Notice2024-28720
Guardian Service Industries, Inc.; Analysis of Agreement Containing Consent Order To Aid Public Comment
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 6, 2024
Issuing agencies
Federal Trade Commission
Abstract
The consent agreement in this matter settles alleged violations of Federal law prohibiting unfair methods of competition. The attached Analysis of Proposed Consent Order to Aid Public Comment describes both the allegations in the complaint and the terms of the consent order--embodied in the consent agreement--that would settle these allegations.
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 235 (Friday, December 6, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 235 (Friday, December 6, 2024)]
[Notices]
[Pages 96980-96984]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-28720]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
[File No. 241 0082]
Guardian Service Industries, Inc.; Analysis of Agreement
Containing Consent Order To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement; request for comment.
-----------------------------------------------------------------------
SUMMARY: The consent agreement in this matter settles alleged
violations of Federal law prohibiting unfair methods of competition.
The attached Analysis of Proposed Consent Order to Aid Public Comment
describes both the allegations in the complaint and the terms of the
consent order--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before January 6, 2025.
ADDRESSES: Interested parties may file comments online or on paper by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Please write: ``Guardian; File
No. 241 0082'' on your comment and file your comment online at <a href="https://www.regulations.gov">https://www.regulations.gov</a> by following the instructions on the web-based
form. If you prefer to file your comment on paper, please mail your
comment to the following address: Federal Trade Commission, Office of
the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex H),
Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Erik Herron (202-326-3535), Bureau of
Competition, Federal Trade Commission, 400 7th Street SW, Washington,
DC 20024.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule Sec. 2.34, 16 CFR
2.34, notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of 30 days. The following
Analysis of Agreement Containing Consent Order to Aid Public Comment
describes the terms of the consent agreement and the allegations in the
complaint. An electronic copy of the full text of the consent agreement
package can be obtained from the FTC website at this web address:
<a href="https://www.ftc.gov/news-events/commission-actions">https://www.ftc.gov/news-events/commission-actions</a>.
The public is invited to submit comments on this document. For the
Commission to consider your comment, we must receive it on or before
January 6, 2025. Write ``Guardian; File No. 241 0082'' on your comment.
Your comment--including your name and your State--will be placed on the
public record of this proceeding, including, to the extent practicable,
on the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website.
Because of the agency's heightened security screening, postal mail
addressed to the Commission will be delayed. We strongly encourage you
to submit your comments online through the <a href="https://www.regulations.gov">https://www.regulations.gov</a>
website. If you prefer to file your comment on paper, write ``Guardian;
File No. 241 0082'' on your comment and on the envelope, and mail your
comment to the following address: Federal Trade Commission, Office of
the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H-144 (Annex H),
Washington, DC 20580.
Because your comment will be placed on the publicly accessible
website at <a href="https://www.regulations.gov">https://www.regulations.gov</a>, you are
[[Page 96981]]
solely responsible for making sure your comment does not include any
sensitive or confidential information. In particular, your comment
should not include sensitive personal information, such as your or
anyone else's Social Security number; date of birth; driver's license
number or other State identification number, or foreign country
equivalent; passport number; financial account number; or credit or
debit card number. You are also solely responsible for making sure your
comment does not include sensitive health information, such as medical
records or other individually identifiable health information. In
addition, your comment should not include any ``trade secret or any
commercial or financial information which . . . is privileged or
confidential''--as provided by section 6(f) of the FTC Act, 15 U.S.C.
46(f), and FTC Rule Sec. 4.10(a)(2), 16 CFR 4.10(a)(2)--including
competitively sensitive information such as costs, sales statistics,
inventories, formulas, patterns, devices, manufacturing processes, or
customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule Sec. 4.9(c). In
particular, the written request for confidential treatment that
accompanies the comment must include the factual and legal basis for
the request and must identify the specific portions of the comment to
be withheld from the public record. See FTC Rule Sec. 4.9(c). Your
comment will be kept confidential only if the General Counsel grants
your request in accordance with the law and the public interest. Once
your comment has been posted on <a href="https://www.regulations.gov">https://www.regulations.gov</a>--as legally
required by FTC Rule Sec. 4.9(b)--we cannot redact or remove your
comment from that website, unless you submit a confidentiality request
that meets the requirements for such treatment under FTC Rule Sec.
4.9(c), and the General Counsel grants that request.
Visit the FTC website at <a href="https://www.ftc.gov">https://www.ftc.gov</a> to read this document
and the news release describing this matter. The FTC Act and other laws
the Commission administers permit the collection of public comments to
consider and use in this proceeding, as appropriate. The Commission
will consider all timely and responsive public comments it receives on
or before January 6, 2025. For information on the Commission's privacy
policy, including routine uses permitted by the Privacy Act, see
<a href="https://www.ftc.gov/site-information/privacy-policy">https://www.ftc.gov/site-information/privacy-policy</a>.
Analysis of Agreement Containing Consent Order To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted for
public comment, subject to final approval, an Agreement Containing
Consent Order (``Consent Agreement'') with Guardian Service Industries,
Inc. (``Guardian'' or ``Respondent''). The proposed Decision and Order
(``Order''), included in the Consent Agreement and subject to final
Commission approval, is designed to remedy the anticompetitive effects
that have resulted from Guardian's use of restrictive covenants in some
of its contracts with building owners and managers that limit the
ability of those building owners and managers to solicit or hire
Respondent's employees (``No-Hire Agreements''). The term No-Hire
Agreement refers to a term in an agreement between two or more
companies that restricts, imposes conditions on, or otherwise limits a
company's ability to solicit, recruit, or hire another company's
employees, during employment or afterwards, directly or indirectly,
including by imposing a fee or damages in connection with such conduct,
or that otherwise inhibits competition between companies for each
other's employees' services.
The Consent Agreement settles charges that Guardian has engaged in
unfair methods of competition in violation of section 5 of the FTC Act,
as amended, 15 U.S.C. 45, by entering into No-Hire Agreements with
customers. Guardian's No-Hire Agreements constitute unreasonable
restraints of trade that are unlawful under section 1 of the Sherman
Act, 15 U.S.C. 1, and are thus unfair methods of competition in
violation of section 5 of the FTC Act. Independent of the Sherman Act,
Guardian's use of the No-Hire Agreements constitutes an unfair method
of competition with a tendency or likelihood to harm competition,
consumers, and employees in the building services industry, in
violation of section 5. The proposed Order has been placed on the
public record for 30 days in order to receive comments from interested
persons. Comments received during this period will become part of the
public record. After 30 days, the Commission will again review the
Consent Agreement and the comments received and will decide whether it
should withdraw from the Consent Agreement and take appropriate action
or make the proposed Order final.
II. The Respondent
Guardian is a privately held business headquartered in New York,
NY. Guardian provides facility maintenance services, including
janitorial, security, engineering and operations, pest control,
lighting and electric, window cleaning, concierge, front desk, and
surface restoration services. Guardian employs approximately 2,800
employees throughout the Northeast, New England, and Mid-Atlantic
regions. The complaint focuses on Guardian's conduct in New York City
and Northern New Jersey.
III. The Complaint
The complaint alleges that Guardian sells building services to
building owners and property management companies, primarily consisting
of the labor of janitors, security guards, maintenance workers, and
concierge desk workers who are directly employed by Guardian. These
employees perform their work at residential and commercial buildings in
various States, but predominantly in New York City and Northern New
Jersey. The complaint also alleges that Guardian and its building owner
and property manager customers are direct competitors in labor markets
for building services workers. These include the markets for workers to
perform concierge, security, janitorial, maintenance, and related
services.
As alleged in the complaint, Guardian uses standard-form agreements
with some of its customers that include No-Hire Agreements. The No-Hire
Agreements restrict the ability of Guardian's customers to (1) directly
hire workers employed by Guardian and (2) indirectly hire workers
employed by Guardian through a competing building services contractor
after the competitor wins the customers' business away from Guardian.
These restrictions apply during the term of Guardian's contracts and
for six months to one year thereafter. The No-Hire Agreements apply not
just to those Guardian employees identified by Guardian and staffed to
provide services for a customer, but to all Guardian building services
employees.
The complaint alleges that Guardian's No-Hire Agreements are
anticompetitive because they are horizontal agreements among
competitors not to compete. Guardian and its customer building owners
and property managers are competitors for the labor of building
services workers like Guardian's employees. The No-Hire Agreements are
horizontal agreements that prohibit buildings and property management
[[Page 96982]]
companies from hiring building services workers, thereby undermining
competition for labor, reducing worker bargaining power, and
suppressing wages. For these reasons, the complaint alleges that the
No-Hire Agreements constitute unreasonable restraints of trade that are
unlawful under section 1 of the Sherman Act, 15 U.S.C. 1, and are thus
unfair methods of competition in violation of section 5 of the FTC Act,
as amended, 15 U.S.C. 45.
Independent of the Sherman Act, the complaint alleges that
Guardian's conduct constitutes an unfair method of competition with a
tendency or likelihood to harm competition, consumers, and employees in
the building services industry, in violation of section 5 of the FTC
Act. According to the complaint, the No-Hire Agreements limit the
ability of building owners and managers to hire Guardian's employees.
This harms Guardian's employees because it limits their ability to
negotiate for higher wages, better benefits, and improved working
conditions. Employees may suffer further hardship if the building they
work at brings services in-house because the No-Hire Agreements force
them to leave their jobs in some circumstances. The complaint further
alleges that the No-Hire Agreements harm building owners and managers
because they may be foreclosed from bringing services in-house due to
the prospect of losing long-serving workers with extensive, building-
specific experience.
IV. The Proposed Order
The proposed Order seeks to remedy Guardian's unfair methods of
competition. Section II of the proposed Order prohibits Guardian from
entering or attempting to enter, maintaining or attempting to maintain,
enforcing or attempting to enforce, or threatening to enforce a No-Hire
Agreement, or communicating to a customer or any other person that any
Guardian Employee is subject to a No-Hire Agreement. Paragraph III.A of
the proposed Order requires Guardian to provide written notice to
customers that are subject to No-Hire Agreements that (i) the
restriction is null and void, and (ii) any customer or a subsequent
building services contractor for a customer is no longer subject to the
restrictions or penalties related to the No-Hire Agreements in
Guardian's contracts. Paragraph III.B of the proposed Order requires
Guardian to provide various written notices to employees who are
subject to a No-Hire Agreement. Paragraph III.C requires that Guardian
post clear and conspicuous notice that employees are not subject to No-
Hire Agreements and may seek or accept a job with the building
directly, or any company that wins the building's business. Paragraphs
IV.A and IV.B of the proposed Order provide a timeline according to
which the obligations enumerated in Section III must be met. Paragraphs
IV.C-E set forth Guardian's ongoing compliance obligations.
Other paragraphs contain standard provisions regarding compliance
reports, requirements for Guardian to provide notice to the FTC of
material changes to its business, and access for the FTC to documents
and personnel. The term of the proposed Order is ten years.
The purpose of this analysis is to facilitate public comment on the
Consent Agreement and proposed Order to aid the Commission in
determining whether it should make the proposed Order final. This
analysis is not an official interpretation of the proposed Order and
does not modify its terms in any way.
By direction of the Commission, Commissioners Holyoak and
Ferguson dissenting.
April J. Tabor,
Secretary.
Dissenting Statement of Commissioner Melissa Holyoak
As I have previously explained,\1\ the Commission cannot issue a
complaint unless it has reason to believe that the law has been
violated.\2\ The same requirement applies equally to complaints headed
toward litigation and to complaints that accompany a consent order that
simultaneously resolves the matter. Today's Complaint against Guardian
Service Industries, Inc. fails to provide sufficient allegations to
establish a violation of section 1 of the Sherman Act or a violation of
section 5 of the FTC Act. Because the restraint at issue is between a
building services contractor and its clients, it would qualify as a
vertical restraint, and ``nearly every . . . vertical restraint''
should be analyzed under the rule of reason.\3\ Further, this is a
novel area, and the per se rule ``is appropriate only after courts have
had considerable experience with the type of restraint at issue, and
only if courts can predict with confidence that it would be invalidated
in all or almost all instances under the rule of reason.'' \4\ Under
the rule of reason, ``the factfinder weighs all of the circumstances of
a case in deciding whether a restrictive practice should be prohibited
as imposing an unreasonable restraint on competition.'' \5\ To do so,
the court conducts ``an inquiry into market power and market structure
designed to assess the combination's actual effect.'' \6\ Today's
Complaint, however, does not plead sufficient facts to make a violation
[[Page 96983]]
under the rule of reason plausible.\7\ For this reason, I dissent.\8\
---------------------------------------------------------------------------
\1\ Dissenting Statement of Comm'r Melissa Holyoak, In the
Matter of Chevron Corporation & Hess Corporation, Comm'n File No.
241-0008 (Sept. 30, 2024); Joint Dissenting Statement of Comm'r
Melissa Holyoak and Comm'r Andrew N. Ferguson, In the Matter of
ExxonMobil Corporation, No. 241-0004 (May 2, 2024).
\2\ 15 U.S.C. 45(b).
\3\ Ohio v. Am. Express Co., 585 U.S. 529, 541 (2018).
\4\ Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S.
877, 886-87 (2007) (citation omitted). Chair Khan contends that
``some no-poach or no-hire provisions may be analyzed as per se
restraints under Section 1 of the Sherman Act.'' Statement of Chair
Lina M. Khan, In the Matter of Guardian Service Industries, Inc.,
Matter Number 2410082 (Dec. 3, 2024). First, to be clear, the
Complaint in today's action does not allege a per se violation.
Second, the Seventh Circuit case upon which she relies, Deslandes v.
McDonald's USA, LLC, 81 F.4th 699, 703 (7th Cir. 2023), cert.
denied, 144 S. Ct. 1057 (2024), does not stand for the proposition
that today's conduct, or no-hire and no-poach provisions more
generally, should be condemned as per se unlawful. To begin with,
the no-poach provisions alleged in Deslandes were purely horizontal,
see id. at 703, lacking the vertical component at issue in today's
complaint against Guardian. Further, Judge Easterbrook, analyzing a
motion for judgment on the pleadings, made clear that the district
court had ``jettisoned the per se rule too early.'' Id. He did not
declare that such agreements were per se unlawful. In fact, he went
on to explain a variety of questions that needed to be considered
before such a determination could be made, including, inter alia:
``So what was the no-poach clause doing? Was it protecting
franchises' investments in training, or was it allowing them to
appropriate the value of workers' own investments?'' Id. at 704. He
explained that ``[t]hese are all potentially complex questions,
which cannot be answered by looking at the language of the
complaint. They require careful economic analysis. More than that:
the classification of a restraint as ancillary is a defense, and
complaints need not anticipate and plead around defenses.'' Id. at
705. Such considerations are a far cry from declaring no-poach
agreements per se unlawful.
\5\ Leegin, 551 U.S. at 885; see also Am. Express Co., 585 U.S.
at 541.
\6\ Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 768
(1984).
\7\ The Commission's 2022 Policy Statement states that under
section 5 of the FTC Act, ``the inquiry will not focus on the `rule
of reason.''' See Fed. Trade Comm'n, Policy Statement Regarding the
Scope of Unfair Methods of Competition Under Section 5 of the
Federal Trade Commission Act, Comm'n File No. P221202, at 10 (Nov.
10, 2022); id. at 2 (``Congress passed the FTC Act to push back
against the judiciary's adoption and use of the open-ended rule of
reason for analyzing Sherman Act claims.''). I disagree with this
conclusion and the 2022 Policy Statement in general. See Dissenting
Statement of Comm'r Christine S. Wilson, Regarding the Policy
Statement Regarding the Scope of Unfair Methods of Competition Under
Section 5 of the Federal Trade Commission Act, Comm'n File No.
P221202 (Nov. 10, 2022). Among other problems with the statement,
section 5 requires a showing of anticompetitive effects. See Boise
Cascade Corp. v. FTC, 637 F.2d 573, 579 (9th Cir. 1980); cf. E.I. du
Pont de Nemours & Co. v. FTC, 729 F.2d 128, 141 (2d Cir. 1984)
(rejecting unfair method of competition claim because there was no
``causal connection'' between the challenged practices and adverse
competitive effects); FTC v. Raladam Co., 283 U.S. 643, 647-48
(1931).
\8\ Chair Khan somehow believes that just because she, as one
agent of the American government, declares her choices as helpful to
``American workers,'' that it makes it so. Khan, supra note 4. Good
intentions do not, however, translate into tangible results. And
while her rhetoric may make for good PR, the facts and the law
matter. The Chair's decision to assert that the agreements are per
se illegal in today's statement but not in the actual Complaint is
just one more example where the public should rely more on the
Chair's revealed preferences than her expressed preferences.
---------------------------------------------------------------------------
Dissenting Statement of Commissioner Andrew N. Ferguson
The Commission today issues an administrative complaint and accepts
a proposed consent agreement with Guardian Service Industries, Inc.
(``Guardian'').\1\ Guardian is a building services contractor operating
throughout the Northeast, New England, and Mid-Atlantic regions.\2\ It
employs about 2,800 workers who provide concierge, security, custodial,
maintenance, engineering, and related services at residential and
commercial buildings.\3\ The Complaint alleges that some of Guardian's
contracts with building-management clients contain so called ``no-
hire'' provisions, also sometimes referred to as ``no-poach''
provisions.\4\ As written, these provisions forbid Guardian's clients
from hiring Guardian's employees directly, or by hiring them from one
of Guardian's competitors.\5\ This restriction applies both during the
contract term and for six to twelve months beyond it.\6\
---------------------------------------------------------------------------
\1\ In re Guardian Serv. Indus., Inc., Complaint (``Complaint'')
& Decision and Order (``Order'').
\2\ Compl. ] 1; In re Guardian Serv. Indus., Inc., Analysis of
Agreement Containing Consent Order to Aid Public Comment (``AAPC''),
at 1.
\3\ AAPC at 1.
\4\ Compl. ] 11. No-hire provisions are not non-compete clauses.
No-hire provisions are agreements between two or more employers not
to recruit, solicit, or hire each other's employees. Non-compete
clauses are agreements between an employer and its employee in which
the employee promises not to work for the employer's competitors
after the termination of the employment relationship. No-hire
provisions do not fall within the scope of the Commission's failed
Non-Compete Clause Rule. 89 FR 38,342 (May 7, 2024).
\5\ Compl. ]] 10-11; AAPC at 2.
\6\ Ibid.
---------------------------------------------------------------------------
The Commission is wise to focus its resources on protecting
competition in labor markets. After all, the antitrust laws protect
employees from unlawful restraints of the labor markets as much as they
protect any output market.\7\ But, as I have warned before, we must
always act within the boundaries Congress has imposed on our authority.
For example, while I have no doubt that some noncompete agreements
violate the Sherman Act,\8\ the now-enjoined Non-Compete Clause Rule
\9\ wildly exceeded our authority to address noncompete agreements.\10\
Today, we again exceed our authority by failing to comply with
Congress's procedural requirements for issuing an administrative
complaint. I therefore respectfully dissent.
---------------------------------------------------------------------------
\7\ NCAA v. Alston, 594 U.S. 69, 86-87 (2021) (explaining that
an employee challenging a labor-market restraint need show
competitive injury only in the market for labor); Anderson v.
Shipowners Ass'n, 272 U.S. 359, 361-65 (1926) (agreement among group
of associations that ``own[ed], operat[ed], or control[led]
substantially all the merchant vessels . . . [in] the ports of the
Pacific Coast'' to control employment of seamen violated the Sherman
Act); Todd v. Exxon Corp., 275 F.3d 191, 201 (2d Cir. 2001)
(addressing labor market and explaining that ``[t]he Sherman Act . .
. applies . . . to abuse of market power on the buyer side--often
taking the form of monopsony or oligopsony. . . . Plaintiff is
correct to point out that a horizontal conspiracy among buyers to
stifle competition is as unlawful as one among sellers.''); Phillip
Areeda & Herbert Hovenkamp, Antitrust Law ] 352a (rev. ed. 2024)
(``employees may challenge antitrust violations that are premised on
restraining the employment market.''); id. at ] 352c (``Antitrust
law addresses employer conspiracies controlling employment terms
precisely because they tamper with the employment market and thereby
impair the opportunities of those who sell their services there.
Just as antitrust law seeks to preserve the free market
opportunities of buyers and sellers of goods, so also it seeks to do
the same for buyers and sellers of employment services.''); see also
Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc., 549 U.S.
