ECONOMIC EVIDENCE IN CRIMINAL LABOR CASES

By Erin Johnson, Ph.D.¹

California has led the states in enacting and enforcing legislative worker protections, including pay equity protections, pay transparency laws, and bans on non-compete agreements.² Consistent with that leading role, California was the first state antitrust enforcer to indicate that agreements between horizontal competitors for labor would be prosecuted as criminal violations of its state antitrust law, the Cartwright Act.³ This comes after, and aligns California with, the Department of Justice (DOJ) and the Federal Trade Commission (FTC)’s announcement of their intention to bring criminal labor cases under the Sherman Act in 2016, with the DOJ subsequently following through and bringing cases alleging criminal no-poach and wage-fixing violations in various labor markets.⁴ Since 2016 the California AG’s office has filed a number of amicus briefs in support of both criminal and civil no-poach and wage-fixing cases.⁵ As a further indication of California’s support for antitrust protections for workers, in 2023 California AG Rob Bonta stated, "[w]orkers should be able to move freely to another job—one that might pay them better, or have better hours, or better benefits, or be closer to their home."⁶

With no precedent for criminal wage-fixing and no-poach cases under California state law, the federal precedent is informative for practitioners. In criminal cases, the DOJ has argued to exclude economic evidence, claiming that it is not informative regarding the existence of or intent behind per se unlawful antitrust conspiracies.⁷ However, economic evidence has recently proved important in two federal criminal cases, and it may prove

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increasingly important moving forward as regulators act on their continued commitment to addressing antitrust issues in labor markets.⁸ This article makes the case that economic evidence is important for evaluating key questions that arise in criminal wage-fixing and no-poach cases. The first section defines wage-fixing and no-poach agreements and provides an overview of criminal cases to date. The second section describes the economic mechanisms and theories of harm for no-poach and wage-fixing agreements with reference to the academic literature in labor economics. With this underpinning, the third section explains that economic evidence is relevant to key questions, including questions related to determining the existence and intent of an alleged conspiracy as well as whether the per se standard applies. This section also discusses the court’s decisions regarding the admissibility of economic arguments in the recent United States v. DaVita Inc., et al. (2022) ("DaVita") and United States v. Patel et al. (2021) ("Patel") cases, and the final section describes the economic evidence and opinions that were submitted in DaVita and Patel.

I. DEFINITIONS AND OVERVIEW OF CASES

Wage-fixing and no-poach agreements are agreements between competitors for labor. This section defines wage-fixing and no-poach agreements and provides a brief description of the criminal cases that have involved wage-fixing and no-poach allegations in the United States to date. The discussion that follows makes use of product market analogs to facilitate definitions, but the next section makes it clear that there are important differences between product and labor markets.

A. WAGE-FIXING AGREEMENTS

Wage-fixing agreements are the labor market analog to price fixing agreements in product markets. In price fixing, a group of firms that compete in the product market set the price of the product above the competitive price (or, equivalently, the quantity of production below the competitive quantity). In wage-fixing, a group of firms that compete in the labor market set the price they pay for labor below the competitive price (or, equivalently, the quantity of labor below the competitive quantity).⁹

The DOJ has brought four such cases since 2016. In chronological order, the cases are:

• United States v. Jindal, et al. (2020) ("Jindal"): In Jindal the government alleged that leaders at a staffing company entered into an agreement with other staffing companies to fix wages of physical therapists in the Dallas-Fort Worth area.¹⁰ In a motion to dismiss, Defendants argued that wage-fixing agreements differ from price fixing agreements and should not be considered per se violations.¹¹ The court decided that the per se standard applied, and the case went to trial in April 2022, resulting in acquittal.¹²

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• United States v. Hee, et al. (2021) ("Hee"): In Hee the government alleged that a staffing company entered an agreement with a competitor to fix wages of nurses working in public schools in Nevada.¹³ The case resulted in a plea agreement involving a criminal fine for the company and community service for the manager of the staffing company. The government included language in the plea agreement describing the conduct as subject to the per se standard.¹⁴
• United States v. Manahe, et al. (2022) ("Manahe"): In Manahe the government alleged that the owner/operators of four home healthcare agencies in Maine agreed not to poach one another’s workers and conspired to reduce wages for home health workers.¹⁵ Defendants claimed the agreements were ancillary to procompetitive collaborations between the companies, but the court decided that the per se standard applied at the motion to dismiss stage.¹⁶ At trial, Defendants presented evidence that they did not lower wages to disprove the existence of the alleged agreement and all parties were acquitted.¹⁷
• United States v. Lopez (2023) ("Lopez"): In Lopez the government alleged that the owner of a home healthcare staffing company entered an agreement with competitors to fix the wages of home health nurses in Las Vegas, Nevada. The defendant in Lopez did not contest application of the per se rule at the motion to dismiss stage, and Lopez remains pending.¹⁸

