Competition Enforcement in Labour Markets The Recent European Commission and CMA Investigations and European Update

Employment Practices Under Scrutiny for Cartel Enforcement in Europe

On November 21, 2023, the European Commission announced that it conducted dawn raids as part of an investigation into a suspected cartel infringement related to no poach agreements. This development highlights the increasing focus on employment practices in cartel enforcement. The United States has been investigating anticompetitive practices in employee hiring for several years, and now the EU and the UK are following suit.

Areas of Concern

Competition law infringements in the employment field can include agreements not to hire each other’s staff members (no-poaching agreements) or not to offer higher salaries to attract employees (wage-fixing agreements). These agreements limit employee mobility and can hinder competition by preventing new companies from entering markets where success depends on hiring skilled employees. No-poaching agreements between employers are seen as a way to keep wages down and restrict talent movement, which is detrimental to the economy.

The European Commission has explicitly classified wage-fixing agreements as “by object” restrictions in its updated Horizontal Guidelines. This means that these agreements are automatically considered illegal without the need to demonstrate negative effects. While similar to purchasing cartels, employment-related agreements involve employees’ terms and conditions, which also belong to the employees themselves.

Enforcement Trends

Various European countries, including the UK and France, have taken steps to address anticompetitive behaviors in labor markets. The UK’s Competition and Markets Authority (CMA) published guidance in February 2023, highlighting three main anticompetitive behaviors: no-poaching agreements, wage-fixing agreements, and information sharing. The CMA advises businesses to understand competition law implications, avoid sharing sensitive information with competitors, provide competition law training to recruitment staff, and establish robust internal reporting processes.

The European Commission has also shown increased interest in anticompetitive hiring practices. In November 2023, the Commission conducted dawn raids for a suspected cartel infringement related to no poach agreements. This investigation may have a similar impact as previous investigations into purchasing cartels, bringing employment cartel law to the forefront. Companies have started extending their compliance programs to include HR personnel and reviewing internal policies regarding compensation disclosure.

In France, the Competition Authority has taken action against anticompetitive behaviors in labor markets. It has sanctioned modeling agencies for price-fixing and salary agreements and addressed the potential antitrust harm of branch agreements. The French regulator recognizes the validity of non-solicitation or no-poach clauses if they are proportionate to the interests being protected.

While Poland lacks specific guidelines from its antitrust regulator, it acknowledges the interest in non-solicitation and wage-fixing agreements. The Polish Competition Authority looks at these practices from the perspective of agreements that prevent, restrict, or distort competition. Notable cases involve remuneration rates for sportsmen and allegations of wage fixing by hospital directors.

Germany and Spain have not published specific guidance on this matter, but both countries recognize that no-poach and wage-fixing agreements can constitute competition law infringements.

In the Czech Republic, the competition authority closed its first labor market investigation in October 2023. It focused on non-compete clauses promoted by associations and expressed its priority to address wage-fixing and no-poaching agreements. The authority may consider case law from other EU countries when assessing these agreements in the future.

Belgium has conducted investigations into the labor market, particularly in the sports sector, with a focus on no-poach agreements. While there is no specific case law or guidelines, the Belgian Competition Authority has indicated its intention to take stricter action against concentrated practices.

In Switzerland, the competition authority investigated banks for colluding on salaries, marking its first-ever probe into labor markets. The alleged practices involved sharing information about employee pay.

What’s Next?

The increased attention from the European Commission and national authorities on employment practices poses challenges for employers in the war for talent. Companies must carefully balance retaining their own staff and sharing information and connections without unnecessarily restricting their ability to hire from competitors.

Companies should revise their policies and training to address discussions on employment market challenges, especially when these discussions occur outside the company. HR teams should be included in competition training sessions, and template employment and service agreements should be reviewed for compliance.

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