Labour Market Allocation Risks

1. Introduction

Labour market allocation occurs when competing employers coordinate to divide, reserve, or otherwise restrict access to workers instead of independently competing for employees. Typical arrangements include:

• “No-poach” agreements;
• Agreements not to solicit employees;
• Agreements not to hire employees without permission;
• Allocation of workers by territory, occupation, employer, or skill category;
• Agreements fixing or coordinating wages;
• Restrictions on employee movement between competing firms;
• Coordinated use of recruitment platforms or labour intermediaries;
• Agreements limiting recruitment from particular universities, factories, hospitals, or professional groups.

From a competition-law perspective, employers are buyers of labour services, while workers supply labour. Therefore, an agreement between competing employers can potentially constitute an allocation of an input market in the same way that competitors can unlawfully allocate customers or geographical markets.

In China, this issue is particularly important because the Anti-Monopoly Law (AML) prohibits monopoly agreements and market-allocation arrangements, although Chinese legislation does not currently create a separate statutory category expressly called “labour-market allocation” or “no-poach agreement.” Chinese enforcement has nevertheless addressed no-poach conduct, including the Hunan shale-brick case and the 2023 hog-breeding case.

2. Legal Framework in China

A. Anti-Monopoly Law

The principal legislation is China's Anti-Monopoly Law, originally enacted in 2007 and substantially amended in 2022.

A labour-market allocation arrangement can potentially be examined as a horizontal monopoly agreement where competing employers coordinate their conduct concerning employees.

Relevant forms of conduct include:

1. Allocation of markets;
2. Restriction of production or business activity;
3. Fixing or changing prices;
4. Other agreements that eliminate or restrict competition.

The central competition question is whether the employers are competing with one another for labour and whether their agreement reduces that competition.

B. Employers as purchasers in a labour market

Competition law traditionally focuses on competition between sellers.

Labour-market antitrust analysis recognises another side of the market:

Workers = suppliers of labour
Employers = purchasers of labour

Thus, two competing companies that agree:

“Your company will recruit engineers from Region A, while our company recruits engineers from Region B”

may effectively be allocating a labour market.

Similarly:

“Neither company will hire the other's employees”

can eliminate competition for those employees.

The FTC and DOJ describe such arrangements as allocation of employees in a labour market.

3. Main Forms of Labour Market Allocation

A. No-Poach Agreements

A no-poach agreement prohibits one employer from recruiting employees of another employer.

Example:

Company A and Company B agree that neither will recruit employees working for the other.

This can reduce:

• employee mobility;
• competing job offers;
• wage bargaining;
• career opportunities;
• recruitment incentives.

Chinese enforcement experience demonstrates that no-poach arrangements can attract competition-authority attention even when incorporated into a broader industry agreement.

B. No-Hire Agreements

A no-hire arrangement goes further than merely prohibiting solicitation.

It may prohibit an employer from hiring employees of another employer even where the employee independently applies for the position.

This can be particularly problematic because it directly prevents employees from changing employers.

C. Territorial Allocation of Workers

Competing employers may divide workers geographically.

For example:

• Employer A recruits workers in northern China;
• Employer B recruits workers in southern China;
• neither employer recruits from the other's territory.

This resembles conventional market allocation, except that the allocated market is the labour supply market.

D. Occupational Allocation

Employers may agree to divide workers according to occupation or skill.

For example:

• one company recruits software engineers;
• another recruits data scientists;
• neither recruits workers classified within the other's category.

Such arrangements may become problematic where they are designed to suppress competition for scarce labour.

E. Wage Coordination

Labour allocation and wage fixing frequently overlap.

Competitors may agree:

• maximum salaries;
• salary bands;
• recruitment bonuses;
• signing bonuses;
• overtime rates;
• temporary-worker rates;
• benefits;
• relocation payments.

A wage-fixing arrangement can operate as a price-fixing agreement on the purchasing side of the labour market.

U.S. authorities expressly identify wage fixing as a serious antitrust concern.

4. Why Labour Market Allocation Is Anti-Competitive

1. Reduction in worker mobility

If competing employers promise not to recruit each other's employees, workers have fewer opportunities to change jobs.

2. Suppression of wages

Employers normally compete for scarce workers by offering:

• higher salaries;
• bonuses;
• benefits;
• flexible working conditions;
• career progression.

Allocation eliminates some of this competitive pressure.

3. Reduced innovation

Highly skilled employees often carry:

• technical expertise;
• research knowledge;
• managerial experience;
• industry knowledge.

