In the previous episode of this series, Mayer Brown JSM discussed how a non-solicitation agreement between competitors differs from the typical restrictive covenants in an employment contract. Colin, now feeling quite learned, is ready to learn more…
Colin: You mentioned that “group boycotts” could pose problems too? So, what are “group boycotts”?
Mayer Brown JSM: There are various forms of “group boycotts”. A boycott may be aimed at preventing a new potential competitor from entering the market. It may also take the form of eliminating an existing competitor.
In an employment context, group boycotts may take the form of a group of competitors ganging up to poach a competitor or a potential competitor’s key employees in order to cripple that competitor’s ability to compete. Such conduct may violate competition law.
Colin: I heard people talking about “cartel agreement” when they discussed competition law issues. What is a “cartel agreement”?
Mayer Brown JSM: A “cartel agreement” is basically an agreement between competitors which has the objective of reducing or eliminating competition among cartel members. For example, if a boycott is intended to facilitate a cartel agreement to eliminate a competitor, the boycott will be considered an essential part of the cartel. A “cartel agreement” will be a clear and serious violation of the Competition Ordinance.
Colin: So this only applies where the competitors gang up and target an outside member?
Mayer Brown JSM: No. It would also be anti-competitive if a group takes action against one of its own members. It is not uncommon for cartels to take action against a “rogue” member as “punishment” for adopting a different course of conduct than what has been agreed amongst the cartel members, which then undermines the cartel arrangement.
Colin: Okay, I get it.