Antitrust Enforcement Is Top of Mind for State Attorneys General

Sued by multiple states over antitrust claims challenging its advertising business, Alphabet Inc.’s Google hoped to consolidate the matters into one court in New York. But on June 5, a judge followed a law passed by Congress late last year that exempts state antitrust cases from the federal multidistrict litigation process—and ordered the case brought by the state of Texas to be sent back to the Lone Star State. Google will now have to defend its advertising practices in federal courts in New York, Texas, and Virginia.

This development demonstrates why antitrust lawyers are on alert as the federal government intensifies its anticompetition enforcement. They also must watch out for state attorneys general across the country.

Large bipartisan coalitions of state attorneys general have pursued antitrust suits against big tech companies like Alphabet (Google and YouTube) and Meta Platforms Inc. (Facebook and Instagram), while more partisan state enforcers argue that industry agreements to fight climate change violate antitrust laws. Individually, some state attorneys general have invested substantial resources in pursuing labor-related restrictions on competition, such as no-poaching and noncompete agreements.

Here’s how we see the risks and what can be done to minimize them.

Big Tech and No-Poach

The past three years have seen state attorneys general take aim at big tech. In December 2020, a bipartisan coalition of 48 state attorneys general sued Facebook, claiming it used anticompetitive means to maintain its monopoly power. Later that month, a bipartisan group of attorneys general from 35 states, Washington, DC, and the territories of Guam and Puerto Rico sued Google for illegal monopolization over general search engines and related general search advertising markets.

In July 2021, a bipartisan group of attorneys general from 36 states and Washington, DC sued Google for alleged antitrust violations in connection with its Play Store on Android. Then in January this year, eight state attorneys general joined the Department of Justice in suing Google over alleged antitrust violations in the digital advertising market.

State attorneys general also have brought civil enforcement actions against franchisees of the same company agreeing not compete to hire each other’s employees. These cases have ended with numerous businesses consenting not to enforce such clauses in existing franchise agreements and to stop using them in future agreements.

For example, franchisees of Dunkin’, Arby’s, Five Guys, and Little Caesars in 2019 settled with 14 state AGs to stop using no-poach agreements that prevented fast food workers from moving from one franchise to another within the same restaurant chain. Late that year, Washington Attorney General Bob Ferguson reported that his office had signed legally binding agreements with 155 companies representing more than 160,000 locations.

Climate Action or Anticompetitive Behavior?

While a broad swath of attorneys general challenge big tech and no-poach clauses, a more partisan subset of state lawyers are taking on corporations’ adoption of environmental, social, and governance initiatives, including efforts to fight climate change. These attorneys general question the potential anti-competitiveness of ESG initiatives and appear eager to launch investigations, particularly in conservative jurisdictions with fossil fuel interests.

Last summer, 19 Republican attorneys general sent a warning to the CEO of BlackRock, one of the world’s largest asset managers, over its participation in an initiative that aims to ensure that the world’s largest corporate greenhouse gas emitters act on climate change. The attorneys general wrote that BlackRock’s “coordinated conduct with other financial institutions to impose net-zero” emissions commitments could be a violation of Section 1 of the Sherman Antitrust Act.

Then in October, another group of Republican state attorneys general issued civil investigative demands to the six largest US banks. Basing their requests on purported antitrust and consumer protection concerns, the AGs sought documents and information relating to the banks’ participation in global climate change initiatives such as the Net-Zero Banking Alliance and the Glasgow Financial Alliance for Net Zero.

Democratic attorneys general, in contrast, have expressly stated their support for ESG initiatives and the procompetitive benefits such activities offer.

Going Forward

The challenge in antitrust law is that there are few black-and-white lines, aside from some obvious no-no’s. For example: Don’t fix prices with your competitors, don’t agree to restrict supply or divide geographic or product markets, and don’t exchange competitively-sensitive information with competitors—particularly relating to future business plans.

Yes, the last point could hinder climate change advancements. However, with proper counseling, many initiatives can be implemented that limit antitrust risk.

As for the issues around no-poach and noncompete agreements, we recommend these practices:

Stay alert to statutory and regulatory enactments concerning noncompetes and other restrictive agreements, particularly from the Federal Trade Commission and the states where employees work.
Review restrictive clauses in existing or standardized contracts to ensure they comply with applicable law.
Make sure that restrictive clauses are used only when there is a legitimate business interest at stake, such as the protection of goodwill or trade secrets and other confidential information, and that any restrictions are narrowly tailored to protect that interest.
Avoid entering into noncompete or other restrictive agreements with low-wage or hourly workers.
Establish an antitrust compliance program to ensure that senior executives and human resources personnel are aware that agreements with other employers to restrict hiring and recruitment violate the antitrust laws.

A firm antitrust compliance policy can provide clear guidelines for deterring antitrust violations, and periodic antitrust training can sensitize personnel to antitrust concerns and assist them in detecting potential violations.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Katie Reilly and Natalie West, of Wheeler Trigg O’Donnell, represent clients in complex commercial litigation, including antitrust matters and class actions in highly regulated industries.