Recruiters get £40m OFT fine after whistleblowers expose cartel

The OFT has come down hard on six recruiters caught price-fixing in the construction sector.

Last Updated: 31 Aug 2010

Recruitment firms have had a rotten time of it lately – but a bad year just got a lot worse for six of their number, who have been fined a collective £39m by the Office of Fair Trading over a price-fixing scam. According to the OFT, the six firms clubbed together to try and freeze out Parc UK, a potential competitor. And they’re going to pay a heavy price – particularly listed firm Hays, which faces a fine of over £30m, over three-quarters of the total. It's not really clear why it’s bearing the brunt of the punishment, but we’re pretty confident that it can really do without that kind of penalty at the moment...

They say a bit of competition is healthy – but these recruiters apparently didn’t agree. According to the OFT, eight firms involved in supplying temporary workers to the construction sector got together after Parc was launched in 2003, with the aim of trying to act as an intermediary between recruiters and construction firms. Not surprisingly, the agencies weren’t keen on a middleman soaking up some of their precious margins, so they formed a cartel called the ‘Construction Recruitment Forum’ (not very discreet, one might argue), in which they agreed to fix their prices and collectively boycott any dealings with Parc. We're minded of Adam Smith's famous quote: 'People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.'

Eventually two of the firms – Beresford Blake Thomas and Randstad-owned Hill McGlynn – decided to blow the whistle back in 2005, presumably hoping for a sympathetic hearing. And indeed, they’ve been given immunity from any financial penalties. The other six weren’t so lucky, although they all received some leniency in exchange for their co-operation – even Hays got a 30% reduction in its fine, so it could have been a lot worse. OFT senior director Heather Clayton said it was a ‘serious breach of competition laws and the fines reflect this’.

Not surprisingly, Hays is a bit upset that it's been fined three times more than everyone else put together. CEO Alistair Cox blamed the whole thing on one (now ex-) rogue consultant, insisted his firm had complied fully with the investigation and described the fine as 'wholly disproportionate with the activities to which it relates'. So we're guessing an appeal is quite likely...

In today's bulletin:

Relief for Rose as Marks & Spencer sales recover
City bad, SMEs good - Brown bites the hand that fed him
Recruiters get £40m OFT fine after whistleblowers expose cartel
Will HR soon be a thing of the past?
Downturn sees rise in corporate prisoners

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