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Six recruitment agencies hit with £40M fine for price-fixing in the construction industry

Hays Specialist Recruitment has been hit with the biggest fine of £30M and said it was “actively considering” an appeal.

The Office of Fair Trading has imposed fines totalling £39M on six recruitment agencies 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 OFT has 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.

The OFT has concluded that this conduct forms one single overall infringement of the Competition Act 1998, which had as its object the prevention, restriction or distortion of competition in the market for the supply by recruitment agencies of professional, managerial, trade and labour skills required by the construction industry in the UK.

The price fixing began in 2003 when recruitment agency Parc entered the market with a new and innovative business model. It indended 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’, which met five times between 2004 and 2006. 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 have been 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.

Hays Specialist Recruitment was hit with the biggest fine of £30M. CDI AndersElite was fined £7.6M. Hays said it was considering an appeal.

“We take the findings of the OFT investigation seriously. However, it is important to recognise that the OFT’s investigation related to an isolated matter arising from the conduct of a single employee who is no longer with the company and affected only a small part of our UK Construction & Property business.

“At all times Hays has independently determined the price and terms on which it has dealt with its customers and at no stage did the matters investigated by the OFT affect Hays’ dealings with its clients, said Hays chief executive Alistair Cox.

“Since the start of the investigation in 2006, Hays has co-operated fully with the OFT in all aspects of its investigation. The Board has taken appropriate steps to strengthen Group compliance and training in this area and has developed and implemented a detailed training programme for all key employees which is repeated at regular intervals.

“Hays believes that the level of the fine is wholly disproportionate with the activities to which it relates, Hays’ involvement in those activities and the way in which the OFT has dealt with other cases in the past. The Group is actively considering an appeal.”

 

FirmParent companyLeniencyFine (after leniency)
A Warwick Associates-0%£3,303
CDI AndersEliteCDI Corp30%£7,602,789
Eden Brown-35%£1,072,069
Fusion People-20%£125,021
Hays Specialist RecruitmentHays plc30%£30,359,129
Henry Recruitment-25%£108,043
Beresford Blake Thomas-100%£0
Hill McGlynn & AssociatesRandstad Holding100%£0



OFT senior director Heather Clayton 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.”

Readers' comments (9)

  • Does anyone know which clients or Projects these agencies were supplying candidates to? I can only assume it must have been for a large client / infrastructure project between 2004 and 2006.

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  • good for finning these scaming agencies... i recently found out that Hays was invoicing a company they placed me on a job with for £26 per hour and paid my less than £10 an hour as a site engineer. the reason, apparently, was because i am still at university and not qualified yet... and yet they had confidence in me getting the job done, (as i did!) how cruel is that? thats just messed up!

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  • I have applied for jobs and have never been contacted by those agencies irrespective of my qualifications. Was it because i need working visa and therefore less easy to obtain their fees or prefer only Uk/EU candidates.
    Anyone having the right clue are welcomed to reply.

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  • Taylor Woodrow and Vinci I believe were the clients

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  • I was working for one of the companies in question at the time and this article does cast a very much more sinister light over the events than that which was originally intended. When people use recruitment agencies they see them very much as a necessary evil. Client companies see it as being a very expensive service and very many others who are not directly involved cannot see the justification for the kind of fee that an agent charges. What a client or candidate does not see is that the fee charged is effectively paying for the entire infrastructure of being able to provide the service. Clients usually pay their bills after several months while the agency will have to pay it's temporary workers at the end of the week. This alone amounts to providing hundreds of thousands of pounds worth of credit for even a small agency and thats before you have even paid anything for finding the candidate.

    I would not dispute that this incident is in effect a cartel and was wrong but it was very much formed as a method of maintaining a viable industry rather than simply to maintain profits. The service Parc provided added no value to the process and was in many respects simply a cosh to beat up suppliers.The rates that they expected people to work to were very low and in all honesty produced fees too small to be able to sustain business. In effect it meant that none of Parc's clients were provided with the best candidates as they were placed elsewhere at higher rates.

    What this group did was wrong but they are not the only bad guys here.

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  • I'm amazed some of these recruitment agencies are still in business in the engineering sector - the engineering industry needs a reliable alternative - has anyone seen this service: www.engineeryourcareer.com ?

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  • I can't see 'engineeryourcareer.com' being succesful no respectable client will source clients via this method. The website is very poor and provides very little information also. I for one would not register my details without knowing more about the company and potential clients, if any!

    Don't be too hasty to judge all 'agencies' the same I worked previously for an outsourcing company, note this was not a recruitment agency though. I was an employee of the company and was seconded out to clients direct. The company had minimal overheads as all it's staff including the management team were seconded out, on that basis the hourly rates were very competitive and typically a lot lower than rival recruitment agencies could offer.

    This type of outsourcing has great benifit to clients who have peaks in workloads but don't the risk or hassle of taking on permenant staff in the fragile current climate.

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  • CDI Corporation own MRINetwork also known as Management Recruiters International, a global recruitment franchise. They have a track record of misrepresenting the truth. For years they falsely portrayed someone as a regular franchisee who had no valid franchise agreement and who was not paying them royalties. This got so bad that he eventually owed them more than £170,000 UK Pounds or approx. $300,000 US Dollars in unpaid royalties. MRINetwork continued with this deception for years and fooled all real franchisees and clients alike. Read the facts about this and more questionable business practices by MRINetwork and their owners at http://www.cdicorp.info

    Specifically read about:

    Roger H Ballou misstatements to shareholders http://www.cdicorp.info/rogerhballou-denial.html

    Joseph R Seiders affidavit misstatements made under oath http://www.cdicorp.info/josephrseidersaffidavit.html

    Sarbanes-Oxley concerns - was the debt correctly written-off? See why Roger H Ballou is so coy about clarifying his legal obligations under SOX rules http://www.cdicorp.info/sarbanesoxleyconcerns.html

    The years of misrepresentation by MRI Network http://www.cdicorp.info/mrimisrepresentation.html

    MRINetwork Breach of Franchise Contract http://www.cdicorp.info/rogerhballou-damage-to-mrinetwork.html

    Steve Mills denies responsibility http://www.cdicorp.info/stevemillsdeniesresponsibility.html

    Steve Mills applies coercion to franchisee in attempt to gain get-out clause for MRI Network negligence. http://www.cdicorp.info/management-recruiters-international.html

    Management Recruiters International Break agreements. Read how Steve Mills made and then broke written agreements with franchisee. http://www.cdicorp.info/management-recruiters-international-ethics.html


    Read the facts and form your own opinion on their ethics and actual business practices of MRINetwork and their owners CDI Corporation.

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  • I think the engineeryourcareer.com concept looks very interesting indeed - if you read the site what is displayed is a development version - clearly the site isn't completed yet. You might note that you can't actually sign up.
    I for one would be delighted to send my details to employers directly rather than have to deal with a the normal recruiter's meddling.
    Why hasn't anyone done this before?

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