Great Britain – Antitrust law, competition in the EU

Competition authorities in Europe and the UK are increasingly focusing their enforcement activities on labor markets. This is part of a broader global trend in law enforcement. In the United States, the Federal Trade Commission has decided to prohibit employee non-competes (see our April 2024 recommendations). Although the law itself has not changed in Europe and the UK, competition authorities have increased their enforcement focus, focusing on employment practices. Moreover, the current UK government has proposed introducing regulations limiting the non-competition ban to three months, and we will see whether the new UK government will accept this proposal after the upcoming elections.

Therefore, employers and human resources (HR) professionals should be aware of changes in the rapidly changing competition enforcement landscape.

What are agencies interested in?

The idea that labor collusion can constitute anticompetitive conduct is not new, but enforcement cases have been few in the past. It changes. New guidance from the European Commission and the UK Competition and Markets Authority (CMA) identifies the three most likely forms of behavior that will be of concern to them are:

1. Anti-Poaching Agreements: Where two or more companies agree not to associate with or employ each other’s employees, either absolutely or without consent.

2. Wage-fixing agreements: Where two or more companies seek to fix employee wages or equivalent benefits.

3. Sharing information: Where are the competitors share confidential commercial information relevant to employment, such as standard terms and conditions of employment or pay levels, directly or indirectly. This may also extend to
comparative exercises when exchanging salaries or other confidential information.

Importantly, no contract or formal consent is required to be caught: For competition law purposes, a “contract” does not have to be a written contract. It may be an exchange of words, a “gentleman’s agreement” or simply an agreement. The concept involves a very soft understanding and this is a major area of ​​potential exposure, particularly in industries where HR professionals from competing companies meet in dedicated forums or industry organizations. When it comes to exchanging information, simply receiving and transmitting information is enough.

What are the key enforcement cases in the European Union and the UK?

In January 2024, the CMA widened the scope of its investigation into the UK fragrance sector to include “unlawful coordination… involving reciprocal agreements relating to the employment or recruitment of certain employees”, which is likely to be a form of no-poaching agreement. Similarly, the CMA is currently considering employment issues in parallel investigations into the sports and non-sports broadcasting sectors. In this case, the CMA’s suspicions center on potential coordination with both direct and independent workers from whom services are purchased, although the exact details of the alleged breach have not been made public.

At the same time, the European Commission carried out dawn inspections in November 2023 to expand the scope of its investigations to the online food delivery sector and to include potentially (it considers) anti-competitive no-poaching agreements between competitors.

The graphic below shows countries that have been actively pursuing such issues. This means that every European company must have appropriate procedures in place to avoid creating antitrust risks.

Figure 1 – European competition cases relating to labor markets.

In parallel, the UK government published a policy document setting out plans to limit non-competition clauses in employment contracts to a maximum period of three months. This will require a change in legislation and, given the UK general election, it will be important to see whether the new government takes up this initiative. This may be rejected given the other pressing demands of the new government’s timetable, but if implemented such a change could well spell death for non-competitors in the UK as it would rarely be worth the time and expense of going to court to enforce the restriction of only three months.

The continued focus on non-competes and terms of employment in the context of competition was re-emphasised in a detailed report on this topic by the CMA’s Microeconomics Unit in January 2024, and the topic was flagged as an area of ​​continuing concern in the CMA’s 2023-2024 report. Annual plan.

Transparency, benchmarking and industry associations

Anti-competitive collusion between competitors is not limited to actively agreeing on specific terms of employment, such as remuneration or notice periods. The simple exchange of competitively sensitive information (e.g. one-off sharing of insufficiently aggregated remuneration data) could constitute a breach of competition law. At the same time, employers are under increasing pressure to disclose employment data such as salaries in a bid for pay transparency. Fulfilling all statutory obligations therefore requires employers to walk a tightrope, meeting labor law requirements regarding disclosure of information, without violating restrictions on competition.

Past examples of competition authorities treating exchanges of information as anti-competitive, even if they are not part of a wider cartel, involve mutual (or unilateral) exchanges of information without further agreements or arrangements as to how to proceed. There is therefore a significant risk that competition authorities will take a more active approach to employment.

Furthermore, exchanging information through independent third parties, such as a trade association, does not necessarily protect an employer from competition law risks if the information is not sufficiently historical or aggregated. For example, in the Polish basketball case mentioned above (see chart 1), members of the Polish Basketball League agreed to withhold the payment of each player’s salary due to the premature end of the season during the Covid-19 pandemic. This coordination was made possible by a system of exchanging information between teams through a third party, the league itself. Similarly, this may be done through pay benchmarking through an industry association if the data is not sufficiently historical, aggregated or generalized.

What does this mean for busy HR professionals?

Protecting against anti-competitive behavior and the resulting enforcement actions poses a complex challenge – even more so for HR teams already operating in a highly regulated field. The risk will be even greater if the company has a potentially dominant position in its industry and is subject to greater scrutiny by competition authorities. The first step in any compliance program is to conduct up-to-date employee training and education on competition restrictions and use internal reporting tools to sensitize HR specialists to the potential for antitrust risk and familiarize them with competition law concepts. Ideally, this should be supported by internal policies or guidance provided by employers to relevant managers and HR professionals to demonstrate that the employer is a leader in this area and does not encourage collusion or illegal exchange of information.

As a permanent measure, particular care should be taken when conducting disclosure or transparency initiatives where a certain degree of disclosure is required, as well as industry initiatives, for example through industry associations or other third parties. HR professionals should actively seek assistance from their internal or external lawyers early in the process of presenting or developing such initiatives.

The content of this article is intended to provide a general guide to the subject. You should seek specialist advice regarding your specific situation.