Are anti-poaching agreements anti-competitive? The recent no-poaching agreement between India’s two largest business houses — Adani Group and Reliance Industries — is interesting from a competition law and policy perspective. Competition concerns arise not only in the context of goods and services but also in the labour market due to collusive arrangements between competing employers and non-compete agreements between employers and employees.
Collusive conduct in the labour market is mostly seen in the form of no-poach agreements between competing firms for reducing employee mobility and expenditure on personnel, leading to lessening of, if not altogether eliminating, competition among employers for labour.
Such behaviour can take the form of wage-fixing agreements between employers to increase wages by an agreed percentage to maintain or lower wages. In fact, like commercially sensitive information, exchange of labour market-sensitive information, no-poach agreements, wage-fixing and other similar practices can violate provisions of competition law which forbid anti-competitive agreements.
The Department of Justice and the Federal Trade Commission in the US have been extremely proactive in this area and they have even issued guidance on how the competition law would apply to labour markets. The guidance emphasises the importance of independent decision-making in framing terms of employment and the compliance needed to be observed by HR Departments in the conduct of enterprises in labour markets.
Thus, despite established global precedents of matured jurisdictions, the Competition Commission of India (CCI) has been quite reticent in asserting its role in this area, treading rather cautiously. This regulatory forbearance by the CCI is inexplicable.
This hands-off approach is further reinforced by the recent regulatory changes effected by the CCI in its merger control regime towards ease of doing business, whereby the requirement for providing details of non-compete clause in merger filings have been dispensed with, giving the parties flexibility to negotiate non-compete arrangements.
This, despite the fact that an OECD report indicating a clear emerging trend towards a more systematic scrutiny of the competition issues arising in labour input markets in certain jurisdictions.
The current competition law framework in India allows enforcement and advocacy actions in labour input markets. All that is needed is recalibration of existing tools and competition analysis for these markets.
As for product markets, competition in labour markets is important to ensure that such markets function efficiently. The CCI has a clear case for prioritising scrutiny of labour input markets as such cases are likely to increase.
In fact, workers are facing a difficult time. On the one hand, employers through such industry practices have been able to keep wages low or suppressed, on the other, employees are being sacked for moonlighting which they are forced to resort to precisely because of low wages!
The CCI should examine these industry practices closely as the Ambani-Adani no-poach deal is just a tip of the iceberg. The CCI needs to shed its laissez faire approach to labour markets and exercise its mandate which is quite empowering.