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B. NO-POACH AGREEMENTS

According to the FTC and the DOJ, no-poach agreements in the labor market are analogous to market division or customer allocation agreements in product markets.¹⁹ In the product market, customer allocation involves competitors dividing sales territories or otherwise agreeing not to compete for customers. In no-poach agreements, firms agree not to "poach" one another’s incumbent workers, with the definition of poaching varying across allegations. Some cases involve alleged agreements not to cold call or otherwise solicit workers from firms within the agreement; those types of agreements often allow workers to switch between firms within the agreement so long as the worker initiates the conversation about switching, such that the worker was not affirmatively cold called, solicited, or recruited to switch. Others allege agreements that amount to outright hiring bans, with firms within the agreement committing not to hire one another’s workers under any circumstances, even if the worker applies for a position through their own initiative.²⁰ In either case, no-poach agreements differ from customer allocation agreements, leading some to question the government’s view that they are analogous.²¹ Customer allocation typically eliminates competition for groups of customers, but no-poach agreements do not restrict competition for workers new to the industry or otherwise outside of the agreement, and they may not restrict workers from moving across firms by first quitting their job or by way of intervening employment at a firm outside of the agreement. No-poach agreements that only limit active recruitment on the part of employers may not restrict any worker mobility in situations where workers are not affirmatively recruited by firms within the agreement and instead workers initiate efforts to switch employers. Also in contrast with product market allocation, no-poach agreements may enable vertical relationships or teaming arrangements between firms, and they can enable efficient investment in workers.²²

Since 2016 the DOJ has brought four criminal no-poach cases. In chronological order, the cases are:

• United States v. Surgical Care Affiliates LLC (SCA), et al. (2021) ("SCA"): In SCA the government alleged that SCA entered into an agreement with other outpatient medical centers not to poach one another’s high-level workers.²³ The United States dropped the case against SCA in November 2023.²⁴

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• DaVita: In DaVita the government alleged that DaVita and its CEO entered into agreements with other operators of outpatient medical facilities, including SCA, not to poach each other’s high-level workers.²⁵ In response to a motion to dismiss, the court decided that the prosecution could proceed with the per se allegations, but the jury instructions at trial stated that the Plaintiffs had to prove "beyond a reasonable doubt that Defendants entered into an agreement with the purpose of allocating the market," opening the door for economic evidence, as I explain below.²⁶ DaVita was the first criminal labor case to go to trial, and it resulted in acquittal for all Defendants.²⁷
• Patel: In Patel the government alleged that Pratt & Whitney, an aerospace engineering firm, and a number of outsourcing firms that supplied it with workers entered into agreements not to hire one another’s workers.²⁸ In the motion to dismiss phase, the judge ruled that the per se standard applied, despite the vertical relationship between some defendants.²⁹ At trial, however, the judge allowed economic and other evidence for certain purposes, including to support Defendants’ ancillary restraints defense, a defense that, if proven, removes an agreement from per se scrutiny and invites a rule of reason inquiry into the competitive effects of the agreement.³⁰ The judge ultimately acquitted Defendants after the government presented its case and before the jury could deliberate. In his decision, the judge stated that the per se standard did not apply, despite his prior decision. His decision was also notable in its assertion that there was an agreement, but a reasonable jury could not conclude that the agreement caused a "cessation of ‘meaningful competition.’"³¹

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• Manahe: As described above, Plaintiffs alleged Defendants in Manahe agreed not to poach one another’s workers as well as to reduce the wages of home health workers in Maine.³²

II. ECONOMIC THEORIES OF HARM

The frameworks economists use to understand labor markets make some necessary departures from product market frameworks to reflect the fact that individuals sell their own work as the "product" in these markets. This section briefly describes the economic theory of competition in labor markets. It explains how wage-fixing and no-poach agreements can potentially harm workers and some factors that determine whether and to what extent there is an effect. It also provides the requisite framework for the discussion of the role of economic evidence in criminal labor cases in the next section.

A. LABOR MARKET ECONOMICS

Like in product markets, economic theory says that the intersection of supply and demand determine the market price in perfectly competitive labor markets.³³ In these markets the equilibrium price of labor, termed the "wage," is equal to the marginal product of labor (MPL), or the increase in firm revenue that results from the marginal worker’s efforts. This is analogous to the condition that price equals marginal cost in perfectly competitive product markets.³⁴

Labor markets can depart from perfect competition for several reasons, even in the absence of any anticompetitive agreement. There are two main categories of models used to analyze labor markets under imperfect competition. "Cournot-style models" are used to analyze oligopolistic labor markets, and "search-and-matching models" are used to analyze labor markets with differentiated jobs and "search frictions," or factors that make looking for a job costly.³⁵ The former show that market concentration can lead wages to

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be suppressed relative to the MPL under certain conditions,³⁶ although concerns about concentration are less than in product markets when labor markets are broader than a single industry.³⁷ Search-and- matching models also show that wages can be below the MPL without any anticompetitive agreements.³⁸