Restricting their mobility can reduce competitive entry and innovation.

4. Reduced entrepreneurship

Employees who cannot freely move between employers may have fewer opportunities to establish:

• start-ups;
• consulting businesses;
• competing enterprises.

5. Increased employer bargaining power

A group of employers acting collectively can acquire greater bargaining power over workers than they would possess individually.

5. Six Important Case Laws / Enforcement Examples

Case 1: Hunan Shale-Brick Manufacturers Case — China

Facts

In Hunan Province, a group of shale-brick manufacturers operated through an industry association. The arrangements included several restrictive practices involving:

• prices;
• production;
• geographic markets; and
• labour.

The manufacturers also agreed not to poach employees from one another.

The case was investigated by the predecessor of today's SAMR.

Competition issue

The no-poach arrangement restricted competition between the manufacturers for labour.

Importantly, the labour restriction appeared alongside conventional cartel conduct.

Significance

The case is significant because it demonstrates that Chinese competition authorities can examine employee-related arrangements as part of a broader horizontal cartel.

It is one of the earliest publicly discussed Chinese examples connecting no-poach arrangements with AML enforcement.

Case 2: Chinese Hog-Breeding No-Poach Case — 2023

Facts

In 2023, four major Chinese hog breeders entered into an arrangement concerning recruitment of employees and agreed not to poach one another's personnel.

Other breeders were reportedly invited to participate.

SAMR intervened and convened the companies.

Regulatory response

The companies were warned that the arrangement was inconsistent with the competitive principles underlying the AML.

They subsequently terminated the arrangement and improved their antitrust compliance.

Unlike a conventional cartel fine, the reported response involved regulatory correction rather than a monetary penalty.

Significance

This case is particularly relevant because it is a relatively direct example of Chinese competition authorities addressing a labour-market no-poach arrangement independently of a traditional price cartel.

It demonstrates that the absence of a specifically named “no-poach” provision does not necessarily eliminate AML risk.

Case 3: United States v. eBay Inc. / Intuit Inc.

Facts

eBay and Intuit were competitors in the technology sector.

They entered into an agreement concerning recruitment of each other's employees.

The arrangement restricted the companies from competing for certain employees.

Legal issue

The DOJ characterised the agreement as a horizontal allocation of employees.

The court indicated that, if proven as alleged, the arrangement could constitute a naked horizontal market-allocation agreement.

Outcome

The DOJ obtained a settlement requiring eBay to terminate the arrangement and preventing similar conduct.

Significance

The case established an important analytical principle:

A market-allocation agreement does not cease to be an allocation agreement merely because the “market” consists of employees rather than customers.

The DOJ stated that the arrangement reduced competition for highly skilled workers and potentially affected employee opportunities and compensation.

Case 4: United States v. Adobe / Apple / Google / Intel / Intuit / Pixar / Lucasfilm

Facts

Several major technology companies entered into arrangements restricting recruitment of employees from one another.

The companies agreed, among other things, not to cold-call certain employees of competing companies.

Legal issue

The DOJ considered the arrangements to be restrictions on competition for employees.

The concern was particularly significant because technology companies compete for highly skilled personnel.

Outcome

The DOJ brought civil antitrust actions, resulting in consent judgments.

Significance

The case illustrates how labour allocation can arise through seemingly informal recruitment practices.

It also demonstrates that an agreement need not contain an explicit clause stating:

“We allocate the labour market.”

A coordinated understanding regarding recruitment can potentially produce the same competitive effect.

Case 5: In re Debes Corp. — U.S. FTC

Facts

Debes involved nursing homes and competition for temporary nursing services.

The nursing homes opposed a nursing registry's proposed increase in prices and coordinated conduct that reduced competition among the nursing homes for temporary nursing services.

Competition issue

The FTC treated the conduct as an attempt to eliminate competition among purchasers of nursing labour.

Thus, the case illustrates an important concept:

Labour-market antitrust law applies not only to permanent employees but also to temporary and contract labour.

Outcome

The FTC proceeded against the conduct and obtained an order addressing the competitive restrictions.

Significance

The case is useful because it demonstrates the buyer-side dimension of labour competition.

The relevant competition was not among nurses selling services, but among employers purchasing nursing services.

Case 6: Lucasfilm Ltd. v. Pixar / Related Technology-Industry No-Poach Enforcement

Facts

Lucasfilm and Pixar were among the technology and entertainment companies involved in arrangements restricting recruitment of employees from competing firms.

