Portugal uses interim measures in first no-poach probe

Charley Connor

27 May 2020

Portugal uses interim measures in first no-poach probe

Credit: Sergey Nivens/Shutterstock

Portugal’s Competition Authority has used interim measures for the first time in over a decade to order the Portuguese Professional Football League to stop enforcing no-poach agreements between its teams.

The enforcer yesterday ordered the governing body to immediately suspend agreements among clubs in its top two divisions, which prevented them from hiring out-of-contract players who had left a rival club before the delayed football season finished. It is the first time the authority has taken action against no-poach agreements.

The Portuguese Professional Football League, or LPFP, must also ensure that its member teams are aware that the no-poach agreements have been suspended. It will be fined €6,000 for each day that it fails to comply with the enforcer’s order.

The authority said in a press release that it decided to impose interim measures because of “the potential serious and irreparable impact of a practice that could harm the competition rules”. 

No-poach agreements, which require rival companies to stop hiring each other’s employees, effectively renounce competition for “the acquisition of human resources”, the antitrust enforcer said.

The LPFP is the governing body of the country’s professional football leagues. On 8 April, the presidents of teams in Portugal’s second-highest league, the LigaPro, jointly agreed not to hire any player that cited the coronavirus pandemic as a reason for unilaterally terminating his contract at another club.

This followed a similar agreement concluded the previous day between teams in the country’s top league, the Liga NOS.

In particular, the LPFP warned that players may use the extension of the football season as a reason to terminate their current contracts. The league has extended the 2019-2020 season – and all related player contracts – for as long as it takes to make up the games suspended due the pandemic.

The competition authority said the football teams’ no-poach agreements could distort market conditions, harming the economy and consumers. It claimed that no-poach provisions can weaken competition by reducing innovation, decreasing the quantity of goods available or increasing prices, although it did not set out what specific harm the football clubs’ cooperation could cause.

The agency noted that enforcers in the EU and the US view no-poach agreements as serious restrictions of competition. 

The enforcer therefore ordered the LPFP to immediately suspend the agreements, as it completes its investigation into the allegedly anticompetitive conduct. It did not respond to a question about how long it expects the probe to last.

It is the first time the Portuguese authority has used interim measures since 2009, when it ordered ZON Multimédia – now NOS – to end a loyalty programme that gave free cinema tickets on a monthly basis to subscribers of its pay-TV service.

Miguel Mendes Pereira, a partner at DLA Piper in Lisbon, said there is a clear recent tendency at the Portuguese enforcer to open “borderline test cases” that other European authorities have not yet dealt with. 

Last year, Germany’s Federal Cartel Office fined eight magazine lending companies more than €3 million for concluding no-poach agreements. In 2017, France fined three linoleum floor manufacturers for participating in a cartel, which included an apparent agreement not to hire each other’s workers.

National enforcers in Spain, the Netherlands and Croatia have also reportedly examined no poach restrictions in markets such as freight forwarding, healthcare and information technology. 

“It remains to be seen how courts view the incursion of the [Portugeuse] competition authority in domains that are far from the mainstream line of previously tested cases,” Pereira said.

Portugal’s competition law only allows the enforcer to adopt interim measures in the context of an investigation, he said, “so it is likely that a more in-depth probe” will follow into the football clubs’ agreements. 

At the very least, the LPFP has a legal right to be heard, he said. “The authority must decide whether to keep the interim measures in force after hearing [from] the league – and probably also some or all of the clubs,” he said.

Gonçalo Anastácio, a partner at SRS Advogados in Lisbon, said there is “no doubt” that the Portuguese enforcer views no-poach agreements as anticompetitive. But taking action against certain companies that rely on them follows a “line of enforcement” seen in the US, he said. 

“It’s a sign of the times,” he explained. “As companies are more cautious on the traditional infringements, including the classic price-fixing cartel, the European authorities are moving towards new frontiers such as no-poach and hub-and-spoke.”

The enforcer’s interim measures against the LPFP came just days after it warned trade associations that it will not relax competition rules because of the covid-19 crisis, Anastácio noted. This suggests the authority is taking a more “hardline” approach than other EU authorities, many of which have granted or indicated that they will grant temporary competition law exemptions, he said.

The LPFP did not respond to a request for comment.

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