Upheaval in the antitrust enforcement – labour markets are under the microscope of the EU Commission and National Competition Authorities

In May 2024 Commission published a policy brief on ‘Antitrust in Labour Markets’. Policy brief details the current antitrust enforcement efforts in the labour markets. Beyond just a mere policy brief, the Commission has been opening a new avenue in its antitrust enforcement. In her speech of 22 October 2021, Commissioner Vestager enshrined that the labour markets do not remain out of the competition authorities’ sight anymore. As a probable prologue for the antitrust upheaval in the labour markets, the Commission raided two major courier services Glovo and Delivery Hero twice in July 2022 and November 2023. During the second raid, Commission indicated that there were initial labour market concerns triggering the probe. In addition to the raids, the Commission has published additional guidance regarding labour markets in its guidelines on collective agreements 2022 and Horizontal Guidelines 2023. Director-General of DG Comp Olivier Guersernt also noted that companies are possibly circumventing traditional merger control regimes with non-compete clauses and large-scale hires.

National Competition Authorities (“NCAs”) are also following the suit. Nordic NCAs commissioned a study regarding labour markets and their role in competition law. The study shed light to the typical traits of the Nordic labour markets, namely: high degree of unionisation. The results were two-folded; a high degree of unionisation deters the cartelisation, but on the other hand there are still cases which reflect possible cartelisation in labour markets. Hence, one cannot categorically state that due to worker’s unions there are no cartels, but they still deter the cartels from occurring.

Labour markets and competition law

In principle, labour markets can be regarded as any other product market, where employee is the upstream supplier of a product (its work product), and employer operates in the downstream market by purchasing the work product. Due to this relationship, it is the employers who wield considerable power over the employees since they are the sole purchaser of the employee’s work product and expertise. This power is especially strengthened in fields where high degree of professionalism is required or the workforce consists of workers with a special skillset. Furthermore, this buyer-centric relationship is prone to buyers’ cartels and captured under the Article 101 (1) TFEU.

Wage fixing and no-poaching

Due to the labour markets’ special constellation, they are especially susceptible particular to competition infringements called wage-fixing and no-poach agreements. Wage fixing agreements are agreements between competitors where the competitors agree on mutual wage levels of their employees. No-poach agreements are agreements between competitors where the competitors agree not to hire each other’s employees. The main theory of harm for the infringements is that they limit labour mobility, which consequently affects the quality of the goods, services, and innovation in the market. Additionally, whenever employers find common ground on one matter, it could further entrench the collusive behaviour in the market, which could manifest itself via other competition law infringements (e.g. price fixing or market allocation).

As outlined earlier, wage-fixing agreements and no-poach agreements are buyers’ cartels, and therefore, captured by the Article 101 (1) TFEU. In regard to the wage fixing, the Commission’s guidelines on horizontal agreements literally state that the agreements or collusive behaviour with the purchases which influence the parameters of competition – namely wage fixing – are by-object infringements under Article 101(1) of TFEU.

No-poach agreements do not have the same kind of clear-cut definition as wage-fixing in any of the Commission’s guidelines or case law. Horizontal guidelines provide that in buyers’ cartels purchasers should not fix conditions of purchase (namely source of supply) between themselves. In this context, the source of supply can be interpreted as a workforce or employees. Additionally, in its guidelines on collective agreements, the Commission exemplifies that no-poach agreements will likely fall to the by-object category.

As such, landmark decisions on EU level for wage-fixing agreements and no-poach agreements are still lacking. Bearing in mind that the labour markets are rather national than EU-wide, it is the national competition authorities which has been much more active in this field.

The need for companies to ensure compliance also with the new enforcement priorities

Given the newly established interests to the antitrust infringements in the labour market, companies should be wary of their HR and employment practices. Wage fixing and no-poach agreements are generally regarded as infringements under Article 101(1) of TFEU. Discussions with competitors about their employees’ wages or concluding no-poach agreements could trigger a competition law risk.

Risks of the competition infringements are draconian. Infringers are subject to a fine which is at the maximum 10 % of the company’s global turnover. Apart from the imposed fine, breaching competition law exposes the company to incalculable reputational harm and damage claims and invalidity of agreements in whole or in part. For instance, in Finland, the infringing company may also be excluded from participating in public tendering processes.

For more information, contact Author Joonas Huovinen or Partner Tuomas Saraste

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