Freelancers are vulnerable to rate collusion and some industries could be feeding on it
SPECIAL REPORT: OPINION
Investigations in the US, UK, and Europe have revealed that large companies, despite the warnings, still fall foul of anti-competitive practices. This raises the question: if they collude with the competition to control product prices and no-poach clauses, why not freelancer rates?
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CEOs get grilled on collusion
Patterns of corporate behaviour can be telling for any freelancer, contractor or small business considering becoming engaged with a new client. That is why keeping on top of anti-competition investigations is worthwhile. Sometimes investigations can be dragged on for years, but they do reveal how some larger companies in certain industries treat their suppliers and that could include independent workers and small business owners.
Earlier this week, before the US Senate Committee on Small Business and Entrepreneurship, CEOs of some of the largest mobile phone networks in the US were subjected to fierce criticism concerning alleged collusion and the use of fixed matrix pricing, according to a report by trade news site Wireless Estimator.
Lawmakers asserted that these practices are pushing contractors, suppliers, and key players within the telecommunications supply chain towards financial ruin, with numerous businesses being forced to close down entirely.
The report said, “Verizon CEO Hans Vestberg gave a vague and evasive response to Senator Rand Paul’s (R-KY) question about carriers knowingly using illegal 1099 contractors; it drew a mix of confusion and carefully measured disdain from fellow panellists [including] AT&T CEO John Stankey, Dish Networks CEO Hamid Akhavan, and T-Mobile CEO Mike Sievert—each seemingly striving to maintain plausible deniability regarding their own companies’ practices. However, an investigation by the FCC and DOJ, as called for by Senator Kennedy, may challenge the validity of such denials.”
The same news report said, “In a heated exchange, Chairman Senator John Kennedy (R-LA) lashed into AT&T CEO John Stankey, accusing the nation’s top mobile carriers of knowingly operating as an oligopoly—a potential violation of antitrust laws under the jurisdiction of the Department of Justice.”
In the report, Kennedy was quoted:
They don’t just act like an oligopoly. They know they are one. Y’all have carved up the market like a Sunday ham, fixed prices behind the curtain, and called it strategy. But let me tell you—if it walks like collusion and bills like collusion, it ain’t free enterprise. It’s a cartel of carrier CEOs in Versace suits.
Are these industries at risk for freelancer rate collusion?
Freelancers and contractors, often operating (by choice) without the collective bargaining power of traditional employees, are particularly vulnerable to rate manipulation. Many of them certainly wouldn’t be in the market for a Versace suit.
Price fixing is a serious breach of competition law. Here’s a breakdown of industries where price-fixing and related anti-competitive behaviours, such as no-poach clauses in contracts and pay rate collusion have been observed.
While the following does not indicate that these companies, industries or individuals had or are involved in price collusion among their independent workforce (unless stated otherwise), it would be wise for contractors working in these industries to read through their contracts to spot anti-competitive clauses.
Contractors, for example, who find their work through recruitment firms should ask their recruiter how they and their clients determine the day or project rates for certain roles. How much influence does your individual experience and skill level determine the rate you will be paid?
Broadcasting & Media Production
The UK’s Competition and Markets Authority (CMA) has recently taken action against major broadcasting companies, including the BBC, ITV, BT, and IMG, for colluding on freelance pay rates. The imposed fines, totalling £4,240,356, underscore the seriousness of this issue.
As reported by the Freelance Informer, some freelancers may take legal action. “Many disgruntled freelancers and contractors will have seen this story (which was headline news on the BBC website), and many may be tempted to mount actions or make complaints on the back of this to the CMA, so any organisation which is involved in collaborating with competitors about pay rates, or helps hirers set those rates, should take immediate steps to make sure their house is in order: competition law fines can be very high,” said law firm Osborne Clarke in a statement.
Recruitment firms
Law firm Osborne Clarke also stated, “Staffing companies, MSPs and RPOs which advise a range of companies and help all those companies set rates (perhaps related to attempts to keep rates down while the economic outlook is so uncertain) may be particularly at risk.”
Industry associations and algorithmic pricing
The ease of information sharing in the digital age further exacerbates the problem. Industry associations, online networks, and even algorithmic pricing can facilitate coordinated rate-setting, leaving freelancers at the mercy of market forces they cannot control. As IPSE, has stressed, this is an industry-wide problem that requires urgent attention.
Tech
“Competition authorities worldwide have declared competition law enforcement in labour markets a top priority,” according to a guest blog post by Marta Isabel Garcia, Partner at Stephenson Harwood, highlighting a global trend.
This prioritisation involves “closely scrutinising practices between competitors such as wage fixing, agreements not to poach employees as well as the exchange of sensitive employment information (e.g., current/future looking, granular, non-public information on wages, bonuses, benefits, and allowances).”
This increased vigilance shows such arrangements can “have negative effects, including the suppression of wages and the restriction of movement of employees which can prevent career development, reduce employee choice and lead to less innovative and competitive markets.”
