The U.S. Federal Trade Commission violated Australian law by attempting to force a Melbourne-based factory to restrict employee assignments and overtime opportunities, according to documents filed last week with the FTC. Agilent Technologies, Inc., asked the FTC to modify the terms of a June order that required the company to sell its part of its scientific measuring instrument business to a competitor, Bruker Corporation. The FTC said this was necessary to “preserve competition threatened” by Agilent’s earlier acquisition of Varian, Inc.
Under the FTC order, Agilent sold part of the business it acquired from Varion to a Commission-approved buyer, Bruker, Inc. The FTC ordered Agilent to also provide “transition services” to help Bruker move certain assets from Varian’s facility in Melbourne, Victoria, to Bruker’s facilities in the United States. To carry out the FTC’s demands, Agilent had to make certain employees available to Bruker. Agilent and Bruker signed a subsidiary agreement, with the FTC’s approval, that said Agilent employees providing these transition services “shall be devoted exclusively to the provision of such Transition Services and shall not be assigned to any work relating to a business of [Agilent] throughout the term of this Agreement.” Agilent said it would also require the affected employees to “execute a Confidentiality Agreement” in a form approved by the FTC.
According to Agilent, “Employees have declined to execute the required Confidentiality Agreement because of their objection to the prohibition upon their work” on products outside those being transferred to Bruker. Since these are Australian citizens, the workers and their union complained to Fair Work Australia, the equivalent of the U.S. National Labor Relations Board. “In essence,” Agilent told the FTC, “they complain that the prohibition denies them equal access to work and, in particular, equal access to overtime opportunities vis-à-vis other Agilent employees at the Melbourne facility.”
The particulars of the grievances, including correspondence between Fair Work Australia and the union, was redacted from the public version of Agilent’s filing with the FTC. Agilent noted, however, that during an August conference call, a FWA commissioner said “there is a conflict between Australian employee law and” the FTC-approved transition services agreement. Subsequently, Agilent and Bruker renegotiated their agreement to remove the prohibition. (Sadly, the FWA commissioner did not demand the booting of FTC officials.)
Agilent has now petitioned the FTC to accept the amended agreement as part of its overall order against the company. The FTC will make a decision after a 30-day public comment period.
While the situation here was apparently resolved, it highlights the often overlooked impact of FTC “consent orders” on employees who are not direct parties to antitrust cases even though their rights are affected. In merger reviews that result in forced “divestitures,” the FTC and the Justice Department’s Antitrust Division artificially restrict competition for employees in order to favor the government-approved acquirer. For example, a typical order will require the divesting firm to allow the acquiring firm to hire away any employees it wants — regardless of any existing employment contracts — and the divesting firm is prohibited from offering employees more money or other inducement to stay.
These orders can literally rip businesses and communities apart. In March, at least three employees of an Alcan Packaging Foods plant in Menasha, Wisconsin, complained to the Justice Department after the Antitrust Division forced the plant’s sale because it objected to Bemis Company’s purchase of the plant from Rio Tonto. The DOJ said the deal was anticompetitive and risked hurting consumers. The DOJ ordered part of the Menasha plant’s operations transferred to an approved buyer. One employee said the DOJ’s intervention created a “war zone” where “complete chaos takes place on a daily basis.” Another employee said old friends were asked not to talk to one another for fear of violating the DOJ’s order.
The DOJ acknowledged its order — and Bemis’s compliance thereto — “have given rise to the commenters’ concerns about diminished working relationships within the Menasha plan.” The DOJ added, however, that any negative impact on the workers was necessary “to preserve current and future competition between Bemis and the acquirer of the divested business.” Antitrust, after all, is designed to protect consumers, not employees.
Even if employees are not directly affected by a divestiture order, they may still be vulnerable to government snooping during the investigation. There are no few, if any, limits on what records FTC and DOJ officials can examine during a merger review. In one recent merger case, an official for a company under investigation told me that after nearly two years of complying with FTC demands, the agency requested confidential employee evaluation records — documents that bore no relevance to the merger under review. Employees have no way of knowing if their personnel files might be in FTC or DOJ hands, and they certainly have no recourse to object.
The DOJ also acquired wiretap authority for antitrust investigations during a prior reauthorization of the Patriot Act. Since a criminal antitrust probe can cover any business activity, the DOJ could conceivably tap individual employee phones and listen in on any conversation, including personal calls. It’s unknown how or where the DOJ has used its wiretap authority, as the details of Antitrust Division investigations are generally not made public.