B. WAGE-FIXING AND NO-POACH AGREEMENTS

According to economic theory, no-poach and wage-fixing agreements have no impact in perfectly competitive markets. If a group of firms suppresses wages in a perfectly competitive market, their workers leave and join a firm outside the agreement that is paying the MPL.³⁹ In Cournot-style models, wage-fixing and no-poach agreements can impact wages under certain conditions. For an agreement to have an effect in these models, it has to increase effective concentration to a large enough extent that the parties can successfully suppress wages given worker behavior, especially movements of workers to employers outside the greement.⁴⁰ Without providing an exhaustive list of conditions, the effects of an agreement in these models will depend on whether the parties adhere to the agreement, whether the parties compete on other dimensions, e.g., benefits or working conditions, and whether barriers to entry are present to prevent other employers from entering the market.

In search-and-matching models, wage-fixing and no-poach agreements can reduce worker mobility and wages if they meaningfully reduce "effective competition" for workers.⁴¹ The degree to which agreements affect wages in these models ultimately depends on the degree to which they reduce effective competition, which depends on many of the aforementioned conditions as well as the nature of competition and worker

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mobility in the market.⁴² As an example, an agreement not to cold call workers would not have any impact in a market where job offers are initiated by workers not employers.

In analyzing potential impacts in labor markets, it is important to recognize that firms that compete in a relatively concentrated product market may account for only a small fraction of the labor markets in which they participate.⁴³ Moreover, firms that compete in a national product market may compete in many local geographic labor markets, or vice-versa, and the geographic boundaries of labor markets can vary across jobs and areas depending on labor mobility and worker preferences.⁴⁴ It is also important to note that agreements between competitors for labor can have procompetitive benefits. No-poach agreements can promote efficient investment in the employer-employee relationship, for example by ensuring that employers have incentives to invest in the socially efficient level of training for their workers.⁴⁵ In addition, wage-fixing and no-poach agreements can facilitate cooperation and joint ventures between firms and can enable vertical relationships or collaborations that benefit workers and would not otherwise be possible.⁴⁶

III. ECONOMIC EVIDENCE IN CRIMINAL CASES

In their 2016 Antitrust Guidance for HR Professionals, the FTC and DOJ jointly assert that naked wage-fixing and no-poach agreements are per se illegal. With regard to no-poach agreements, the document states, "[t]hese types of agreements eliminate competition in the same irredeemable way as agreements to fix product prices or allocate customers. . . ."⁴⁷ The document recognizes the ancillarity doctrine, allowing that the agreement must be "separate from or not reasonably necessary to a larger legitimate collaboration between the employers" to be "deemed illegal without any inquiry into its competitive effects."⁴⁸ However, the government did not view the agreements in Patel or

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Manahe as ancillary, despite a vertical relationship between defendants in the former and possible collaborations between defendants in the latter.⁴⁹

Under the per se standard, the only relevant questions are whether an illegal agreement existed and whether it was entered into with the intent to allocate the market, which the government has interpreted as prescribing a limited role for economic evidence. However, recent decisions in the courts have revealed a willingness on the part ofjudges to allow economic evidence in criminal matters for the purposes of determining existence and intent as well as whether the per se standard applies.⁵⁰ In this section, I make the case that economic evidence can be relevant for each of these purposes, and I explain that this view is supported by the courts’ decisions in DaVita and Patel to admit evidence from economics experts.

First, economic evidence is informative regarding ancillarity and the applicability of the per se standard. The ancillarity doctrine states that an agreement between horizontal competitors can be handled under the rule of reason rather than the per se rule if it is "subordinate and collateral" to a "separate, legitimate transaction or collaboration" and "reasonably necessary to achieving that transaction’s procompetitive purpose."⁵¹ In the case ofjoint ventures and collaborations as well as vertical relationships, evaluating ancillarity requires determination of the extent to which the agreement enabled the collaboration as well as the benefits of the collaboration to workers. These are fundamentally economic questions that require an understanding of labor markets, and the courts’ decisions regarding the admissibility of economic evidence in DaVita and Patel reflect this fact. In both cases, the courts allowed ancillarity to be addressed at trial despite having upheld the per se standard at the motion to dismiss stage.⁵² In Patel the Judge noted, "[e]vidence concerning the ancillary restraints defense is also likely admissible," noting that he would decide the relevance of particular evidence at a later date "in light of the Government’s evidence of the charged conspiracy."⁵³ In fact, the judge in Patel placed the burden ofproof on the government, requiring it to show that the doctrine did not apply.⁵⁴

In both DaVita and Patel, the courts required more than non-ancillarity to determine that the agreements were per se illegal at trial. In Patel, the court required that the agreement constituted a "meaningful cessation of competition" for labor, citing to the decision in Bogan v. Hodgkins stating that "a horizontal market allocation requires cessation

