119/09    30 September 2009

The OFT has imposed fines totalling £39.27 million on six recruitment agencies for price-fixing and the collective boycott of another company in the supply of candidates to the construction industry.

Download Q&A (pdf 79kb). 
Download the non-confidential version of the decision.

The 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.

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', 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 £173 million.

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.'

NOTES

1. The table linked below sets out the eight parties, their parent companies (which, although not directly involved in the infringement, have been found to be jointly and severally liable for it) and the fines imposed, after discounts for leniency.

Download Parties and Fines (pdf 45kb).

2. The Competition Act 1998 prohibits agreements, concerted practices and conduct that may have a damaging effect on competition in the UK. The Chapter I prohibition covers anti-competitive agreements and concerted practices that have the object or effect of preventing, restricting or distorting competition in the UK or a part of it and which may affect trade in the UK or a part of it.

3. On 1 July 2008 Randstad Holding NV merged with Vedior NV, the previous parent company of Beresford Blake Thomas and Hill McGlynn & Associates. As of 1 July 2008 Vedior NV ceased to exist and Randstad Holding acquired all assets, rights and liabilities of Vedior NV. Beresford Blake Thomas and Hill McGlynn & Associates received total immunity from financial penalties as they form part of the same corporate group which first provided the OFT with evidence of this cartel activity.

4. This decision follows an OFT Statement of Objections issued in October 2008. See press release 121/08.