The European Commission has carried out unannounced inspections within the data centre construction sector due to concerns regarding potential breaches of EU antitrust laws. These inspections aim to ensure compliance with EU competition laws amidst concerns over the sector's practices. While non-solicitation agreements can be seen to restrict competition, the Commission acknowledges their necessity under certain conditions.

As non-solicitation agreements are commonplace in the sector, understanding the Commission's concerns and ensuring business compliance is crucial as the approach taken by the Commission will have a lasting impact on the data centre construction sector, not only for European development, but internationally.

The concerns of the European Commission

The European Commission has raised concerns regarding the use of non-solicitation agreements within the data centre construction sector. In a press release dated 18 November 2024, the European Commission stated it would be carrying out 'unannounced inspections' at the premises of those working within the sector, along with sending formal requests to others, in order to ensure that EU antitrust rules were being upheld.

In particular, the Commission raised concerns of potential breaches of Article 101 of the Treaty on the Functioning of the European Union, which "prohibits agreements between two or more independent market operators, which restrict competition". In essence, this aims to prevent cartels and restrictive business practices. In line with this, the EU Commission is investigating possible collusion through the use of no-poach agreements.

Non-solicitation clauses and EU compliance

In May 2024, the Commission released the Competition Policy Brief "Antitrust in Labour Markets" which outlines the general opposition to non-solicitation agreements, however recognised their necessity and set out the requirements for exemption from the antitrust restrictions.

Non-solicitation agreements are a type of no-poach agreements in which companies agree not to 'steal' employees from one another. While such agreements can be viewed as restricting competition, the Commission has not ignored the security brought by such agreements and, as such, allows for them under certain conditions.

According to the brief, if companies wish to assert that their non-solicit agreements are required, they must be able to show that:

  1. there are no less restrictive means by which to implement the relevant commercial arrangement; and
  2. the scope of the relevant "non-solicit" agreement is:
    1. strictly limited to the employees necessary to implement the commercial arrangement in question; and
    2. only for a justifiable duration and covers an adequately limited territorial scope.

It is important to recognise that this policy brief is not "law", it is a useful insight into the current thinking of individuals within the Commission when investigating suspected infringements of EU competition law. The positions established within the brief must be ruled on by the EU courts before they can become law. In the interim, the existing EU antitrust provisions will guide appropriate practice.

What can the sector expect?

The announcement of such inspections may be of concern to data centre providers, but with the Commission's acknowledgement of the necessity of such agreements, a blanket ban is unlikely and is not implied with their current action. On this basis, we can assume that whether or not a non-solicitation agreement gives rise to concerns is dependent on the provisions within said agreement if they were to come to the attention of the Commission (likely through either inspections or third-party complaint).

Such unannounced inspections are a usual preliminary step when the Commission investigates anti-competitive practices. They do not necessarily indicate that such practices have occurred, just that the Commission is investigating such a possibility.

With the shortage of necessary skilled workers in the data centre sector, the risk of poaching is a significant concern. It is crucial to address this in compliance with relevant legislation. As data centre investment continues to increase at a rapid pace both in Europe and internationally, particularly in the Middle East, the demand for skilled workers will only increase. Companies need to know how to retain talent effectively, considering varying anti-competition approaches across regions.

The European Commission's actions highlight the importance of balancing competitive practices with the necessity of non-solicitation agreements in the data centre construction sector. As the industry navigates these challenges, ensuring compliance with EU competition laws will be crucial for sustainable growth and talent retention.

To discuss any of the points raised in this article, or for more information on non-solicitation agreements and EU compliance, please contact Jocelyn Paulley or Samuel Beighton