests that a case-by-case approach is essential. This approach should take into account the market context, the business models involved, and the distribution of bargaining power between firms and their current and potential workers to determine appropriate regulatory interventions that protect the interests of both consumers and workers.

Read the full article here