FTC Reaffirms Focus on Labor Markets in Reviewing Microsoft-Activision Blizzard Merger
Federal antitrust enforcers are heeding the call for more vigorous regulation of monopsonies, which may soon no longer be the forgotten man of competition law.
Anybody closely following the priorities of antitrust enforcers is sure to have noticed the U.S. Federal Trade Commission’s and U.S. Department of Justice’s escalating focus on labor markets. This focus is increasingly being directed at monopsony power—which, in labor markets, enables dominant firms to use their market power, as buyers of their workers’ labor, to depress those workers’ wages and rights. Historically, such anticompetitive abuses of monopsony power have not drawn the attention given to dominant firms’ abuses of monopoly power that result in higher prices for consumers.
But the increasing consolidation and dominance of large companies have ignited a populist urgency to regulate monopsonies, not just monopolies. Most recently, FTC Chair Lina Khan jumped on the opportunity to reaffirm the FTC’s focus on labor markets with the FTC’s investigation of Microsoft’s $68.7 billion takeover bid for popular video game developer Activision Blizzard.
Slow Progress in Labor Markets
Due to the historical hyperfocus on consumer welfare in antitrust law, labor markets have endured decades of lackluster antitrust protection. A simple review of antitrust cases in Westlaw’s legal database shows a huge disparity between product market and labor market antitrust cases since 1960. But recently, the federal government has unequivocally refocused its antitrust attention to encompass on monopsony cases. President Biden’s 2021 executive order on competition specifically called out the threat of monopsonic conduct on worker welfare, and directed federal agencies to monitor labor markets.
And both the DOJ and FTC have dived into antitrust enforcement in labor markets, from holding joint workshops and soliciting comments to strengthen labor protection in merger enforcement, to bringing criminal cases for wage collusion and no-poach agreements. Significantly, the DOJ sued to block Penguin Random House’s acquisition of Simon & Schuster, alleging anticompetitive impact on authors. With all this fanfare, this blog identified antitrust enforcement in labor markets as one of the six “Antitrust Developments to Watch in 2022.”
Early results, however, have been anticlimactic. Most significantly, juries in two separate criminal cases brought by the DOJ failed to convict any defendant of wage-fixing or unlawful no-poach agreements. While these cases had unique facts, entailed criminal prosecution, and did not involve merger enforcement, observers wondered if the DOJ and the FTC might slow their focus on labor markets and devote their stretched resources elsewhere.
The FTC’s Review of Microsoft-Activision Blizzard
FTC Chair Khan put such doubts to rest in her recent comments regarding the FTC’s review of Microsoft’s proposed acquisition of Activision Blizzard. Chair Khan was responding to a public letter sent by Senator Elizabeth Warren and others urging the FTC to closely examine the deal’s impact on workers, particularly in light of Activision Blizzard’s recent sexual misconduct scandals, and concerns that Microsoft could inhibit the attempts of Activision Blizzard workers to unionize in response to those scandals. Given that not a single Microsoft worker in the U.S. belongs to a union, such concerns are not baseless.
In her response to Senator Warren, Chair Khan directly addressed the concerns regarding monopsony power and doubled down on the importance of analyzing labor markets in addition to product markets. While Chair Kahn did not discuss the specific labor concerns related to Activision Blizzard, she confirmed that labor markets are no exception to the FTC’s commitment to “thoroughly examining effects on competition in all relevant markets.” Furthermore, Chair Kahn agreed that the negative effects of monopsony power on workers could include “undermining their rights and dignity.” Chair Khan’s response clearly signals to the public that the FTC will continue to examine a merger’s effects on labor.
To be sure, Chair Khan’s response does not presuppose that Microsoft’s acquisition of Activision Blizzard would have a negative impact on workers. Nor is their any indication that anticompetitive effects in labor markets would by itself call for blocking the acquisition, notwithstanding potentially procompetitive consumer effects. Doing so would almost certainly subject the FTC to legal challenges.
Rather, there are two takeaways. First, the response is a commonsense reaffirmation that labor markets, like all markets, are within the scope of the FTC’s merger analysis.
Second, it is an unmistakable sign that the FTC will not shy from using its enforcement powers to combat harm in labor markets. Moreover, it signals that the FTC will examine effects not just on workers’ wages and mobility, but also on workers’ “rights and dignity.” This of course makes economic sense because the operative lens is whether monopsony power unreasonably stifles workers’ bargaining power. If workers are stripped of their power to bargain for their labor, it should not matter whether the resulting negative effects materialize in the form of lower wages or poorer work conditions.
In any event, with antitrust enforcement poised to continue spotlighting labor welfare in addition to consumer welfare, companies should take extra care to conduct their business with a clear understanding, informed by antitrust counsel, of the impact of their transactions and conduct in both labor markets and product markets. Dominant firms especially must be prudent in the treatment of workers generally, lest a simple employment complaint becomes a federal antitrust lawsuit.
Written by Kristian Soltes
Edited by Gary J. Malone