Employers beware: the cartel rules also apply to the job market
The cartel prohibition means that companies may not make agreements or engage in concerted practices that have the restriction of competition as their object or effect. This is set out in Article 6 of the Mededingingswet (Competition Act) and in its European law equivalent, Article 101 TFEU. The reason for this is that companies compete with each other not only when selling products or services, but also when hiring staff. Agreements between employers that distort competition in the job market are therefore prohibited and are subject to high fines. In the Netherlands, these rules are enforced by the Netherlands Authority for Consumers and Markets (ACM) and the European Commission.
Prohibited agreements may relate, for instance, to salary level, salary increases or other employment conditions. Authorities are furthermore increasingly taking action against agreements among employers not to poach one other’s staff (known as ‘no poaching agreements’) or not to hire staff who apply for a job at another employer.
This focus on harmful job market agreements has blown over from the USA, where the job market has long been in the competition authority’s sights (see here, here and here). Since a year or two, investigations have also increasingly been launched in Europe and the first fine was recently imposed (in Portugal), amounting to more than €11 million.
Job market agreements are also on the radar in the Netherlands. Martijn Snoep, chair of the ACM board, stated in 2022 already that job markets have so far wrongly been largely ignored by European and other competition authorities. He stated that ACM had recently changed this. ACM has investigated, for instance, a possible wage cartel among supermarkets, it intervened after the chair of a trade association publicly called on its members not to poach staff from one other, it investigated whether the merger between DPG and Sanoma Media might lead to buying power in the market for journalistic services, and it published its Guidelines on price agreements among self-employed workers. ACM has warned that it will focus on violations of the job market cartel prohibition in the coming period, in particular on wage cartels and no-poaching agreements
In practice, companies are not yet always aware that agreements on employment conditions may constitute a cartel, resulting in high fines. In this blog, we address which job market agreements are under a magnifying glass and how employers can avoid violations.
Investigations into prohibited job market agreements in various sectors
National competition authorities in the EU have launched several investigations these last few years into prohibited job market agreements in various sectors.
In June 2022, for instance, the Portuguese competition authority imposed fines totalling €11.3 million on 30 football clubs that had signed agreements not to hire footballers who had unilaterally terminated their contracts due to problems caused by the COVID-19 pandemic. Another example is the investigation by the Romanian competition authority, which conducted raids at several companies in the automotive industry in January 2022. The companies had agreed not to poach staff from each other, which resulted, among other things, in wages being kept artificially low. In Spain, the competition authority launched an investigation into an association of privately funded schools in February 2022, due to suspicions of agreements made between them not to contact and hire each other’s teachers. The Catalan competition authority imposed a €75,500 fine for these practices in September 2023.
In December 2022, the Portuguese competition authority accused seven laboratories of cartelising the supply of blood and COVID-19 tests, among other things by agreeing not to hire employees of competing laboratories. In July 2023, the Belgian competition authority declared that it suspected several security companies of having violated the cartel prohibition, including entering into no-poaching agreements regarding employees of competitors. Finally, in November 2023, the French competition authority accused several companies in engineering, technology and IT consulting of having entered into and implemented agreements aimed at prohibiting each other from recruiting and hiring each other’s staff.
The European Commission – as the regulator of European competition rules – is also sharpening its knives. In late 2021 already, Margrethe Vestager (European Commissioner for Competition) announced, for instance, that the European Commission would be extending its cartel enforcement to include job markets and referred in that regard to “a new era of cartel enforcement”. That culminated in 2023 in a raid at the German Delivery Hero and its Spanish subsidiary Glove, operating in the food delivery sector, for making no-poaching agreements, among other things (see here for the earlier 2022 raid).
Points of attention for employers and risks of prohibited agreements
Employers and HR professionals are well advised to beware of agreements that may have the restriction of competition on the job market as their object or effect. Six points of attention in practice:
- Do not make agreements with other companies on the wage levels offered or the rate of wage increases. Agreements on other employment conditions, such as restrictions on allowances or bonuses, are also prohibited. Do not exchange information on this point with other companies either.
- Do not agree not to recruit or hire each other’s staff. This may, however, be allowed temporarily if and insofar as necessary in the context of an acquisition.
- Beware that the same rules apply within a trade association. Trade associations also may not give any advice that restricts job market competition among themselves, such as advice on wage levels.
- Do not make agreements with other companies on not hiring self-employed workers or on doing so only subject to conditions, or agreements on maximum rates for hiring self-employed workers.
- Exception 1: agreements among employers on employment conditions may be made in the context of collective bargaining (the ‘collective bargaining exception’ in Article 16 of the Competition Act), but this no longer applies if such negotiations have been terminated.
- Exception 2: job market agreements may be made between companies that belong to the same economic entity (e.g. between a parent company and a wholly-owned subsidiary).
Risk of high fines for prohibited job market agreements
Companies that make prohibited job market agreements risk high fines. The maximum fine that ACM may impose per violation is €900,000 or 40% of a company’s turnover, whichever is higher. The maximum fine may also be doubled if a company has previously been guilty of violating the cartel prohibition. Agreements infringing competition law are furthermore void (Article 6(2) of the Competition Act). Employees who have suffered damage as a result of prohibited agreements are furthermore entitled to damages. It is therefore essential for employers to beware of prohibited agreements in the job market, also in times of shortages.
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