by David B. Anders, Carrie M. Reilly, Kevin S. Schwartz, and Yolanda Bustillo
From left to right: David B. Anders, Carrie M. Reilly, Kevin S. Schwartz, and Yolanda Bustillo. Photos courtesy of Wachtell, Lipton, Rosen & Katz.
Today, almost three years after the Antitrust Division brought criminal charges against Surgical Care Affiliates (“SCA”), the District Court for the Northern District of Texas granted the government’s motion to dismiss the indictment, with prejudice, marking the latest setback in the agency’s aggressive enforcement of labor market cases. Earlier this year, we noted that the Antitrust Division’s prosecution of criminal wage‑fixing and no-poach agreements warranted reconsideration given the many problems these cases present. The Antitrust Division’s decision to dismiss its case against SCA signals that the agency may have done just that.
The Antitrust Division has a longstanding policy of prosecuting only per se violations of antitrust law, such as price-fixing, bid-rigging, and market allocation schemes that are so “manifestly anticompetitive” so as to lack “any redeeming virtue.” In 2016, however, the Antitrust Division announced its enforcement initiative to charge criminally labor market cases, thereby attempting to expand per se treatment to apply to wage-fixing and no-poach agreements. In Surgical Care Affiliates, the Antitrust Division’s first no-poach prosecution, the agency claimed that SCA had entered into non-solicitation agreements to allocate senior-level employees. Such conduct, the indictment alleged, was a per se unlawful restraint on trade and a violation of Section 1 of the Sherman Act. Since SCA’s indictment in January 2021, the Antitrust Division has brought four labor market cases to trial – U.S. v. DaVita (one of SCA’s alleged co-conspirators), U.S. v. Patel, U.S. v. Manahe, and U.S. v. Jindal. The government lost all of those cases. The string of acquittals suggests that the Antitrust Division’s attempt to fit new categories of violations under the per se standard has failed to resonate with judges and juries.
The district court’s order dismissing the indictment against SCA marks a pivot from the agency’s years‑long course of prosecuting SCA under the theory that non-solicitation agreements are per se unlawful. As SCA argued from the start, the indictment stood on legally baseless grounds as neither the Supreme Court nor any courts of appeals have concluded that standalone non-solicitation agreements are manifestly anticompetitive, a requirement for per se treatment. Additionally, declaring that the per se rule applied to non-solicitation agreements for the first time in a criminal prosecution raised constitutional concerns about fair notice and due process. And more fundamentally, the facts at issue in the case did not support a criminal prosecution.
While the future of labor market prosecutions remains unclear, the district court’s order granting the Antitrust Division’s motion to dismiss is notable. The government’s decision to voluntarily drop the charges is a reminder that, in the appropriate circumstances, corporate defendants can indeed resist government pressure to resolve cases – especially in the face of novel and aggressive enforcement campaigns – and can succeed in doing so.
David B. Anders, Carrie M. Reilly, and Kevin S. Schwartz are Partners and Yolanda Bustillo is an Associate at Wachtell, Lipton, Rosen & Katz. The post was first distributed as a memo by the firm.
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