September 29, 2022
The Biden administration’s most newsworthy antitrust enforcement effort is found in its reiterated campaign to employ antitrust tools to increase wages and employment opportunities for ordinary workers by moving against employers for allegedly limiting competition among themselves for employees’ services.
Under prior administrations, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) focused primarily on protecting consumers and other buyers against higher prices, inferior quality or reduced choices – while paying relatively limited attention to competition in the markets for workers’ services.
Since 2021, the Biden administration’s new worker-focused antitrust program has been slowly getting off the ground with what has seemed at least as much rhetoric as enforcement (eg, with 2021’s joint DOJ-FTC public event on “promoting competition in labor markets”). Actual enforcement against employers has largely been limited to a handful of small DOJ criminal cases – begun during the Trump administration – challenging alleged agreements among employers in some specialized markets:
- not to solicit each other’s employees (so-called “no poach” agreements); and
- not to compete on wages offered to employees (“wage fixing” agreements).
For further details, see “Department of Justice set back by acquittals in labor antitrust cases” and “Antitrust indictments for employer restraints against employees“.
However, the DOJ has been unable to persuade the juries to convict the defendants after several recent trials. And the DOJ is pursuing impact on authors selling books in its challenge to the Penguin Random House proposed acquisition of Simon & Shuster, now awaiting a decision by the court.
Meanwhile, the FTC has been looking at employment market issues in merger investigations, but otherwise it has been less visible on employment market antitrust issues. Still, the FTC is potentially important because it appears inclined to use some of its broad administrative powers to help workers the way it has tried to help consumers in the past.
This gives additional significance to the FTC’s 19 July 2022 announcement that it had agreed to a memorandum of understanding (MOU) with the National Labor Relations Board (NLRB) – for the purpose of allowing the agencies to share non-public information with each other to “protect workers against unfair methods of competition, unfair or deceptive acts or practices, and unfair labor practices”.
In fact, the MOU seems likely to have little effect on the FTC staff’s actual day-to-day operations. It does not directly expand FTC enforcement responsibilities. Rather, reading much like a normal litigation protective order or a non-binding international antitrust enforcement agreement, the MOU:
- explains how each agency will handle non-public information obtained from the other; and
- imposes mutual obligations to keep data secure, among other things.
But there is no indication the two agencies will be regularly seeking information from each other under the MOU the way that the FTC and DOJ regularly do with foreign competition agencies when investigating international mergers or cartels.
What seems more significant is the MOU’s list of “areas of mutual interest” between the two agencies. This list provides a useful catalogue of the FTC’s policy priorities in employment markets – priorities that are frequently different from those that the DOJ has been pursuing. This priorities list includes:
- “the extent and impact of labor market concentration”;
- “the imposition of one-sided and restrictive contract provisions, such as noncompete and nondisclosure provisions”;
- “labor market developments relating to the ‘gig economy’ and other alternative work arrangements”;
- “the ability of workers to act collectively”; and
- “the classification and treatment of workers”.
The rest of this article looks briefly at each of these potential priorities and asks where the FTC might try to go with them.
Labor market concentration
The FTC leadership keeps talking about this issue publicly and asking some pending merger applicants for extensive employment market information. But the practical question is: how often will the FTC be able to find a merger where clear adverse “employment” market effects would justify blocking it when there were insufficient adverse “product” market effects to support a conventional section 7 merger challenge? The DOJ’s pending case against the Penguin Random House-Simon & Schuster merger may be such a case because it focuses separately on potentially reduced competition (and lower royalties) for book authors. Yet this very specialized, high-end “labor” market seems fairly far from showing that there is a broader “labor market concentration” issue involving ordinary workers which might occur, except rarely, in a normal FTC merger investigation.
One-sided contractual provisions
The MOU mentions “noncompete and nondisclosure provisions”. The FTC is obviously focusing on familiar terms that regularly appear in vertical employment contracts and have to be evaluated under the antitrust rule of reason – where their legality would be evaluated primarily on how much confidential information the employee has access to, how broad the restriction is and how long it runs. These are highly fact-specific issues which are regularly at issue in a lot of private litigation. It is hard to imagine the FTC bringing more than a few such small cases to try to clarify the rules. So instead, FTC Chair Lina Khan has indicated that she would like to use the FTC’s rulemaking powers in this area because such clauses are particularly unjustified when applied lower paid workers – but without explaining about how the FTC contemplates doing so. Recent news reports have suggested that a proposed rule may be considered by the commissioners within the next month. However, any such effort will attract serious opposition from major corporate organizations before the FTC and in court. In these circumstances, it is not anticipated that any such FTC rule will come into effect anytime soon, even assuming that it survives judicial review. (Employers will still have to face statutory non-compete prohibitions in a few states and the District of Colombia.)
“Gig economy” issues
This probably is potentially the most important priority unveiled by the FTC in its MOU. The “gig economy” is a growing and hugely important sector which the FTC and DOJ have largely ignored in their prior employment market pronouncements and enforcement efforts, despite the large numbers of workers involved. This sector is also still something of a legal vacuum. On 15 September 2022, the FTC issued a 17-page Policy Statement on Enforcement Related to Gig Work, which does little to fill that legal vacuum. Instead, treating this new sector with an air of cautious suspicion, the FTC (by a three-to-two vote) offers the public a menu of enforcement actions that it might take under its diverse powers. Gig workers are described as “consumers who work in jobs that are part of the gig economy” because the FTC hopes thereby to justify using its use consumer protection powers regarding the tech platforms which have created gig-based services and retained gig workers to perform them (eg, Uber and Lyft). Any future FTC rulemaking efforts that should be carefully watched by everyone because the FTC seems the only likely source of competition rules in the gig labor sector for the foreseeable future, unless the normally gridlocked Congress is somehow moved to enact new “gig economy” legislation the way some major foreign parliaments have done.
Classification of workers and their ability to act collectively
This is a particularly challenging “gig economy” legal problem, which raises some important fairness issues for many “gig” workers. Today’s US workers fall into one of only two categories: either they are employees or independent contractors. The legal and economic consequences of this determination are profound. If employees, the workers can join a union that can collectively bargain for them over wages and other economic conditions of employment under the national labor laws. By contrast, if the workers are independent contractors, they are on their own for antitrust purposes. They are treated as ordinary competitors – and thus it is illegal per se for them to collectively coordinate on how they are to be compensated. The FTC’s policy statement just seeks to duck this issue: “the manifold protections enforced by the Commission do not turn on how gig companies choose to classify working consumers.” But this legal distinction does matter elsewhere in the economy. The heavily footnoted policy statement never mentions that, after California had reclassified some gig workers as “employees” rather than “independent contractors”, this result was overturned in a referendum.
The FTC’s MOU with the NLRB suggests that agency leaders want the FTC to become a more active participant in the Biden administration’s campaign to use antitrust law to help workers obtain higher wages, better working conditions and more access to alternative employment opportunities. The agency’s broad administrative powers to undertake investigations, conduct public hearings and adopt new binding rules means that the FTC can do new things that the DOJ cannot do and the FTC has not yet tried to do in this area. The “gig economy” is the sector in which the FTC has the capability to make the biggest difference for workers.
To the extent that the FTC embarks on rulemaking(s) on employment markets issues, interested market participants and their representatives should carefully consider whether to become actively involved then, rather than await whatever rule(s) might emerge from the traditional hearings-and-compromise process.
This content was originally published on September 29, 2022, via the International Law Office (ILO) newsletter. It can be found here: FTC engagement in labor markets: all talk or real action?
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