United States: State Attorneys General Urge FTC To Consider Labor Issues In Antitrust Enforcement

Last Updated: August 6 2019
Article by Dallin R. Wilson and Dawn Mertineit

A group of 18 state attorneys general (the "AGs") recently filed comments with the Federal Trade Commission ("FTC") in advance of a series of hearings centered on changes to antitrust and consumer protection enforcement in the 21st century. The letter identifies four major areas where recent antitrust activity involving labor issues have occurred: (1) horizontal no-poach agreements between employers; (2) vertical no-poach agreements, particularly franchise agreements; (3) non-compete agreements between employers and employees; and (4) mergers impacting labor markets. Although it may reveal the enforcement priorities of its signatories, the letter's arguments are mostly unsupported by any case law and in some respects are contrary to the Department of Justice's positions on the matters.

First, the AGs argue that naked horizontal agreements between employers to not hire each other's employees reduce competition for labor. They suggest that such agreements are per se illegal under antitrust law and "enforcement of these cases is relatively straightforward." While this is consistent with the position previously espoused by the DOJ and FTC, it is not yet clear under the case law whether such agreements are subject to the per se rule.

The letter also asserts that state enforcers have viewed vertical agreements between a franchisor and a franchisee, whereby the franchisee agrees not to hire employees of other franchisees as per se illegal. However, this contention is directly contrary to the position taken by DOJ which has argued that such agreements should be judged under the rule of reason because they may enhance interbrand competition. Not surprisingly, the letter highlights recent settlements between many of the AGs and various national fast food franchisors to stop the use of no-poach agreements in their franchise agreements. Those cases highlight that state attorneys general have independent authority to enforce both state and federal antitrust, labor, and consumer protection laws, even where the federal government chooses not to act.

With respect to non-compete agreements between employers and employees, the letter points out, as we have covered extensively in recent months, that non-compete agreements are undergoing new scrutiny at the state level. The AGs point to recent legislation in Illinois, Massachusetts, Washington, Maryland, New Hampshire, and New York that have restricted the enforcement of such agreements, in addition to California and Montana's existing bans on non-competes. Notwithstanding this recent attention however, non-competes have largely flown under the antitrust radar and are rarely involved in antitrust litigation, despite the letter's contention that they have "real world economic impact" and should be viewed as an unfair restraint on trade in some instances. By limiting worker mobility, the AGs argue, non-competes harm competition by depriving businesses the opportunity to hire available, qualified workers. The AGs also believe that non-solicitation agreements deserve antitrust scrutiny, particularly when an employer uses such agreements as de facto non-competes to enjoin an employee from taking a position with a competitor.

Although the AGs may advocate that the FTC take such positions, these positions are generally contrary to the way courts have analyzed such claims in the past. For example, the Seventh Circuit has rejected the theory that non-competition covenants contained in an agreement for the sale of a vending machine company violated the Sherman Act or Clayton Act. See Lektro-Vend Corp. v. Vendo Co. 660 F.2d 255 (1981). Likewise, the Third Circuit has held that agreements to restrict the hiring of certain employees upon the former parent's sale of a subsidiary did not violate the Sherman Act. See Eichorn v. AT&T Corp., 248 F.3d 131 (2001).

Lastly, the letter suggests that antitrust laws should be applied to mergers that result in "monopsonization, which means only one or very few buyers of a good or service instead of sellers, as in monopoly." The AGs suggest that a monopsonist employer can depress wages below competitive levels, causing sellers to exit the market, thereby decreasing the quantity of jobs and decreasing output and product quality.

The AGs recommend that the FTC incorporate labor concerns into merger reviews, by looking into whether the merger involves companies with specialized labor needs or are within the same geographic area with a small labor force. The AGs challenge "the traditional view" that layoffs are an efficiency in the merger review, suggesting that savings from employee layoffs are not always passed through to consumers. The AGs also recommend that the FTC should consider using Section 5 of the FTC Act to stop the use of non-compete, non-solicitation, and no-poach agreements "in many situations," particularly those involving low income employees or workers in the "gig" economy.

Although the FTC and DOJ have suggested in recent years that they would begin to put more of an emphasis on labor issues that restrict competition, we are skeptical that the FTC will adopt the letter's recommendations. The 18 AGs almost exclusively come from so-called "blue states" and the current administration is likely to view the letter as more a piece of political advocacy than constructive policy comments. This is particularly true given the focus on the harms to low income employees, where in our experience, very few employers seek to enforce such agreements. That being said, the letter may offer a preview into the enforcement priorities of the AGs and employers in those states should give consideration to the recommendations, especially if they seek to enforce non-compete agreements or may be considering a merger that could that could involve labor issues that might catch the AGs' attention. However, most states' legislative efforts to curb abusive enforcement of non-competes have failed to raise any concerns with antitrust laws, and state enforcement efforts have been limited primarily to the franchise context.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions