In recent times, authorities throughout Europe and the rest of the world have been focusing on antitrust violations in the labor market. As a result, in 2024, the EU Commission came out with the policy brief on Antitrust in Labor Markets. Although the cases at the EU level have just started to trickle in, many of the European competition authorities have already dealt with the issues concerning no-poach/non-solicitation agreements, wage-fixing, and, to a smaller extent, information exchange. The Croatian Competition Agency (CCA) is no exception.
In recent years, the CCA examined the non-solicitation clause included in the agreement between two undertakings in a vertical relationship, both active in the IT sector. The case was initiated on the basis of a complaint filed by the user of IT and consulting services against its service provider, on the grounds that the non-solicitation clause forming part of the service agreement between the undertakings was anticompetitive, as it forbade the parties from soliciting each other’s employees without the consent of the other party to the agreement, subject to the penalties for breaching the non-solicitation obligation. The CCA ultimately decided to reject the complaint without opening the formal procedure.
Even though the CCA did not carry out a full investigation into the matter, the CCA’s reasoning for the rejection gave insight into what facts may be viewed by the CCA as material in analyzing the non-solicitation provisions. Namely, the CCA found that the relevant non-solicitation clause was an ancillary restraint without which the respective agreement would not have been made or continued.
Basing its analysis on the more or less same criteria, which are now outlined in the EU Commission’s briefing paper, the CCA found that the relevant restraint was directly related to the service agreement made between the parties, proportionate, and objectively necessary for the implementation of the service agreement. This conclusion was supported by the fact that the solicitation prohibition was limited to the employees directly involved in the performance of the underlying agreement and did not extend to all the employees of the other party. Also, the CCA considered that the market for the provision of programming and IT services is marked by high demand and low supply of skilled workers, with the high fluctuation of employees between different employers providing the same IT services. In this context, the CCA found that the objective of the non-solicitation clause was not to restrict competition on the market for the provision of IT/programming services and, as such, that the clause in the instant case was acceptable from the Croatian competition law perspective.
In an earlier case from 2014/2015, no-poach clauses were brought to the CCA’s attention, somewhat unusually, through an abuse of dominance complaint. The case was also centered around the IT industry, and the complaint was filed against the undertaking offering specialized IT services to leasing companies. The no-poach clause was included in all the undertaking’s agreements with its clients – the leasing companies – broadly prohibiting them from hiring any of the undertaking’s current or former employees for the duration of their respective agreements.
Before the CCA’s investigation into the potential violation even began, the undertaking against which the complaint was filed proposed remedies that were accepted by the CCA. The remedies were aimed at excluding the no-poaching provision from all the agreements with the leasing companies. When accepting the remedies, the CCA also took into consideration that the leasing companies apparently never abided by the poaching prohibition, and that the provision could not have been relevant to a large number of employees, as during the lifetime of the respective agreements, only three people left the undertaking in question. The rationale behind accepting these early proposed remedies did, however, give us a glimpse into CCA’s thinking on the restrictions in the labor markets, at a time when the no-poach and similar agreements were not yet such a hot topic.
Although the local practice is still scarce, it sets a benchmark for the cases to come. This being said, and considering that the relevant decisions were adopted before the Commission’s policy brief, it will be interesting to see whether the Commission’s policy brief in any way changes the CCA’s stance on the issue, as it appears to advocate for stricter interpretation of conditions for ancillary restraints, some of which may require more detailed analysis than what we have seen in the existing CCA’s practice.
By Iva Basaric, Partner, Babic & Partners
This article was originally published in Issue 12.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
