When Is a No-Poach Agreement a ‘By-Object’ Restriction? Lessons from Tondela (Part 1)

The^[1] judgment of the Court of Justice of the European Union (CJEU) in Tondela^[2] has already generated considerable commentary – not least because it appears, at first glance, to suggest that a “no-poach” agreement between competitors may be capable of being compatible with EU competition law. However, that reading risks overstating what the CJEU actually did.

In reality, the CJEU confirms that whilst no-poach arrangements are often likely to be restrictive of competition  ‘by object’ (describing the agreement as a “manifest restriction of a competitive parameter”)^[3], under the Treaty on the Functioning of the European Union (TFEU), it also makes clear that this characterisation does not dispense with the need for a structured assessment of the agreement’s content, context and objectives.

As such, rather than create an “emergency exception”, the CJEU has instead reaffirmed the strict interpretation of ‘by object’ competition restrictions. A "by-object’ restriction refers to a type of agreement or practice that is inherently anti-competitive, judged by its very nature, without needing detailed analysis of its effects.

However, even conduct that closely resembles one of the recognised ‘by object’ restrictions under TFEU cannot be automatically categorised as such if, on a proper analysis of (a) the agreement's content, (b) the objective aims from a competition standpoint, and (c) the specific legal and economic context of which it forms part, there is doubt as to whether it reveals a “sufficient degree of harm” to competition as to warrant being classified as a ‘by object’ restriction.

 For those less familiar with competition law, see this article here by the authors for some further background reading to understand the ‘by object’ restriction in more detail^[4]

This analysis is published in two parts. This article is Part 1 which addresses whether a no-poach agreement of this kind is a restriction of competition ‘by object’ at all, working through the content, context and objectives of the arrangement including the role played by the COVID-19 crisis.

Part 2 (see here) turns to what follows if the agreement is caught: whether it can nonetheless be justified as a proportionate means of protecting the integrity of sporting competition, and what that means in practice for clubs and governing bodies.

This article looks at:

• Background to the case –how a COVID-19 no-poach deal in Portuguese football reached the CJEU
• Recap: From enforcement trends to the Advocate General Opinion
• Starting point: No-poach agreements remain inherently problematic under Article 101 TFEU
• How to assess Restrictions ‘by object’? Analytic framework: Content, context and objectives – applied rigorously
  • Assessing the agreement's content and context
  • Two categories of ‘by object’ conduct: cartels and beyond
  • Did the context of the COVID-19 crisis surrounding the no poach agreements change the analysis?
  • An agreement with both anticompetitive and pro-competitive aim

The CJEU’s judgment can be found here.