On April 3, the Department of Justice (DOJ), in the context of a settlement with rail equipment companies Knorr-Bremse AG (Knorr) and Westinghouse Air Brake Technologies Corporation (Wabtec), removed any lingering doubt that the Trump Antitrust Division will adhere to the Obama administration’s 2016 guidance on no-poaching agreements. The circumstances of the investigation and terms of the settlement forecast how the division may prosecute such conduct in the future.
“No-poaching” agreements are those in which companies agree not to solicit or compete for each other’s employees. Traditionally, the division has pursued companies for non-solicitation agreements, if at all, through civil enforcement actions rather than criminal prosecutions. That changed in October 2016, when the Obama DOJ and Federal Trade Commission issued new HR Antitrust Guidance explaining that the agencies would thereafter treat “naked” agreements between employers not to hire or actively solicit employees like they treat other hardcore anticompetitive agreements (e.g., price fixing): as per se illegal antitrust violations subject to criminal prosecution.
The HR Antitrust Guidance also discussed what would be considered such a naked restraint, explaining that non-solicitation agreements can be appropriate when reasonably related to furthering a broader legitimate collaboration, such as a joint venture or a proposed merger or acquisition. These types of agreements are not illegal per se, but are instead evaluated under the rule of reason, which traditionally does not provide the basis for a criminal prosecution.
As a matter of antitrust theory, the rationale adopted by the agencies is clear. Antitrust principles treat seller power and buyer power symmetrically. Thus, an agreement between sellers to allocate customers is no different in kind than an agreement between “buyers” of labor to allocate employment opportunities, a point that the DOJ made directly in last week’s settlement. Like agreements to fix prices or divide markets, no-poaching agreements are facially anticompetitive—they harm workers by reducing competition for their services.
On several occasions, the current division has declared that it would continue the approach adopted in the HR Antitrust Guidance. Andrew C. Finch, first in a September 12, 2017 speech at the Global Antitrust Enforcement Symposium (while serving as acting assistant attorney general), and more recently in a January 23, 2018 speech at the Heritage Foundation (in his capacity as principal deputy assistant attorney general), emphasized that the division will continue to enforce the guidance. Also in January, Assistant Attorney General Makan Delrahim announced that the division was currently pursuing several criminal no-poaching cases (although there has been no follow-up information on the nature of these investigations or the identity of the target companies). In their public statements, both Delrahim and Finch made clear that criminal enforcement under the HR Antitrust Guidance would be limited to those no-poaching agreements “that began after the date of that announcement, or that began before but continued after that announcement.”
United States v. Knorr-Bremse
According to settlement documents filed by the division, rival rail supply companies Knorr (a private German company with several US subsidiaries), Wabtec (based in the United States, and the world’s largest provider of rail equipment), and a third company—Faiveley Transport SA (Faiveley)—that Wabtec later acquired in November 2016, entered into various pervasive and unlawful agreements not to solicit each other’s employees. These agreements were unrelated to any legitimate business collaboration, and therefore exemplify naked no-poaching restraints. The DOJ found the Knorr-Wabtec agreements especially concerning given the high demand for and a limited supply of skilled and experienced rail workers, making months-long vacancies common. The alleged agreements affected recruiting across multiple jurisdictions, corporate entities, and job types. The settlement documents cite letters and conversations over a period of several years in which senior executives at the companies agree not to solicit each other’s employees, or in some cases not to hire employees from each other without prior approval. In some instances, a company allegedly refused to consider an otherwise qualified applicant solely because he worked for the other party to the no-poaching agreement. The division also alleged that after the agreements’ inception, the companies actively monitored each other’s behavior to ensure mutual adherence.
The division explained why these circumstances were handled as a civil, not criminal, matter: “[i]n an exercise of prosecutorial discretion, the department will pursue as civil violations no-poach agreements that were formed and terminated before the announcements [that the division intended to bring criminal charges against companies who entered no-poach agreements] were made.” Even so, the settlement provides a first view into the types of terms the division would seek in any criminal prosecution of no-poaching agreements.
