AdC issues Statements of Objections for anticompetitive agreement in the labour market for the first time

​Press Release 04/2021

 AdC issues Statements of Objections for anticompetitive agreement in the labour market for the first time

The AdC (Portuguese Competition Authority) has issued for the first time Statements of Objections for an agreement not to hire workers, in this case involving the Portuguese Professional Football League and 31 sports companies.
 
This is the first decision regarding an anti-competitive practice in the labour market, that may occur in any sector of activity and is punishable under the Competition Law.
 
The AdC issued Statements of Objections to 31 sports companies participating in the 2019/2020 edition of the First and Second Leagues and the Portuguese Professional Football League (LPFP) for a competition restrictive agreement.
The agreement prevented the hiring by First and Second League of professional football clubs, of players who unilaterally terminated their employment contract invoking issues caused by the Covid-19 pandemic.
 
As a result of this agreement, a player who ceased his contract mentioning pandemic-related reasons could not be hired by another club in the First or Second Professional Football Leagues in Portugal, and could only be hired by a club if it was located outside of Portugal or if it participated in a competition below the two main professional leagues in Portugal.
 
Through a non-hiring (no-poach),  agreement companies abstain from hiring each other's workers, therefore renouncing to competition for the acquisition of human resources, in addition to depriving workers of labour mobility.
 
In the present case, the agreement is able to reduce the quality of football matches and thereby to harm consumers by reducing the competitive environment between clubs, preventing the hiring of players that could fill gaps in teams, and resulting in the loss of players in national competitions.
 
The case was opened by the AdC in May 2020, following two press releases issued by the LPFP on 7 and 8 April which referred to a deliberation/decision, adopted by agreement between the First League clubs, with the participation of the President of the LPFP, and to which the Second League clubs adhered.
 
This deliberation/decision stated that clubs would not hire players who unilaterally terminated their employment due to issues caused by the Covid-19 pandemic.
Given the nature and characteristics of the behaviour, as well as the potential damage, serious and irreparable, or of difficult reparation, arising from it for the competitive functioning of the markets, the AdC determined, the implementation of interim measures on 26 May, 2020.

The AdC stresses that the adoption of a Statement of Objections does not determine the final outcome of the investigation. At this stage of the case, the companies concerned are given the opportunity to exercise their right to be heard and to defend themselves in relation to the alleged infringement and the sanction or sanctions they may incur.
 
The Statement of Objections was issued on April 13, 2021.
 
 
What are “no-poach” agreements?
 

No-poach agreements are horizontal agreements between companies, whereby they agree not to make spontaneous offers or to hire each others’ workers.

These agreements can occur in any sector of the economy and are punishable under the terms of the Portuguese Competition Act, since they limit the firms’ individual freedom to strategically define their commercial conditions, in this case, the hiring of human resources.

No-poach agreements have an impact on labour markets and lead to a reduction in workers' bargaining power vis-à-vis employers. To that extent, no-poach agreements have the potential to reduce the level of workers’ wages, as well as depriving workers of labour mobility.
 
The topic has taken greater visibility in the decision-making practice of several competition authorities at an international level including, among others, the cases that involved several technological undertakings.
 
This type of agreement can also have effects on downstream product markets, namely by introducing inefficiency and distorting the allocation of labour, by limiting the quantity and/or the quality of products and services, as well as by limiting innovation in sectors where labour mobility is a relevant element in the downstream innovation process. To that extent, no-poach agreements can have negative effects on the competitive conditions and efficiency in the market, to the detriment of consumer welfare.

 

April 16, 2021