A review of the construction recruitment agencies competition investigation
First published by Admin on February 23, 2018 in the following categories: Investigations and tagged with cartels | price fixing
Six construction recruitment agencies were found to be in breach of the Competition Act 1998 between 2004 and 2006 by creating a cartel in order to boycott another company, Parc UK, and fix the fee rates they would charge other construction companies as well.
The six companies reportedly met on five occasions where they agreed to not use Parc, who were a mediator between recruitment agencies and constructions companies. Parc was apparently putting pressure on the margins of the six construction recruitment agencies involved.
The six agencies breached competition law by price-fixing and excluding Parc. All six reportedly agreed one fee that they would charge to companies like Parc who act as mediator for agencies and construction companies.
The Office of Fair Trading (OFT) – the predecessors of the Competition and Markets Authority – found that their conduct amounted to a breach of competition law.
What was the outcome?
The outcome of the OFT findings was to issue the six companies with a fine totalling £39.37 million, with one company in particular, Hays, receiving the majority of the fine, totalling £30.36 million.
Beresford Blake Thomas and Hill McGlynn were the whistle-blowers to the cartel operation which resulted in them not being fined. If they were fined, however, the overall fine could have been £173 million.
Fines were also reduced due to the Office of Fair Trading granting leniency to the companies cooperating in their investigation.
How did they breach competition law?
The six companies breached competition law in two ways; boycotting Parc, and price-fixing.
All six companies agreed they would not use Parc as a mediator to help supply candidates to construction companies. The companies came to this decision to boycott Parc reportedly after five separate meetings over the course of two years between 2004 and 2006.
The companies also decided to fix the rates they charged to supply candidates to construction companies and to mediators like Parc.
Both of these acts were seen as a breach of competition law by restricting the competition within their particular market. Exclusion and price-fixing can obviously manipulate the market, and these kinds of actions can lead to inflated prices and poor competition. Healthy competition can allow companies to compete on price and work more efficiently to keep costs down and innovate for new ways to bring in revenue or lower their prices.
A cartel is a serious breach of competition law. The six companies involved could have faced higher fines had they not cooperated.