The U.S. Federal Trade Commission offered a new approach to the federal government crackdown on diversity, equity, and inclusion initiatives, and the 42 largest law firms were alerted that their hiring criteria might be against the federal antitrust law, last week.
The strategy may also be used to bolster more general, continuing attempts by the administration of President Donald Trump to fight DEI with anti-discrimination law by asserting that it threatens competition. Legal experts said that the hurdle of instituting an antitrust case would be high.
The letters, which were released on Friday by FTC Chairman Andrew Ferguson to Paul, Weiss, Rifkind, Wharton and Garrison; Latham and Watkins; Skadden, Arps, Slate, Meagher and Flom, and other large firms, were targeting their involvement in a certification program operated by consultancy Diversity Lab, which strived to increase access of lawyers to leadership roles.
The letters stated, warning against, “Such agreements can distort competition for labor in legal professions, including along dimensions like hiring decisions, pay, and promotions. Potentially anticompetitive collusion between law firms on DEI metrics.”
In recent years, there has been a rising body of litigation using antitrust law to attack labor markets, accusing competing firms of conspiring to fix wages and limit the flow of workers by collaborating with industry trade associations or consulting firms.
In one of those cases, a federal judge in December held that the leading U.S. shipbuilders and consulting firms should be subject to a civil antitrust case that accused them of suppressing pay and mobility of engineers and architects.
This is the case where major meat producers have consented to pay close to $400 million to settle similar claims that they violated the antitrust law by colluding with an industry consultancy to set wages.
Although all of those instances were related to DEI, it is claimed by experts that antitrust rules can be used to address diversity-related hiring procedures in limited situations.
The law professor Douglas Ross of the University of Washington’s law school stated that the legislation may make it illegal to have rival employers agree on favoring some job applicants over others, including white males.
Ross reported that the most important hurdle the FTC or other plaintiffs would face in bringing an antitrust case against law firms, it would be proving that they were colluding to limit hiring or promotion.
He added that in the absence of evidence that the companies employed the certification program of Diversity Lab to synchronize their decision-making, such a lawsuit would probably collapse. A spokesperson of the FTC did not immediately reply to a comment request on whether it plans to follow up on its letters.
The Diversity Lab, which was also warned by the FTC, writes on its website that its “Mansfield” certification program asks the law firms to pledge to increase their leadership talent pipelines and to spread information on the process.
It declares that the certification process is not discriminatory and forces participants to take into account different applicants to head the leadership positions. Spokespeople of a Diversity Lab did not respond to an immediate request for comment, nor did Paul Weiss, Latham, or Skadden Arps.
Antitrust scholar Mark Lemley of Stanford Law School said that based on his understanding of the certification process, participation in the Diversity Lab program “seems extremely unlikely to be an antitrust violation.”
The FTC would need to demonstrate that the targeted law firms actually limited the employment of white workers and that such was not an autonomous act on the basis of the firm’s business interests.
Lemley said, “Unless there are facts suggesting both of those things that haven’t been made public, this is the sort of claim based on parallel conduct that regularly gets thrown out by courts on a motion to dismiss.”
The FTC letters continued the intensity of scrutiny of diversity initiatives that the law firms already experienced with Trump, who lamented about the practice of hiring executive lawyers by the legal industry in executive orders that he issued against a group of firms last year.
Reuters special report reported that in recent months, several large law firms publicly dropped or changed their publicly stated commitment to diversity, equity, and inclusion.
The U.S. Equal Employment Opportunity Commission required the large companies to provide specific hiring information in 20 companies, including name of applicants and whether race or gender factored in their hiring decisions, in March.
