The Office of Fair Trading ("OFT") yesterday fined 6 recruitment agencies a total of £39.27 million for their role in a collective boycott and price fixing cartel in the supply of candidates to the construction industry. This decision follows hot on the heels of last week's decision in which 103 construction companies in England were fined a total of £129.5 million for colluding with their competitors on building contracts.
The OFT found that the agencies involved formed the cartel (known as the Construction Recruitment Forum) in 2004. This was in response to a company known as Parc UK entering the market to act as an intermediary between the agencies and construction companies for the supply of staff. Quite simply, the intermediary would put pressure on the agencies' margins.
The cartel met 5 times between 2004 and 2006, during which time they agreed not to deal with Parc UK (i.e. a collective boycott). They also agreed the rates which they would charge to intermediaries and certain construction companies for the supply of candidates (i.e price fixing).
The total fine before leniency reductions were applied was £173 million. Two of those involved (with the same parent company) were afforded 100% immunity for blowing the whistle on the cartel. The remaining reductions ranged from between 25% and 35%. The highest individual fine (after leniency) was £30 million.
This case is interesting for several reasons.
Firstly, the OFT considered this to be a serious breach of the competition rules – this is clear from the level of fines.
Secondly, it raises the issue of collective boycotts. Competition law is not just concerned with fixing prices and rigging bids – it also catches agreements not to deal with a particular intermediary, customer or supplier. The basic message here is that any decision not to deal with someone, such as an intermediary, has to be made by you unilaterally and without recourse to your competitors.
Thirdly, calling a cartel a "forum" or an "association" does not make that cartel any less illegal. The key issue is the nature of the "forum" and the substance of matters being discussed or agreed, rather than its name. The basic guideline here is that you should not be engaging at all with your competitors on commercial matters.