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of ‘meaningful competition’ in the allocated market."⁵⁵ Similarly, in DaVita the jury was instructed to deliberate based on instructions that stated, "the government will have to prove more than that Defendants had entered into a non-solicitation agreement—it will have to prove that Defendants intended to allocate the market," and that they "may not find that a conspiracy to allocate the market for the workers existed unless" they found "that the alleged agreements and understandings sought to end meaningful competition for the services of the affected workers."⁵⁶

Second, economic evidence is relevant to evaluating whether an agreement was intended to allocate a market. Economic evidence on the procompetitive benefits of an alleged agreement speaks to intent by revealing whether there was an alternative, procompetitive purpose. Evaluating procompetitive benefits in labor markets requires understanding the incentives employers have to invest in workers and how attrition affects these incentives, as well as the possible benefits to workers in the form of productivity improvements and improved career opportunities. These are fundamental questions in labor economics.⁵⁷ As in the case of ancillarity, the judges’ decisions in DaVita and Patel reflect the importance of economic evidence on procompetitive benefits.⁵⁸ In DaVita, the judge denied the motion to exclude this evidence, stating that it "might be relevant to the question whether Defendants entered into an agreement to allocate the market and did so with the intent to allocate the market, as charged in the indictment." In Patel, the judge took an even broader view, stating "[t]he procompetitive evidence at issue here is relevant because it relates to whether Defendants joined the charged conspiracy, whether the conspiracy existed as alleged, and whether Defendants had the requisite intent to join such a conspiracy."⁵⁹ Empirical evidence on the impact of an alleged agreement on workers can also inform as to intent. It is less likely that Defendants entered into the agreement for the purpose of allocating the market if the agreement in its implementation did not suppress wages or reduce flows of workers between the companies.

Third, economic evidence is relevant to evaluating whether an agreement existed. Empirical analysis of wages and worker movements informs directly as to whether the agreement restricted competition for workers. The judges’ decisions regarding admissibility in DaVita and Patel reflect the relevance of this information. In both cases, the judges permitted economic evidence on the impact of the alleged agreements on wages and on

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the movement of workers.⁶⁰ In Patel, the judge agreed with Defendants’ claim that the experts’ opinion on wage impacts was "relevant to show that ^vthe Government cannot meet its burden to prove the existence of an agreement or an intent to conspire.’"⁶¹

Finally, in addition to the evidence on ancillarity, procompetitive benefits, and impacts, in Patel, the judge also allowed evidence on market definition, agreeing with Defendants’ statement that the expert’s opinion "on the relevant market share of workers ‘rebut[s] the very existence of a market allocation by demonstrating why the alleged agreement never could have achieved the Government’s claimed purpose that Defendants sought to suppress wages or allocate a labor market.’"⁶² In addition, in Patel the judge allowed the economics expert to opine on the design and implementation of the agreement, stating that these opinions were relevant to "rebutting that purported financial motive or otherwise undermining the alleged purpose of the agreement."⁶³

IV. ECONOMIC EVIDENCE IN DAVITA AND PATEL

The prior section explained that economic evidence, including evidence regarding ancillarity, procompetitive impacts, and impacts on wages and worker movements, can be relevant to key questions in criminal labor cases. It also explained that this view is supported by the courts’ decisions to admit economic evidence in DaVita and Patel. In this Section I describe the economic evidence presented at the DaVita trial and included in the economic expert’s report in Patel.⁶⁴

In DaVita, Defendants argued that the agreements at issue had procompetitive benefits as evidence that the agreement was not intended to meaningfully reduce competition. Specifically, they noted that the agreements required workers to notify their employer prior to applying for a job at one of the other companies, and they argued that this enabled DaVita to compete for these workers, which they did by offering raises and promotions.⁶⁵

In addition, in DaVita the economics expert testified regarding his empirical analyses of wages, worker turnover, and worker movement. In his analyses of wages and worker turnover, the expert compared the wages and turnover rates of DaVita workers during the agreements with benchmarks including other industries and the period before the agreements. The expert testified that neither wages nor turnover were suppressed relative

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to benchmarks.⁶⁶ In his analysis of worker movement, the expert used data from online resumes to compare flows of workers between DaVita and firms inside the agreement with flows between DaVita and firms outside of the agreement. He also compared flows between DaVita and firms inside the agreement before and after the alleged conduct period. The expert concluded from this analysis that agreements did not meaningfully impact worker movements. Ultimately, he testified that the evidence on wages, turnover, and worker movements was consistent with competition and was not consistent with market allocation.⁶⁷ The jury requested clarification on the definition of "meaningful competition" just prior to reaching the decision to acquit, suggesting that the expert’s evidence on wages and worker movements may have factored into the final decision.⁶⁸

While Patel ended before Defendants presented evidence at trial, the pre-trial motions and decision are informative regarding the economic evidence that was prepared for trial. According to these documents, the economics expert offered four main opinions. The first opinion pertained to market definition, and Defendants claimed that this opinion was informative regarding intent, writing that it "rebut[s] the very existence of a market allocation by demonstrating why the alleged agreement never could have achieved the Government’s claimed purpose."⁶⁹

