Architecture Of Restraint: EU Labour Enforcement And Worker Mobility In India
Historically, the Indian labour market has been regulated by labour and employment laws, which primarily focus on aspects such as wages, working conditions, and collective bargaining. Article 19(1)(g) of the Constitution guarantees every citizen the freedom to practice any profession or carry on any occupation, trade, or business. Although the State can impose reasonable restrictions under Article 19(6), the broader constitutional vision clearly supports occupational mobility and guards against unfair restraints on the freedom to work. However, in today's labour markets, certain contractual practices have begun to restrict employee mobility in subtle yet powerful ways, often slipping past the boundaries of traditional labour law scrutiny.
No-poach agreements, also known as non-solicitation agreements, are arrangements under which firms agree not to recruit or hire each other's employees. These agreements may be written or informal and are often justified by firms as necessary for maintaining stability or protecting business interests. However, when such agreements are entered into between competitors without a legitimate justification, they effectively limit workers' employment options and weaken their bargaining power. Over time, this may lead to a reduction in wages, worker mobility, and an inefficient allocation of skills. However, these agreements have largely escaped antitrust scrutiny.
A significant shift in this approach occurred in June 2025, when the European Commission (“EC”) imposed fines totalling €329 million on Delivery Hero and Glovo for entering into no-poach agreements and exchanging sensitive information relating to employee hiring and compensation. Rather than focusing on price effects in downstream markets, the Commission examined how the conduct restricted competition in the labour market itself. In doing so, it recognised workers as participants in a market that is capable of being distorted through collusive conduct.
This raises a significant question: Should the Competition Commission of India draw inspiration from the Commission's approach? The CCI has historically focused on investigating price-fixing cartels, with labour market distortions rarely being examined as a competition law issue. While the labour discourse has traditionally centred on collective bargaining, wage protection, and industrial disputes, less focus has been placed on inter-employer arrangements that indirectly restrict mobility. With existing labour laws ill-equipped to address the issue, this blog aims to make a case for their scrutiny under competition law.
Labour-Market Cartelisation in India
From an economic perspective, the labour market is similar in nature to other markets. Workers offer their labour as service-providers, while organisations act as their buyers or recipients. In a competitive setting, organisations are expected to compete by offering higher wages and better working conditions to attract and retain labour. This competition ensures that wages reflect the value of labour and that human resources are allocated efficiently across firms and sectors. No-poach agreements disrupt this process by removing competitive pressure from the hiring market. When firms agree not to hire each other's employees, they effectively eliminate wage bidding between themselves. As a result, workers have fewer outside options, which weakens their bargaining power and allows firms to keep wages artificially low. Over time, this can lead to wage stagnation, reduced labour mobility, and inefficiencies in the allocation of skilled workers, particularly in sectors where a limited number of firms dominate employment opportunities. A study conducted by Matthew Gibson, titled 'How Major Tech Firms Used Illegal “No-Poach” Agreements to Control Workers' Salaries', analysed the effects of no-poach agreements on employee salaries, stock-based compensation, and job satisfaction in the context of a United States Department of Justice investigation. The investigation concerned no-poach arrangements among several technology companies, including Adobe, Apple, eBay, Google, Intel, Intuit, Lucasfilm, and Pixar. The study compared salary levels between firms that were part of these arrangements and those that were not. It found that employees at the colluding firms earned, on average, around 6% less than employees at non-colluding firms. Importantly, once the no-poach agreements were discontinued, salary levels at the colluding firms began to align with those offered by non-colluding firms. Based on these findings, the study concluded that the no-poach agreements in Silicon Valley had a significant negative effect on worker compensation. These effects closely resemble those caused by traditional cartels in product markets.
When competing firms coordinate their hiring practices to avoid competing for labour, they engage in behaviour that is functionally equivalent to market allocation or price-fixing. Basically, in a price-fixing cartel, firms agree not to compete on price, leading to higher prices and reduced consumer welfare. Similarly, in a labour-market cartel, firms agree not to compete for workers, leading to suppressed wages and reduced worker welfare. The core feature in both cases is the suppression of competition through coordination between competitors. The fact that the harm is suffered by workers rather than consumers does not alter the anti-competitive nature of the conduct.
To demonstrate this, we curated data from the financial statements of businesses involved in the food delivery industry in India. The dominant players in the industry are Zomato and Swiggy. Despite posting an approximately 714% increase in the consolidated adjusted revenue over a span of 5 financial years from FY 2020-21 to FY 2024-25 as derived from Zomato's annual financial statements, the employment benefit expense did not show a similar increase. A similar situation was seen at Swiggy, with the company's annual financial statements showing a 444% increase in profits from FY 2020-21 to FY 2024-25. However, the employee benefit expense during the same period registered a mere 73.33% increase.