The arrangements restricted direct solicitation and recruitment.

Legal concern

The authorities considered the restrictions capable of reducing competition for specialised workers.

Significance

The case is particularly relevant to industries where employees possess scarce, highly specialised human capital.

A no-poach arrangement can therefore have consequences beyond immediate wage suppression by limiting the movement of knowledge and expertise between competing firms.

The broader technology-company enforcement program ultimately resulted in consent judgments covering the participating companies.

6. Comparative Case-Law Table

The U.S. authorities' current guidance continues to identify wage-fixing, no-poach arrangements, restrictions on worker mobility, and competitively sensitive information sharing as potential antitrust concerns.

7. Labour Market Allocation and Information Exchange

An important risk exists even where employers do not expressly agree not to hire each other's workers.

For example, competing companies may exchange:

• current salary data;
• planned salary increases;
• recruitment bonuses;
• employee turnover information;
• hiring targets;
• benefits information;
• individual employee compensation;
• future recruitment strategies.

If the exchange facilitates coordination, it may reduce independent competition.

The FTC and DOJ specifically recognise that competitively sensitive employment information can create antitrust risk even where there is no explicit wage-fixing agreement.

8. Labour Market Allocation Through Trade Associations

Trade associations create particular risks.

An association may organise:

• common recruitment policies;
• salary surveys;
• employee databases;
• no-poach arrangements;
• standard employment restrictions;
• restrictions on recruitment from member companies.

A legitimate association activity can become problematic if it facilitates coordination among competing employers.

The Hunan shale-brick case is especially relevant because the restrictive arrangements were facilitated through an industry association.

9. Joint Ventures and Legitimate Collaboration

Not every restriction on employee recruitment is necessarily anti-competitive.

A restriction may arise in connection with:

• a joint venture;
• outsourcing;
• merger or acquisition;
• shared facility;
• research collaboration;
• technology partnership;
• temporary project.

The critical question is whether the restriction is reasonably connected and proportionate to a legitimate collaboration.

For example, a narrowly tailored restriction protecting employees assigned to a genuine joint project may be distinguishable from a broad agreement covering all employees of the participating companies.

U.S. enforcement guidance similarly recognises that recruitment restrictions may sometimes be ancillary to legitimate collaborations rather than independent labour-market allocations.

10. Labour Market Allocation Through Franchising

Franchise systems can create another risk.

A franchisor may attempt to impose:

“Employees of one franchisee cannot work for another franchisee.”

The competition issue becomes more complex because the franchisees may technically operate under the same brand while independently competing for workers.

The analysis should therefore consider:

1. Whether franchisees are economically independent;
2. Whether they compete for the same labour;
3. Whether the restriction is imposed by the franchisor;
4. Whether the restriction is necessary for the franchise system;
5. Whether the restriction covers all workers or only particular personnel.

11. Digital Platforms and Labour Allocation

Modern labour-market allocation can occur through digital platforms.

Examples include:

• online recruitment platforms;
• gig-work platforms;
• driver platforms;
• freelancer marketplaces;
• healthcare staffing platforms;
• professional networking platforms.

Potential concerns include:

A. Algorithmic allocation

A platform could potentially coordinate how workers are distributed among employers.

B. Recruitment exclusivity

An employer may be prevented from accessing workers available through competing platforms.

C. Data-driven wage coordination

Employers may use a common algorithm or third-party system to determine compensation.

D. Worker ranking

Platforms may manipulate visibility of workers to competing employers.

E. Multi-homing restrictions

Workers may be prevented from simultaneously using multiple labour platforms.

These practices require careful distinction between legitimate platform design and conduct that actually restricts competition.

12. Special Risks in China's Digital Economy

China's digital economy creates additional labour-market competition issues because large platforms may simultaneously possess:

• extensive worker data;
• recruitment information;
• algorithmic pricing systems;
• large user networks;
• dominant market positions;
• access to employment histories.

A dominant platform could potentially create competition concerns if it uses its position to restrict workers or employers from dealing with rival labour platforms.

The broader Chinese competition-policy literature also indicates that increased competition following AML enforcement can affect wages and human-capital decisions, illustrating the connection between competition policy and labour outcomes.

13. Labour Market Allocation vs Non-Compete Agreements

These concepts should not be confused.

No-poach

Employer A agrees with Employer B:

“I will not recruit your workers.”

Wage fixing

Employer A agrees with Employer B:

“We will pay workers the same salary.”

