The Office of Fair Trading (OFT) has issued a press release confirming that it has issued a Statement of Objections against eight recruitment agencies for conduct alleging that they have breached UK Competition Law.  The Statement (the specific details of which remain confidential) asserts that the agencies have acted in breach of the Chapter 1 prohibition of the Competition Act 1998 to the extent that they were involved in actions which amounted to the following:

(i)   Collective Boycott - acts considered to be an agreement to withdraw and/or refrain from entering into contracts with intermediaries for the supply of candidates to construction companies within the UK, whose object was to prevent, restrict or distort competition in the market for the supply, by recruitment agencies, of candidates with skills required by the construction industry in the UK; and

(ii)   Price Fixing - where parties have engaged in an agreement or practice to fix target fee rates for the supply of candidates to intermediaries and certain construction companies in the UK, which has the object of preventing, restricting or distorting competition in the market for the supply by recruitment agencies of candidates required by the construction industry.

The agencies that have been named are:

• A Warwick Associates Limited
• Beresford Blake Thomas Limited
• CDI AndersElite Limited
• Eden Brown Limited
• Fusion People Limited
• Hays Specialist Recruitment Limited
• Henry Recruitment Limited
• Hill McGlynn Associates Limited

It should be stressed that it should not be assumed that any of these companies have broken the law and that this is the start of the process where these parties are given the opportunity to make representations about the conduct alleged by the OFT.  It should however act as a reminder to all recruitment agencies that the OFT has wide ranging powers to investigate activities which they consider may be a breach the provisions of the Competition Act 1998. 

Businesses need to be familiar with the prohibitions that are placed upon them by Competition Laws and the wide ranging powers that the OFT has to investigate business practices if they believe that there has been a breach of restrictions.  These laws aim to prevent anti-competitive acts which restrict or distort competition - this can include acts such as price fixing or collective boycotts.

The OFT has wide ranging powers of investigation which include the right to enter a premises in connection with an investigation and the right to inspect and review documents.  These investigations can often take place with little or no notice to you.  There are in some circumstances criminal sanctions for non compliance with the investigations.  In addition to potential criminal penalties, there are potentially huge financial sanctions should a breach of the competition laws be found to have occurred - these can be a fine of up to 10% of the turnover of the penalised business or undertaking.  Leniency can be granted, however, if you are the party that reports such actions to the OFT - often called whistle blowing - and can in some circumstances amount to a total immunity from sanction.

The message to take from the latest Statement of Objections issued by the OFT is that this is another of the high profile investigations that the OFT are prepared to initiate, and that businesses should be aware of the restrictions placed upon them to prevent anti competitive acts.

Gordons LLP has advised clients on these types of OFT inquiries (which can include dawn raids) and offers training to key management personnel so that they are aware of the prohibitions on activities which may be considered to be anti-competitive and of the penalties that may be imposed upon those businesses found to be in breach of the competition laws.

If you require any further information or advice on this or other issues surrounding UK Competition issues please contact:

Katherine Southby - Partner and Head of Regulatory Law

katherine.southby@gordonsllp.com

Matthew Howarth - Partner and Head of Commercial Litigation

matthew.howarth@gordonsllp.com

John Hall – Senior Partner, Employment Department

john.hall@gordonsllp.com

Paul Stokey – Partner, Employment Department

paul.stokey@gordonsllp.com