Price fixing in the recruitment services industry robs the state frustrates transformation

12 Mar 2017

Ujuh Reporter

An investigation by South Africa’s Competition Commission has uncovered cartel like behaviour in the country’s recruitment services industry. Three firms; Human Communications, Kone Staffing, and Jobvest; stand accused of price fixing, market division and collusive tendering.

In a statement released this week the Commission said its decision to prosecute follows an investigation by the Commission which found that the firms discussed and agreed on prices at which to quote their customers.

The Respondents’ services include linking job seekers to potential employers and assisting their clients place advertisements in newspapers. They also receive and process responses to the advertisements on behalf of clients. The Respondents’ main clients are government departments and municipalities.

The Commission said the respondents discussed their responses to requests for quotations and decided on the price which each would tender for its services. The Respondents agreed on how to rotate advertising work amongst each other. This constitutes price fixing, market division and collusive tendering in contravention of the Competition Act.

In addition, an agreement to engage in collusion is presumed among the Respondents as they had a director in common between 2006 and 2015. The Commission is of the view that the Respondents were engaged in horizontal restrictive practices (a relationship between competitors at the same level).

The Competition Commissioner, Tembinkosi Bonakele, “As the Commission we remain steadfast in our commitment to rooting out collusive and anti-competitive practices which impact negatively on South Africa’s quest towards an inclusive economy and job creation,”

Like the multi-billion rands case uncovered by the Commission in the construction industry, the activities of the three recruitment services firms must have caused the state, and by extension the taxpayers, lots of money. It could mean that the state has been paying fictitiously higher prices for services it procured from these firms. And such cartels can be used to elbow out new comers which means they can frustrate economic transformation or black economic empowerment (BEE).

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