Non-compete

Employer A individually restricts its employee from working for competitors after leaving.

Labour-market allocation

Several employers collectively divide workers, occupations, territories, or recruitment opportunities.

The first three can overlap with labour-market allocation, but they are legally distinct concepts.

14. Evidence Relevant to Enforcement

Competition authorities may examine:

• emails;
• WhatsApp or other messaging records;
• trade-association minutes;
• HR communications;
• recruitment policies;
• employment contracts;
• salary databases;
• internal compliance documents;
• communications between HR executives;
• recruitment-platform data;
• employee movement patterns;
• wage trends;
• hiring restrictions.

Particularly important evidence may include statements such as:

“We agreed not to recruit from Company B.”

or

“No member company should approach another member's employees.”

Such evidence can demonstrate an agreement even where there is no formal written cartel document.

15. Economic Effects

The effects of labour-market allocation may include:

Direct effects

• lower wages;
• fewer job offers;
• reduced employee mobility;
• reduced recruitment;
• fewer benefits;
• weaker bargaining power.

Dynamic effects

• reduced innovation;
• reduced entrepreneurship;
• lower investment in human capital;
• weaker entry by new firms;
• inefficient allocation of skilled workers.

Industry effects

The effects may be particularly significant in:

• technology;
• healthcare;
• finance;
• engineering;
• aviation;
• pharmaceuticals;
• professional services;
• construction;
• agriculture;
• logistics.

16. Key Legal Tests for China

When analysing a suspected labour-market allocation arrangement under Chinese competition law, the following questions are useful:

Step 1 — Identify the relevant labour market

Determine:

• occupation;
• geographic scope;
• skill level;
• employee category;
• substitutability.

Step 2 — Identify competing employers

Determine whether the participants actually compete for the relevant workers.

Step 3 — Identify the agreement

Establish whether there is:

• written agreement;
• oral agreement;
• association decision;
• coordinated practice;
• informal understanding.

Step 4 — Determine the restriction

Identify whether the arrangement involves:

• no-poach;
• no-hire;
• wage fixing;
• territorial allocation;
• occupational allocation;
• recruitment restrictions.

Step 5 — Examine competitive effects

Consider:

• worker mobility;
• wages;
• recruitment;
• employment opportunities;
• innovation;
• entry.

Step 6 — Examine justification

Determine whether the restriction is genuinely ancillary to:

• JV;
• M&A;
• outsourcing;
• research collaboration;
• franchise arrangement;
• other legitimate commercial activity.

Step 7 — Assess duration and scope

A restriction covering:

all employees + all competitors + unlimited duration

creates substantially different competition concerns from a narrowly defined temporary restriction relating to a specific project.

17. Compliance Measures for Chinese Businesses

Businesses should consider:

1. Prohibiting informal no-poach agreements.
2. Training HR personnel on AML requirements.
3. Restricting competitor discussions about salaries.
4. Using independent and appropriately aggregated salary surveys.
5. Reviewing industry-association communications.
6. Documenting legitimate reasons for employee restrictions.
7. Reviewing JV and M&A recruitment clauses.
8. Avoiding informal “gentlemen's agreements.”
9. Separating HR functions from competitor communications.
10. Conducting periodic antitrust audits of recruitment practices.

Particular attention should be given to informal communications, because labour-market coordination does not necessarily require a formal written contract.

18. Conclusion

Labour market allocation is an emerging and important competition-law risk in China. Although China's AML does not currently contain a standalone statutory offence labelled “labour-market allocation,” existing monopoly-agreement principles can potentially reach agreements among competing employers that restrict competition for workers.

The Hunan shale-brick case provides an early Chinese example involving a no-poach arrangement, while the 2023 hog-breeding case demonstrates more recent regulatory attention to direct no-poach conduct.

The comparative U.S. cases—particularly eBay–Intuit, the technology-company no-poach proceedings, and Debes—illustrate the broader competition-law principle that employers can compete in a purchasing market for labour. Agreements that eliminate that competition can therefore be treated as market-allocation or price-fixing conduct rather than merely as ordinary employment arrangements.

For Chinese businesses, the principal risk areas are therefore no-poach agreements, wage coordination, employee allocation, recruitment restrictions, competitor HR-information exchanges, industry-association decisions, and overly broad employee restrictions accompanying legitimate collaborations. The January 2025 U.S. DOJ/FTC guidance likewise confirms the continuing international movement toward treating competition for workers as an integral component of antitrust enforcement.