First EU labour market fines issued on competition grounds

The European Commission said it is the first decision where it had found a cartel in the labour market and the first time it had imposed sanctions in relation to the anti-competitive use of a minority share in a competing business.

Competition law experts Angelique Bret and Ian Hastings of Pinsent Masons said this decision shows that a wide array of information sharing and employee arrangements between competitors will be subject to increased scrutiny from the European Commission and other competition authorities.

According to the European Commission, food delivery companies Delivery Hero and Glovo engaged in a cartel – in breach of EU competition law – in the online food delivery sector across the European Economic Area for four years between July 2018 and July 2022 through what the European Commission described as “multi-layered anticompetitive coordination”.

It said the companies agreed not only to poach each other’s employees but had also exchanged information on their commercial strategies, prices, capacity, costs and product characteristics, as well as allocated geographic markets between one another. The European Commission said the anti-competitive practices had been “facilitated by Delivery Hero's minority shareholding in Glovo”.

The businesses admitted their involvement in the cartel and German-based Delivery Hero was fined €223.3m and Spain-based Glovo €105.7m. Each benefited from a 10% discount on the fines the Commission would have imposed, since the companies settled the case with the regulator.

Bret said: “This case builds on the Commission's publication last year where the enforcer set out its views on the different types of labour market practices that could infringe EU competition law, including ‘no poach’ agreements; and later that year a CJEU judgment confirmed that non-poaching agreements can amount to a ‘by object’ breach of competition law.”

Hastings added: “Competition authorities are increasingly viewing information sharing as an enforcement priority. Information sharing of varying degrees is common across many industries, but this decision shows that the European Commission will likely be increasingly robust in applying its rules to this activity, particularly where labour markets are also at issue. Other competition authorities are taking similar steps, with the CMA imposing  fines totalling over £4m against broadcast and production companies for exchanging information on rates of pay for freelancers, in March of this year.”

Tadeusz Gielas, also a competition law expert of Pinsent Masons, said: “Jurisdictions outside Europe, such as the US and Australia, are likewise focusing on competition issues in labour markets. For example, the Australian federal government has recently announced that it will amend the country’s Competition and Consumer Act 2010 to expressly prohibit no-poach and wage-fixing agreements under competition law, following a public consultation it conducted last year.”

Bret reflected on the wider competition law compliance implications, beyond the labour markets context. She said it was notable that the illegal sharing of commercially sensitive information was facilitated via a minority shareholding. She explained that minority, non-controlling interests can create a competition law risk, particularly if the companies are actual or potential competitors as, even though the companies are linked, for the purpose of the competition law rules, they remain independent undertakings and therefore must not share commercially sensitive information or strategies with each other.

“This emphasises the importance of implementing appropriate 'clean team' protocols, non-disclosure agreements, and similar measures in the context of any M&A transaction between actual or potential competitors, and additionally the importance of adhering to ongoing competition compliance safeguards and the ringfencing of confidential information in cases of cross-shareholdings between competing firms,” Bret said.