Competition Policy for Labour Markets

Abstract

Competition law in many jurisdictions defines its consumer welfare goal in terms of low consumer prices. For example, mergers are challenged when they threaten to cause a price increase from reduced competition in the post-merger market. While the consumer welfare principle is under attack in some circles, it remains the most widely expressed goal of antitrust policy. We would do better, however, to define consumer welfare in terms of output rather than price. Competition policy should strive to facilitate the highest output in any market that is consistent with sustainable competition. That goal is in most ways the same as a goal of pursuing lower consumer prices; that is, as output goes up prices go down. In the United States we have traditionally seen anti-labour policies as coming from the political right, through such means as right-to-work laws that drive wages down or other forms of anti-union activity. But today the competition policy advocated on the left has its own share of anti-worker sentiment, particularly in the form of attacks on low prices. Higher prices certainly harm consumers, but they also harm labour by reducing output. Product consumers and labourers have one thing in common: just as consumers benefit from high output because it produces lower prices in product markets, so too labour benefits from high output because it increases the demand for jobs and, in the process, boosts wages. This paper examines competition policy toward labour, focusing on these themes. In particular we look at anticompetitive mergers in labour markets; anti-poaching agreements; excessive noncompetition covenants, particularly those that bind only the employees working in a particular franchise, such as McDonald’s; and anticompetitive occupational licensing.