Competition in the workplace: global crackdown by enforcers on labour markets
In recent years, labour market monopsony – which refers to the buyer power of employers – has become heavily scrutinised by competition authorities around the globe. This is because labour monopsony implies that employers do not have to compete amongst themselves for employees, which can lead to workers being paid less, or that such employees become captive in their jobs as they will not receive job offers that could enable them to switch careers and achieve a higher wage.
Similarly, different employers can also enter into anti-competitive agreements regarding employees’ salaries or working conditions, hindering competition in labour markets. In essence, the market power exercised by employers can end up reducing workers’ wages or setting working conditions below competitive levels.
Competition or monopsony?
In contrast to a monopoly, where a single seller dominates a market, a monopsony refers to a market where a single buyer of a specific good or service dominates or controls the relevant purchasing market.
In an employer-employee relationship, the employee is selling its work to the employer in exchange for compensation (salaries, hourly wages, bonuses, but that can include other benefits). But what motivates employers to offer higher wages and better conditions to employees? The answer is simple: competition between current and potential employers.
Nowadays, if an employer wants to attract and retain talent, it will have to offer a competitive compensation package to prospective job seekers and current employees. If not, there is a real possibility that such a candidate might accept another offer somewhere else, or that the employee in question might decide to leave for another workplace offering better conditions.
However, when such competition is non-existent or limited, the employer might not be motivated to offer better conditions, as there is little risk of losing the worker or job seeker. For example, if there is only one factory in a hypothetical town, the factory may be the monopsony employer, being the primary or only supplier of jobs in such area. The monopsony employer would have the power to set wages and working conditions, as workers would not have alternative ways to sell their work. This is called labour market monopsony. A similar effect would also occur if there were to be two factories in the town, but both companies were to be colluding concerning how much they were willing to pay current or future employees. This conduct could potentially constitute an anti-competitive agreement.
Enforcers from around the globe have been focusing on those sectors where there are higher risks of labour market monopsony existing or more possibilities for different employers to collude via anti-competitive agreements. In particular, regulators are mainly targetting two categories of behavioural conduct: anti-competitive agreements and abuses of monopsony power. In terms of anti-competitive agreements, regulators now have wage-fixing, no-poach agreements, exchanges of competitively sensitive information and non-compete covenants in their sights. This conduct has been identified as being of concern both by regulators and the OECD.
Additionally, regulators have also been paying particular attention to so-called abuses of monopsony power. This includes cases where dominant employers can abuse their position and exercise labour market power unilaterally with few or no consequences. Some sectors are particularly susceptible to these practices, particularly those which are highly specialised and heavily concentrated.
The US has been at the forefront of this new type of regulatory battle for a long time now. For example, 11 years ago, the US Department of Justice (DOJ) settled the Apple/Google/Intuit High-Tech anti-poaching deal. Following the relevant investigation, in 2015, Apple, Google, Intel, Adobe and others settled civil claims for US$415 million for these types of practices.
In 2016, the DOJ and the Federal Trade Commission (FTC) jointly released the Antitrust Guidance for Human Resource Professionals. The Guidelines consider wage-fixing and no-poach agreements to be per se illegal in the US and declare the DOJ’s intention to proceed criminally against naked wage-fixing or no-poach agreements.
More recently, the Jindal indictment in December 2020, which concerned the physical therapy sector, was the DOJ’s first criminal prosecution targeting labour markets, but it is unlikely to be the last. In the previous year, the DOJ has investigated similar agreements in the aerospace, staffing, education, nursing, and healthcare providers sectors. We should therefore also expect to see several indictments for criminal antitrust-related conspiracies affecting labour markets in the US this year.
Turning to the EU, on 22 October 2021, EVP and Competition Commissioner Margrethe Vestager delivered a speech where she signalled that anti-competitive labour market-related agreements would become a new area of cartel enforcement for the Commission, as these can constitute buyers’ cartels.
Action is not only happening at the supranational level, but some national competition authorities (NCAs) have also been working on these types of cases in the past few years and are increasing their focus on punishing these types of conduct.
For example, in January 2021, the Hungarian Competition (GVH) fined a recruitment association €2.8 million for imposing rules on members, setting minimum prices and putting in place no-poach agreements.
In April 2020, The Competition Council of the Republic of Lithuania opened an investigation into a suspected anti-competitive agreement among the Lithuanian Basketball League and basketball clubs relating to the exchange of commercially sensitive information on players’ salaries.
In April 2021, the Polish Competition Authority (UOKiK) opened an investigation against the Basketball league and 16 clubs in relation to conduct, which could have limited players’ ability to switch clubs following the end of the regular season.
In April 2021, the Portuguese Competition Authority (AdC) issued its first statement of objections relating to no-poach agreements in Portuguese football. In its Competition Policy Priorities in 2022 document published in December 2021, the AdC has remarked that wage-fixing and no-poach agreements will be among the competition authority’s priorities for this year.
The Spanish Competition Authority (CNMC and formerly CMC) has previously investigated information exchanges affecting wages in the freight forwarding sector and no-poach agreements in the professional haircare sector. More recently, in February 2021, the CNMC settled a case affecting the mooring and unmooring services sector concerning potential information exchange and wage-fixing, amongst other relevant conduct.
The Dutch Competition Authority (ACM) has also been active against employment-related anti-competitive agreements. Last year the ACM investigated a possible wage-fixing cartel between Dutch supermarkets, following indications that in February 2021 several supermarkets had made arrangements regarding a limited wage increase of 2.5 percent for their employees because collective agreement negotiations broke down. This investigation was ultimately suspended when a collective agreement, to which the Dutch Competition Act does not apply, was eventually concluded and took effect retroactively.
In conclusion, in-house counsel and compliance officers will not only need to continue to be aware of the potential for classic anti-competitive conduct in doing business, but should now also keep an eye on their company’s human resources activities. It seems likely that in the coming years we will see more corporates facing employment-related antitrust investigation.