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New York Trustbusters Are Being Deputized to Bust Abusive Employers

Posted  October 27, 2021

New York’s pending overhaul of its antitrust law is in the forefront of a nationwide antitrust revival that seeks to use competition policy to combat labor market abuses.

This post examines how New York’s proposed 21st Century Antitrust Act (Senate Bill S933A)—which has already passed the State Senate—aspires “to ensure that our labor markets are open and fair” through a renewed focus on the harmful impact that concentrated market power can have on workers and working conditions.  The Bill is part of a growing movement to utilize antitrust enforcement to protect workers.

On September 28, 2021, the U.S. House of Representatives’ Subcommittee on Antitrust, Commercial, and Administrative Law held a hearing focused on “21st Century Antitrust Reforms and the American Worker.” Economists and union leaders alike gathered to discuss whether contemporary antitrust policy and enforcement have failed to address market concentration in labor markets and anticompetitive labor practices that have impacted workers, wages, and wealth equity.  In a recent interview, New York Attorney General Letitia James also stated that “prioritizing antitrust enforcement in labor markets” should be among the enforcement priorities of antitrust agencies in the 21st Century.

Constantine Cannon lawyers have already discussed in this blog a range of novel issues relating to the Bill’s efforts to overhaul New York’s 122-year-old antitrust law, the Donnelly Act, including what the Bill’s abuse of dominance provisions  would mean for companies with market shares in excess of 30 to 40%; how the Bill allows the NYAG and private antitrust litigants to recover expert witnesses’ fees and costs when they prevail; the Bill’s adoption of a dominance standard for merger review; and pro-consumer benefits of the Bill’s premerger review program.  The Bill’s efforts to give workers an opportunity to protect and strengthen wages, job mobility, and other working conditions through private antitrust enforcement—including now through the use of class actions—constitutes an additional innovation, which has unsurprisingly received broad support from unions, industry associations, workers, and small business owners.

The Bill seeks to achieve its objectives in three ways.  First, it subjects companies with a dominant position in “any labor market” to an abuse-of-dominance standard. Labor-market dominance can be proved through “direct evidence,” including the use of restrictive covenants as conditions of employment or “the unilateral power to set wages.”  When dominance is shown through direct evidence, a firm cannot defend itself by arguing alleged procompetitive benefits of its exploitative practices. Dominance call also be shown through “indirect evidence,” including by demonstrating that a company has a 40% or greater share of a relevant market as a seller, or a 30% or greater share if a company is a buyer. In recognizing a lower market share threshold for showing the monopsony power of buyers, the Bill specifically contemplates, and benefits, labor markets.  The Bill also singles out contracts that restrain individuals from engaging in “lawful profession[s], trade[s], or business[es]” or which restrict “workers and independent contractors” from “freely disclosing wage and benefit information” as examples of “abuse” in labor markets.

The Bill’s topical focus on noncompete and no-poach agreements aligns with President Biden’s recent Executive Order on Promoting Competition in the American Economy, as well as with the bipartisan Workforce Mobility Act.  It also coincides with an increase in criminal enforcement actions by the U.S. Department of Justice (“DOJ”) against no-poach agreements, as well as actions by the New York Attorney General.  Growing empirical evidence has shown that restrictive covenants of this kind—which have become increasingly widespread in recent years, with an estimated 36-60 million workers subject to noncompete agreements—have contributed to wage stagnation and deflated labor dynamics by preventing workers from leaving their employment for better, higher paying jobs or from starting their own businesses. As one example, a recent study of an Oregon law that banned noncompete agreements for hourly workers showed that it led to a 2 to 3% wage increase for all hourly workers in Oregon across the board.

Second, the Bill requires the New York Attorney General to consider the impact of mergers on “labor markets” when determining whether to grant approval—a change the FTC Chair, Lina Khan, has also informally required for transactions reviewed by the FTC.  Studies have shown that wages fall in highly concentrated labor markets, with mergers contributing to concentrated market power—the consolidation of hospitals in New York being one obvious example. Yet, the Antitrust Division of the DOJ and the FTC—charged with reviewing the potential harmful effects of mergers—historically have not challenged mergers for lessening competition in labor markets.  To the contrary, the federal agencies have historically credited the concentration of monopsony power with the ability to drive down prices, assuming that a company’s exploitation of labor will inevitably inure to the benefit of consumers, not just its shareholders.  Thus, the Bill strengthens the scope of antitrust enforcement by making it mandatory that the New York Attorney General consider the impact on labor markets of “any transaction” falling under the Premerger Notification Subdivision, reversing one of the most harmful presumptions under federal antitrust policy and practice.

A final, particularly noteworthy aspect of the Bill—and one that has flown under the radar—is its inclusion of “independent contractors” as among the “workers” the law protects.  Under the Bill, traditional “employees” and independent contractors—gig workers like Uber and Lyft drivers or Instacart shoppers—are entitled to analogous protections and rights.  In a clear departure from federal antitrust law—on an issue also recently singled out by FTC Chair Khan—the Bill declines to proscribe independent contractors from “combin[ing] in unions, organizations and associations, not organized for the purpose of profit, . . . [or] bargain[ing] collectively concerning their wages and the terms and conditions of their employment.” However, independent contractors still remain vulnerable under federal antitrust law which only protects traditional “employees” recognized as such under the National Labor Relations Act from antitrust scrutiny for analogous activity.

As FTC Chair Khan recently stated:

[L]egislation clarifying that labor organizing by workers regarding the terms and conditions of their work is outside the scope of the federal antitrust statutes, regardless of whether the worker is classified as an employee, would remove the threat of antitrust liability resulting from such coordination. This type of clarification could have far-reaching effects, especially given the prevalence and expansion of “gig economy” firms that rely heavily on workers classified as non-employees. As federal lawmakers consider antitrust legislation to better protect labor, state efforts with similar aims could also provide a useful model.

New York’s proposed new antitrust law is clearly a useful model.  It is both modern and progressive—possibly foreshadowing meaningful new trends in federal antitrust policy where workers are concerned.  While only time will tell how the law affects businesses and how workers use the law to effect change, its recognition that corporations with outsized power can depress wages and circumvent job mobility is a major development that hopefully will help to reset antitrust enforcement in ways that are truly beneficial to all of society.

Edited by Gary J. Malone

Tagged in: Antitrust Enforcement, Antitrust Litigation,