The tech sector, with its reliance on flexible labour and rapid information dissemination, is particularly vulnerable. “The technology sector has been particularly hit by this recent increased level of antitrust enforcement of labour practices,” writes Garcia, emphasising that companies must understand and mitigate antitrust risks.
In Garcia’s piece, she highlights how hiring companies can try to push no-poach clauses in contracts. Some content agencies and publishers, for example in the UK, have been known to go as far as trying to get contractors to sign contracts disallowing them to work with other companies within their area of expertise.
These examples show just how careful a freelancer must be in reading the fine print in a contract and requesting changes to stop rate collusion and anti-competitive labour practices. Often these clauses are not legally binding or enforced, but why would a freelancer be asked to “contractually” curb their earning power?
Besides the UK and the US, other regulators are cracking down on anti-competitive labour practices. According to Garcia, The European Commission has conducted dawn raids on “online food delivery companies for allegedly entering into no-poach arrangements and exchanging competitively sensitive information.”
- France’s Competition Authority is investigating “engineering, technology consulting and IT services companies” for similar practices.
- Romania’s Competition Council has targeted “automotive engineering and technology providers” for alleged no-poach and wage-fixing agreements.
- Turkey’s Competition Authority has levied fines on telecoms companies for colluding on hiring practices.
Automotive
There has been a significant case reported by the CMA involving car manufacturers and industry bodies. They were found to have illegally agreed not to compete on vehicle recycling. This involved both agreements on how to advertise recycling credentials, and also agreements to avoid paying third parties to recycle customers’ scrap cars.
This has led to very large fines being issued by the CMA. Ten manufacturers – BMW, Ford, Jaguar Land Rover, Peugeot Citroen, Mitsubishi, Nissan, Renault, Toyota, Vauxhall and Volkswagen – and 2 trade bodies have been fined a total of £77,688,917.
Construction and Demolition
In March of 2023, the construction and demolition sector has seen cases of bid-rigging, specifically “cover bidding.” Companies have colluded to manipulate tender processes, giving the illusion of competition when, in fact, bids were pre-arranged.
The CMA had fined 10 construction firms a total of nearly £60 million for illegally colluding to rig bids for demolition and asbestos removal contracts involving both public and private sector projects. The CMA has also secured the disqualification of 3 directors of firms involved in the unlawful conduct.
Each of the 10 firms was involved in at least one instance of bid rigging between January 2013 and June 2018. The fines for each are: Brown and Mason (£2,400,000), Cantillon (£1,920,000), Clifford Devlin (£423,615), DSM (£1,400,000), Erith (£17,568,800), JF Hunt (£5,600,000), Keltbray (£16,000,000), McGee (£3,766,278), Scudder (£8,256,264) and Squibb (£2,000,000).
The CMA reported in 2023 that it had secured the disqualification of three directors of companies involved in unlawful conduct. These included Mr David Darsey (formerly a director of Erith) for a period of 5 years and 10 months from 2 February 2023, Mr Michael Cantillon (formerly a director of Cantillon) for 7 years and 6 months and Paul Cluskey (current director of Cantillon) for 4 years and 6 months.
The CMA said, “Each of these directors has benefited from reduced disqualification periods, having voluntarily agreed to the disqualification by way of undertakings to the CMA.”
Office Design
Similar to construction, the UK office design industry has also faced penalties for involvement in cover pricing activities.
A case reported back in 2019 found between 2006 and 2017, each company used ‘cover bidding’ at least once to avoid competing with one or more of the other companies when submitting bids. The CMA reported that the bids were to fit-out and refurbish offices in London and the Home Counties. The conduct affected 14 contracts and the companies’ clients included a low-cost airline, a City law firm, and a further education college in East London.
The CMA explains, “Cover bidding is where two or more companies secretly agree that at least one of them will submit a bid that is deliberately high or of poor quality during a competitive tender process. They do this to try and make sure that a specific company can win the tender, with what appears to be the best offer or proposal. On each of the 14 occasions, the evidence shows that one company who wished to win the contract arranged for one or more of the other companies to submit a cover bid. This gave the first company a higher chance of winning the work.
“Once agreed, in almost all instances, the firm instigating the scheme told the company providing a cover bid what price it should submit. In most cases, the ‘instigator’ also provided the cover bidder with completed costs and/or design plans, with the intention that the cover bidder submit these as its own bid.”
Freelance economy at risk for rate collusion
In light of heightened regulatory scrutiny, Garcia advises that “companies should assess whether their practices are compliant with competition law and HR departments should ensure they are fully familiar with competition law and trained to identify potential areas of concern.”
She also asserts, that “immediate action should be taken if improper conduct is identified which may involve carrying out an internal audit, reporting the conduct to a regulator and rolling out a comprehensive competition law compliance programme.”
Freelancers and contractors need to understand how regulations and anti-competitive practices affect their pay. Knowing their rights is essential to protect their income. To prevent rate fixing, regulators must stay alert, and independent workers must be informed. The evidence clearly shows that rate collusion is a risk for the freelance/self-employed economy, which is the backbone of any economy.