The expert’s second main opinion in Patel related to the expert’s empirical analysis of worker movements and his regression analysis of the impact of the agreement on wages. With respect to worker movements, the court summarized the expert’s opinion "that the lateral movement of engineers generally increased year-over-year" and Defendants’ conclusion that it "directly undermines the existence of the alleged conspiracy."⁷⁰ With respect to the analysis of wages, the court summarized the expert’s opinion that he found "no statistical support in his economic regression for the notion that a restraint had an adverse effect on compensation."⁷¹

The expert’s third main opinion in Patel related to procompetitive benefits, and the court summarized it as claiming "that benefits to competition can arise from no-poach restraints among companies in the same supply chain."⁷² The expert’s fourth main opinion related to the "design and application of the alleged restraint," and the court quoted the expert’s opinion as follows: "because the conspiracy was not comprehensive enough, or because Defendants made exceptions to their no-poach agreement, Defendants appear to have lacked an anticompetitive purpose."⁷³ As in DaVita, the economic evidence appears to have been impactful on the outcome of the trial. The judge cited the economic

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evidence in his acquittal decision, stating that job switching between companies was "commonplace" throughout the alleged agreement period.⁷⁴

To summarize, in DaVita and Patel, economic experts prepared evidence that pertained to the impacts of the agreements on wages and worker movements to inform questions of either intent or the existence of an agreement, and this evidence appears to have been impactful. In addition, in Patel, the economic expert prepared evidence that pertained to procompetitive benefits, market definition, and the "design and application" of the agreement.

V. CONCLUSION

The economic theory of labor markets and the DaVita and Patel cases show that economic evidence is relevant to determining key questions in no-poach cases. Since Patel, the DOJ has continued to argue that no-poach cases constitute per se illegal market allocation. In response to a motion to dismiss in SCA, the DOJ stated that the Patel decision was "contrary to [U.S.] Supreme Court and Fifth Circuit precedent" and that SCA’s position based on the Patel decision "amounts to an assertion that two competitors can agree not to compete with each other at all through solicitations, and can agree on other restrictions to limit their competition with each other for workers, as long as the agreement does not altogether foreclose hiring or worker movement."⁷⁵ Because the government dismissed SCA, we do not know how the judge would have responded to the motion to dismiss, and we do not know whether economic evidence would have been permitted if the case went to trial. It will be interesting to see the role economic evidence plays in future criminal no-poach cases and the influence of the DaVita and Patel decisions on future cases.

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Notes:

^1. Erin Johnson, Ph.D., Director, NERA Economic Consulting

^2. The California Equal Pay Act was enacted in 1949 and amended most recently in 2015. California’s Pay Transparency Act, S.B. 1162, went into effect on January 1, 2023. California’s original ban on non-competes dates to 1872, and S.B. 669B/A.B.1067 updated the law beginning as ofJanuary 2024 to make noncompete agreements void even if initiated outside of California.

^3. Ms. Blizzard made the statements during a panel discussion on criminal antitrust enforcement on March 6, 2024, at the American Bar Association’s annual National Institute on White Collar Crime. See Bonnie Eslinger, Top Calif. Antitrust Atty Says Criminal Cases On The Horizon, Law360 (Mar. 6, 2024, 11:38 PM), https://www.law360.com/articles/1810754/top-calif-antitrust-atty-says-criminal-cases-on-the-horizon.

^4. U.S. Dep’t of Just. Antitrust Division & Fed. Trade Comm’n, Antitrust Guidance for Human Resource Professionals (2016), https://www.justice.gov/atr/file/903511/dl. The guidance stated, "Naked wage- fixing or no-poaching agreements among employers, whether entered into directly or through a third-party intermediary, are per se illegal under the antitrust laws." Id. at 3 (emphasis added).

^5. For example, California filed amicus briefs in support of the appeal of the decision in Deslandes v. McDonald’s USA LLC, No. 22-2333 (7th Cir. Aug. 25, 2023), and in opposition to the district court’s decision in Giordano v. Saks Inc., 654 F. Supp. 3d 174 (E.D.N.Y. 2023).

^6. Attorney General Bonta’s August 29, 2023 statement was in response to a decision in a federal no-poach case involving fast food franchises. See Press Release, Cal. Dep’t of Justice, Attorney General Bonta Issues Statement on Favorable Court Decision Regarding McDonald’s Use of "No-Poach" Agreements (Aug. 29, 2023), https://oag.ca.gov/news/press-releases/attorney-general-bonta-issues-statement-favorable-court-decision-regarding#:~:text="Workers should be able to,%2C"said Attorney General Bonta.

^7. See, e.g., United States v. Patel, No. 3:21-CR-220 (D. Conn. Dec. 2, 2022) and United States v. DaVita, No. 1:21-CR-00229-RBJ5 (D. Colo. Jan. 28, 2022).

