How Antitrust Failed Workers

"I really liked this book because it’s got a very simple thesis and it looks at an angle of antitrust that I think has been overlooked. The thesis of the book is that antitrust has tended to look at market power in the product market, firms raising prices above costs when selling to consumers. But the mirror image of that is monopsony power, which is the ability of firms to reduce wages below the productivity of workers. This doesn’t happen in a competitive economy where you have to pay your workers their marginal product, but if you’ve got monopsony power, you can get away with reducing the wages of workers. What’s very interesting is that competition policy seems to have evolved in a way where there’s nothing really in the law, particularly in American law, to say you can’t look at labour markets as well as product markets. But, for some reason, as competition policy has evolved, it has looked at product markets and not labour markets. This book suggests that we should start looking at labour markets more. It goes hand in hand with a lot of consensus now in the economics profession, that monopsony power is everywhere. We didn’t used to believe in monopsony power 30 or 40 years ago. It’s only recently that competition economists have begun to realize that this is one of the major costs of having a weak competition policy. His book is really US-centric. He is an American antitrust lawyer and most of the evidence that he puts forward is American evidence. But the conclusions that he draws and the arguments he makes apply equally well to other countries. There’s no reason to think that monopsony power is less of a problem in the UK or in Europe than it is in America. That’s a very good question and it is addressed in the book. The answer is yes and no. There are certainly some things you can do that are the same as for monopoly behaviour. When you’re assessing a merger, you can start looking at the impact on workers, because there is evidence that certain mergers have depressed wages. So you could start to factor in the effects on workers when you decide whether or not a merger should go ahead. You could also penalize collusive agreements between firms. There’s quite a lot of evidence that firms have been agreeing with each other not to poach each other’s workers. This is a bit like colluding over prices, but instead of colluding over prices in the product market it’s colluding over wages in the labour market. Sometimes firms have agreements with their own workers that they can’t go and work for a competitor. Now, if that was in the product market, that would be considered an anti-competitive practice. But because it’s in the labour market, it’s tended to be overlooked. He’s arguing that, really, a lot of the policies that we have for product markets can just be transferred, quite simply and directly, across to the labour market. He suggests that we can just take the tools straight across. You can really think of the input market of labour and monopsony as being essentially just the mirror image of monopoly. A lot of the tools and things you’ve learned about on the product market side can be used on the labour market side. “EU competition policy is quite removed from political pressure” But he says that product markets and labour markets are different in certain respects. For example, it’s probably a bit naive to think that antitrust policy can be used to solve all these problems of monopsony on its own. He thinks that other things can be used such as a minimum wage, for example. The minimum wage has been quite a successful policy in the UK. When it was brought in back in the 1990s, we thought it could cause unemployment but it hasn’t. That’s part of what’s led us to change our thinking on monopsony. It seems that the reason it didn’t lead to unemployment was because there is a lot of monopsony power. In fact, the minimum wage could cause employment to go up in certain circumstances. Giving trade unions an exemption from competition policy so that they can collectively bargain up wages is another way of tackling the monopsony power of employers. So, there are additional labour market policies that you wouldn’t use on the product market side, but which you can use on the labour market side. I’m very sympathetic to the view that antitrust has ignored the workers and I think the arguments are convincing. It’s time for antitrust to start looking at them a bit more."