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The Office of Fair Trading (OFT) has imposed fines totalling 39.27 million Pounds on six recruitment agencies for price-fixing and the collective boycott of another company, Parc UK, in the supply of candidates to the construction industry.
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.
Major fines were imposed on Hays (30.36 million Pounds), CDI Anders Elite (7.60 million Pounds), and Eden Brown (1.07 million Pounds), while lesser amounts were imposed on Fusion People, Henry Recruitment and A Warwick Associates.
Two of the recruitment agencies involved, Beresford Blake Thomas and Hill McGlynn & Associates (both part of Randstad), 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 differing levels of leniency, apart from A Warwick Associates which is in liquidation. The total level of fines before reductions for leniency were taken into account was set at 173 million Pounds.
The six agencies 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 objective 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.
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."