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Employers beware: The Competition and Markets Authority’s focus on labour market practices

Whilst historically regulators have focussed on demand side product and service markets, there has been a recent shift to engage with potential anti-competitive supply side practices particularly in the labour market, with the Competition and Markets Authority (CMA) making it clear that it will use its competition law enforcement powers to tackle such behaviour. These include fines of up to 10% of turnover, director disqualifications and follow-on actions for damages as well as potential criminal cartel offence sanctions.

The CMA recently published its report into competition and market power in the UK labour market. In a follow up speech delivered by the CMA’s Chief Executive Officer, Sarah Cardell, she confirmed that the CMA’s priority was to tackle businesses colluding to restrict competition between them in labour markets – whether through wage fixing, no-poaching or information sharing.

It’s not surprising that there is a focus on this area: anti-competitive behaviour by businesses can directly impact household finances and in the current economic climate, whereby the population is struggling with cost of living and debt increases, addressing this type of conduct should be a priority. With two investigations into suspected anti-competitive conduct relating to workers in TV production/broadcasting sectors, as well as an extended cartel investigation into no-poaching arrangements in the fragrance industry, the CMA has demonstrated its commitment to taking enforcement action on this issue.  These investigations follow a wider international trend in competition law enforcement, particularly in the US.

While these issues may impact any market sector, the more concentrated the market the greater the risks (especially markets with low growth where there are significant pressures on costs).  Going forward, the CMA announcement clearly signals an increased risk of regulatory investigations, which are themselves extremely demanding in terms of time and resources. These could be triggered by whistleblowing disclosures from impacted staff. It goes without saying that companies found guilty of anti-competitive behaviour face huge reputational damage and public relations fallout.

Finally, although the CMA’s focus is on arrangements between businesses, its report does contain some startling statistics on the wide-spread use of restrictive covenants in employment contracts, and the knock-on effect this has on employee mobility. In light of the Government’s announcement that it intends to introduce a three-month statutory limit on non-competes, this area of law looks likely to undergo reform.

If you would like to discuss any of the issues raised in this article, please contact Robert Forsyth (Employment), Noel Beale (Competition) or your usual Michelmores LLP contact.