Booker calls on antitrust regulators to start paying attention to workers

Sen. Cory Booker (D-NJ) is challenging federal antitrust officials to explain what — if anything — they are doing about the impact of corporate concentration on labor markets.

“It appears that — despite having a clear mandate to promote competition across the economy and extensive enforcement tools at your disposal,” Booker writes in a letter to the Federal Trade Commission and Justice Department obtained by Vox and to be released later today, “your Agencies have not prioritized the responsibility to ensure that workers have meaningful choices that allow them to fairly bargain among potential employers.”

Antitrust law normally comes up in the context of monopoly power, the prospect that a company will control such a large share of output that it can raise prices or reduce quality. But it also applies to situations of monopsony power, in which market concentration offers undue leverage over workers or upstream suppliers. Antitrust regulators have consistently recognized the importance of the monopsony issue when it comes to cartels between separate companies — suing a number of big Silicon Valley companies that had reached an illegal “no poaching” agreement to depress engineers’ wages — but has not in recent years appeared to recognize such concerns when conducting merger review.

Booker writes that this neglect “appears to have been the case under administrations from both parties, stretching back decades.” His newfound interest in the matter, however, is part of a broader trend inside the Democratic Party to a heightened interest in antitrust matters across a number of fronts — highlighting a potential opportunity for Democrats to press anti-business and pro-worker themes without necessarily asking people to put enormous amounts of faith in big new government programs.

Booker’s letter starts with a premise that’s now become common in progressive circles: that the American economy is becoming broadly more concentrated across a range of sectors. The table below, from a report assembled by the Obama administration’s Council of Economic Advisers, illustrates the thesis clearly — in 12 out of 13 major industry sectors, the biggest firms are capturing a larger share of overall revenue than they did 20 years ago.

At the same time, corporate profits as a share of the overall economy are at an unusually high level, the stock market is booming, and wage growth has been incredibly restrained even as the economy has recovered from the depths of the Great Recession.

Booker connects this to research from Jan de Loecker and Jan Eeckhout and a separate paper from Simcha Barkai that, working from methodologically opposite directions, reach the same conclusion — the wage share of the overall economy is declining because companies are increasingly able to charge high markups for the goods and services they sell. Declining competition isn’t the only possible explanation for rising markups, but it’s certainly an obvious contender. And paired with the observation about growing revenue concentration, it paints a fairly persuasive picture.

The question is what to do about it. In their “Better Deal” policy proposal, congressional Democrats offer a number of changes to antitrust policy, but Booker’s point is that existing laws and institutions could be used in a more far-reaching way.

Merger enforcement in the United States underwent a conceptual revolution starting in the late 1970s and especially after Ronald Reagan’s appointments to the federal judiciary. Robert Bork and judges, scholars, and regulators working in his intellectual tradition argued that the point of antitrust policy was to “protect competition, not competitors,” and alleged that earlier cohorts of antitrust enforcers had been overly skeptical of mergers. Sometimes two companies combining is, after all, a legitimately efficiency-enhancing move that will allow the combined company to produce more goods and a lower price than the separate companies could ever achieve.

Other players in the industry won’t like that, of course, but part of the new approach to antitrust thinking was to clarify that the interests of other players aren’t what matters. An efficiency-enhancing merger creates more vigorous competition and should be allowed.

In practice, this has meant that merger review and enforcement has focused nearly exclusively on the impact on consumer prices.

The authors of American antitrust laws were, however, clearly concerned about anti-competitive power’s impact on workers and suppliers as well. A common concern in the Populist era, for example, was that railroads could achieve monopsony pricing power over farmers in a given geographical area and squeeze their incomes. Since grain is ultimately sold into a fairly globalized commodity market, this kind of consolidation of middlemen, which can still happen today, wouldn’t necessarily impact end consumers. But anti-competitive behavior is anti-competitive behavior, and antitrust law is supposed to guard against it.

And indeed, when it comes to cartels, current antitrust enforcement does guard against it. Beyond the Silicon Valley case, the government has in recent years taken action against an Arizona hospital cartel that was suppressing pay for temporary nurses, a trade association of fashion designers that agreed not to compete when hiring models, and an Illinois nursing home cartel that was retaliating against a nursing agency for trying to raise prices.

But Booker writes that his staff has been unable to find an instance “in which employment monopsony concerns were cited as a reason to challenge a proposed merger or acquisition,” and concludes that “despite having a clear mandate to promote competition across the economy and extensive enforcement tools at your disposal that could be used to promote this goal[,] your Agencies have not prioritized the responsibility to ensure that workers have meaningful choices that allow them to fairly bargain among potential employers.”

Booker’s letter ends with a lengthy three-page list of questions for the Antitrust Division and the Federal Trade Commission about monopsony, labor markets, and antitrust enforcement. Some are aimed at clarifying the agencies’ stance on these matters as a conceptual issue; others are aimed at asking them to identify whether there are analytic tools or other concrete resources they are lacking that would help them analyze these topics.

The overall message, however, is pretty short and clear.

Booker believes that existing antitrust law and institutions are being underutilized as tools to fight economic concentration and help workers get a leg up. This is a message area that Democrats have been tinkering with for a couple of years now, and Booker’s focus on monopsony and labor markets connects it directly to widespread anxiety about why even a falling unemployment rate isn’t leading to meaningfully higher pay for most workers. And at a time of growing distrust in big institutions — both private and public sector — it offers a potential policy fix for stagnating middle-class living standards that doesn’t require the public to have faith in a big new government program.