Over the past few years, competition authorities in Europe have increasingly grappled with the application of competition law to restrictive agreements and practices in the market for labour. For a summary, see our previous Perspectives here and here. Recent enforcement activity in Europe signals that the legal and economic theories of harm developed by competition authorities are now being put into practice across economic sectors.

The theory: Anti-competitive behaviours in labour markets

In guidance published on 9 February 2023, the CMA identified three main types of anti-competitive behaviour in labour markets:

1. No-poach agreements: agreements between two or more businesses not to hire each other’s employees;
2. Wage-fixing agreements: agreements between two or more businesses to fix employees’ pay or other benefits or renumeration; and
3. Information sharing: where two or more businesses share information, such as terms and conditions offered to employees.

The CMA noted that all three would constitute business cartels and further explained that these agreements do not need to be in writing and can cover freelancers and contracted workers as well as permanent salaried staff.

In May 2024, the European Commission (“EC”) in a policy brief likewise confirmed that wage-fixing and no-poach agreements are by object infringements of competition laws.

However, as noted by Sarah Cardell, Chief Executive of the Competition and Markets Authority, in a speech at the start of the year, despite this theoretical clarity, “labour markets are an area in which competition authorities have traditionally been less active.”

That apparent lack of activity has now ended, with competition regulators in the UK and Europe putting theory into practice.

Enforcement at EU level

While the EC, in its policy brief, stated that anticompetitive issues in the labour market will often best be addressed at the national level due to the localised nature of labour markets, this has not stopped the EC from commencing its own investigations.

On 23 July 2024, the EC announced that it has opened a formal investigation to assess whether Delivery Hero and Glovo, two of the largest online food delivery companies in Europe, breached competition law. In particular, the Commission is concerned that, prior to Delivery Hero's acquisition of sole control of Glovo, the companies may have entered into unlawful market sharing and information sharing agreements. The EC has also noted that it is concerned that the companies may have agreed not to poach each other's employees. This is the first investigation on no-poach agreements that has been formally initiated by the EC, which has stated that this investigation forms part of its efforts to ensure a fair labour market where employers do not collude to limit the number and quality of opportunities for workers but compete for talents. In announcing the investigation, Margrethe Vestager highlighted that such collusive conduct affects both workers as well as consumers:

“Online food delivery is a fast-growing sector, where we must protect competition. This is why we are investigating whether Delivery Hero and Glovo agreed to share markets and not to poach each other’s employees. If confirmed, such conduct may amount to a breach of EU competition rules, with potential negative effects on prices and choice for consumers and on opportunities for workers.”

Enforcement in EU member states

The last 2 months have seen a number of developments across EU members states related to anti-competitive labour agreements, spanning across a variety of sectors:

• Portugal: A Portuguese technology consulting group is under investigation for allegedly having entered into no-poach agreements with competitors during the period of 2014 to 2021. On 27 May 2024, the Portuguese Competition Authority issued a Statement of Objection against two companies within the group. This follows an initial investigation related to no-poach agreements in March 2022 which addressed several companies, during which all but the remaining two groups cooperated and accepted fines in settlement ranging between €287,000 and €2,481,000.
• Belgium: On 3 July 2024, the Belgian competition authority fined private security providers Securitas, G4S and Seris over €47m in respect of a cartel affecting private security guards and the allocation of private security contracts. The anticompetitive practices lasted from 2008 to 2020 and included price fixing agreements, bid rigging, as well as no-poach agreements. The Belgian regulator noted that its decision “contributes to the development of a growing body of precedents in Europe that makes clear that such no-poaching practices are illegal by object under the competition rules.”
• Poland: On 8 July 2024, the Polish competition authority announced that it had opened an investigation into two Polish retail chains (Biedronka and Dino) together with transport companies serving the retailers, in respect of allegations of no-poach agreements in relation to drivers, potentially coordinated by the retail chains. The authority explained that the practices under investigation would have resulted in a “lack of flexibility for drivers to change jobs and a limitation on the growth rate of their wages.”
• Switzerland: On 11 July 2024, the Swiss Competition Commission (WEKO) announced that it will work with social partners, authorities and other interested parties to develop best practice guidance for competition compliance on the labour market. In a preliminary investigation opened in 2022, the authority found that more than 200 companies from various sectors regularly exchanged detailed information on wages, wage developments, fringe benefits and other working conditions. WEKO considered that it would be more effective to focus on establishing best practices, instead of commencing formal investigations.

Lastly, following Portugal’s first no-poach antitrust decision in April 2022, a Portuguese court has requested a preliminary ruling by the European Court of Justice. The request asks the European Court of Justice to determine whether no-poach agreements between Portuguese football clubs in the First and Second Leagues during the 2019/2020 season, preventing players who unilaterally terminated their contract on the basis of issues caused by the pandemic, are to be interpreted as by object infringements. It will therefore be interesting to see whether the European Court will affirm the strong stance taken by the EC in its policy brief.

Developments in the UK

The CMA bolstered its intentions to address potential anti-competitive practices and cartels in the labour market by including ‘competition in labour markets’ as an area of focus in its 2024-2025 annual plan, noting that its ambitions are “not solely focussed on consumers, but also on competition in labour markets”.

The CMA has launched two investigations into suspected anti-competitive behaviour in relation to the purchase of freelance services and the employment of staff in the broadcasting industry with one relating to the production and broadcasting of sports content and the other relating to television content excluding sports.

Comment

Now that competition enforcement agencies have commenced putting theory into practice, it is apparent that restrictive behaviour in the market for labour may affect a large variety of workers and employees across Europe, from professional football players, to truck drivers, security guards, and technology consultants.

In its policy brief, the EC noted that labour markets in a number of members states are “moderately to highly concentrated” and that “[i]n this context, wage-fixing and no-poach agreements risk reinforcing that market power and cause harm to employees, while softening downstream competition and ultimately leading to higher prices and lower quality”. Accordingly, it is expected that the investigations discussed above mark only the start of a larger enforcement campaign.

Authors: Aqeel Kadri, Lisa Mildt and Michael Zymler