^8. Assistant AG Jonathan Kanter, head of the Antitrust Division, stated in October 2023 that "protecting workers from criminal behavior that harms their ability to get better wages, to realize upward mobility in their lives by getting access to better jobs, better training, and opportunities to provide for their families is fundamental and foundational to the work we do as antitrust enforcers." See A Conversation with FTC Chair Lina Khan and DOJ Assistant Attorney General Jonathan Kanter on Antitrust Enforcement, Brookings Inst. (Oct. 5, 2023), https://www.brookings.edu/wp-content/uploads/2023/08/gs 20231005 antitrust transcript.pdf.

^9. Collusion in product markets can also involve agreements not to compete on dimensions other than price and quantity, such as product quality or innovation. Similarly, collusion in labor markets can involve agreements not to compete in the provision of employment benefits, working conditions, or other characteristics of jobs.

^10. Superseding Indictment, United States v. Jindal, No. 4:20-cr-00358 (E.D. Tex. Apr. 15, 2021).

^11. Motion to Dismiss, United States v. Jindal, No. 4:20-cr-00358-ALM-KPJ (E.D. Tex. May 25, 2021).

^12. The jury acquitted both Defendants of agreeing to fix wages, but convicted the owner of obstructing the investigation. See Verdict of the Jury, United States v. Jindal, No. 4:20-cr-00358-ALM-KPJ (E.D. Tex. Apr. 14, 2022), ECF No. 112. Memorandum Opinion and Order, United States v. Jindal, No. 4:20-cr-00358 (E.D. Tex. Nov. 29, 2021).

^13. The indictment also alleged that the staffing companies agreed not to hire nurses from each other. See Criminal Indictment, United States v. Hee, No. 2:21-cr-00098-RFB-BNW (D. Nev. Mar. 26, 2021).

^14. Plea Agreement, United States v. Hee, No. 2:21-cr-00098-RFB-BNW (D. Nev. Oct. 27, 2022), ECF No. 106.

^15. Indictment, United States v. Manahe, et al., No. 2:22-cr-00013-JAW (D. Me. Jan. 27, 2022), ECF No. 1.

^16. Motion to Dismiss, United States v. Manahe et al., No. 2:22-cr-00013 (D. Me. Jan 27, 2022).

^17. Judgment of Acquittal, United States v. DaVita, Inc., No. 1:21-cr-00229-RBJ (D. Colo. Apr. 20, 2022), ECF No. 266.

^18. Superseding Criminal Indictment, United States v. Lopez, No. 2:23-cr-00055-CDS-DJA (D. Nev. Sept. 6, 2023).

^19. See Fed. Trade Comm’n, Market Division or Customer Allocation, https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/dealings-competitors/market-division-or-customer-allocation (last visited Sept. 6, 2024). Note also that the DOJ argued that the no-poach agreements in the Patel and DaVita criminal cases were per se market allocation agreements. See also Indictment, United States v. DaVita Inc., No. 1:21-cr-0229-RBJ (D. Colo. 2021); Indictment, United States v. Patel, No. 3:21-cr-00220-VAB) (D. Conn. Dec. 15, 2021).

^20. For example, in Patel the government alleged that the Defendants would not hire each other’s engineers under any circumstances, but the government alleged that DaVita entered into agreements with other companies not to solicit one another’s workers.

^21. See, e.g., Perry A. Lange et al., The State of "No-Poach" Prosecution: Is It Just Like Market Allocation After All?, 38 Antitrust 12 (2024).

^22. No-poach agreements can enable cooperation between firms that might not otherwise occur due to concerns that the cooperation or joint venture would lead to worker attrition. No-poach agreements can also enable investment in workers that may not occur if employers anticipate turnover. This can be to the benefit of workers, firms, and productivity. For a discussion of efficient investments in vertical relationships, see Dennis W. Carlton & Jeffrey Perloff, Modern Industrial Organization, Ch. 12 (4th ed. 2005).

^23. The indictment included two counts, one alleging an agreement between SCA and a "Texas-based company" and one alleging an agreement between SCA and a "Colorado-based company," DaVita. See Indictment, United States v. Surgical Care Affiliates, LLC, No. 3:21-cr-00011-L (N.D. Tex. Jan. 5, 2021).

^24. See Bryan Koenig, DOJ Abandons Last Remaining No-Poach Prosecution, Law360 (Nov. 14, 2023, 6:10 PM), https://www.law360.com/articles/1766482/doj-abandons-last-remaining-no-poach-prosecution.

^25. Superseding Indictment, United States v. DaVita, Inc., No. 1:21-cr-00229-RBJ (D. Colo. Nov. 3, 2021). The three other operators of outpatient medical facilities that DaVita allegedly conspired with were SCA, Hazel Health, and Radiology Partners.

^26. Order on Pending Motions, United States v. DaVita, Inc., No. 1:21-cr-00229 (D. Colo. Mar. 21, 2023), ECF No. 210; Order Resolving Disputes on Proposed Jury Instrs. 10, United States v. DaVita, Inc., No. 1:21-cr-00229 (D. Colo. Mar. 25, 2023), ECF No. 214.