312, 322 (2007) (Thomas, J.) (``The kinship between monopoly and
monopsony suggests that similar legal standards should apply to
claims of monopolization and to claims of monopsonization.'' (citing
Roger Noll, ``Buyer Power'' and Economic Policy, 72 Antitrust L.J.
589, 591 (2005) (``[A]symmetric treatment of monopoly and monopsony
has no basis in economic analysis.''))); Mandeville Island Farms v.
Am. Crystal Sugar Co., 334 U.S. 219, 235 (1948) (``It is clear that
the agreement is the sort of combination condemned by the [Sherman]
Act, even though the price-fixing was by purchasers, and the persons
specially injured under the treble damage claim are sellers, not
customers and consumers.'').
\8\ See Dissenting Statement of Comm'r Andrew N. Ferguson,
Joined by Comm'r Melissa Holyoak, In the Matter of the Non-Compete
Clause Rule, Matter No. P201200, at 18 n.142 (June 28, 2024)
(hereinafter ``Ferguson Non-Compete Dissent''), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/ferguson-noncompete-dissent.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/ferguson-noncompete-dissent.pdf</a>
(``Noncompete agreements are contracts in restraint of trade, and
therefore subject to the rule of reason under section 1 of the
Sherman Act and section 5 of the FTC Act. But as is true of all
agreements that do not implicate one of the few per se rules,
whether a given noncompete agreement violates the antitrust laws
will turn entirely on the particular circumstances and competitive
effects of that agreement.'' (internal citations omitted)).
\9\ 89 FR 38342 (May 7, 2024).
\10\ Ferguson Non-Compete Dissent at 8-9; Ryan LLC v. FTC, No.
3:24-CV-00986-E, 2024 WL 3879954 (N.D. Tex. Aug. 20, 2024) (vacating
the Commission's Non-Compete Clause Rule); Properties of the
Villages, Inc. v. FTC, 2024 WL 3870380 (M.D. Fla. Aug. 15, 2024)
(issuing a preliminary injunction prohibiting enforcement of the
Commission's Non-Compete Clause Rule as to plaintiff). With the
Presidential transition in full swing, the Chair has some parting
shots. She argues that my dissent is part of a ``trend in matters
where the Commission is protecting American workers.'' Statement of
Chair Lina M. Khan, In re Guardian Serv. Indus., Inc., Matter No.
2410082, at 2 (Dec. 3, 2024) (hereinafter ``Chair's Statement'').
For the second time in a couple months, she cites as an example of
this ``trend'' my dissent from the Non-Compete Clause Rule. Id. at 2
n.6; Statement of Chair Lina M. Khan, Joined by Comm'rs Rebecca
Kelly Slaughter and Alvaro M. Bedoya, In re Lyft, Inc., Matter No.
2223028, at 8-9 & n.35 (Oct. 25, 2024), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/Statement-Chair-Khan-Joined-Comm-Slaughter-Comm-Bedoya-In-the-Matter-Lyft-Inc-10-25-2025.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/Statement-Chair-Khan-Joined-Comm-Slaughter-Comm-Bedoya-In-the-Matter-Lyft-Inc-10-25-2025.pdf</a>. It bears repeating
once more that this rule is enjoined nationwide as unlawful, and the
Biden-Harris Administration will leave office without it ever having
taken effect. Ryan LLC, 2024 WL 3879954; Statement of Comm'r Andrew
N. Ferguson, Concurring in Part and Dissenting in Part, United
States v. Lyft, Matter No. 2223028, at 14 (Oct. 25, 2024)
(hereinafter ``Ferguson Lyft Statement''), <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/Ferguson-Lyft-Dissent-10-25-2024.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/Ferguson-Lyft-Dissent-10-25-2024.pdf</a>. As I
said in Lyft, I strongly favor protecting workers to the fullest
extent of our statutory authority. Ferguson Lyft Statement at 14.
Promulgating failed rules and settling cases for pennies on the
dollar does not protect workers, no matter how triumphant the
Commission's press releases are. Ibid.
