Recruitment firms fined millions by OFT for price fixing

The OFT has fined six recruitment agencies a total of £39.3m for price-fixing and the collective boycott of another company in the supply of candidates to the construction industry.

Two other recruitment agencies involved have been granted immunity from fines in return for exposing the cartel.

The Office of Fair Trading concluded that A Warwick Associates, Beresford Blake Thomas, CDI AndersElite, Eden Brown, Fusion People, Hays Specialist Recruitment, Henry Recruitment and Hill McGlynn & Associates all breached the Competition Act 1998. They were found to have engaged in the following anti-competitive conduct:

  • Collective boycott – an agreement to withdraw from and/or refrain from entering into contracts with an intermediary company, Parc UK, for the supply of candidates to construction companies in the UK
  • Price-fixing – an agreement and/or concerted practice to fix target fee rates for the supply of candidates to intermediaries and certain construction companies in the UK

In 2003, Parc entered the market with a new and innovative business model to act as an intermediary between construction companies and different recruitment agencies for the supply of candidates, which put pressure on the margins of recruitment agencies.

Instead of competing with Parc – and each other – on price and quality, the parties formed a cartel, referred to as the ‘Construction Recruitment Forum’. In this forum, they agreed to boycott Parc and also co-operated to fix the fee rates they would charge to intermediaries, such as Parc, and also certain construction companies.

Beresford Blake Thomas and Hill McGlynn & Associates were granted immunity from fines as they are part of the corporate group which first provided the OFT with evidence of this cartel activity. All parties applied for and were granted leniency, apart from A Warwick Associates which is in liquidation.

The total level of fines before reductions for leniency were taken into account was £173m.

Heather Clayton, OFT senior director, said: “This is a serious breach of competition law and the level of fines reflects this. Cartels such as these can impact on other businesses, in this case construction companies, by distorting competition and driving up staff costs. Ultimately it is the consumer and the wider economy that loses out from such behaviour.”

Personnel Today first reported the OFT investigation in 2006.

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