While the Competition Commission (the “Commission”) has been active in prosecuting anti-competitive conducts in the provision of goods and services markets as evidenced by the upcoming trials of the first two cases later this year, the city watchdog reveals that since the commencement of the operation of the Competition Ordinance (Cap. 619) in December 2015, it has encountered various situations in which undertakings have engaged in employment-related practices giving rise to competition law concerns under the “First Conduct Rule” of the Competition Ordinance. As such, the Commission has issued an Advisory Bulletin dated 9 April 2018, which is accessible on the Commission’s official website, to raise the awareness of both employers and employees in respect of the potential competition law issues arising from employment practices.
Competition law and the labour market
The Advisory Bulletin notes that competition among employers for employees would constitute more attractive employment terms and conditions such as higher salaries or more attractive fringe benefits in a free market economy. Undertakings that compete with each other to recruit employees are considered to be competitors in the relevant labour market. The Commission further points out that such relevant labour market does not concern with whether the undertakings concerned are providing the same products or services in the “downstream market”. Therefore, anti-competitive agreements between undertakings in respect of compensation or hiring related matters would certainly be a matter that the Competition Commission would like to investigate.
To make it even more explicit and clear as to what kinds of practices in the labour market are more likely to attract potential liabilities under the Competition Ordinance, the Commission provides certain scenario in the Advisory Bulletin. For example, if the undertakings in question reach an anti-competitive agreement (a specific term under the Competition Ordinance covering any arrangement, understanding, promise or undertaking, whether express or implied, written or oral, and whether or not enforceable or intended to be enforceable by legal proceedings) in relation to any aspect or element of compensation such as salaries, wages, benefits and allowances, severance payments or long service payments to the employees, such agreement would be considered as fixing the price of labour, which is clearly contrary to the First Conduct Rule. Alternatively, if the undertakings in question reach an anti-competitive agreement in relation to solicitation, recruitment or hiring of the employees of each other, such as a non-poaching agreement, the Commission may take the view that these kinds of practice are effectively market sharing by means of allocating sources of labour supply and contrary to the First Conduct Rule.
The recommendations from the Commission
After setting out its views on the anti-competitive arrangements between undertakings in the labour market, the watchdog provides some general recommendations to market participants in the Advisory Bulletin. In particular, the Commission emphasises that undertakings should establish their own human resource policy and their own employment terms and conditions with their employees independently. Undertakings are further reminded that they should avoid exchanging sensitive information in respect of their own human resources policy to their “competitors” in the labour market.
In addition, the Commission considers that if an undertaking possesses the relevant information about employment practices which may give rise to competition law concerns, the undertaking concerned should contact and report the same to the Commission. The Advisory Bulletin also points out that even if an undertaking considers that it may have itself violated the First Conduct Rule, the undertaking in question could blow the whistle and supply the relevant information to the Commission to facilitate its investigation such that it may be able to claim the benefit from the lenient policy.
Unique aspects of competition law in the labour market
The Commission specifically mentions that if an employer (being an undertaking) assures its employee that the latter would be re-employed in the same role at an unrelated company after his or her “voluntary resignation”, such an arrangement proposed by the employer may be inferred that there is an existence of coordination between the employer and another employer in respect of their human resources policies.
Interestingly, the Advisory Bulletin clarifies that members of labour unions, who are employees, are not considered to be an undertaking under the Competition Ordinance. Therefore, union members are free to exchange their respective information in relation to their salaries and fringe benefits.
Conclusion
While the Advisory Bulletin seeks to clarify certain competition law issues arising from practices in the labour market, it provides certain important interpretations of the provisions of the Competition Ordinance in the context of a labour market. Nevertheless, it is not clear why the Commission does not issue the same in the form of “Guidelines” pursuant to section 35 of the Competition Ordinance. Potential legal issues may also arise as to the preciseness of the interpretations set out in the Advisory Bulletin. Therefore, legal advice should be sought promptly if any competition law issue is identified.
