In October 2023, the UK's Competition and Markets Authority (the CMA) launched an investigation into suspected infringements of UK competition law arising from concerns over how certain businesses in the media sector: (i) employed staff; and (ii) obtained the services of freelance providers.

In this update, we consider the background to the current investigations, and the practical steps businesses can take now to ensure their HR activities are compliant with UK competition law.

Current UK investigations into competition law concerns affecting "labour markets"

This is the second investigation the CMA has opened in this area, emphasising its focus upon addressing UK competition law concerns in so-called "labour markets".

While these two investigations are currently ongoing, if the CMA ultimately finds that infringements have taken place:

  • any business involved in those infringements will be exposed to significant risks, including: (i) fines of up to 10% of the group worldwide turnover of the business; (ii) claims for damages brought in reliance upon the CMA's findings; and (iii) harm to reputation and brand; and
  • directors of that business could face director disqualification proceedings, with 15 years being the statutory maximum period of disqualification in connection with an infringement of UK competition law.

What are the CMA's concerns?

Competition authorities worldwide are increasingly active in investigating arrangements that restrict competition between businesses in relation to the recruitment and/or retention of permanently employed staff, temporary contract staff, and/or freelance providers (together referred to as personnel).

For authorities, arrangements of this nature may be expected to:

  • benefit the businesses in question (e.g. by reducing their costs associated with the recruitment and/or retention of personnel); and
  • disadvantage individuals, who may be expected to: (i) receive lower remuneration and associated rewards; and (ii) find it harder to move between employers (e.g. to progress in their careers), than they otherwise would in the absence of such restrictions.

The CMA's first investigation in this area was launched in July 2022. Under this investigation, the CMA is investigating suspected infringements of UK competition law arising from concerns over how certain businesses in the media sector: (i) employed staff; and (ii) obtained the services of freelance providers, who were involved in supporting the production and broadcasting of sports content in the UK.

Following this first investigation, the CMA published its guidance "Employers advice on how to avoid anti-competitive behaviour" (February 2023), which we considered in our earlier Employment Essentials podcast.

Importantly, the CMA's guidance identifies the following three types of anti-competitive arrangements as "business cartels":

  • no-poaching agreements: where two or more businesses agree either not to approach or hire each other's personnel, or not to do so without the other's consent;
  • wage-fixing agreements: where two or more businesses agree to cap or fix the pay and/or other benefits offered to personnel; and
  • information sharing: where competitively sensitive information about the terms and conditions a business offers to personnel is shared with another business, thereby reducing competition between these businesses in relation to the recruitment and/or retention of personnel.

Within the CMA's Annual Plan for 2023/24 (published in March 2023), the authority made clear that identifying "potential competition issues within UK labour markets" is a key area of focus.

Subsequently, the CMA's "Guidance on horizontal agreements" (published in August 2023) expressly identifies wage-fixing agreements (see above) as an example of a "buyer cartel", with the guidance stating that:

"Buyer cartels are agreements between purchasers aimed at coordinating their individual negotiations and purchases with suppliers. They do so by: (a) coordinating those purchasers' individual competitive behaviour on the purchasing market or influencing the relevant parameters of competition between them through, for example, fixing or coordinating purchase prices or aspects of purchase prices (including agreements to fix wages)".[1]

The CMA's current investigations and recent policy statements mark a significant shift in approach, with HR strategies now clearly being viewed by the CMA as having the potential to constitute serious infringements of UK competition law.

What does this mean for businesses?

Against this background, businesses must be aware that the CMA will seek to take enforcement action against suspected anti-competitive arrangements in relation to labour markets, and may be expected to sanction any such arrangements as cartels.

Businesses should therefore take proactive steps to ensure that all members of their internal teams are performing their roles in compliance with UK competition law.

These actions could include:

  • reviewing the business' current HR policies to ensure these are compliant with UK competition law;
  • discussing the current HR policies with the relevant personnel internally, in order to seek to confirm that the business' actual HR activities align with the requirements of the policies;
  • providing regular UK competition law training to relevant personnel, focusing upon how competition law concerns can arise in the context of labour markets, and making clear that:
    • the business must act independently at all times;
    • no-poaching and wage-fixing agreements are not permitted; and
    • competitively sensitive information (including information relating to the terms and conditions offered to personnel) must not be given to, or received from, another business;
  • creating and implementing an appropriate internal protocol under which certain information may be provided to identified third parties in limited circumstances (e.g. in the context of a third party service provider undertaking a legitimate benchmarking exercise);
  • ensuring that an appropriate internal reporting process is in place, and that relevant personnel know they can use this to report any competition law concerns they may have; and
  • if there are any concerns about whether the business may have been involved in anti-competitive arrangements in the context of labour markets:
    • engaging with these concerns as a matter of urgency; and
    • undertaking an appropriate legal assessment to inform the business' strategy to seek to minimise any risks arising.

If you have any questions regarding UK competition law in the context of labour markets, and how your business can engage with this issue, please contact Gowling WLG's EU, Trade & Competition team.

Footnotes:

[1] See, Guidance on horizontal agreements, 16 August 2023, paragraph 6.9(a).