The UK's Office of Fair Trading (OFT) on 30 September 2009 fined six recruitment agencies a total of £39.27 million for agreeing to boycott another company and agreeing to fix target fee rates in the supply of candidates to the construction industry, in breach of the Competition Act 1998 (CA 1998).

The construction sector has been hard hit recently, given the OFT's finding earlier in September 2009 of widespread cover pricing in the construction industry itself, for which it imposed fines totalling £129.5 million.

The recruitment agencies essentially breached the CA 1998 in their reactions to a new market entrant, Parc UK, which was putting pressure on their margins by using a new and innovative business model. Parc was acting as an intermediary between construction companies and different recruitment agencies for the supply of candidates.

The recruitment agencies set up the "Construction Recruitment Forum" within which they agreed:

  • a collective boycott – agreeing not to do business and/or to withdraw from existing business with Parc for the supply of candidates to the construction industry; and
  • price fixing – fixing target fee rates for the supply of candidates to intermediaries, such as Parc, and to certain construction companies.

The cartel came to light when two recruiters involved in the Construction Recruitment Forum blew the whistle to the OFT in return for lenient treatment. Most of the other cartelists later also applied for and were granted leniency by the OFT. Without leniency, the OFT would have imposed fines of £173 million.

This decision is a stark reminder that competition law compliance is essential for all market players, large and small. No matter how difficult market conditions, resorting to operating a cartel is never appropriate and can come back to bite you through hefty fines at the very least.

To discuss competition compliance, for example whether you wish to audit your organisation's competition law compliance, please do not hesitate to contact Susan Hankey or John Markham.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 02/10/2009.