On 25 January 2024, the UK Competition and Market Authority’s (“CMA”) Microeconomics Unit (“MU”) published its research report on competition and market power in UK labour markets (“the Report”), which was accompanied by a speech delivered by the CMA’s CEO, Sarah Cardell at Durham University. The CMA’s plan to focus on UK labour markets was discussed in our previous post on why HR needs to understand the role of the CMA. The purpose of the Report, and the MU more broadly, is to inform the CMA’s casework and wider government and policy thinking. We cover some of the key findings highlighted in Report and the speech below. 

The Report focuses on three main areas: 

  1. employer market power in the UK;
  2. employer market power and labour market outcomes; and 
  3. labour market power and the changing nature of work.

The CMA’s recent work

The Report comes against the backdrop of the CMA’s concerns about potential anti-competitive collusion in labour markets. The CMA’s competition work focuses on the following areas:

  1. No-poaching – agreements between employers to not approach or hire each other’s employees, or not to do so without the other employer’s consent. 
  2. Information sharing – employers sharing confidential and non-public sensitive information about the terms and conditions (including pay) offered to their employees.
  3. Wage fixing - agreements between employers to set wages at an agreed level, including matching pay or setting pay caps. 

The CMA has already initiated two separate investigations into potential anti-competitive wage practices in both the sports and non-sports television production and broadcasting sectors. Additionally, it has extended an existing investigation to include potential unlawful non-poaching agreements within the consumer fragrance industry.

The CMA’s report

The Report covers a broad range of areas, including finding that employer market power varies between geographies and industries and considering the increase in hybrid and flexible working and the gig economy.  It also examined the impact of collective bargaining (for example via trade associations) on market power and found that these arrangements counteract the negative effect on wages of market power in concentrated industries.

Non-compete arrangements

Another area of focus was non-compete arrangements (i.e., restrictions on employees working for rival firms after leaving their employer), which the MU found to be prevalent across UK labour markets. 

The Report notes that non-compete clauses between employees and employers are not generally subject to UK competition law; however, Sarah Cardell highlighted that as the labour market evolves, the law and policy on non-compete clauses may need updating. 

Future changes

The MU also uncovered open questions for policymakers, including: 

  1. How do mergers and acquisitions affect labour market concentration and wages in the UK? Would it be plausible to argue mergers are harmful if the parties in question are not close competitors for products or services, but are for labour and the market is very concentrated?
  2. What lies behind the geographical differences in labour market concentration?
  3. What would the impact of changing labour market policies (for example, on non-compete agreements, pay setting and the minimum wage) be for worker mobility and wages?

These questions present opportunities for researchers and government analysts to further build the evidence base for labour market policies. 

What happens next?

Whilst the CMA is clear that the MU’s work is intended to inform the CMA’s work but will not necessarily mean the CMA’s seeking to amend employment law, such a wide-ranging report suggests the CMA intends to look very closely at labour markets for some time to come.

If you have any questions relating to how competition law will affect your business, please contact Chris Worrall, Shachi Nathdwarawala or Sandra Mapara

This article was co-written by  Shachi NathdwarawalaSandra Mapara and Tommy Yapp.