The European Commission has imposed a record £277 million fine on two of the largest food delivery companies in Europe. We consider the implications for UK businesses and their labour market practices.
Last month, the European Commission (EC) levied a potentially precedent-setting £277 million (€329 million) fine against two of the largest food delivery companies in Europe, Delivery Hero SE (DH) and Glovo, for breaches of EU competition law related to non-poaching agreements.
This follows recent guidance from the UK's Competition and Markets Authority (CMA) highlighting the risk that non-poaching agreements entered between commercial undertakings could breach UK competition law.
Background
In 2018, DH purchased a minority stake in Glovo. Over the next few years DH and Glovo coordinated:
- The sharing of commercially sensitive information;
- An agreement to allocate EEA territories between themselves and avoid operating in each other's territories; and
- An agreement not to poach each other's corporate staff.
In July 2022, DH acquired sole control of Glovo.
The European Commission's verdict
The EC's investigation into DH and Glovo opened in July 2024 following an own-initiative inquiry into collusion in the food delivery sector. The EC considered that the three practices outlined above constituted a single and continuous infringement of EU competition law which was facilitated by DH's minority shareholding in Glovo. This, it noted, ultimately led to the two companies aligning their respective business strategies.
Regarding non-poaching agreements, the EC specifically noted that: "It is... the first time the Commission is sanctioning a no-poach agreement, where companies stop competing for the best talent and reduce opportunities for workers."
Teresa Ribera, Executive Vice-President of the EC for a Clean, Just and Competitive Transition further commented:
"These types of no-poach agreements are a form of purchasing cartel. In such a cartel, the companies restrict competition for a specific input, in this case the input is labour... In other words, companies stop directly competing for workers. This is not good for workers, as it is the type of agreement that suppresses wages and reduces labour mobility... no-poach agreements can also be bad for the affected sector, as they may have a negative impact also on productivity and innovation."
Following the EC's investigation, DH and Glovo admitted their involvement in the cartel and agreed to settle the case in line with the EC's settlement procedure, benefiting from a 10% reduction in fines.
The CMA's approach
In the UK, the CMA has the power to investigate practices which breach UK competition law and can take various actions, including levying fines and disqualifying directors. The CMA operates with limited resources: it generally investigates only high-profile practices, relies on whistleblower reports and tends to look for "quick wins" (i.e. where wrongdoing is clear and sanctions can be swiftly issued).
In February 2023, the CMA published guidance aimed at what it deemed to be anticompetitive behaviour in UK labour markets. This highlighted non-poaching agreements ("when two or more businesses agree not to approach or hire each other's employees...") as one of three main types of common anticompetitive behaviours in labour markets, alongside wage-fixing and unlawful information sharing.
What steps should UK businesses take?
Businesses in the UK often have legitimate and compelling reasons to enter into non-poaching agreements with their staff. These agreements safeguard the stability of a business' workforce by preventing departing staff from seeking to hire their former colleagues for a time-limited period after their engagement ends. This type of post-termination restriction is very unlikely to breach UK competition law and is not the target of the CMA's guidance.
The use of non-poaching agreements should be limited in scope and tailored to meet legitimate business needs without engaging in unlawful anti-competitive activity. Businesses should exercise caution (and obtain legal advice) before entering into any of the following types of non-poaching agreement with other potentially competitive commercial entities. Non-poaching agreements:
- entered in connection with a joint venture or other commercial collaboration;
- entered in connection with the sale of a business;
- entered in connection with the settlement of commercial disputes/litigation (e.g. following 'team move' litigation or litigation to enforce a 'non-compete' provision against an employee and/or their new employer);
- entered with reference to any form of labour supply or talent acquisition service; and
- entered as part of supplier agreements or service contracts.
Agreements/provisions falling into these categories may breach competition law. A breach of UK competition law could lead to attention from the CMA (e.g. the CMA might investigate) and if anti-competitive practices are identified then sanctions could follow. The offending agreements/provisions could also be deemed void and unenforceable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