^27. Judgment of Acquittal, United States v. DaVita, Inc., No. 1:21-cr-00229-RBJ (D. Colo. Apr. 20, 2022), ECF No. 266.

^28. Indictment, United States v. Patel, No. 3:21-cr-00220-VAB (D. Conn. Dec. 15, 2021), ECF No. 20.

^29. Order Denying Mot. to Dismiss at 21, United States v. Patel, No. 3:21-cr-00220-VAB (D. Conn. 2023), ECF No. 257.

^30. United States v. Patel, No. 3:21-CR-220 (D. Conn. Mar. 27, 2023).

^31. Rule 29 Motion, United States v. Patel, No. 3:21-CR-00220 (D. Conn. Apr. 28, 2023).

^32. Indictment, United States v. Manahe, et al., No. 2:22-cr-00013-JAW (D. Me. Jan. 27, 2022), ECF No. 1.

^33. N. Gregory Mankiw, Principles of Economics ch. 18 (8th ed. 2018).

^34. The supply of labor refers to the number of workers that are available and willing to work, and it depends on factors like the size and skills of the available working population and the alternative employment options available to workers. Demand for labor refers to the number of workers firms want to employ, and it depends on factors like the production level of firms, the technology used, and the productivity of workers. In labor markets, the "wage" can include hourly pay or annual salary as well as other components of compensation that can be important in equilibrating supply and demand. These components include bonuses, employment benefits, career advancement opportunities, and working conditions.

^35. Job differentiation refers to differences in jobs along dimensions like geographic location or working conditions. In job differentiation models, workers typically differ in the amount they value the different characteristics of jobs. This sets job differentiation models of labor markets apart from models of product differentiation. Kenneth Burdett & Dale T. Mortensen, Wage Differentials, Employer Size, and Unemployment, 39 Int’l Econ. Rev. 257 (1998).

^36. Conditions include that workers cannot be too sensitive to wage changes and employers must compete as in the Cournot framework. Note also that, in the long-run, entry of employers would lead wages to return to the competitive level. In markets characterized by barriers-to-entry, wages can theoretically remain below the MPL in the long-run. See Efraim Benmelech et al., Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages? (Nat’l Bureau of Econ. Rsch., Working Paper No. 24307, 2018); José Azar et al., Labor Market Concentration, 57 J. Hum. Res. S167 (2022); Kevin Rinz, Labor Market Concentration, Earnings Inequality, and Earnings Mobility (Ctr. for Admin. Records Rsch. & Applications, Working Paper 10, 2018), https://www.census.gov/content/dam/Census/library/working-papers/2018/adrm/carra-wp-2018-10.pdf.

^37. While some highly specialized workers or workers tied to geographic areas with few employers may only be able to work for a small number of employers, labor markets can be broader than a single industry or occupation. See Ian M. Schmutte, Free to Move? A Network Analytic Approach for Learning the Limits to Job Mobility, 29 Labour Econ. 49 (2014); Giuseppe Moscarini & Kaj Thomsson, Occupational and Job Mobility in the US, 109 Scandinavian J. Econ. 807 (2007).

^38. David Card et al., Firms and Labor Market Inequality: Evidence and Some Theory, 36 J. Lab. Econ. (2018); Sydnee Caldwell & Oren Danieli, Outside Options in the Labor Market (2018) (unpublished manuscript), https://scholar.harvard.edu/files/danieli/files/danieli jmp.pdf; Sydnee Caldwell & Oren Danieli, Outside Options in the Labour Market, Rev. Econ. Stud. (2024).

^39. N. Gregory Mankiw, Principles of Economics ch. 18 (8th ed. 2018).

^40. The aggregate elasticity of labor supply determines the extent to which the wage decreases in response to reductions in the quantity of labor demanded.

^41. Suresh Naidu, Recruitment Restrictions and Labor Markets: Evidence from the Postbellum U.S. South, 28 J. Lab. Econ. 413-45 (2010).

^42. See, e.g., Alan B. Krueger & Orley Ashenfelter, Theory and Evidence on Employer Collusion in the Franchise Sector (Nat’l Bureau of Econ. Rsch., Working Paper No. 24831, 2018).

^43. Ian M. Schmutte, Free to Move? A Network Analytic Approach for Learning the Limits to Job Mobility, 29 Labour Econ. 49 (2014); Giuseppe Moscarini & Kaj Thomsson, Occupational and Job Mobility in the US, 109 Scandinavian J. Econ. 807 (2007).

^44. Alan Manning & Barbara Petrongolo, How Local Are Labor Markets? Evidence from a Spatial Job Search Model, 107Am. Econ. Rev. 2877 (2017); Ferdinando Monte et al., Commuting, Migration, and Local Employment Elasticities, 108 Am. Econ. Rev. 3855 (2018).

