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Recruitment agencies fined £39.27m for price-fixing

Wednesday 30th September 2009

By Mike Jones

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

Two recruitment agencies involved have been granted immunity from fines in return for exposing the cartel.

The OFT 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 £173million.

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."

Have your say on this story using the comment section below

View Comments 22 comments

Posted By DPJ on Tuesday 15th December 2009 05:24:14
As a niche supplier of IT into Banking my business growth and success(apart from the recession) has been inhibited by the advent of Intermediate Management companies, who don't recognise or value your contribution to your clients. And the sqeezed margins mean that its not worth trying to do business. I had more success dealing directly with the line managers who recognised a good service when they had one and they got value for money and the skilled people they needed. Now they daren't go outside the PSL for fear of losing their jobs.

Posted By Sam on Monday 23rd November 2009 02:56:02
I am sorry to say, although I agree that regulations need to be upheld, I understand the frustrations faced when dealing with these "middle men" such as Parc & DePoel. As Manager of a local agency, although part of a national group, service levels to local clients we already supplied have been damaged through the introduction of these intermediaries, and our clients have been helpless to stop this at local site level. Where we have pushed to maintain a close partnership with these clients despite the new presence of these controlling middle men, we are then eventually forced out unless we agree to become "Gold Standard" suppliers, which effectively just means handing candidates over for a song and a dance! Someone at head office sees a saving whilst sitting behind their comfortable desk in the procurement department, and doesn't realise the damage this causes to efficiency in service and supply at the local level for all involved!

Posted By Chris on Friday 13th November 2009 04:24:11
If price fixing increaces the labour costs for the clients what exactly does the existance of the middle man do? These large companies are popping up everywhere taking thier cut, and holding onto cash. They only make the cost higher for the client and reduce the profits for the little guys. Is this not just as un ethical as this whole cartel?

Posted By Charles on Thursday 29th October 2009 11:15:31
Large agencies have cornered the market for years and have also locked out not only small agencies but personal as well for various reasons.It is about time the goverment agencies dig a bit deeper.

Posted By Fenton on Friday 2nd October 2009 02:43:02
It's not just the construction sector recruitment this occurs in, take a look at most of the big outsourced contracts in health, defence, aerospace and IT. They're all at it. The OFT should take a look at those and fill their boots.

Posted By Gary on Wednesday 30th September 2009 12:04:48
The other side of the argument is that fees are non-negotiable and recruiters are forced to accept fees that are not in line with the service levels expected, get pissed off and react to protect their interests (de Poel scenario?!)

Posted By Simon on Wednesday 30th September 2009 11:57:20
As a recruiter who spends his whole life battling with useless intermediaries I feel its a bit unfair. At the end of day we are merely making an introduction to the right person who has the problem. Intermediaries seem to benefit from other peoples hard work. Im ashamed

Posted By Anon on Wednesday 30th September 2009 11:53:22
PARC deserved everything they got. They refused to negotiate fairly with their supply chain and spread mistrust by nicking candidates. They were a massively unprofessional crowd. No wonder the main players conspired against them. Bad luck getting caught, but I guess that's what happens when you set up something as blatant as the "construction recruitment Forum".. What else could it be for other than price fixing and chopping up the market for themselves. Better luck next time.

Posted By Cheryl on Wednesday 30th September 2009 11:29:42
As a business owner of a small family run recruitment agency, I am so pleased to see that comeuppance does happen. For every smaller agency out there, we know all too well that the “big guns” have monopolised the industry for far too long.

Posted By Gary Dixon on Wednesday 30th September 2009 11:11:02
As vigilance from government bodies and professionalism increasingly pervade the recruitment industry in the UK to raise the quality profile of recruitment, more incidences of this type of activity will no doubt be exposed. This can only bode well for our industry sector long term in the UK...getting rid of outdated /unethical processes and activities.

Posted By Bob on Wednesday 30th September 2009 10:56:55
Do rats cheat? Are foxes sly?? That's anti ratist!!

Posted By HR on Wednesday 30th September 2009 10:46:51
Lets hope this means that OFT will take some action On healthcare market now

Posted By Done it once do it again on Wednesday 30th September 2009 10:45:04
With the likes of Anders, Fusion, Hays, BBT and Hill McGlynn. They have done it once they will do it again it's their nature as cheating rats.

Posted By Bob on Wednesday 30th September 2009 10:40:11
Blimey!!

Posted By Pbizzness on Wednesday 30th September 2009 10:30:28
Hays = dirty capitalist corporate trash! Hill Mcglynn + BBT = Dirty rats

Posted By Dale Kenny on Wednesday 30th September 2009 10:28:51
Ouch.

Posted By A Bung on Wednesday 30th September 2009 02:43:22
I have always found these companies right down my street, no questions asked you know what I mean!

Posted By Gary on Wednesday 30th September 2009 02:18:16
Comment by Jay - at 01.22 100% spot on its a hugh issue

Posted By Jay on Wednesday 30th September 2009 01:22:43
It's a pity that these companies were only fined for price fixing in the Construction industry, as a small recruitment agency we have been subjected to years of so called 'management' companies who are supposedly there to SAVE companies both in the public and private sector money, they have consistently dictated the level of profit their 'approved suppliers' can make thus making it extremely difficult to supply candidates of the right calibre, bearing in mind that ALL of the companies mentioned in the report are recruitment companies does it not raise the question of fairness as they most certainly have the upper hand as they most probably fill vacancies requested with their own candidates and only release a vacancy if they are unable to fill a vacancy from their own database. Also bearing in mind that when an 'approved supplier' submits a candidate to the Management company, for example - Hays, all the candidates details are forwarded to the Management company at some stage, thus they are able to constantly update their own databases and thus possibly use that candidate at a later date if a vacancy is requested and the candidate submitted previously by the approved supplier, if suitable, can then be recruited from within their own organisation thus depriving the supplier.

Posted By Tony B on Wednesday 30th September 2009 01:21:36
Over the years I've always avoided dealing with Parc, too much hassle for too little fee...

Posted By sally on Wednesday 30th September 2009 01:21:24
Why not just get rid of all these intermediaries and allow market forces to determine the prices? Large groups are usually big headed bullies offering a rubbish service with contracts going on for years with all us small agencies pushed out. Give someone else a chance.

Posted By John on Wednesday 30th September 2009 01:02:21
Ouch. Aren't these the companies that usually clean up on the recruitment awards???

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