European Commission Launches Series of Antitrust Inspections, Reports Interest in No-Poaching Agreements | Wilson Sonsini Goodrich & Rosati

On October 12, 2021, the European Commission (EC) announced that it had carried out surprise inspections of companies active in the pulp sector due to suspected cartel behavior. The following week, on October 22, 2021, Margrethe Vestager, head of the European Competition Authority, said publicly that this was “just the start of a series of raids that we are planning for the months to come. “.1 The EC kept its promise only three days later, with the early morning raid of animal health company Zoetis in Belgium for abuse of dominant position (i.e. monopolization).

The EC actually started the series in June 2021 with a surprise inspection of a German clothing company over suspicion of cartel behavior, the first in two years and since the COVID-19 outbreak. On this occasion, the EC also reversed its long-standing policy of only confirming inspections once made public, as it issued a press release regarding the inspection before the news was made public. Other national competition authorities in France, Greece, Hungary, Norway, Poland, Portugal, Romania and Slovenia have also announced similar inspections in summer 2021 in various sectors.

Unannounced inspections of company premises (or dawn raids) have long been an essential tool used to detect and prosecute cartels and other types of antitrust violations. They allow the EC and national competition authorities to search company premises, seize key evidence and question the employees concerned. However, dawn raids became less frequent as a result of several ‘mega-cartels’ between 2013 and 2017 in the finance, auto parts and truck industries, resulting in high fines and major claims for damages. The adoption of the Damages Directive in 2014, which makes it easier to claim compensation from victims of competition violations, has also led to a reduction in leniency claims and cartel investigations. In the same statement of 22 October 2021, Commissioner Vestager also explained that “with the decrease in the number of leniency applications, we are investing more efforts in putting in place these other means of detecting cartels”. New detection tools include, for example, the launch of an anonymous antitrust whistleblower tool in 2017 and the creation of intelligence and forensic intelligence units, which Commissioner Vestager says appear to be paying off. On this basis, the crackdown on cartels in Europe is expected to increase significantly in the coming months.

In her speech of 22 October 2021, Commissioner Vestager further stressed that investigations would not only focus on the traditional behaviors of ‘unmistakable’ cartels (for example, price fixing or market sharing), but also on more complex offenses, such as development agreements, buyer cartels (eg, pricing of supplies), and no-poaching agreements (agreement not to poach each other’s staff). Regarding collusion on technical development, in July 2021 the EC fined five German automakers € 875 million ($ 1.05 billion) for limiting competition in clean exhaust diesel cars (see our alert here). While buyer cartels are a recurring topic in the enforcement of European antitrust laws (for example, the car battery recycling purchase cartel in 2017 and more recently the ethylene purchase cartel in 2020) , no-poaching agreements have not been a priority for application in Europe.

The US Department of Justice and the Federal Trade Commission have been prolific in their recent challenges with no-poaching agreements. However, despite being on the radar of some national competition authorities in Europe (eg Portugal, Italy, the Netherlands and Spain), no cases yet exist before the EC. Commissioner Vestager’s statements are a sign of change in the near future.

Implications. Companies should review their antitrust compliance programs, inspection guidelines, and training to ensure employees know what to expect and how to respond to search procedures. In addition, Wilson Sonsini recommends that companies review their recruitment and human resources policies in Europe to ensure that policies or practices comply with antitrust laws, for example, that companies have not agreed to limit wages. or other remuneration agreed with other companies, or refused to solicit or hire employees of competing companies.

[1] Vestager, M., Speech delivered on October 22, 2021 at the Italian Antitrust Association Annual Conference, “A new era of cartel repression», Transcript available here.

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