CMA guidance on competition law and recruitment practices

The Competition and Markets Authority (CMA) has issued new guidance clarifying how competition law applies to recruitment and employment practices. It builds on the guidance for employers on how to avoid anti-competitive behaviour, published in 2023, in which the CMA identifies no-poaching and wage-fixing agreements and the sharing of competitively sensitive information as the three main types of anti-competitive behaviour in labour markets. See our briefing on the 2023 guidance here.

In the new guidance on competing for talent, the CMA provides additional guidance, in particular, in relation to information sharing and its approach to collective bargaining. In this briefing, we consider the key takeaways and next steps for HR professionals, recruiters and senior managers. These takeaways and next steps will be of interest to all businesses, whatever their size or sector.

Benchmarking and information sharing

The CMA acknowledges the importance of benchmarking in helping HR management to make informed decisions about, for instance, pay, benefits and recruitment strategies. However, the sharing of ‘competitively sensitive’ information (ie, non-public information that gives an insight into a company’s strategy in the market) can infringe competition law when businesses are competitors. Even if businesses do not compete for customers, they may still compete for talent in the labour market and therefore need to take extra care when it comes to dealing with information for benchmarking (and any other) purpose.

The guidance contains examples of when information sharing between competitors in the purchase of labour are more or less likely to be problematic from a competition law perspective. The information exchanges that are more likely to be problematic are, for example:

• The unilateral disclosure or bilateral exchange of current pay or future pay intentions.
• Multilateral exchange about pay, including through a third party (eg, a consultancy firm).
• Legitimate discussions that stray into the exchange of competitively sensitive information.

Benchmarking on HR matters that are not competitively sensitive, or which involve the use of public data or a third party that ensures the information is anonymised and sufficiently aggregated, is less likely to be problematic. Ultimately, however, each arrangement must be assessed based on the facts.

Coordination and collective bargaining

The CMA confirms that it will not seek to enforce competition law whenever workers and businesses buying their labour come together to reach a genuine collective bargaining agreement (ie, an agreement that will govern the terms and conditions of the workers' employment). In recognition of the crucial role of coordination in the collective bargaining negotiation process, coordination that takes place in preparation for and will help the collective bargaining will not be subject to competition law enforcement. However, there must not be any exchange of competitively sensitive information, unless it is necessary and only if the purpose of such an exchange cannot be achieved by other means (eg, by using an independent party to aggregate and anonymise the data). Otherwise, the coordination may constitute an illegal cartel.

What should businesses do in response to the guidance?

The CMA has stated publicly that labour markets are key to a well-functioning economy. The CMA’s decision to publish the guidance illustrates that it is focused on ensuring competition compliance in labour markets and this remains a priority. All businesses, irrespective of size and sector, should therefore:

• Familiarise themselves with the guidance, and also the case study published by the CMA on its freelancer pay investigation (see our briefing on this case here).
• Ensure that relevant teams within the business understand how competition law applies to labour markets and their roles in order to build a culture of compliance.
• Implement/update internal policies and procedures on the use of benchmarking and information sharing.
• Ensure the regular delivery of training to staff on how competition law applies in the recruitment context.
• Implement/update dawn raid policies and ensure that internal reporting processes are in place for any suspected breaches.