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Clifford Chance

Clifford Chance
Antitrust/FDI Insights<br />

Antitrust/FDI Insights

US Department of Justice Faces Additional Setback in Criminal Antitrust Labour-Market Prosecutions

A recent acquittal in a criminal antitrust case marks another setback to the US Department of Justice's effort to use criminal prosecutions to address alleged anticompetitive conduct in labour markets.

A criminal jury trial of six aerospace executives charged with violating federal antitrust law came to an end on April 28, 2023, when the judge overseeing the case granted the defendants' motion for acquittal.

The indictment, filed in the United States District Court for the District of Connecticut by the Antitrust Division of the US Department of Justice ("DOJ"), alleged that the defendants had agreed "to restrict the hiring and recruiting of engineers and other skilled-labor employees," an agreement that it alleged should be adjudged as a per se unlawful restraint of trade in violation of Section 1 of the Sherman Act. Unlike a rule of reason analysis, which weighs the procompetitive benefits of an agreement against the alleged harms, per se treatment deems an agreement outright illegal if proven.

Before trial, the defendants had moved to dismiss the indictment, arguing, among other defenses, that the indictment had not alleged any agreement that was per se illegal. The judge denied that pretrial motion in December 2022, stating that "agreements to not hire competitors' employees could constitute employee allocation such that the per se rule applies." The judge added the caveat that "not all no poach agreements are market allocations subject to per se treatment and therefore, determining whether a no poach agreement is a market allocation is highly fact specific."

On April 24, immediately following the close of the government's case-in-chief, the defendants moved jointly for acquittal under Federal Rule of Criminal Procedure 29, which requires the court to enter a judgment of acquittal if the "evidence is insufficient to sustain a conviction." The court granted the defendants' motion after several days of briefing and argument. Due to the constitutional protection against double jeopardy, the DOJ can neither appeal the judge's ruling nor retry the case.

The court held that even assuming the defendants had made an agreement to restrict hiring that "constrain[ed]" job applicants "to some degree, it d[id] not allocate the market for engineers or other skilled laborers from the supplier companies . . . to any meaningful extent," and thus was "not a market allocation agreement as a matter of law." Based on the evidence at trial, the court found that there was regular movement of employees between the companies notwithstanding any agreement among the defendants. Thus, there were too many exceptions to any agreement for it to constitute a meaningful allocation of the market for labour among the defendants. The judge concluded that the facts showed that "no reasonable juror could conclude that there was a cessation of meaningful competition in the allocated market." In responding to the government's objection, the judge stated that "[i]f anything, the Government has tried to expand the common and accepted definition of market allocation in a way not clearly used before," and quoted a precedential case for the statement that courts "are obligated to construe criminal statutes narrowly so that Congress will not unintentionally turn ordinary citizens into criminals."

The judge's ruling is the DOJ's fourth straight loss attempting to criminally prosecute labour-market antitrust cases before a jury. The first two of these losses, occurring in April 2022, were the first-ever criminal jury trials in the US for alleged wage-fixing and labour market allocation. The third loss occurred in March 2023 in a case where the DOJ alleged that the defendants had engaged in wage-fixing and allocated a labour market through no-hire agreements. In each of these cases, defendants argued that the DOJ had failed to prove a per se illegal agreement, either because the agreement at issue did not allocate a market for employees or because the parties had not actually reached an agreement to restrict hiring at all. The DOJ's only other case in this area, against a healthcare staffing firm and one of its executives, never went to trial; the government secured a guilty plea from the company and a pretrial diversion agreement from the individual. As of March 8, 2023, DOJ is still litigating two criminal prosecutions for alleged antitrust violations in labour markets, one alleging no-poach violations, the other alleging wage-fixing.

Although DOJ has yet to issue any public comments on the order of acquittal, the leadup to the trial saw DOJ attorneys continue to express the agency's commitment to bringing criminal prosecutions whenever the agency believes that the facts and the law establish a criminal antitrust violation in labour markets. Assistant Attorney General Jonathan Kanter, head of the Antitrust Division, stated in a March 2023 speech that the agency's labour-market prosecutions were "righteous cases" addressing "real harms." Officials emphasized that they saw these cases as victories in the sense that, in each case, the respective judges had agreed with the agency on the general principle that wage-fixing and no-poach agreements among competing employers can rise to the level of a criminal antitrust violation.

The outcome in this case, however, may give the government a new perspective. Because the defendants in this case were not acquitted by a jury verdict but by a judicial order, with a corresponding opinion supporting the reasoning for the order, the ruling in the present case has more far-ranging legal implications than the DOJ's previous losses. Although the court's opinion explaining its acquittal decision will not become binding precedent, it may provide a roadmap for future criminal defendants facing charges of allocating a labour market. Specifically, the judge appeared to be troubled by DOJ's argument that, given that it was prosecuting the defendants for a per se illegal violation, the DOJ only needed to show that the defendants entered into an agreement without properly defining a relevant market or proving that the agreement had anticompetitive effects. The judge's opinion also demonstrated skepticism about whether criminal prosecutions were appropriate to address labour restraints like no-poach agreements.

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