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Wage-fixing agreements are anticompetitive agreements of a collusive nature that take place in the labor market.
Specifically, these agreements occur when two or more companies coordinate regarding the wage conditions of their workers, with the intention (as a general rule) of driving wages down. This coordination can include the imposition of a fixed salary, where all employees receive the same amount of money, or the restriction of salaries within predefined ranges. Both approaches seek to reduce or eliminate wage competition between the companies involved.
Although wage-fixing agreements are currently considered serious competition infringements, for many years they were subject to scarce investigation and sanctioning by competition authorities. Indeed, authorities focused on the prosecution of so-called “hardcore cartels,” which are those that affect key competitive variables such as price, production, market shares, and public tenders.
However, in recent years, the oversight and sanctioning of wage-fixing agreements has intensified globally. In this context, the European Commission, the Department of Justice (“DOJ”), and the Federal Trade Commission (“FTC”) of the United States have led the adoption of forceful measures to address these agreements (see CeCo note “EE.UU.: Nuevos aires en la persecución penal en libre competencia“). In particular, the FTC, under the direction of Lina Khan, has emphasized the interrelationship between antitrust and the protection of labor rights, thus reinforcing the commitment of the U.S. authority to guarantee competition in labor markets (see CeCo note “La visión anglosajona sobre la libre competencia y los mercados laborales“).
That said, within this trend of paying more attention to labor markets, the investigation and prosecution of another category of collusion has also been strengthened: no-poach agreements. In this type of agreement, two or more companies commit not to solicit or hire the workers of the other companies involved in the agreement. Thus, while wage-fixing agreements cover what is traditionally treated as price-fixing collusion, no-poach agreements cover what is traditionally understood as collusion in the allocation of sales territories.
The anticompetitive nature of wage-fixing agreements is primarily evidenced by the deterioration of wages and working conditions for employees. This limits workers’ bargaining power and decreases their purchasing power, negatively affecting their economic well-being (see OECD report “Competition in Labour Markets”).
The logic behind sanctioning such agreements is that they increase the monopsony power of employers. A monopsony is a situation in which there is a single buyer in the market, allowing it to influence the price and quantity of the goods or services it acquires. This typically results in lower prices and lower quantities purchased compared to a competitive market.
In the labor market, employers and workers assume the roles of buyers and sellers, respectively. Thus, a monopsony implies the existence of a single employer who exerts its power to lower the wages paid to the workers it hires.
In addition to harming workers, these agreements can have an adverse impact on company productivity. Wage reductions and the disincentive to the labor supply can result in worker shortages, limiting productive capacity. This could have a negative effect on allocative efficiency, as a lower level of output would be produced than what would exist under competitive conditions (for a counterpoint, see the 2024 opinion piece by M. Zink regarding the potential positive impact for consumers generated by restrictions applied by a company to its workers).
Furthermore, by pushing wages downward, wage-fixing agreements restrict the ability of companies to attract and retain talent. This, in turn, leads to a less efficient workforce, which could directly impact the quality and diversity of the goods and services offered (see the Portuguese competition authority report “Labor market agreements and competition policy“).
Finally, by establishing uniform or similar wages among competitors, these agreements homogenize the cost structures of the companies. This uniformity diminishes the strategic uncertainty that usually characterizes competitive markets, thereby facilitating price coordination among the companies involved in the agreement. Consequently, this could lead to artificially high prices for consumers (see the Nordic competition authorities’ report “Competition and labour markets“).
Firstly, the European Commission has been clear in classifying this type of agreement as a restriction by object, which places it at the same level as hardcore cartels. Furthermore, according to Article 101 (1) (a) of the Treaty on the Functioning of the European Union (“TFEU”), wage-fixing agreements are considered a form of price-fixing (European Commission, 2024).
In addition to the above, the Commission has rejected any justification for this type of agreement based on the efficiencies they might present. Along the same lines, it has pointed out the impossibility of them qualifying for the exemptions provided for in Article 101 (3) of the TFEU, highlighting that less restrictive agreements exist to achieve the same objectives.
Secondly, in the United States, both the FTC and the DOJ have classified wage-fixing agreements as illegal per se under Section 1 of the Sherman Act.
The DOJ has led the criminal prosecution of these agreements, calling them “naked restraints.” This implies that they are considered anticompetitive by nature, requiring no additional analysis regarding their market impact (see the guide prepared by the FTC and DOJ “Antitrust Guidance for Human Resource Professionals“). Thus, the DOJ has investigated labor markets in various sectors, such as nursing, fast food franchises, the aerospace industry, and fashion, where wage-fixing and the exchange of sensitive information have gravely harmed workers and market competition.
