06 May 2024

Labouring over competition: tech sector feels the heat of enforcement

Guest blog: Marta Isabel Garcia, Partner at Stephenson Harwood, delves into how various regulators have approached competition enforcement in labour markets, especially in tech.

Competition authorities worldwide have declared competition law enforcement in labour markets a top priority, closely scrutinising practices between competitors such as wage fixing, agreements not to poach employees as well as the exchange of sensitive employment information (e.g., current/future looking, granular, non-public information on wages, bonuses, benefits, and allowances). Regulators recognise that such arrangements can have negative effects, including the suppression of wages and the restriction of movement of employees which can prevent career development, reduce employee choice and lead to less innovative and competitive markets.

The technology sector has been particularly hit by this recent increased level of antitrust enforcement of labour practices, such that it is vital companies in this sector are aware of the antitrust risks and how to mitigate against such risk.

In 2022, the UK's Competition & Markets Authority ("CMA") launched an investigation into several large UK-based broadcasters, in relation to their purchase of freelance services and the employment of staff supporting the production and broadcasting of sports content in the UK for alleged wage fixing. Again, in October 2023, a similar separate investigation was launched against British television groups for the alleged fixing of wages of freelance employees. The CMA has also even more recently in January 2024 extended its fragrance cartel investigation to investigate no-poach agreements. The CMA's recent Competition and Market Power in Labour Markets report by the CMA's Microeconomics Unit will only encourage this momentum through its findings on how market power in the labour market can have a negative impact on wages, labour supply, production decisions, economic efficiency and, ultimately, consumer outcomes.

Elsewhere, various regulators are also conducting investigations into suspected breaches of competition law against companies in the technology sector.

In November 2023, the European Commission dawn raided various online food delivery companies for allegedly entering into no-poach arrangements and exchanging competitively sensitive information.
That same month, France's Competition Authority disclosed it was looking into several labour market cases, and accused several engineering, technology consulting and IT services companies of conspiring to implement no-poach agreements.
In 2022, Romania’s Competition Council began an investigation into seven automotive engineering and technology providers, that focused on specialised motor vehicle production and related activities, for alleged no-poach and wage-fixing agreements and carried out dawn raids at the headquarters of the targeted companies.
In March 2024, the Turkey Competition Authority fined two telecoms companies for colluding not to hire employees engaging in no-poach arrangements, only seven months after imposing €5 million in fines on 16 companies for similar practices.

Competition regulators in the Nordic countries have also recently commented that employers (including in the technology space) could face antitrust scrutiny over potential restriction of labour markets, whilst the Japan Fair Trade Commission has expressed a desire for international collaboration as the digital economy progresses and the activities of Big Tech platform operators are expanding globally.

Across the pond, the US Department of Justice ("DoJ") which has led the charge investigating labour law anti-competitive restrictions since at least 2016 when it announced its Antitrust Guidance to Human Resource Professionals, continues to pursue breaches through civil and criminal actions (with its first successful criminal conviction in 2021). Notably, several technology firms have recently settled actions with the DoJ, in relation to their no solicitation of employee agreements.

In the wake of the renewed interest in labour markets, companies should assess whether their practices are compliant with competition law and HR departments should ensure they are fully familiar with competition law and trained to identify potential areas of concern so that firms may steer clear of engaging in anti-competitive activities. Immediate action should be taken if improper conduct is identified which may involve carrying out an internal audit, reporting the conduct to a regulator and rolling out a comprehensive competition law compliance programme.

Author: Marta Isabel Garcia, Partner, Stephenson Harwood

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