DOJ Loses Fourth Consecutive Criminal Antitrust Prosecution in Labor Markets
A Connecticut district court acquitted six defendants of criminal antitrust violations arising out of alleged employee no-poach agreements, marking the first dismissal of a U.S. Department of Justice, Antitrust Division's ("DOJ") criminal antitrust charges as a matter of law since the early 1990s.
In another setback for DOJ's antitrust enforcement agenda in labor markets, a Connecticut federal court held in U.S. v. Patel that no reasonable juror could find the defendants guilty of a no-poach market allocation scheme beyond a reasonable doubt, and prevented the case from going to the jury. This marks the fourth consecutive case in which DOJ failed to secure criminal convictions against companies and executives accused of labor-side antitrust violations, wage fixing, or no-poach agreements.
Citing to Second Circuit precedent and jury instructions in another recent no-poach prosecution, U.S. v. Davita, the court found the alleged agreement had "so many exceptions that it could not be said to meaningfully allocate the labor market of engineers from the supplier companies working on Pratt and Whitney projects."
The court also rejected DOJ's strict application of the per se rule in labor markets and suggested DOJ was trying "to expand the common and accepted definition of market allocation in a way not clearly used before." The court agreed with the defense that DOJ "would not be entitled to present its case to the jury on a per se theory of liability without proving that the alleged agreement was in fact a naked, non-ancillary one."
DOJ charged six executives with a nine-year conspiracy to restrict hiring and recruiting of engineers and other skilled workers between and among Pratt & Whitney ("P&W") and suppliers of outsourced engineers to P&W. Although DOJ alleged both that P&W competed with its outsourcing suppliers for engineering talent and that Patel, a P&W executive at the time, orchestrated the conspiracy, the primary relationship between P&W and its outsourcing suppliers was vertical—as customer and supplier. Most criminal antitrust prosecutions involve conspiracies among competitors.
This case is a significant development for DOJ's enforcement agenda in labor markets. It marks the first dismissal of criminal antitrust charges as a matter of law since the early 1990s and highlights that courts continue to treat no solicitation/no poach agreements differently than traditional hardcore cartel conduct. In holding that DOJ failed to prove the alleged no-poach agreement was not ancillary to P&W's legitimate relationship with outsourcing suppliers, the court imposed an additional hurdle for DOJ that could complicate future no-poach prosecutions.