Labour markets are clearly in the sights of the Competition and Markets Authority (CMA). Now more than ever, all participants in labour markets (such as employers, HR departments, trade unions and other trade bodies) need to be aware of the CMA's "cheating or competing" campaign, which targets unlawful business cartels. This is because cartel activity (such as wage-fixing and no-poach agreements between competing employers) can negatively impact both employees and the companies involved. Current or former employees are potential informants on such cartel activity and can be financially rewarded by the CMA for reporting cartel conduct.

The CMA (as well as several other competition authorities worldwide) is taking an increasing interest in competition issues that arise in labour markets. It is concerned in particular about the negative effects such competition issues may have on often lower-paid workers, many of whom are struggling in the face of sharp increases in the cost of living. The CMA identified labour markets as a key area of focus in its Annual Plan 2023/24 and, in February 2023, it released short guidance for business on these issues. It also recently hosted a roundtable on these issues, which we attended, where it was made clear that this is a priority area for the CMA. The CMA currently has two live competition investigations related to labour markets, concerning freelance and employed labour in the production, creation and/or broadcasting of television content (one of which relates to sports broadcasting).

Key risks

There are three main types of anti-competitive behaviour in labour markets, which are considered to be "by object" infringements of UK competition law (i.e. inherently harmful to competition):

• No-poach agreements: Agreements between employers not to approach or hire each other's employees (or not to do so without the other employer's consent).
  
  
• Wage-fixing agreements: Agreeing to fix employees' pay or other benefits, including agreeing the same wage rates or setting maximum caps on pay. This is potentially broad – for example, it could include an exchange of information between employers about whether to cover the cost of EV company cars (thus lowering employees' personal tax liabilities).
  
  Remember that an "agreement" is very widely defined in competition law – it does not have to be in writing or legally binding, so for example an exchange of WhatsApp or text messages could be enough.
  
  
• Information sharing: Sharing or disclosing sensitive information related to terms and conditions of employment (e.g. salaries, business plans, charge-out rates, recovery rates, costs etc.). Particular care should be taken in respect of trade associations/industry events and benchmarking reports. Again, "sharing" can be one-way – it does not have to be reciprocal.

Additionally, some clauses in employment contracts, such as non-compete provisions, may have the effect of restricting competition, based on the facts of the individual case. The use of non-competes in certain types of industries, such as knowledge-intensive industries, may be more likely to be permissible under competition law.

It is important to remember that companies can be competing in the same labour market (e.g. to hire IT staff) without being competitors for the products or services they supply.

On the horizon

Increased CMA enforcement action in labour markets seems likely, given the CMA's 2023/2024 areas of focus and recent and ongoing competition investigations.

We expect to see the CMA take an interest in restrictive covenants/non-compete clauses in labour contracts (between employees/self-employed individuals and employers) and, in particular, post-term non-competes. This follows a general trend by competition authorities to restrict the use of non-competes, including in the US (where the Federal Trade Commission (FTC) is proposing a complete ban on them) and in the UK (where the government put forward proposals earlier in 2023 to limit the duration of post-termination non-competes to three months).

Finally, we understand that the CMA is considering whether to issue competition law guidance on collective bargaining, in particular for independent contractors and "gig economy" workers (such guidance already exists at an EU level).

The message for companies doing business in the UK is clear: it is vital to ensure your HR departments are fully familiar with your competition law compliance and training programmes.