The public data available for both the companies showcases a growing plateauing of the employment benefits expense curve. This showcases a growing standardization in the expense, indicating the possible existence of a no-poach agreement, which, as we shall demonstrate, have the effect of suppressing wages. However, the existing labour law architecture in India, especially the Code, does not effectively address this problem. The Code does not contemplate a scenario involving structural collusion among employers to bring down production costs. Instead, it focuses on employer-employee relations, regulating trade unions, grievance redressal mechanisms, strikes, lock-outs, etc. This lacuna in the existing architecture ignores the detrimental impact of such agreements on worker mobility and wage progression, necessitating the use of competition law to capture employer coordination in the labour market.
The absence of immediate consumer price effects has often been used to justify regulatory inaction in cases involving labour-market restraints. However, this approach fails to take into account the broader policy objectives of competition policy, which also include the promotion of efficiency, the prevention of the concentration of economic power, and the maintenance of the competitive process. Labour is an important factor of production in a number of sectors, and limiting the flow of labour as well as its price can have a variety of effects. Moreover, as evidenced from traditional competition law analysis, it struggles to address no-poach agreements because the harm they cause does not easily fit within a price-centric framework. Unlike classic cartels, these arrangements do not directly involve fixing prices or limiting output. Instead, they restrict competition over labour, which is reflected in stagnant wages and limited job switching rather than higher consumer prices. This has made it difficult for regulators to detect and penalise such conduct using conventional antitrust tools.
Given this context, no-poach agreements should be recognised as a form of labour-market cartelisation. They involve coordination between competing firms, restrict independent decision-making, and produce outcomes that would not arise in a competitive market. By focusing on the nature of the conduct rather than the identity of the affected market, competition law can more effectively address anti-competitive practices that undermine both worker welfare and market efficiency.
The authors have the following recommendations to bolster the CCI and other regulators' ability to address labour market collusion:
1. The Second Schedule of the Code, which deals with Unfair Labour Practices, should be amended to include the following clause:
“Entering into, or enforcing, any agreement, arrangement, or understanding with another employer, associations of employers, or entity, that, directly or indirectly, restricts, limits, or suppresses the mobility, recruitment, wage negotiation, hiring or employment terms of workers, including no-poach or wage-fixing arrangements across establishments.”
1. CCI should conduct and release its own market study identifying practices which constitute labour market collusion and provide a guidance note and/or policy brief addressing such conduct under section 3(3)(c).
2. The role of recognised trade unions may also be expanded to address coordinated practices across establishments. Currently, unions primarily raise disputes against individual employers. However, the legal framework could be strengthened to permit unions to challenge collective employer practices that negatively affect workers across a sector.
3. Labour Ministry should take active steps to spread awareness. It can organise workshops and issue advisories for HR departments, employer associations, and industry bodies explaining how informal no-poach agreements or wage coordination can negatively affect workers and encourage the adoption of alternative means such as non-disclosure agreements, minimum service periods, etc. to protect legitimate business interests.
4. Further, the burden can be shifted to such companies by calling upon the employers to disclose, in annual compliance filings under labour laws, whether they have entered into any inter-employer hiring restrictions or coordination arrangements.
Labour laws have always been concerned with managing the interface between employers and employees, e.g., with regard to salaries, working conditions, dispute resolution, and job security. Yet, as demonstrated in the blog, in a contemporary labour-intensive economic system, this is no longer sufficient. Labour markets cannot be seen as operating in a vacuum, independent of other market forces. They are intricately connected with the manner in which firms compete with one another for workers. Labourers are not only consumers whose welfare is improved by a fall in prices. They are also suppliers of a critical resource – human capital. When a labour market is distorted, it is a severe and enduring problem. To overlook it is a large blind spot in enforcement. No-poach agreements are an obvious candidate for the blind spot. No-poach agreements may be seen as a business practice, aimed at maintaining stability and protecting proprietary knowledge. However, when firms enter into an understanding with their competitors not to hire each other's workers, it is similar to a violation of the labour market. This is because it lessens wage competition and hampers workers' flexibility, which in turn hurts workers' bargaining power. The damage that such practices cause is real, especially in sectors that have a high concentration of skilled labour in a handful of firms. The blog has established that the economic damage caused by such agreements is neither theoretical nor speculative.
Authors are fifth year B.A.LL.B. (Hons.) students at Gujarat National Law University, Gandhinagar. Views are personal.