FTC Joins DOJ’s Amicus Brief Supporting Workers’ Challenge to McDonald’s “No Hire” Franchise Restrictions

The Federal Trade Commission and the Department of Justice have filed an amicus brief in an ongoing antitrust case against McDonald’s USA, LLC. They argue that the chain’s former policy forbidding competing franchises from hiring each other’s workers violates the Sherman Act. 

The case concerns plaintiffs Leinani Deslandes and Stephanie Turner, who formerly worked for McDonalds. They were each allegedly discouraged from seeking better pay and promotions at competing franchise locations, so they sued arguing the policy in question (which ended in 2017) constituted an illegal market allocation agreement. The district court ruled the policy was  “ancillary to an agreement with a procompetitive effect,” and thus ruled against the plaintiffs. They appealed to the Seventh Circuit.

The amici argue that the district court misapplied the per se rule for Sherman Act violations. They contend that the lower court inadequately interpreted the Supreme Court’s ruling in NCAA v. Alston in refusing to perform a “quick look” analysis, thus misapplying the ancillary-restraints doctrine. In fact, they state, that case only tangentially mentioned quick look analyses and the evidence in this case suggests the policy was, on its face, anticompetitive.

The brief goes on to argue that in the labor market, different franchisees under the same license (and locations owned by the parent company) are customers and thus direct competitors. As such, barring managers from hiring directly from competitor stores constitutes a horizontal antitrust conspiracy.

The agencies further criticize the lower court for not challenging McDonald’s arguments that this policy was ancillary on the basis that it was a small part of a larger contract. If that was used as a basis, they say, any company or individual could avoid antitrust violations by merely burying them in large contracts. 

The brief concludes with a plea that the Seventh Circuit overturn the district court’s decision and rule in favor of the plaintiffs.