Antitrust’s Monopsony Problem
February 7, 2020
Open Markets Legal Director Sandeep Vaheesan and Reporter-Researcher Matt Buck published an article this week revealing how today’s antitrust law fails to protect workers from the concentration of power by employers, as shown in four recent cases alleging employer collusion against workers. Vaheesan and Buck published their article on ProMarket, the blog of the Stigler Center at the University of Chicago Booth School of Business.
They write that more and more workers today are being harmed by monopsony, which refers to a market dominated by a single buyer. Viewed through the lens of working people, a monopsony exists when there are only one or a few potential employers for their particular skills or in the particular place they live. Recent studies show that millions of Americans, especially those living in rural areas, earn significantly lower wages because of monopsony. Dominant retailers, such as Amazon and Walmart, use their size to depress wages throughout their entire supply chains.
All four cases studied by Vaheesan and Buck involve collusion, which antitrust lawyers today consider categorically bad and relatively easy to challenge in court. Collusion is per se unlawful, meaning it is illegal if it happens, regardless of its ultimate effects on workers or consumers. But these four recent antitrust cases alleging collusive wage-fixing by employers suggest that antitrust law is not equipped to protect all workers today.
Vaheesan and Buck focus much of their article on an ongoing antitrust suit against the National Collegiate Athletic Association (NCAA). In that case, a district judge ruled last March that the NCAA can continue capping compensation for players because the viewing public purportedly believes that college athletes should not be paid for their hard work and skills.
Vaheesan and Buck argue that such a sacrifice of the players’ interests to cater to viewers’ tastes is indefensible, factually doubtful, and would rightly cause outrage if applied to any other line of work. The court’s decision, in the words of one scholar, “leads to the abhorrent result of allowing purchasers of labor to unlawfully exploit one class of people (in this case, predominantly African American college athletes) for the purpose of benefiting another, presumably a more important class of people (the consumers of college athletics, in particular the viewers of televised men’s football and basketball games).”
In the article, Vaheesan and Buck also look closely at three other cases, including a 2019 case about shepherds employed by Western ranchers, a 2019 FTC case about therapists working for home health agencies, and a well-known 2010 Justice Department settlement with Apple, Google, and four other corporations about collusive agreements not to poach each other’s employees. (Disclosure: The Open Markets Institute filed amicus briefs or comment letters in support of the injured workers in the NCAA, shepherds, and therapists cases.)
The authors argue that the root cause of the failure to protect workers is the prevailing consumer welfare philosophy of antitrust. This narrow interpretation of the law and its history—which holds that the sole objective of the law is to protect consumer welfare—enables enforcers and the courts to overlook the exercise of power over working people.
Open Markets has been a pioneer in exposing the ways in which monopolists harm America’s working people. In 2010, Open Markets Executive Director Barry Lynn and Policy Director Phil Longman wrote the cover story in the Washington Monthly about the devastation of labor markets by corporate concentration. Also in 2012, Lynn published in Harper’s Magazine the first coverage in the mainstream news about the hiring cartel in Silicon Valley. Open Markets Legal Director Sandeep Vaheesan has for years published pioneering articles, amicus briefs in the courts, and comment letters with regulatory agencies to develop the legal arguments against no-poaching agreements among employers and against non-compete clauses in employee contracts.