---------------------------------------------------------------------------
The Complaint charges that Guardian's no-hire clauses are
unreasonable restraints of trade under section 1 of the Sherman
Act,\11\ and are also therefore unfair methods of competition in
violation of section 5 of the Federal Trade Commission Act.\12\ The
Complaint proceeds on a rule-of-reason theory, rather than a per se
theory. That choice makes sense. The rule of reason ``presumptively
applies'' to every restraint,\13\ especially when, as
[[Page 96984]]
here, the restraint is ancillary to an otherwise lawful and primarily
vertical agreement.\14\ Under the rule of reason, a restraint violates
section 1 if the anticompetitive effects of the restraint outweigh its
procompetitive effects.\15\ Put slightly differently, the rule of
reason forbids restraints for which the procompetitive justifications
for the restraint could have been achieved through ``less
anticompetitive means'' than those imposed by the restraint.\16\
---------------------------------------------------------------------------
\11\ Compl. ] 16.
\12\ Id. ] 17.
\13\ Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006); see also
Cont'l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 58-59 (1977)
(``[D]eparture from the rule-of-reason standard must be based upon
demonstrable economic effect rather than . . . upon formalistic line
drawing.''); Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551
U.S. 877, 899 (2007) (``Resort to per se rules is confined to
restraints, . . . `that would always or almost always tend to
restrict competition and decrease output.' To justify a per se
prohibition a restraint must have `manifestly anticompetitive'
effects and `lack . . . any redeeming virtue.' '' (cleaned up)).
\14\ See, e.g., Aya Healthcare Servs., Inc. v. AMN Healthcare,
Inc., 9 F.4th 1102, 1109 (9th Cir. 2021) (citing Rothery Storage &
Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 224 (D.C. Cir.
1986)). The Chair invokes Deslandes v. McDonald's USA, LLC as
``affirm[ing]'' that ``some no-poach or no-hire provisions may be
analyzed as per se restraints under section 1 of the Sherman Act.''
Chair's Statement at 2 n.6. That is not quite right. Deslandes held
only that a properly pleaded per se claim challenging no-hire
clauses could survive a motion to dismiss because ``the
classification of a restraint as ancillary,'' and therefore not
subject to the per se standard, ``is a defense, and complaints need
not anticipate and plead around defenses.'' 81 F.4th 699, 705 (7th
Cir. 2023), cert. denied, 144 S. Ct. 1057 (2024). Whether a
restraint is ancillary, and therefore subject to the rule of reason,
``requires discovery, economic analysis, and potentially a trial.''
Ibid.
\15\ See, e.g., GTE Sylvania Inc., 433 U.S. at 49 & n.15 (citing
Chi. Bd. of Trade v. United States, 246 U.S. 231, 238 (1918)
(Brandeis, J.)); Atl. Richfield Co. v. USA Petroleum Co., 495 U.S.
328, 342 (1990); Ohio v. Am. Express Co., 585 U.S. 529, 541-42
(2018).
\16\ Am. Express Co., 585 U.S. at 542; Alston, 594 U.S. at 100
(``[A]nticompetitive restraints of trade may wind up flunking the
rule of reason to the extent the evidence shows that substantially
less restrictive means exist to achieve any proven procompetitive
benefits.'').
---------------------------------------------------------------------------
Here, the Complaint alleges that ``[a]ny legitimate objectives of
Guardian's'' use of the no-hire provisions ``could have been achieved
through significantly less restrictive means.'' \17\ This certainly may
be true of some no-hire agreements. And no-hire clauses undoubtedly can
have anticompetitive effects.\18\ In some circumstances, those
anticompetitive effects will outweigh the procompetitive justifications
for a no-hire clause.\19\ When those facts obtain, the no-hire
provision violates the Sherman Act.
---------------------------------------------------------------------------
\17\ Compl. ] 14. Potential procompetitive justifications, i.e.,
legitimate objectives, in these circumstances could include Guardian
seeking to recoup any costs for the training of and investment in
its workers or for screening and background checks to employ these
workers, or to protect any relevant trade secrets.
\18\ Matthew Gibson, Employer Market Power in Silicon Valley,
IZA Discussion Paper No. 14843 (Nov. 2021), <a href="https://docs.iza.org/dp14843.pdf">https://docs.iza.org/dp14843.pdf</a> (comparing workers' salaries at Silicon Valley firms
subject to DOJ's no-poach investigation to worker salaries at other
information-technology firms and concluding that the challenged no-
poach agreements reduced salaries at colluding firms by 4.8%).
