A few years back, my colleague Royce Barondes and I wrote an essay entitled Should Antitrust Education Be Mandatory (for Law School Administrators)? The essay, whose title was intended to be tongue-in-cheek, argued that the members of the Association of American Law Schools were engaged in an illegal conspiracy to limit competition for professor talent. The focus of our criticism was an AALS “good practice” under which the law schools agree not to extend offers of employment to professors at competing law schools after March 1.
Law school administrators maintain that their agreement not to compete is justifiable because unbridled competition for professor talent causes them inconvenience (e.g., having to reschedule the fall semester courses of a professor who gets hired away during the spring or summer). But law schools could always rely on non-collusive, unilateral means of avoiding these difficulties. They could, for example, execute employment contracts that preclude professors from departing after some particular date and specify some amount of liquidated damages as a remedy for breach. In any event, the Supreme Court has made clear that the law schools’ argument — “Competition for professor talent is just too hard!” — amounts to a frontal assault on the Sherman Act and is entitled to no weight. (See Professional Engineers.)
Perhaps Royce and I should have included law firm recruiters and law school placement directors in our proposed antitrust education program. A few weeks back, a prominent group of those folks — acting through the National Association for Law Placement, or “NALP” — proposed a similarly collusive agreement not to compete for legal talent. The centerpiece of the proposed scheme is a pact among law firms, which currently interview law students whenever they want and make offers on a rolling basis, to refuse to extend offers of summer employment to second-year law students before a set date in January. The law schools, then, agree to punish gun-jumping firms (which the NALP proposal revealingly terms “cheaters”) by barring them from on-campus recruiting. NALP attempts to justify this law school-policed collusion among employers on grounds that it (1) allows firms to make staffing decisions when they have a better idea of their employment needs (i.e., after their year-end accounting); (2) enables firms to utilize better, but more time-consuming, interview methods (tests, simulations, “McKinsey-style group projects,” etc.); and (3) prevents firms from having to interview law students in the late summer and early fall, when lawyers like to vacation. (I’m serious. Read the proposal linked above.)
This agreement among law firms to limit competition in entry-level hiring is a bad idea for a number of reasons. For example, do the firms really want to extend the wining and dining period until January? Do they really want to replace the current system of rolling offers, in which the timing of an offer doesn’t reveal much information, with a system that signals to second-round offerees that they were not first choice? Relative to the current rolling offer system, won’t a scheme that encourages firms to make all or most of their offers at once (lest they lose attractive candidates to other firms) exacerbate, rather than alleviate, the difficulty of managing yield?
Most importantly, though, this agreement is a bad idea because it constitutes an illegal restraint of trade among competitors. A group of competitors has effectively said: “We don’t like having to make quick hiring decisions to catch the best talent, so we’re going to agree to limit competition amongst ourselves, and we’re going to enlist the law schools, who desperately want us to hire their grads, to act as our policemen.” That, my friends, is a naked restraint of trade. It seeks to level the playing field by removing an advantage from those well-managed law firms that are good at identifying and wooing talent and that can confidently predict their future business prospects, and it doesn’t create notable efficiencies (e.g., transaction cost reductions) or enable the creation of a new product or service.
Moreover, its purported justifications fail. The agreement isn’t necessary to achieve the first two putative benefits — enabling firms to make hiring decisions when they have a better idea of future labor needs and permitting them to utilize more time-consuming interview methods. Under the current system, firms are free to delay making offers until they get year-end accounting data, and they can take as long as they want to evaluate job candidates. While they might find that they lose candidates to employers who are more confident about future needs and who are speedier evaluators, no one’s stopping them from taking their sweet time if they want to. As for the third purported benefit — less need to interrupt attorneys’ late summer vacations, etc. — courts have not looked favorably on the “But competition makes us work too hard!” defense.
Fortunately, one prominent law firm — Jones Day — has objected to the NALP recommendations on grounds similar to those set forth above. Perhaps we should put that firm’s excellent antitrust lawyers in charge of our mandatory antitrust education program for law school administrators and law firm recruiters.