CMA signals intention to tackle competition issues in labour market

In its Annual Plan for 2024/25, the UK’s main competition regulator, the Competition and Markets Authority (CMA), announced its intention to tackle potential competition issues in labour markets. 

In this blog, we highlight the key takeaways relating to competition law enforcement in labour markets, which should be of interest to HR professionals and employment lawyers in a wide range of organisations across all sectors of the economy.  

What is the CMA focusing on?

The CMA is the UK’s principal authority responsible for competition and consumer protection.  It has a statutory duty to promote competition for the benefit of consumers and can impose (amongst other things) a financial penalty of up to 10% of worldwide annual turnover for a breach of competition law.  Tackling anti-competitive behaviour in labour markets has been announced as an enforcement priority for the CMA.  In its Annual Plan for 2024 / 2025, the CMA highlighted a shifting focus from “identifying” to “tackling” competition law issues in this space.  It currently has three open investigations in which it is assessing alleged anti-competitive practices in labour markets, with more cases potentially in the pipeline. 

Is the regulatory focus on competition issues in labour markets exclusive to the UK?

No – competition regulators in many other jurisdictions are also increasingly interested in employment practices.  As recently as May 2024, the European Commission produced a policy brief on antitrust in labour markets.  National competition authorities, in France and Poland, for example, have launched investigations focusing on these issues. The US authorities have also been active in this space.  The wide range of sectors which have, to date, been investigated (e.g., sport, media, tech, fragrances, real estate and construction) illustrates that no sector is out of bounds.

So, what type of employment practice, agreement or conduct might be considered anti-competitive?

The main potential anti-competitive agreements between employers include:

• No-poaching agreements – when organisations agree not to approach or hire each other’s employees, or not to do so without the other’s consent.
• Wage-fixing agreements – when organisations agree to fix employees’ pay, benefits or other conditions of employment.  This can include setting the same wages or setting maximum caps on pay.
• Sharing commercially sensitive information with other organisations about wages or other terms or conditions of employment.

It is important to remember that organisations can be “competitors” in labour markets if they are competing to hire talent from the same talent pool, regardless of whether they compete downstream in the provision of products or services.  Moreover, the rules extend to competition for freelancers and contracted workers, as well as permanent salaried staff. 

The fact that an agreement or understanding between employers may have been to ensure that workers are paid fairly or received increased salary or benefits is no defence of itself to unlawful conduct.  The CMA is clear that the types of conduct outlined above are business cartels, which distort the operation of labour markets and harm employees. 

However, competition authorities are generally not concerned with non-compete clauses agreed between an employer and an employee; or with genuine collective bargaining agreements.

What can you do to mitigate these risks?

The CMA has published guidance for employers on how to avoid anti-competitive behaviour.  Organisations should consider reviewing the processes by which salary increases are agreed and talent is recruited to identify whether there are any areas of risk which need addressing.  Implementing competition training for HR teams would also be recommended, as would implementing processes through which HR teams can obtain guidance and report issues.

As is the case with any compliance measure, after an initial deep dive and implementation of any remedial action, these actions should be kept under review to ensure they are fit for purpose, including to take account of any developments as the CMA and other competition authorities develop their decisional practice in this area. 

Our competition team has experience in advising on these types of issues and can help you design and deliver effective compliance training or identify and deal with any specific problems or concerns.

Contact the authors

For more information about this post, please contact Kate Newman, Nicola Holmes or Sara Warner.

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