^45. Intuitively, if a no-poach agreement decreases attrition, it can increase returns to investment by employers in workers. The increase in investment can benefit workers through increases in productivity and career opportunities. In Deslandes v. McDonalds, the Seventh Circuit acknowledged that the need to recoup investments in worker hiring and training could justify restrictions on hiring, see Deslandes v. McDonald’s USA LLC, No. 22-2333 (7th Cir. Aug. 25, 2023).

^46. In some cases, they may enable vertical relationships or collaborations that benefit workers and would not otherwise not be possible due to concerns that the collaboration would lead to costly attrition of workers. For example, a staffing agency might not be willing to supply workers to a firm if it expects the firm to poach its best workers. As an example, in Aya Healthcare Servs. v. AMN Healthcare, Inc., 9 F.4th 1102, 1109 (9th Cir. 2021)), the no-poach agreement was determined to be ancillary to the companies’ collaboration in supplying traveling nurses to hospitals.

^47. U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidance for Human Resources Professionals 4 (2016), https://www.justice.gov/atr/file/903511/dl.

^48. Id. at 3.

^49. In their opposition to the Defendants’ motion to dismiss in Manahe, the government pointed out that the Defense did not describe the collaboration. United States’ Opp’n to Defs.’ Mot. to Dismiss the Indictment, United States v. Manahe, et al., No. 2:22-cr-00013-JAW (D. Me. June 21, 2022), ECF No. 89.

^50. See the discussion of the judges’ decisions in DaVita and Patel below. In both cases, the judge upheld the per se standard at the motion to dismiss stage.

^51. Aya Healthcare Servs., Inc. v. AMN Healthcare, Inc., 9 F.4th 1102, 1109 (9th Cir. 2021).

^52. Order on Pending Motions, United States v. DaVita, No. 1:21-cr-00229-RBJ (D. Colo. Mar. 21, 2023), ECF No. 210; Order Denying Mot. to Dismiss at 21, United States v. Patel, No. 3:21-cr-00220-VAB (D. Conn. 2023), ECF No. 257.

^53. Ruling and Order on Motions, United States v. Patel, et al., No. 3:21-cr-220-VAB (D. Conn. 2023).

^54. Order Denying Mot. to Dismiss at 21, United States v. Patel, No. 3:21-cr-00220-VAB (D. Conn. 2023), ECF No. 257.

^55. Jury Instructions, United States v. Patel, No. 3:21-cr-00220 (D. Conn.2023), ECF 456.

^56. Jury Instructions, United States v. DaVita, No. 1:21-cr-00229 (D. Colo. 2022).

^57. See the literature on the investment decisions of employers, determinants of worker productivity, and career concerns of workers.

^58. It should be noted that procompetitive evidence was only permitted in regards to the existence of a market allocation agreement and the intentions regarding parties entering into the agreements at issue. For example, in DaVita, the jury instructions stated, "[i[f defendants entered into an agreement or understanding with the intent to allocate the market, it is immaterial whether such an agreement or understanding was actually good for the company or even good for the market as a whole." Jury Instructions, United States v. DaVita, No. 1:21-cr-00229 (D. Colo. 2022).

^59. Ruling and Order on Motions, United States v. Patel, et al., No. 3:21-cr-220-VAB (D. Conn. 2023).

^60. Reporter’s Transcript, United States v. DaVita, Inc., No. 1:21-cr-00229-RBJ (D. Colo. 2022); Ruling and Order on Motions, United States v. Patel, et al., No. 3:21-cr-00220-VAB (D. Conn. 2023).

^61. Ruling and Order on Motions, United States v. Patel, et al., No. 3:21-cr-00220-VAB (D. Conn. 2023).

^62. Id.

^63. Id.

^64. For DaVita I rely on the trial transcript for information on the economic evidence presented. Because the judge decided Patel before Defendants presented any evidence, I rely on discussions of the economic evidence in the memoranda in support of and in opposition to the motion to exclude the economic expert’s opinions, as well as the judge’s final ruling on the pre-trial motions, to understand the economic evidence that was prepared prior to trial.

^65. Reporter’s Transcript, United States v. DaVita, Inc., No. 1:21-cr-00229-RBJ (D. Colo. 2022).

^66. Id.

^67. Id.

^68. Id.

^69. Ruling and Order on Motions, United States v. Patel, et al., No. 3:21-cr-00220-VAB (D. Conn. 2023).

^70. Id.

^71. Id.

^72. Id.

^73. Id.

^74. See Bryan Koenig & Nadia Dreid, DOJ’s Latest, Biggest No-Poach Trial Thrown Out, Law360 (Apr. 28, 2023, 10:36 AM), https://www.law360.com/articles/1602209.

^75. DOJ’s Response to SCA’s Motion to Dismiss, U.S. v. Surgical Care Affiliates LLC et al., No. 3:21-cr-00011-L (N.D. Tex. May 16, 2023).