I. About This Article
Labour markets and antitrust law are no longer completely separate areas. For many years, competition law enforcement mainly focused on consumer welfare. Authorities looked at prices of products, fuel, services, supply conditions and consumer choice on the market.
However, in recent years, European competition law has increasingly moved in a new direction – protection of competition in labour markets.
One of the most important examples is the Delivery Hero and Glovo case, where the European Commission imposed a significant fine on the companies, including for restrictions related to employee poaching and employment-related arrangements.
This issue is particularly important for businesses because many companies still view HR practices only through the lens of labour law. In reality, an agreement between competing companies not to hire each other’s employees, to set wage caps or to exchange sensitive employment-related information may be assessed as a violation of competition law.
In this article, we discuss what a no-poach agreement is, why it has become a focus of antitrust enforcement, what the Delivery Hero/Glovo case means, what risks may arise in HR practice and what businesses should do to reduce these risks.
II. How Is the Traditional Focus of Competition Law Changing?
The traditional purpose of competition law is often associated with consumer welfare. In practice, this meant that competition authorities focused on price increases for consumers, reduced choice, lower quality or restrictions on innovation.
Under this approach, the main attention was given to how companies sell products or services on the market.
However, in the modern economy, competition does not occur only at the stage of selling to consumers. Companies also compete with each other for talent. This is especially relevant in technology, courier and platform economy sectors, construction, energy, sports, professional services and other industries where attracting qualified employees is part of a company’s competitive advantage.
If competitors agree not to hire each other’s employees or not to increase wages above a certain level, this restricts employee choice, reduces competition in the labour market and may artificially suppress remuneration.
For this reason, competition law is gradually entering a stage where its focus is not only the consumer, but also the employee.
III. What Is a No-Poach Agreement?
A no-poach agreement is an agreement under which two or more companies undertake not to solicit, hire or recruit each other’s employees.
Such an agreement may be direct or indirect.
A direct form exists where companies expressly agree, in writing or orally: “We will not hire your employees, and you will not hire ours.”
An indirect form may appear in a partnership, franchise, distribution, outsourcing or other commercial agreement that contains a clause restricting the transfer, recruitment or hiring of employees.
In many business cultures, such clauses are often perceived as a mechanism for protecting “collegiality”, “partnership ethics” or “staff stability”. However, from a competition law perspective, the problem is that such an agreement may restrict competition in the labour market.
Companies should compete with each other not only through products, prices and quality, but also through working conditions, remuneration and the ability to attract talent. A no-poach agreement restricts exactly this competitive process.
IV. Delivery Hero and Glovo – Why Is This Case Important?
The Delivery Hero and Glovo case is one of the turning points in European competition law.
The European Commission fined the companies for participating in a cartel in the online food delivery sector. One of the important elements of the case was the restriction on employee poaching.
According to the Commission’s assessment, the companies reduced competitive pressure through cooperation. The arrangements concerned not only commercial issues, but also restrictions related to the labour market.
The importance of this case is that the European Commission clearly showed that restricting competition in the labour market may be treated as an antitrust infringement.
This message is not limited to courier or food delivery businesses. It is relevant for any company that deals with competitors, partners or other market players in matters involving employee recruitment, wage-setting or HR-related information.
V. No-Poach Agreements and Wage Caps
Antitrust risks in labour markets are not limited to restrictions on employee poaching.
Another important risk is wage-fixing or agreeing on wage caps. If competing companies agree that they will not pay more than a certain amount to a specific category of employees, this may be treated as price-fixing in the labour market.
Price-fixing in product markets is a classic cartel behaviour. Similarly, in labour markets, wages may be seen as the price of labour. Therefore, an agreement between competitors on wage levels or wage limits creates serious antitrust risk.
Such an agreement harms employees because it limits their ability to obtain better remuneration. At the same time, it restricts healthy competition between businesses for qualified personnel.
This means that an HR policy which may initially appear to be only an internal management issue can become a competition law matter where competitors coordinate or exchange sensitive information.
VI. The Portuguese Football Clubs Case – From Sports to General Business
No-poach agreements have also become relevant in the sports sector.
In Portugal, during the pandemic, professional football clubs entered into an agreement under which they refused to recruit each other’s players. The matter was also considered by the Court of Justice of the European Union.
The importance of this case goes beyond sport. If restrictions on the recruitment of players between football clubs may be assessed under competition law, the same logic may also apply to other sectors: technology, construction, courier services, energy, professional services and other industries.
In the labour market, an employee is not only an employee. An employee is also a resource for which companies compete. Therefore, an agreement restricting this competition may create legal risk.
VII. Dawn Raids and Labour Market Agreements
The European Commission has not expressed its attention to labour market agreements only through fining decisions.
In the data centre construction sector, the European Commission carried out unannounced inspections, known as dawn raids, to investigate possible no-poach agreements.
A dawn raid is a surprise inspection conducted by a competition authority at a company’s premises in order to obtain evidence of possible anticompetitive conduct.
This shows that labour market agreements are no longer only a theoretical risk. Competition authorities are actively reviewing company communications, contracts, emails, meeting notes and other documents that may indicate agreements on employee poaching restrictions or wage limitations.
