The Portuguese Competition Authority (AdC) has warned that growing shortages of highly skilled talent in the artificial intelligence sector are creating incentives for companies to adopt strategies that could weaken competition and stifle innovation.
In a study released on 25 July, the AdC said that firms — particularly those with significant market power — may resort to practices such as mass hiring of rival teams, restrictive labor clauses, and agreements not to recruit each other’s employees. While these strategies are often justified as a means of protecting investments in talent and know-how, the authority cautioned that they can also limit the mobility of specialized workers and reduce opportunities for competitors to innovate.
The report highlights that labor mobility plays a crucial role in the diffusion of knowledge and the development of new technologies in the AI sector. “Workers often carry with them not only technical skills but also tacit knowledge that can drive innovation in new or existing companies,” the study notes. The AdC cited examples from the tech industry where former employees went on to found some of today’s leading AI companies, underscoring how mobility fuels competition and progress.
The paper also draws attention to “reverse acquihires,” in which companies recruit nearly the entire staff of a rival without formally acquiring the business. According to the AdC, such deals may amount to mergers under EU and national competition law, and therefore merit close scrutiny. The recent case involving Microsoft and Inflection was cited as a benchmark for how regulators may approach these transactions.
Restrictive contractual clauses, such as non-compete and confidentiality agreements, were identified as especially prevalent in the AI and digital sectors. Although legal under labor law, the AdC warned that their widespread use by dominant firms could restrict labor mobility and have exclusionary effects on competitors. Similarly, agreements between companies not to recruit each other’s employees — known as no-poach agreements — or to fix wages were described as potentially serious violations of competition law.
This publication marks the third short paper in the AdC’s ongoing series examining the competitive challenges posed by generative AI. Previous reports focused on access to data and the openness of AI models, following an issues paper on artificial intelligence released in 2023. With the new study, the AdC seeks to alert policymakers and industry players to emerging risks while reinforcing its position as a leading voice in Europe on the competition implications of AI.
