Defendant's Attorney: Not Available
Description: Chicago, Illinois employment law lawyers represented Plaintiffs who sued Defendant on an anti-trust theory claiming that Defendant's franchise agreement wrongfully restricted their ability to take higher paying jobs with other franchises.
Until recently, every McDonald's franchise agreement contained an anti-poach clause. Each franchise operator promised not to hire any person employed by a different franchise, or by McDonald's itself, until six months after the last date that person had worked for McDonald's or another franchise. A related clause barred one franchise from soliciting another's employee. We use "anti-poach
clause" or "no-poach clause" to refer to these collectively.
Plaintiffs in this suit under §1 of the Sherman Act, 15 U.S.C. §1, worked for McDonald's franchises while these clauses were in force and were unable to take higher-paying offers at other franchises. They contend that the no-poach clause violates the antitrust laws. If this clause holds down the price of labor by reducing competition for fast-food workers, that could benefit owners-and conceivably consumers too. But the antitrust laws prohibit monopsonies, just as they prohibit monopolies. See NCAA v. Alston, 141 S.Ct. 2141 (2021).
Claims under §1 fall into two principal categories: naked restraints, akin to cartels, are unlawful per se, while other restraints are evaluated under the Rule of Reason. (The quicklook approach, see NCAA v. University of Oklahoma, 468 U.S. 85 (1984), is a subset of analysis under the Rule of Reason.) The district court rejected plaintiffs' per se theory after stating that the anti-poach clause is not a naked restraint but is ancillary to each franchise agreement-and, as every new restaurant expands output, the restraint is justified. 2018 U.S. Dist. LEXIS 105260 (N.D. Ill. June 25, 2018).
The court deemed the complaint deficient under the Rule of Reason because it does not allege that McDonald's and its franchises collectively have power in the market for restaurant workers' labor. Market power is essential to any claim under the Rule of Reason. See Ohio v. American Express Co., 138 S.Ct. 2274, 2284 (2018); Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 885-86 (2007); Ball Memorial Hospital, Inc. v. Mutual Hospital Insurance, Inc., 784 F.2d 1325, 1334-35 (7th Cir. 1986). The absence of such an allegation rendered the claim implausible, the court held. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (establishing the plausibility requirement for antitrust complaints). The judge invited plaintiffs to file an amended complaint alleging market power. After they declined to do so, the judge dismissed the complaint with prejudice, ending the suit. 2022 U.S. Dist. LEXIS 113524 (N.D. Ill. June 28, 2022).
On appeal plaintiffs assert that they didn't "really" waive or forfeit their opportunity to allege market power, but the district court's contrary conclusion is not an abuse of discretion. Plaintiffs also contend that the existence of market power is too obvious to need allegations and proof, but that line of argument depends on treating "workers at McDonald's" as an economic market. That's not sound. People who work at McDonald's one week can work at Wendy's the next, and the reverse. People entering the labor market can choose where to go-and fast-food restaurants are only one of many options. If wages are too low at one chain, people can choose other employers. The mobility of workers-both from one employer to another and from one neighborhood to another-makes it impossible to treat employees at a single chain as a market.
The district judge found it undisputed that within three miles of Deslandes's home there are between 42 and 50 quickservice restaurants as well as two McDonald's franchises, and that within ten miles of her home there are 517 quick-service restaurants. This is not a situation in which a court can treat employment for a single enterprise as a market all its own. See also, e.g., Elliott v. United Center, 126 F.3d 1003 (7th Cir. 1997) (peanut sales in or near a sports arena is not a meaningful market); Menasha Corp. v. News America Marketing In-Store, Inc., 354 F.3d 661 (7th Cir. 2004) (store coupons, ice cream flavors, and diet soda are not meaningful markets). So the Rule of Reason is out of this suit, and, as quick-look analysis is part of the Rule of Reason, it is out too.
Outcome: Judgment in favor of Defendants reversed.