In its Annual Plan for 2024/25, the UK’s competition regulator, the Competition and Markets Authority (CMA), announced its intention to tackle potential competition issues in labour markets.
In this briefing, we highlight the key takeaways relating to competition law enforcement in labour markets that will be of interest to a wide range of organisations in the life sciences sector, including pharmaceuticals, medtech and biotech businesses, as well as universities and research institutions.
What is the CMA focusing on?
Tackling anti-competitive behaviour in labour markets is 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. The CMA currently has three open investigations in which it is assessing alleged anti-competitive practices in labour markets, with more cases potentially in the pipeline.
Are other competition authorities also focusing on labour markets?
Regulators in many jurisdictions are increasingly putting employment practices under a competition law spotlight. As recently as May 2024, the EU Commission produced a policy brief on antitrust in labour markets (Competition policy brief: Antitrust in labour markets (europa.eu)), and the national competition authorities in France and Poland have launched investigations focussing on these issues. The US authorities have also been active in this space.
What type of employment practice, agreement or conduct might be considered anticompetitive?
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 includes setting the same wages or setting maximum caps on pay.
- Sharing commercially sensitive information with other organisations about e.g., 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 distorts the operation of labour markets and harms 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 are the risks for the life sciences sector?
The CMA has not taken enforcement action (insofar as we are aware) against businesses in the life sciences sector in relation to anti-competitive conduct in labour markets. However, certain characteristics of the sector, such as limited talent pools, may heighten the risk of collusion to win or retain talent.
How might businesses mitigate these risks?
The CMA has published guidance for employers on how to avoid anti-competitive behaviour: Avoid breaking competition law: Advice for employers. 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 measures, 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 build up their decisional practice in this area.
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