Additionally, in January 2025, the FTC and the DOJ published a new guide explaining how these agencies identify and evaluate potentially anticompetitive practices in labor markets, reaffirming the commitment of both institutions to protecting free competition in the workplace.
In Chile, the National Economic Prosecutor’s Office (FNE), part of the legal doctrine, and even the Court for the Defense of Free Competition (TDLC) have stated or suggested that wage-fixing and no-poach agreements could be classified as collusion (although a case of this type has not yet been prosecuted or sanctioned).
On one hand, the National Economic Prosecutor, Jorge Grunberg, has stated that these agreements are prohibited per se under Article 3, letter a) of Decree Law No. 211, which allows for sanctions without the need to prove the market power of the companies involved or the anticompetitive effects of the agreement (see CeCo note “FNE Competition Day 2023: Labor Markets“).
On the other hand, the former President of the TDLC, Tomás Menchaca, has highlighted the importance of considering these agreements from a competitive perspective, emphasizing that their prohibition not only improves competition but also labor conditions and economic growth (see CeCo note “TDLC 2024 Public Report: Labor Markets and Objectives of Free Competition“).
For its part, while the TDLC has not yet directly heard a labor market case, it has made statements in line with this trend. Indeed, in the case of FNE v. Faasa and MR (2022) regarding collusion in firefighting services, the Court found that: “there is evidence in the record referring to the existence of a decision not to compete regarding the hiring of personnel necessary for the Defendants to provide their services, a practice known in comparative law as ‘no-poaching agreements,’ which constitutes a type of collusive agreement” (C. 78, Ruling 179/2022). However, in this case, the TDLC did not convict for this conduct as it fell outside the scope of the trial and the configuration of the agreement charged by the FNE.
Fourthly, in Canada, the 2022 amendment to the Competition Act expressly prohibited wage-fixing agreements. In said amendment, the Competition Bureau, the Canadian competition authority, even classified these types of agreements as naked restraints. Canadian legislation imposes severe penalties for these types of agreements, including significant fines and prison sentences of up to 14 years for the individuals and companies involved.
Finally, immunity and leniency programs have also been created to encourage the reporting of these conducts, incentivizing those who possess relevant information to collaborate with the authorities.
Finally, in the United Kingdom, the Competition and Markets Authority (“CMA”) has recognized the negative impact of wage-fixing agreements on labor markets and has urged companies to understand competition law in this area.
In view of the above, the CMA promotes training on competition law among recruitment personnel and discourages the exchange of sensitive information on labor terms with competitors (CMA, 2023). Likewise, it encourages individuals to report any anticompetitive agreements of which they become aware.
Below are several cases that illustrate how various courts and competition authorities have approached these types of anticompetitive agreements.
In the United States, in 2007, the DOJ, in conjunction with the State of Arizona, filed a civil lawsuit against the “Arizona Hospital and Healthcare Association” and “AzHHA Service Corporation.”
The lawsuit contended that both entities had agreed to fix prices for the contracting services of temporary nurses through recruitment agencies. This agreement resulted in greater uniformity of wages paid to nurses, eliminating competition among the hospitals involved in hiring personnel. The case culminated in a judicial settlement, which included commitments to cease this conduct.
In the same country, in 1995, the FTC denounced the Council of Fashion Designers of America (“CFDA”), alleging that its members met with the purpose of reducing competition in the market for modeling services by decreasing the rates paid to models. According to the FTC, this reduction constituted an illegal restraint of competition, as it was not ancillary to the legitimate purpose of producing a centralized fashion show.
Similarly, this case was resolved through an agreement between the FTC and the CFDA, which included a prohibition on members fixing or reducing model fees, as well as educational measures regarding the illegality of price-fixing.
In the Netherlands, in 2010, the Civil Court of Appeals resolved a case involving 15 hospitals in the provinces of Zeeland, Noord-Brabant, and Limburg. These hospitals agreed, within the context of a joint training program, to include a wage-fixing clause for anesthesiologists and assistants, establishing a maximum limit of 75% of the hourly wage for overtime pay.
The Court concluded that this agreement constituted an infringement by object. By significantly restricting wages and limiting competition in the labor market for anesthesiologists, it contravened Article 6 of the Dutch Competition Act, which prohibits collusive agreements.
