Sports broadcasters fined for anti-competitive collusion on rates of pay

Sports broadcasters fined for anti-competitive collusion on rates of pay: What lessons can businesses learn?

The CMA recently issued fines totalling £4.2 million following an investigation involving major broadcasting/production companies in the UK. This resulted in five companies accepting that they had unlawfully shared sensitive information on rates of pay for freelancers including sound technicians and camera operators.

What happened?

Sky, the BBC, ITV, BT and IMG had routinely engaged freelance staff in connection with the production and broadcasting of sports events including football matches and rugby tournaments.  

The investigation uncovered 15 instances in which, in pairs, these companies colluded to illegally exchange sensitive information, for example regarding day rates and pay rises for freelance workers, with one another.  

It was acknowledged that their aims had been variously to:

• co-ordinate rates of pay to freelance workers, 

• avoid “bidding wars”, 

• align and benchmark rates, and 

• present a united front with competitors.

The CMA concluded that the companies’ conduct breached the requirements of Chapter I of the Competition Act 1998 as it had as its object the prevention, restriction or distortion of competition within the UK. It made no findings as to the effect of the infringements.  

Fines of £4.2 million

The BBC, ITV, BT, IMG and Sky each admitted to breaches of competition law and each concluded settlements with the CMA. The fines issued were discounted and ranged between £1.7 million for BT (which had committed 6 infringements) and £424k for the BBC (for 3 infringements). Sky also admitted 10 infringements but availed itself of the CMA’s leniency policy to avoid a fine by choosing to report the issue and to assist the CMA with its investigation.

So what should businesses do or avoid doing?

The outcome of this investigation into sports production and broadcasting serves as a useful reminder of the need to ensure that companies in all sectors implement fair pay policies and processes to cover freelance and other staff, so as to ensure protections and promote healthy competition in the labour market. So what lessons can businesses learn from this? Our top tips to avoid falling foul of the law in this regard:

• Don’t Share Sensitive Information: Do not exchange sensitive information about pay rates, salary ranges, or other compensation details with competitors;

• Independent Rate-Setting: Ensure that all pay rates and compensation packages are set independently based on the business’ own circumstances without any coordination, collusion or agreement with other companies;

• Avoid Wage Fixing: Do not agree with other businesses to fix wages or set salary caps for workers;

• Anti-Poaching: Avoid entering into any agreements with competitors which would prevent you from hiring or “poaching” employees from one another;

• Compliance Training: Regularly train employees, especially those involved in hiring and compensation decisions, on competition laws and the importance of compliance;

• Clear Policies: Establish and enforce clear policies regarding the sharing of information with competitors and ensure all employees are aware of these policies;

• Internal Audits: Conduct regular internal audits to ensure compliance with competition laws and to identify any potential risks or breaches; and

• Transparency: Promote transparency within the company about how pay rates are determined and ensure that these processes are fair and unbiased.  Pay should be based on clear and fair criteria like performance, skills or experience.   

Discounts to Financial Penalties

The CMA has a discretion to impose a financial penalty on an undertaking which has intentionally or negligently committed an infringement of the Chapter 1 prohibitions. Penalties are to reflect the seriousness of infringement and to deter infringing undertakings and other undertakings that may be considering anti-competitive activities from engaging in them.  

If a business finds itself in the unenviable position of having committed an infringement of competition law in this regard, there are still essential steps to be considered urgently to seek to minimise or mitigate the impact.  

The first thing to consider is the CMA’s leniency policy. In summary, a business that has infringed competition law in this regard can be granted immunity from penalties or a reduction in penalty in return for reporting the anti-competitive conduct and assisting the CMA with its investigation. The CMA has published detailed guidance on leniency. 

In this instance, Sky (which had committed 10 infringements) was the first of the companies to report its involvement, and also assisted the CMA with the investigation. As a result, it did not receive any fine from the CMA. Contrast this with the next biggest offender, BT, which committed 6 infringements and incurred a financial penalty of £1.7m.   

Co-operation with a CMA investigation may serve as a mitigating factor and this requires conduct over and above mere compliance with CMA timescales. Examples of co-operation which may count as mitigation include provision of staff for voluntary interviews and/or arranging witness statements from relevant individuals. Undertakings benefitting from the leniency programme will not receive any additional reduction in financial penalties on this basis because continuous and complete co-operation is a condition of leniency.

Second, businesses should also be aware that the CMA may enter into a settlement agreement with a party it is investigating if that business:

• admits that it has acted in breach of competition law;

• agrees to pay a fine; and 

• accepts and assists in a streamlined administrative procedure for the remainder of the investigation.

The fines issued by the CMA in such circumstances will normally be subject to a settlement discount, which may be substantial. The outcomes for the five companies involved in this investigation are illuminating in this regard. Sky was not fined at all. BT, IMG and ITV assisted with the CMA’s investigation and so benefitted from leniency discounts, and all four companies received settlement discounts which reduced the fines they would otherwise have incurred, as follows:

• BT’s fine was subject to a 15% leniency discount and 20% settlement discount;

• IMG benefitted from a 40% leniency discount and 20% settlement discount;

• ITV a 42.5% leniency and 20% settlement discount; and

• BBC a 20% settlement discount.

Updated guidance expected

On the back of this and other investigations, the CMA has indicated that it plans to publish updated guidance in the near future, to try to help businesses ensure compliance with competition law in the labour market. Employers need to be aware that they must avoid unlawful collusion on employee pay.  

Conclusion

The key message is that businesses must set pay rates entirely independently of their competitors if they are to protect employees’ interests, keep pay competitive, and avoid the financial and potentially business critical risks that can arise from behaving anti-competitively. 

We suggest if you are in any doubt as to compliance in this regard, you seek legal advice from experts to ensure your business policies and practices do not fall foul of competition law and regulation.