First, the consent decree suggests certain factors the division may find relevant in determining whether a no-poaching agreement is reasonably related to a broader business arrangement, as opposed to a naked restraint. If the terms of this consent decree are any indication, to qualify as a no-poaching agreement not subject to the guidance companies will need to (1) memorialize the agreement in writing; (2) specifically identify the corresponding legitimate business arrangement to which the non-solicitation agreement is related; (3) narrowly tailor the agreement’s terms so that they affect only employees that will likely be involved in the broader collaboration; (4) identify “with reasonable specificity” the employees who are subject to the agreement; and (5) set a specific date or event that triggers termination of the agreement.
Second, the consent decree suggests that the DOJ will require significant affirmative compliance-related conduct as part of any criminal resolution. The decree’s compliance requirements include appointing an antitrust compliance officer tasked with briefing US employees and management on the decree’s meaning, prominently advertising the settlement to the rail supplier industry, reporting any potential violation of the consent decree to the DOJ, and cooperating with any future DOJ investigation of no-poaching agreements related to the defendant companies. The decree also permits the DOJ to monitor defendants’ compliance by inspecting their financial records and interviewing their employees.
Although the settlement clarifies many points, it is difficult to predict how the DOJ will proceed against no-poaching agreements formed outside the United States, a topic on which the HR Antitrust Guidance and subsequent speeches by division officials have been silent. The consent decree in this action expressly prohibits no-poaching agreements that apply to US candidates for hire anywhere and non-US candidates for hire in the United States. It does not address no-poaching agreements that apply to non-US candidates for hire outside the United States, even though such agreements may impact wages in the United States (of course, some of the underlying conduct that triggered the investigation may have also involved hiring foreign employees for foreign positions). It is important to note, however, that other per se antitrust offenses committed abroad but affecting the United States are still under the jurisdiction of US courts and antitrust enforcement agencies, subject to statutory limitations and considerations of comity.
The Knorr-Bremse settlement substantially advances our understanding of the Trump Antitrust Division’s position on no-poaching agreements. It demonstrates the division’s commitment to the Obama-era guidance on no-poaching agreements. It cements the line between pre-October 2016 conduct against which the DOJ will proceed civilly and post-October 2016 conduct, which will be subject to criminal prosecution. And it offers valuable guidance on the circumstances in which non-solicitation agreements will be analyzed under the rule of reason.
 Agency scrutiny of non-solicitation agreements is a relatively recent phenomenon. In the past five years, however, the DOJ has reached settlements over no-poaching allegations with a number of technology companies. See Complaint, United States v. eBay, Inc., No. 12-cv-5869 (N.D. Cal. Nov. 16, 2012); Complaint, United States v. Lucasfilm Ltd., No. 10-cv-2220 (D.D.C. Dec. 28, 2010); Complaint, United States v. Adobe Sys., Inc., No. 10-cv-1629 (D.D.C. Oct. 1, 2010).
Antitrust Guidance for Human Resource Professionals (Oct. 2016), available at https://www.justice.gov/opa/pr/justice-department-and-federal-trade-commission-release-guidance-human-resource-professionals.
 Competitive Impact Statement at 9, United States v. Knorr-Bremse AG, No. 18-cv-0747 (D.D.C. Apr. 3, 2018) (“Market allocation agreements cannot be distinguished from one another based solely on whether they involve input or output markets. Nor are labor markets treated differently than other input markets under antitrust law”).
 For a discussion of the analytical and practical similarities between buyer and seller anticompetitive conduct in the merger context, see Jonathan Sallet’s Buyer Power in Recent Mergers, published in Antitrust magazine, Vol. 32, No. 1, Fall 2017.
 Proposed Final Judgment at 4, Exhibit A to Stipulation and Order, United States v. Knorr-Bremse AG (D.D.C. Apr. 3, 2018).
 Competitive Impact Statement at 7 (“As alleged in the Complaint . . . a high-level . . . executive directed [Wabtec’s] recruiters in the United States and other jurisdictions to raid Faiveley for high-potential employees”).
 For a more detailed discussion of US antitrust law’s international reach, see Tracy Huang’s “Will the Real Conflict Please Stand Up: International Comity on the Supreme Court Stage,” (Apr. 3, 2018), available at steptoeantitrustblog.com/2018/04/internationalcomityatscotus.