The key message for businesses is simple: HR matters may become the subject of competition authority inspections.
VIII. Why Is This Important for Georgia?
Georgian competition law largely follows European approaches in substance. This is especially visible in areas where Georgian legislation and enforcement practice are gradually moving closer to EU standards.
Therefore, it cannot be excluded that labour market agreements may also become a competition law issue in Georgia in the future.
However, Georgian legislation contains one important provision. Under Article 1(4)(a) of the Law of Georgia on Competition, the law does not apply to labour relations.
This provision may, in certain cases, be used as an argument that issues related to labour relations fall outside the scope of competition law.
However, the issue is not that simple. A no-poach agreement is often not merely a labour relationship between an employer and an employee. It may be an agreement between competing companies that restricts competition in the labour market.
For this reason, relying only on the provision that competition law does not apply to labour relations is not a safe strategy for businesses — especially where the issue concerns an agreement between competitors or exchange of sensitive HR information.
IX. What Risks May Georgian Businesses Face?
For Georgian businesses, the risk of no-poach agreements may arise in several forms.
The first risk is an informal agreement with competitors that companies will not recruit each other’s employees. Such an agreement may be reached at a meeting, industry event, association format or through direct communication.
The second risk is exchange of wage-related information. For example, if competitors share exact remuneration data for specific positions and use this information to align wages or set limits, this may become problematic.
The third risk is a no-poach clause included in partnership agreements. For example, a service, outsourcing, distribution or other agreement may contain a clause stating that the parties will not “take” each other’s employees. In some cases, such a clause may serve a legitimate interest, but broad and general wording may create antitrust risk.
The fourth risk is exchange of HR data within industry associations. If association members discuss wages, bonuses, talent shortages or recruitment practices, such communication must be strictly controlled.
X. How Should Businesses Prepare?
Businesses should assess labour market antitrust risks as part of HR compliance.
The first step is to review HR policies and internal practices. A company should check whether there are any informal arrangements with competitors regarding employee poaching, wage caps or hiring practices.
The second step is to control communication with competitors. Any discussion about wages, bonuses, employee recruitment, talent shortages or employment strategy may be sensitive.
The third step is to review contracts. No-poach clauses in partnership, service, outsourcing, franchise or other agreements should be assessed individually.
The fourth step is to create an information exchange protocol. If a company participates in industry associations or market surveys, there should be clear rules on what type of HR information may be exchanged and in what form.
The fifth step is training for employees and management. Competition law violations often occur not through an intentional cartel, but through careless communication.
XI. Is a No-Poach Clause Always Prohibited?
The legal assessment of a no-poach clause always depends on its content, purpose, scope and the relationship between the parties.
In some cases, a restriction on employee poaching may have a legitimate commercial purpose. For example, if two companies cooperate on a specific project and one party needs protection against the other party directly recruiting key employees assigned to that project, the restriction may be justifiable if it is narrow, temporary and proportionate.
The problem arises when the clause is broad, indefinite, applies to all employees, is not connected to a specific project or effectively serves to allocate the labour market between competitors.
Therefore, businesses should not use standard and general no-poach clauses without legal assessment. Each such clause should be reviewed from both labour law and competition law perspectives.
XII. How TB Legal Can Help
TB Legal assists businesses in assessing labour market antitrust risks, reviewing HR compliance, developing rules for communication with competitors and analysing no-poach or similar clauses in partnership agreements.
Our services include contract review, assessment of HR policies, preparation of information exchange protocols, competition law training and prevention of risks related to labour market practices.
This issue is particularly important for companies operating in competitive sectors, participating in industry associations, cooperating with competitors on specific projects or frequently using no-poach clauses in commercial agreements.
For more information about competition law matters, see our service page: Competition Law Services in Georgia.
For more information about labour law matters, see our service page: Labour Law Services in Georgia.
XIII. Conclusion
The labour market is no longer fully separate from competition law.
European practice shows that agreements between competitors on employee recruitment, wage limits or exchange of HR information may be assessed as antitrust infringements.
The provision in Georgian legislation stating that competition law does not apply to labour relations does not fully protect businesses where the issue concerns an agreement between competing companies and not merely a relationship between an employer and an employee.
Therefore, businesses should view HR matters not only from the perspective of labour law, but also from the perspective of competition law.
Contact TB Legal if you want to review your company’s HR policy, partnership agreements or rules of communication with competitors from the perspective of antitrust risks. We will help you identify risks and develop legally safe practices.
XIV. Sources Used
This article is based on the following sources:
- European Commission practice in the Delivery Hero/Glovo case.
- European Commission practice on dawn raids related to no-poach agreements.
- Court of Justice of the European Union practice concerning no-poach agreements between Portuguese football clubs.
- Law of Georgia on Competition.
- TB Legal’s practical experience in competition, labour and business law.
Disclaimer
This article has been prepared for general informational purposes only and does not constitute individual legal advice or a legal opinion. Assessment of no-poach agreements, HR compliance, exchange of information with competitors and labour market antitrust risks depends on the wording of the specific agreement, the relationship between the parties, market structure, content of communication and factual circumstances of the case.
In a specific case, it is recommended to obtain an individual legal assessment from a qualified lawyer.
