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CMA to target anti-competitive collusion between employers

In its 2023-24 Annual Plan, published on 23 March 2023, the Competition and Markets Authority (the CMA) cited the identification of potential competition issues in UK labour markets as one of its key areas of focus for the year.

This follows the publication, on 9 February 2023, of the CMA’s guidance for employers on how to avoid anti-competitive behaviour. The guidance outlines the main types of anti-competitive behaviour in the employment sphere, steps that may be taken to avoid such behaviours, and how to report them.

This represents a noticeable shift in priorities for the CMA which, save for an investigation launched in July 2022 regarding the purchase of freelance services by companies which produce and broadcast sports content, has not historically focused its enforcement efforts on collusion on employment matters.

We explain below the types of conduct the CMA is targeting and the steps employers should take to reduce the risk of infringement.

Conference-table

What types of behaviour by employers is anti-competitive?

The CMA’s guidance highlights the three main types of anti-competitive behaviours in labour markets, which it likens to cartel behaviour:

  1. No-poaching/non-solicitation arrangements: When two or more businesses agree not to approach or hire each other’s employees (or not to do so without the other’s consent).
  2. Wage-fixing arrangements: When two or more businesses agree to fix employees’ pay or other employee benefits. This includes agreeing the same wage rates or setting maximum caps on pay.
  3. Information-sharing arrangements: When competitors share sensitive information about the terms and conditions they offer employees.

The CMA is concerned that the above behaviours can negatively impact labour markets in a range of ways, including lowering wages, reducing employee mobility and choice, and limiting the ability of smaller businesses to recruit and expand.

The CMA’s guidance for employers reiterates that anti-competitive behaviour extends beyond written agreements to informal arrangements and concerted practices, such as gentleman’s agreements. It also makes clear that these behaviours exist in the markets for freelancers and contracted workers, as well as permanent salaried staff.

Failure to comply with competition law can carry significant financial and personal consequences, including financial penalties for businesses of up to 10% of their annual worldwide turnover, and personal fines, imprisonment and director disqualification for up to 15 years for individuals.

Steps employers should take

In light of the CMA’s guidance for employers, now is a good time for businesses to evaluate their own compliance with competition law and take steps to minimise the infringement risk. In particular, you might consider:

  • increasing awareness of anti-competitive behaviour in the relevant parts of your business (such as those involved in recruitment) through policies, training and other resources and encouraging staff to report any concerns internally;
  • reviewing existing agreements and arrangements with competitors to check for unlawful non-solicitation or information-sharing arrangements; and
  • reviewing other agreements and arrangements relating to employment matters to identify any other competition-compliance risks.

Where infringing behaviour is identified, the CMA encourages market participants to ‘blow the whistle’ in exchange for the grant of full or partial immunity from penalties and protection for staff and directors from individual sanctions. The sooner a company comes forward, the greater the protection it is likely to receive.

How we can help

Our Competition specialists have considerable experience advising businesses on all aspects of competition law. For more information on the CMA’s guidance for employers or assistance on this, or any other competition related topic, please contact Sarah Ward or Jack Gale.

Sarah
Ward

Partner

Competition

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Jack
Gale

Associate

Commercial & Competition

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