What Should HR Know About Antitrust Laws?
In 2011, the Department of Justice filed a lawsuit against Adobe, Apple, Intel, Google, and Pixar because they agreed not to solicit any of each other’s employees.
This no poaching agreement reduced the ability of the companies to compete for workers and limited their employee’s exposure to better job opportunities, which is ultimately unfair to workers.
Their agreement received so much heat because its anti-competitive nature made it a direct violation of antitrust law.
What Are Antitrust Laws?
Antitrust laws were created to break up large trusts and promote healthy economic competition. By banning monopolization and regulating acquisition, antitrust laws allow for entry of new competitors into the market.
The Federal Trade Commission (FTC), which works to protect America’s consumers, highlights three core federal antitrust laws: The Sherman Act, The Federal Trade Commission Act, and The Clayton Act.
These acts collectively ban practices that are considered harmful to the economy because of their anti-competitive nature. Banned practices include, but are not limited to:
- Monopolization or conspiracy to monopolize
- Unreasonable restraint on trade
- No-poaching agreements
- Exclusive contracts that reduce competition
- Arrangements among competing individuals/business to fix prices
- Predatory pricing that drives competitors out of business
- Agreements to rig bids
- Agreements to divide markets
- Unfair or deceptive methods of competition
- Mergers and acquisitions to lessen competition/monopolize the market
- Discriminatory prices, services, and allowances in dealing between merchants
What Red Flags Should HR Watch Out for When It Comes to Antitrust Laws?
As an HR professional, one of your responsibilities is to ensure your organization is complying with federal and state laws. Violations of antitrust laws could subject your organization to criminal or civil liabilities.
Typically, the red flags are most visible when dealing with employers that compete with your organization to hire or keep employees. Because you are regularly involved in hiring processes, you are in the best position to ensure compliance.
According to the FTC, the following situations could indicate a potential violation of antitrust law:
- An agreement among competing employers not to recruit certain employees or not to compete on terms of compensation
- An agreement to limit or fix terms of employment in a way that restrains individual firm decision about salaries and/or benefits
- Sharing sensitive information with competitors
- Receiving documents that contain another company’s internal data about employee compensation
- If you or your colleagues discuss topics like the above with employees of other companies at social events or in other settings
Let’s look at the following scenario:
Lauren and her friend Martha are both HR leaders at competing companies in the construction industry. Over coffee one Saturday, Lauren complains to Martha about how employee wages have soared and become unmanageable. Martha suggests holding a meeting with other construction industry leaders in the area and coming up with a pay scale for all employees.
Is this legal? What Martha suggests is a direct violation of antitrust law because she wants to fix wages among competitors. The FTC would also say that the mere invitation to participate in such an agreement would be considered illegal.
Even though Lauren and Martha are friends outside of work and discussed their frustrations in a non-professional setting, what Martha proposes would restrain individual firm decisions about wages, which violates antitrust law. Lauren should refuse Martha’s request.
Check out the FTC’s Antitrust Guide For Human Resource Professionals for more antitrust violation scenarios.
What Are the Penalties for Violation of Antitrust Law?
Violating antitrust laws comes with hefty criminal penalties. The Sherman Act imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual. Executives could also face up to 10 years in prison.
The Federal Trade Commission (FTC) also states that the fine may be increased to “twice the amount the conspirators gained from the illegal acts or twice the money lost by the victims of the crime, if either of those amounts is over $100 million.”
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Especially in the construction and skilled trades sectors, HR professionals at many small...