\19\ Cf. Eichorn v. AT&T Corp., 248 F.3d 131 (3d Cir. 2001)
(challenged no-hire agreement ``not an antitrust violation under the
rule of reason'' where the particular provision at issue ``did not
have a significant anti-competitive effect on the plaintiffs'
ability to seek employment''); Aya Healthcare Servs., 9 F.4th at
1110 (challenged non-solicitation agreement, involving employee
outsourcing arrangement between healthcare staffing agencies
collaborating to supply traveling nurses, not unlawful under rule of
reason where restraint was reasonably necessary to ensure neither
would lose personnel during collaboration); Giordano v. Saks Inc.,
654 F. Supp. 3d 174, 201 (E.D.N.Y. 2023) (challenged no-poach
agreement involving collaborative business arrangement not unlawful
under rule of reason where luxury brands agreed not to poach Saks
employees who were trained to sell brand products unless current
managers consented or the employee had left Saks at least six months
prior).
---------------------------------------------------------------------------
But we cannot issue a Complaint against a company based solely on a
theory about hypothetical effects of no-hire agreements. To lawfully
invoke our enforcement authority, we must have a ``reason to believe''
that Guardian's no-hire provisions violate section 5, not that no-hire
provisions generally could violate section 5.\20\ The Commission has a
``reason to believe'' the law has been violated only if it has evidence
sufficient to make the ``threshold determination that further inquiry
is warranted.'' \21\ That reason must be ``well-grounded'' in evidence
that the Commission gleaned from its pre-filing investigation.\22\
---------------------------------------------------------------------------
\20\ 15 U.S.C. 45(b).
\21\ FTC v. Standard Oil of Cal., 449 U.S. 232, 241 (1980);
Boise Cascade Corp. v. FTC, 498 F. Supp. 772, 779 (D. Del. 1980).
\22\ Standard Oil, 449 U.S. at 246 n.14; see also AMREP Corp. v.
FTC, 768 F.2d 1171, 1177 (10th Cir. 1985).
---------------------------------------------------------------------------
Had the Complaint plausibly alleged anticompetitive effects
outweighing procompetitive justifications, I would have voted for it.
But the Complaint alleges nothing about the no-hire provisions'
effects. It does not allege direct evidence of anticompetitive effects,
or of indirect, economic evidence of anticompetitive effects, like
market power and harm to competition. It does not even allege that
Guardian has ever tried to enforce any of these agreements, nor does it
allege that a single Guardian customer or worker believed Guardian
would enforce any of these provisions.\23\ Nor have I seen any such
evidence that goes unmentioned in the Complaint. Indeed, I am at a loss
about how my colleagues have formed their reason to believe that
Guardian is violating the antitrust laws.
---------------------------------------------------------------------------
\23\ The Chair presents this case as a choice between Guardian's
no-hire provisions ``remain[ing] in place,'' ostensibly presuming
anticompetitive effects from their very existence, or continuing the
investigation. Chair's Statement at 2. That is not correct. I have
seen no evidence of actual or threatened enforcement of these
clauses. And even if Guardian did threaten or attempt to enforce
such provisions, I have seen no evidence that such threatened or
actual enforcement would violate the antitrust laws--the question
before the Commission when deciding whether to issue a Complaint.
The Chair's citation of public comments submitted in response to the
Commission's separate, unrelated Non-Compete Clause Rule, id. at 2
n.9, does not change the facts, or lack thereof, in this matter.
Moreover, I have no objection to the Commission agreeing not to
bring an enforcement action so long as Guardian agrees not to
enforce its no-hire provisions--akin to a non-prosecution agreement.
But if the Commission invokes its power to issue a complaint, it
must comply with the statute giving it that power--including the
requirement that we have ``reason to believe'' that section 5 has
been violated.
---------------------------------------------------------------------------
The Commission ought to protect competition in the labor markets,
but it cannot bend the law to do so. We must form a ``well-grounded
reason to believe'' that the law has been violated before issuing an
administrative complaint. Because we have no evidence of the effects of
the no-hire agreements in this case, the Commission should not have
issued this Complaint.
I respectfully dissent.
[FR Doc. 2024-28720 Filed 12-5-24; 8:45 am]
BILLING CODE 6750-01-P
</pre></body>
</html>Indexed from Federal Register on December 6, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.