Labor & Employment Law Daily Wrap Up, INDUSTRY NEWS, TRENDS—Letter to FTC urges investigation of anticompetitive effects of DEI-related law firm hiring practices, (Aug 18, 2026)

By Kenneth H. Ryesky, M.B.A., J.D.

“The FTC is right: DEI programs create competition concerns,” said AEO President Clegg Ivey.

A recently-formed equal opportunity advocacy organization, Americans for Equal Opportunity (AOE), has written a letter to the FTC, urging investigation of another organization, Sponsors for Educational Opportunity (SEO), and that entity's program initiative (Fellowship) that places talented but supposedly underprivileged law students into training positions in large law firms. AOE’s letter to the FTC urges investigation of competition and marketing issues consistent with the FTC's mission and areas of specialization. It alleges that “SEO and law firms participating in the Fellowship may have misled law firms about the Fellowship’s selection practices, and facilitated anticompetitive coordination among competing employers.” According to AOE, the letter identifies two grounds for an investigation: (1) SEO facilitates anti-competitive activity among competing law firms by potentially colluding on DEI metrics and possibly wage-fixing; and (2) SEO may have engaged in false advertising by telling participating law firms that it did not discriminate, and was focused on assisting “underserved” students.

Background. SEO is a 501(c)(3) public charity that was founded during the Civil Rights Movement of the early 1960's; it represents its mission as closing "educational and career opportunity gaps" for ambitious young people. SEO has a program initiative, the SEO Law Fellowship program, directed towards assisting "aspiring law students receive access to critical educational, career development, and internship opportunities that propel them to succeed in the legal profession." For this program, SEO has enlisted major law firms to facilitate the fellowship activities of the student fellows, who are selected in mainly if not totally from law schools perceived as having popular cachet.

AEO received its 501(c)(3) public charity designation from the IRS in 2025; it touts its mission as "enforcing civil rights laws and equal treatment in employment." On May 12, 2025, AEO wrote a letter to the Equal Employment Opportunity Commission (EEOC), urging the EEOC to investigate the possibly illegal Civil Rights Act violations of SEO and the law firms sponsoring its Law Fellowship program. The EEOC initiated an investigation. AEO filed with the EEOC another formal Charge of Discrimination (EEOC Form 5) dated July 21, 2026, as a follow-up with respect to further developments in connection with the SEO Law Fellowship.

On August 12, 2026, AEO wrote a letter to the FTC in which it reiterated the practices alleged in its 2025 letter to the EEOC, and requested the FTC to investigate SEO and its sponsoring law firms for anticompetitive activity and false advertising in the Law Fellowship's practices.

The Civil Rights Act issues. The AEO's 2026 letter specified acts of possible illegal discrimination by SEO. Harkening back to the 1960's Civil Rights Movement days, the letter noted that SEO has been explicit about its racial preferences for Black, Hispanic, and Native American candidates. The large law firms who are SEO's sponsors have been attempting to please their corporate clients, many of whom have instituted effective quotas for those groups and/or have instituted so-called "DEI programs." SEO, in turn, has followed its sponsoring law firms' preferences, rejecting Law Fellowship applicants who, although otherwise qualified on academic grounds, do not fit in with SEO's favored racial and ethnic profiles.

The result has been that SEO and the sponsoring law firms are joint employers of the fellows during their paid training sessions and paid summer internships with the law firms. In addition to being a joint employer, SEO effectively functions as a staffing agency. Furthermore, the law firms are effectively outsourcing the hiring and interviewing process to SEO.

The program fellows are first brought aboard following acceptance at a law school, but before beginning classes; this makes it impossible to evaluate the future students on academic criteria in the same way a student who has begun his or her studies can be evaluated. And a high percentage of the sponsoring law firms offer subsequent summer internships to those fellows it has sponsored before the fellows began law school.

The sponsoring law firms and SEO are thus actively and intentionally discriminating by using illegal racial quotas, according to the letter.

The competition issues. The August 2026 letter from the AEO requests that the FTC investigate SEO "and participating employers for potential violations of Section 1 of the Sherman Act and Section 5 of the Federal Trade Commission Act." The invitations to fellows who have completed their initial internships to return after completing the first year of law school "are traditionally the sole pathway for law students to join Sponsor Firms as full-time associates" at annual salaries of $235,000 or more. In such regard, SEO "recommends" minimum salaries to the sponsoring law firms. AEO characterizes SEO as "a Labor-Market Intermediary That Controls Access to Exclusive Job Opportunities."

In addition to the control wielded by SEO over the salaries in the labor market, SEO also effectively standardizes various training programs within the law firms, and shares data regarding its Program fellows with its sponsoring law firms.

One of the former sponsoring large law firms has discontinued its sponsorship and initiated its own internship program. AEO is aware of (and apparently has been in contact with) some highly qualified law students who chose the law firm's program over SEO's. AEO's letter asks, "If major firms are capable of establishing their own independent and competitive recruiting pathways, why did they rely for so many years on SEO? [italics in original]" This, AEO says, an indicium that competition had previously been restrained in the large law firm labor recruitment market.

False advertising. AEO's August 2026 letter to the FTC also noted what it characterized as "false advertising" on the part of SEO. In an admitted response to a Supreme Court decision [Students for Fair Admissions v. Harvard College, 600 U.S. 181 (2023)], SEO changed its mission description language from "underrepresented" to "underserved" in order to avoid perceptions of impermissible racial implications. SEO touted its program as having "strong preference for working professions over current college students,'' yet enrolled minority students having no postgraduate work experience at some schools. The letter also alleges other misrepresentations made by SEO, whether to the students or the sponsoring law firms.

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