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.”
|Firm||Parent company||Leniency||Fine (after leniency)|
|A Warwick Associates||-||0%||£3,303|
|CDI AndersElite||CDI Corp||30%||£7,602,789|
|Hays Specialist Recruitment||Hays plc||30%||£30,359,129|
|Beresford Blake Thomas||-||100%||£0|
|Hill McGlynn & Associates||Randstad Holding||100%||£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.”