Introduction
The CMA has published guidance for employers on how to avoid anti-competitive behaviour. The guidance highlights how employers can recognise the main types of anti-competitive behaviours in labour markets, and take steps to prevent such behaviour occurring, along with how to report it. The CMA's intention is to ensure employers understand their responsibilities under competition law and are aware of the consequences of non-compliance.
Significance
The CMA highlights that anti-competitive agreements can negatively impact labour markets by reducing employees' pay packets- a particular issue during this time of rising costs of living, reducing employee mobility and choice, and limiting a business' ability to expand.
The guidance also reminds employers that as collusion is illegal, it carries significant financial and personal consequences. Following a CMA investigation, a business found to have breached competition law could be subject to financial penalties of up to 10% of their annual worldwide turnover. Individuals participating in illegal collusion can also face significant personal fines, imprisonment and be disqualified from their role. This disqualification can last up to 15 years, seriously affecting business options.
Anti-competitive behaviours
The guidance sets out the three main types of anti-competitive behaviours in labour markets:
- No-poaching agreements: where two or more businesses agree not to approach or hire each other’s employees (or not to do so without the other employer’s consent);
- Wage-fixing agreements: where two or more businesses agree to fix employees’ pay or other employee benefits; and
- Information sharing: where sensitive information about terms and conditions that a business offers to employees is shared between businesses, reducing competition in recruitment and retention.
The CMA reminds employers that not all illegal agreements or practices are in writing, and may take the form of informal practices. They may also cover freelancers and contracted workers, not just permanent salaried staff.
Actions businesses can take
In order to avoid breaching competition law, businesses can:
- Take steps to understand how competition law applies to no-poaching and wage-fixing agreements.
- Ensure that they do not enter into agreements with competitors to fix wages or agreeing not to approach or hire each other’s employees.
- Do not share sensitive information about their business or employees with a competitor.
- Provide recruitment staff with training on competition law and how it applies in the recruitment context.
- Ensure effective internal reporting processes are in place, and that staff are aware of these and how they can use them.
Reporting anti-competitive behaviour
The CMA will investigate businesses if they have reasonable grounds to suspect the law is being broken. If you’ve witnessed an illegal business cartel or been involved in one, you are strongly encouraged to report it to the CMA. If the information you provide leads to an investigation, you may earn a reward; if you have been involved, you may get leniency for telling the CMA.
The bigger picture
The guidance also links to the CMA's Cheating or Competing? campaign, which was launched in 2020 after a sustained crackdown against illegal cartels. The campaign reminds businesses that it is up to them to understand their responsibilities in order to stay on the right side of competition law, and explains what business cartels are. This campaign came following research which found only 6% of firms in this sector were familiar with competition law and that general understanding of the illegality of anti-competitive business practices is low. Only 6% of the respondents had actively sought out information on how to comply with the law.
Taking steps to understand competition law and to recognise whether your practices comply with it is crucial in order to avoid potential sanctions from the CMA and to ensure your business does not suffer the negative consequences of anti-competitive behaviour. If you would like guidance on competition law and how to ensure your business is compliant, please get in touch.
