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:

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:

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