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AdC warns companies on anti-competitive agreements in the labor market


AdC warns companies on anti-competitive agreements in the labor market

Acordos no mercado de trabalho
Press release 06/2021
AdC warns companies on anti-competitive agreements in the labor market
The AdC is alerting companies, human resources professionals and recruitment agencies to the need to prevent anti-competitive agreements in the labor market (no-poach), which generate negative effects for employees and consumers.
In the the Issues Paper on "Agreements in the labor market and competition policy", which is subject to public consultation for a period of 30 working days, the AdC alerts to agreements between companies that may occur in the labor market, namely agreements not to hire employees and agreements to fix the wages or other forms of remuneration of employees, which are sanctionable by the Competition Law.
These agreements may generate harm to workers and consumers by impairing the conditions of competition in several dimensions. In its report, the AdC considers that these agreements are likely to infringe Competition Law and, if applicable, the Treaty on the Functioning of the European Union (TFEU).
The report includes a Guide on Good Practices that advises companies to eliminate these types of agreements and to raise awareness among employees, in particular human resources professionals, to competition law.
In the current context, in which promoting economic recovery and employment is a priority and in which workers should not be deprived of the opportunities that an open and competitive labor market can offer them, compliance with competition law contributes to that goal.
It is important to promote a labor market in which employers adopt an independent and competitive behavior, contributing to an efficient allocation of workers, in favor of efficiency and innovation. Both are even more essential in a context of economic recovery.
Labor markets are among the AdC’s competition policy priorities in 2021.
The interactions between competition and the labor market have occupied a prominent place in the recent global discussion on competition policy.
Alongside this debate, empirical studies have pointed to a downward trend in the proportion of the labor factor in the Gross Domestic Product (GDP) and to an increase in the degree of concentration in some industries. The strengthening of the bargaining power of employers vis-à-vis workers has been pointed out as one of the possible explanations for this trend.
On the other hand, companies sometimes establish agreements among themselves to coordinate their strategies in the labor market, such as no-poach agreements or wage-fixing agreements, which may infringe the competition law.
Recently, on April 13, the AdC issued Statements of Objections for a no-poach agreement, regarding the Portuguese Professional Football League (LPFP) and 31 football clubs participating in the 2019/2020 edition of the First and Second Professional Football Leagues.
Anti-competitive agreements in the labor market
Horizontal agreements regarding no-poach and wage fixing may arise in any sector. These agreements are likely to infringe te competition law and, if applicable, the Treaty on the Functioning of the European Union (TFEU, Article 101).
These agreements limit the individual freedom of firms to define their strategic commercial conditions (e.g. hiring and/or setting wage conditions) and may be responsible for adverse effects on the market by introducing inefficiency, limiting production, reducing innovation, discouraging investment in human capital, among others.
Agreements between employers to fix wages and/or other forms of remuneration also create harm for workers and can result in negative effects on competition. On the one hand, these agreements result in lower remuneration than workers would receive in a full competition scenario between firms. On the other hand, they can affect the uncertainty associated with competitive play, and may facilitate other coordinated behavior.
- Non-solicitation and/or non-hiring agreements (no-poach agreements): horizontal agreements by which firms mutually agree not to make unsolicited offers or hire workers without the prior consent of the other firms with whom they have established the agreement.
- Wage-fixing agreements: horizontal agreements by which companies harmonize or standardize the compensation and/or other benefits of their employees.
Good practices
The AdC has issued, alongside the Issues Paper, a set of good practices for firms. In parallel to adopting such practices, firms may report to the AdC when they are aware of evidence that may constitute an anticompetitive agreement in the labor market, either through the Complaints Portal or by accessing the Leniency Program (i.e. a legal regime of exemption or reduction of fines in proceedings for breach of competition rules).
Thus, firms should internally follow the following good practices:
  1. Eliminate no-poach agreements and other similar recruitment practices and/or setting of salary conditions that involve agreements with other companies with potential anti-competitive risks.  Some examples include the following:
  • They should not agree with other firms to refuse to recruit or hire workers from those other firms.
  • They should not agree with other firms on wages and/or other forms of compensation for work by each other's workers.
  • he broad meaning of the term agreement includes other names, such as: "non-aggression pacts", "gentlemen's agreements", "non-angling agreements", "non-solicitation agreements", "agreements to fix wages or other conditions", "sharing of human resources information".
  • They should not participate in meetings, such as business association meetings, where other companies are present and where the imposition of restrictions on mobility and/or conditions of employment of each other's workers is discussed.
  • They must not exchange information with other companies on the terms of employment, policy for recruiting and hiring workers, and the terms and policy on wages and/or other forms of compensation for employees.

2. Raising awareness for competition law among employees, in particular human resources professionals:

  • Alerting to a number of agreements or other practices, such as those described above, to the extent that they are likely to violate competition law and, if applicable, the TFEU, and generate harm to employees and competition.
  • Promoting, internally, the adoption of these good practices and disseminating them among all employees at all hierarchical levels.
Public Consultation
The AdC submits the Issues Paper to public consultation, in the scope of which, any interested party may submit comments and/or exhibitions concerning the documents, within a period of 30 working days (until June 9), to the email address.
Comments must identify the interested party, its postal address, e-mail, telephone or fax numbers. In the absence of a non-confidential version and reasons for confidentiality, comments will be made public.