DOJ Announces First No-Poaching Settlement

On April 3, 2018, the Department of Justice’s Antitrust Division announced the first no-poaching antitrust settlement of the Trump Administration. Previously, senior DOJ officials had made public comments indicating that the DOJ intends to aggressively police no-poaching agreements, including via criminal prosecutions.

According to the DOJ, the antitrust conspiracy involved two of the world’s largest rail equipment suppliers: Knorr-Bremse AG and Westinghouse Air Brake Technologies Corporation (Wabtec). A third company, Faiveley Transport S.A. was also involved. Wabtec acquired Faiveley in 2016.

Beginning in 2009, Knorr and Westinghouse maintained unlawful agreements not to compete with each other for employees. For example, in a letter dated January 28, 20019, a Knorr director wrote to a senior executive at Wabtec: “You and I both agreed that our practice of not targeting each other’s personnel is a prudent cause for both companies. As you so accurately put it, we compete in the market.” In 2011, Knorr reached the same agreement with Faiveley. In 2014, Faiveley and Wabtec entered the same pact.

Assistant Attorney General Makan Delrahim offered the following statement: “The unlawful no-poach agreements challenged today restrained competition for employees and deprived rail industry workers of important opportunities, information, and the ability to obtain better terms of employment. Today’s settlement will restore competition for employees in the U.S. rail industry.”

Consistent with the foregoing, the DOJ views no-poaching agreements as naked restraints of trade that are per se illegal. Such restraints serve no legitimate business purpose and are solely intended to eliminate competition, restrict employee mobility and suppress wages.

Immediately following these revelations, antitrust giant Michael Hausfeld and his namesake firm – Hausfeld LLP – filed a class action antitrust lawsuit against Knorr and Wabtec. The lawsuit, filed in the U.S. District Court for the Western District of Pennsylvania, seeks damages for lost wages and lost job opportunities on behalf of thousands of workers impacted by the conspiracy. As many will recall, the California no-poaching class action against Apple, Google, Intel and others resulted in a massive settlement of $415 million. The case is worth watching.

The takeaways:

1. Smoking Guns: Somewhat surprisingly, billion dollar companies are still dumb enough to agree to antitrust conspiracies in writing. In spite of widespread corporate efforts to destroy evidence and cover up their illegal conduct, there are still cases where the proverbial smoking gun does, indeed, exist.
2. DOJ Enforcement: The DOJ did not pursue criminal charges against Knorr and Wabtec. But the Department’s decision to forgo criminal prosecution in this specific instance should not be viewed as a signal that such prosecutions are not forthcoming. At this point, market actors are on notice. I expect actual criminal prosecutions for no-poaching conspiracies in the next year.
3. Beyond No-Poaching Agreements: Corporate misconduct in this arena goes beyond no-poaching agreements. Other per se antitrust violations include horizontal non-compete agreements and wage fixing conspiracies. On a related front (although admittedly outside of the per se framework): Abuse of unenforceable non-compete agreements by monopolists. That’s a problem I’ve been working on for years.

Jonathan Pollard is a competition lawyer based in Fort Lauderdale, Florida. He has appeared in Bloomberg, the Wall Street Journal, Inc. Magazine, FundFire, Law360, on PBS NewsHour and more. His office can be reached at 954-332-2380.