You were probably the highest man hourly wise and the client had you and 1 or 2 other people on their final list. More than likely they just wanted a higher commission on the "sale". I have seen instances where there are 2 candidates that are close in skillset and what not and the client hiring them will ask the staffing agency which of the 2 will give them a "deal" and then go with that one. Not sure how often that happens though.

Also, I think it depends on the client they are staffing for. Some will provide a dollar amount and say find us someone who fits in this budget and others will give them requirements for a role and say find us someone who knows this and then they pay based on experience and what not. The former is the one that you have to watch out for.