OFT fines construction recruitment agencies for a collective boycott and price fixing cartel

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

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 anti-competitive conduct in the form of price fixing and a collective boycott of supply.

The companies made 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.

They also made 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”, 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.

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.”