In assessing what salaries or other benefits to offer employees, many businesses may be tempted to discuss with other businesses (especially in the same industry) what they are offering or proposing to offer. This could be to ensure that they attract the best talent or merely to ensure that they do not offer more than what the market demands. But are such discussions legal under the Competition Ordinance (CO)?
According to the Competition Commission, such discussions have a high risk of contravening the CO,1 but a recent Commission announcement suggests a slight relaxation of its approach.2 This article explores the “do’s and don’ts” of such discussions.
Background
The Commission’s guidelines on the CO, adopted when the CO came into force, do not address such discussions between employers. On the contrary, it seemed from these guidelines that the main purpose of the CO was to encourage businesses to compete with each other to offer the best deals to consumers in terms of prices and quality and not encourage them to offer the best deals to employees.3
However, in an “advisory bulletin” issued in 2018, the Commission set forth its view that competition in the market, which the CO is designed to protect, means not just competition for customers but also competition for employees. This means that where employers compete for employees, even if they are in different industries, any discussions between them, which might dampen such competition, could contravene the CO and attract substantial penalties. This could include discussions on the terms and conditions they are offering or propose to offer employees. Businesses should therefore avoid such discussions if they are to minimize the risk of contravening the CO and being subject to penalties.
A Recent (Partial) Relaxation of the Commission’s Approach
In a more recent “advisory bulletin” issued in August 2022, the Commission essentially reiterated the position it took in 2018 (as summarized above) on discussions between employers on employment terms and conditions.4
However, it also indicated that it would not take active enforcement action under the CO against employers who engage in such discussions in certain circumstances, provided that a series of conditions are met, including:
- The discussions take place in the context of joint negotiations between employers and employee bodies;
- The discussions are aimed at improving employment conditions; and
- An employee body is a “genuine participant” in the negotiation process (which seems to mean that they have not been compelled to participate).
Clearly these conditions are strict and will only be met in exceptional circumstances. Moreover, it should be borne in mind that, even if these conditions are fulfilled, it does not mean that such discussions do not contravene the CO. It only means that the Commission at present does not intend to take enforcement action against the parties to such discussions if the relevant conditions are met.
Practical Implications
If you want to get an idea of what benefits to offer to employees, it remains a very high risk strategy under the CO to discuss such matters with other businesses, except in the very limited circumstances described in the Commission’s recent “advisory bulletin.” The bulletin suggests that the risks will be mitigated if a third party, such as a trade association, gathers such information from members individually, aggregates it and distributes it to members on an anonymous basis.5 This appears to be the safest way of obtaining market intelligence to guide your future strategy on employment terms and conditions without contravening the CO.
1 Competition Commission Advisory Bulletin 9 April 2018 Competition concerns regarding certain practices in the employment marketplace in relation to hiring and terms and conditions of employment.
2 Competition Commission Advisory Bulletin 29 August 2022 Competition concerns regarding joint negotiations in the labour sector.
3 Competition Commission Guideline on the First Conduct Rule paras 2, 3.
4 See note 2 above.
5 At para 2.16.