The Corner Newsletter, February 6, 2020
Open Markets Presents Our Views on How the Courts, the Justice Department, and the FTC are Failing to Protect Workers from Monopolies
Welcome to The Corner. In this issue, we present our views on how the courts, the Justice Department, and the FTC are failing to use antitrust law to protect workers from employers who have monopolies in labor markets.
Antitrust’s Monopsony Problem
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.
ANTI-MONOPOLY RISING:
Facebook Agrees to Pay $550 Million to Settle Privacy Lawsuit, Days After Supreme Court Declined to Hear Case. Facebook reached a settlement of the class action suit alleging that Facebook violated the Illinois Biometric Information Privacy Act. The plaintiffs said that Facebook had not obtained users’ permission before collecting data on scans of users’ faces in photos uploaded to its site. Facebook attempted to bring this case to the Supreme Court, but the justices declined to hear the case. Jay Edelson, a lawyer for the plaintiffs, remarked that “biometric privacy is one of the biggest fights of the day.” (The Washington Post)
FTC and NY Attorney General Charge Pharmaceutical Giant With Anti-Competitive Scheme. The move came after the pharmaceutical giant Vyera used pay-for-delay agreements and other tactics to keep generic manufacturers out of the market, and then increased the price for Daraprim from $17.50 to $750 per tablet. (Federal Trade Commission)
FTC Files Suit to Block Edgewell Personal Care Company’s Acquisition of Harry’s Inc. The Federal Trade Commission’s Bureau of Competition filed a suit against Edgewell’s proposed $1.37-billion acquisition of competitorHarry’s Inc. When Harry’s entered the market, it disrupted the duopoly held by Edgewell and Proctor & Gamble as internet-based direct-to-consumer wet-shave brands. (Federal Trade Commission)
NBCUniversal Fined $16 Million for Illegal Sales Curb in EU. NBCUniversal illegally restricted the sales of merchandise of its films such as “Minions” and “Jurassic World.” The European Union is working to promote cross-border online trade in order to compete with the U.S. and Asia. European Competition Commissioner Margrethe Vestager said that such sales restrictions “undermine the very foundations of the EU single market and cannot be tolerated.”(Reuters)
WHAT WE’VE BEEN UP TO:
Barry Lynn gave the keynote speech at the Wisconsin Farmers Union 89th Annual State Convention in Rothschild, Wisconsin and led a workshop on Monopolization in Agriculture. Lynn spoke about the recent investigations of Google and Facebook by states’ attorneys general, and he urged the farmers to use local and state institutions and laws to attack farming monopolies, rather than waiting for Washington to act.
Sally Hubbard, Sandeep Vaheesan, and Phil Longman participated on panels at the Capitol Forum’s February 5 Conference, Populism and Political Economy: Looking Ahead to 2021. The Capitol Forum partnered with the Open Markets Institute, Americans for Financial Reform, Demand Progress Education Fund, and the Revolving Door Project to host this conference to discuss what a populist Democratic agenda would look like. “What concerns me is the targeted advertising model. Day 1, I’m in favor of banning surveillance-based targeted digital advertising,” Hubbard said.
Sandeep Vaheesan participated in a panel at Yale Law School on Antitrust Policy in the Democratic Primary, sponsored by the Thurman Arnold Project and the Law and Political Economy Group. The panel, moderated by Fiona Scott Morton, also included Stacy Mitchell, co-director of the Institute for Local Self-Reliance, Michael Kades from the Washington Center for Equitable Growth, and Yale Assistant Professor of Economics Michael Sinkinson.
Sally Hubbard spoke to the Washingtonian magazine about Amazon CEO Jeff Bezos’s move to a mansion to Kalorama, an exclusive Washington neighborhood, where he hosted a party with financiers, tech moguls, Republican policymakers, and White House advisers Jared Kushner, Ivanka Trump, and Kellyanne Conway. “I am not happy that Amazon is now schmoozing with all the decision-makers,” Hubbard said. “It was already a problem. It just amplifies the problem.”
VITAL STAT: 45,000%
The percentage increase in fees that pharmacies have paid to pharmacy benefits managers – increasing the cost of prescription drugs for consumers.
WHAT WE’RE READING:
“Orwell in Five Words” (BBC, Phil Tinline): A podcast that analyzes the current relevance of George Orwell’s work since his death 70 years ago. The podcast frequently discusses Orwell’s insightful work on monopoly and corporate power.
“The Supreme Court Has Undermined Iowa’s Small Farms and Rural Communities” (Take Back the Court, Patty Judge and Aaron Belkin): Details the decline of rural communities and small farms as a result of Supreme Court and lower federal court decisions that favor large agribusiness and corporate consolidation.
“By Any Means Necessary: How Allergan Gamed the System to Raise Drug Prices and Flood the Country with Pills” (Public Citizen, Zain Rizvi): Describes the different tactics that pharmaceutical companies, such as Allergan, use to hike drug prices and increase profits at the expense of the public.
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Written by: Daniel Hanley, Garphil Julien, Stella Roque, Sanah Shah
Edited by: Barry Lynn, Phil Longman, and Michael Bluhm.