No Poaching

There have also been no-poach agreements to restrict skilled employees. In September 2010, the Justice Department filed a civil antitrust complaint against Adobe Systems, Apple, Google, Intel, Intuit, and Pixar alleging they had made agreements among themselves to place their employees on "no call" lists so they would not recruit employees from one another. In the settlement, the companies agreed to stop these agreements for at least five years. Later, Apple, Google, Intel, and Adobe's employees won $415 million in a class-action lawsuit against them for their no-poaching practices. Noncompete clauses are illegal in California, so tech companies allegedly resorted to such agreements to try to keep their talent.

More recently, Duke University paid $54.5 million in a class-action suit over an alleged agreement with the University of North Carolina not to hire each other's faculty. The Justice Department participated in support of the plaintiffs.

The matter of the franchise no-poach agreements in particular is slightly more complicated because there are subtleties to what could be illegal versus legal agreements. For example, if two firms have some sort of joint venture and poaching would get in the way of that, a no-poach agreement might be lawful. Naked no-poach agreements would be treated as per se illegal — that is, inherently illegal, with factors such as intent not taken into account — while cases where a no-poach agreement could actually help competition would be reviewed under the "rule of reason," in which harms are weighed against benefits.

In several recent fast-food franchise cases, the Justice Department weighed in by filing a memorandum with the court stating its position that in the context of franchises, no-poach agreements should be judged under the rule of reason. According to an article by Nicole Castle and Matt Evola of the law firm McDermott Will & Emery, the Justice Department seemed to reason that no-poach agreements between parent companies and franchisees might help competition because they help promote brands and maintain brand quality, thus improving competition between brands even if they reduce competition within brands.

On the other hand, FTC Chairman Joseph Simons does not see the competitive benefits of such agreements. In a December 2018 interview with GCR USA, he stated, "The FTC doesn't see what the benefits of a non-compete agreement are when there is no highly skilled labour involved. There doesn't seem to be any efficiency benefit, so outlawing that would seem not to have a cost to it; actually it might have a benefit." He did not, however, think it likely that such agreements violate antitrust laws, because the franchises do not have enough market power to limit competition; an employee could always quit and start working for another franchise.

The cost of a violation could be high. In a criminal Sherman Act case, a company can face criminal penalties of up to $100 million, while individuals can face penalties of up to $1 million and up to 10 years in prison — and that's before any civil actions.