“Context always matters”: AG Emiliou’s Opinion on no-poach agreements in the Tondela case

In his recent Opinion in Case C-133/24 Tondela and others, Advocate General Emiliou has suggested that a no-poach agreement concluded between Portuguese football clubs during the Covid-19 pandemic should not be treated as restrictive of competition ‘by object’, if its “genuine rationale” was to preserve the fairness and integrity of football league competitions affected by the pandemic.

What is a restriction by object?

Competition law prohibits agreements that have the object or effect of restricting competition. Restrictions by object are harmful to competition “by their very nature” (i.e. inherently anticompetitive). If an agreement is restrictive by object, there is no need to consider its effects on competition before concluding that an infringement has been committed. 

The approach to determining whether an agreement is restrictive by object is now relatively well-established. It involves analysing not just the content and objectives of the agreement but also the surrounding legal and economic context.  Paragraphs 33-45 of AG Emiliou’s Opinion provide a helpful overview of how these elements should be assessed in practice.

Some no-poach agreements may be restrictions by object

AG Emiliou suggests that no-poach agreements – agreements in which firms agree not to hire or solicit staff from each other – have “all the characteristics to be considered prima facie restrictive of competition ‘by object’”.  Instead of competing to recruit the best employees, the parties “‘lock in’ their staff, with a ‘freezing effect’ on the terms of their contracts”.  The result is “suboptimal allocation of human resources, loss of efficiency and/or innovation and […] lower wages for staff”. The AG thus has “no difficulty” in concluding that “the economic rationale of most no-poach agreements between competitors is anticompetitive”.

But others may not

However, the Opinion makes clear that even if an agreement belongs to a category of agreements that is typically restrictive of competition, that is “by no means the end of the analysis”. In AG Emiliou’s view, although the agreement in question introduced “some restrictions on the clubs’ ability to compete with regard to one of the essential inputs of their activity (the signing of players)”, “a number of elements” suggest it was not in fact restrictive by object:

1. The agreement was concluded in exceptional circumstances (the Covid-19 pandemic). The AG recalls in this connection that the European Competition Network issued a statement during the pandemic acknowledging the possible need for cooperation between businesses; and that the Portuguese Government introduced a set of exceptional and temporary measures in the field of sport in April 2020, allowing Portuguese sports associations to amend their regulations for the duration of the 2019/20 season to deal with difficulties caused by the pandemic.
    
2. The agreement was limited in scope – it lasted only until the end of the 2019/20 season and its geographic scope was limited to Portugal.  The AG contrasts the agreement with the set of rules examined by the CJEU in the FIFA case, which were found to have produced a “generalised and drastic restriction of cross-border competition between clubs [which extended] from a geographic viewpoint to the entire territory of the European Union and, from a temporal viewpoint, [was] permanent”.
    
3. The agreement had the legitimate objective of preserving the fairness and integrity of sports competitions affected by the pandemic.  AG Emiliou considers that the clubs’ desire to keep their squads as similar as possible to those in the first part of the 2019/20 season was “consistent with the objective of ensuring the integrity and fairness of the sports competition, in which the results are based on merit and not expediency”.  The AG observes that “sports leagues do not function like ordinary markets for products or services. The ‘wildest dream’ of any club […] is not to send all its competitors out of the market and become a de facto monopolist. That is factually impossible and economically nonsensical. The number of clubs is stable and their market performance (with supporters, sponsors, broadcasters, and so forth) requires a certain level of competitiveness within the league to be maintained”.  Against that background, the AG concludes that “it would not be unreasonable to take the view that, in so far as the agreement […] was instrumental in securing an appropriate competitive structure within the league until the end of the season, its economic rationale was to preserve and enhance healthy competition”.

Final thoughts

The Opinion serves as a valuable reminder that “context always matters” when assessing whether an agreement is inherently anticompetitive under the competition rules. It also represents something of a setback to the European Commission’s policy position that no-poach agreements “generally qualify as restrictions by object”. 

Nevertheless, given the current enforcement climate, companies should continue to proceed with caution when considering whether to enter into no-poach agreements – particularly with their competitors.  No-poach agreements are currently subject to significant competition law scrutiny in both the UK and the EU.  The CMA has opened at least three investigations into no-poach agreements and has made labour markets a focus in its 2024-25 Annual Plan; the Portuguese competition authority recently fined the Inetum Group more than €3 million for signing no-poach agreements; and in July 2024 the Commission opened a formal investigation in the food delivery sector, prompted partly by concerns that the companies may have agreed not to poach each other’s employees.