What are “wage-fixing agreements”? Why are they considered a form of unfair competition? What are the consequences of entering into them?
Wage-fixing agreements, alongside no-poach agreements, are practices that disrupt competition in the labor market. Recently, these agreements have drawn significant attention from authorities such as the European Commission and the President of the Polish Office of Competition and Consumer Protection (UOKiK). They are currently regarded as some of the most serious violations of competition law in the member states of the European Union.
What are wage-fixing agreements?
“Wage-fixing agreements” are arrangements made between businesses in which they jointly determine and control the level of employee wages. This includes directly setting pay rates, lowering wages, or establishing maximum wage limits that neither party may exceed.
The term “wages” is interpreted very broadly in the context of these violations and encompasses all components of compensation, such as bonuses, rewards, specific task-related or functional allowances, and employee benefits. Thus, a violation of the law occurs not only when specific wage levels are agreed upon but also when arrangements are made concerning any of the aforementioned elements.
Why are wage-fixing agreements prohibited?
Wage-fixing agreements are prohibited because they can lead to artificially maintaining employee wages at lower levels. As a result, they restrict competition and disrupt the functioning and development of the labor market.
These agreements are considered a violation of Article 101(1) of the Treaty on the Functioning of the European Union (TFEU), which prohibits agreements whose purpose or effect is to prevent, restrict, or distort competition. Under national law, entering into such agreements is also prohibited by Article 6 of the Act on Competition and Consumer Protection.
Massive Financial Penalties for Wage-Fixing Collusion Among Polish Basketball Clubs
In 2023, the President of UOKiK (Office of Competition and Consumer Protection) issued a decision concerning anti-competitive practices in Poland’s basketball league. Fines totaling nearly 1 million PLN were imposed on 16 clubs and the Polish Basketball League company for violating competition rules through practices such as restricting access to the market and setting basketball players’ salaries.
Specifically, the decision addressed actions aimed at limiting player transfers. Changing to a better club would have been pointless for players due to the lack of opportunities to receive higher wages. Such practices were deemed unlawful and contrary to the principles of competition.
What Penalties Are Imposed for Entering into Anti-Competitive Wage-Fixing Agreements?
Similar to entering into no-poach agreements, the penalties for businesses involved in wage-fixing agreements are extremely severe. Employers may face fines of up to 10% of their turnover from the financial year preceding the year the penalty is imposed. Additionally, individuals in management who violate competition law may be subject to financial penalties of up to 2 million PLN.
