The Competition and Markets Authority (CMA) has recently issued guidance (the Guidance) debunking two common myths regarding recruitment and retention practices. With a risk of fines, director disqualification and prison sentences for getting it wrong, we analyse where issues are likely to arise and how businesses can stay compliant with competition law.
The Guidance outlines two generally accepted myths:
- first, that competition law does not apply to agreements between employers about wages or working conditions; and
- second, that businesses who do not compete for customers are free to agree how much to pay their staff.
It confirms that competition law does apply when businesses coordinate on employee matters such as salaries or benefit packages and that businesses can be competitors in the labour market for talent even if they are not competing for customers.
The consequences for breaching competition law can be severe, with potential fines of up to 10% of group worldwide turnover, director disqualification and potential prison sentences for individuals involved in cartel activity. The CMA has demonstrated its commitment to enforcing these rules in labour markets, as evidenced by a recent £4.2 million fine imposed on sports broadcasters for coordinating pay for freelance camera operators, sound technicians and producers. It is also currently investigating reciprocal arrangements relating to the hiring or recruitment of certain staff involved in the supply of fragrances.
It is therefore imperative that businesses ensure compliance with competition law at all stages of the employment cycle, including recruitment, retention and remuneration.
The CMA points to various consequences of colluding when hiring workers or deciding pay or other benefits, including reduced salaries for employees, reduced employee mobility and a reduction in organisations’ ability to recruit staff and therefore grow the business. Informal arrangements and interactions between competitors are also subject to competition law – an agreement or practice does not need to be in writing to fall within its scope. The CMA is running a Cheating or Competing campaign to help businesses learn how to spot, avoid and report illegal cartels.
Competition authorities around the world, including in the US, the EU and individual member states, are taking a similar approach, with a recent uptick in fines and enforcement. For example, in June 2025, the European Commission imposed fines of €329 million in relation to no-poach agreements in the online food delivery sector.
Main risks in labour markets
The Guidance focuses on three main types of competition law infringements that occur in labour markets:
- No-poach agreements: These are arrangements where businesses agree not to hire or poach each other’s employees (e.g. no-hire agreements). They do not need to be mutual to constitute an infringement. No-poach agreements do not include no-solicitation clauses in commercial contracts (such as secondment or consultancy agreements) between service providers and their clients, which may be lawful if they are proportionate, necessary to the legitimate purpose (i.e. to enable the agreement to proceed), and the duration and coverage do not go beyond what is reasonably required for that legitimate purpose.
- Fixing wages: This occurs when businesses competing for employees agree to fix pay or other terms and conditions of employment, including agreeing wage increases or pay caps. For example, if three companies hiring camera operators in London agree to increase wages for all employees by 2%, this would amount to wage fixing.
- Exchanging competitively sensitive information: Exchanging information between competitors is problematic if the information is “competitively sensitive” (i.e. if it reduces strategic uncertainty in the market and/or could influence the recipient’s strategic decision-making). Unilateral disclosure of competitively sensitive information is also unlawful – the recipient is deemed to have taken the information into account unless they publicly distance themselves (including by stating they do not wish to receive such information) or report the disclosure to the CMA.
Examples of exchanging competitively sensitive information include:
- sharing information relating to staff wages that is not publicly available;
- sharing recruitment plans, such as recruitment freezes or redundancy plans; and
- sharing competitively sensitive information through a third party (e.g. three businesses hire an HR consultancy to collate and provide an average of salaries across the three businesses).
Some exchanges of information exchanges are less likely to be problematic, including:
- sharing information that is publicly available;
- benchmarking using a third party that anonymises and aggregates data from numerous businesses (e.g. 200 or more), or benchmarking using only public data; and
- discussing matters that are not competitively sensitive such as new regulations or general industry developments.
The CMA will not seek to enforce competition law in the context of genuine collective bargaining involving a group of employers or an industry body. However, employers participating in this type of collective bargaining should not share competitively sensitive information with each other unless it is absolutely necessary and they cannot achieve the purpose of the exchange by other means.
Key takeaways for businesses
The Guidance contains several recommendations businesses can follow to ensure they do not fall foul of competition law:
- Ensure that internal reporting mechanisms are put in place regarding any disclosure or receipt of potentially competitively sensitive information.
- Ensure all employees involved in recruitment and retention receive training on competition law and its application to their roles.
- Ensure internal reporting processes are in place and clearly communicated to employees.
- Ensure all employees who attend trade associations or industry forums understand what constitutes competitively sensitive information and how to report any unilateral disclosures.
