Monday, January 17, 2022
As of late, there has been a concerted push in the Biden administration, backed by prominent academics, to expand the application of antitrust law against major employers who exercise monopsony power that reduces aggregate demand and thus leaves too many workers on the sidelines. The effort chiefly occurs in two major areas: stricter attacks on covenants not to compete and more intense review of mergers under the Clayton Act. This paper begins with an historical account of the law in both areas, from which it concludes that there is no good reason to alter the status quo ante. The modern claims of antitrust violations are said to rest on the traditional consumer welfare standard. But the theoretical and empirical evidence on this point is thin. Turnover rates in labor markets are high, labor shortages are now common; wage growth varies by presidential administration that changes, and not antitrust law, which has been constant. Other labor policies like anti-discrimination laws, paid leave policies, and minimum wage and overtime laws exert a more direct power. No systematic evidence suggests the current (cautious) acceptance of non-compete clauses allows large numbers of major employers to extract monopsony profits. The only employers with market power work in markets (like hospitals subject to certificates of need), where these formal barriers to entry make these mergers suspect for excessive concentration in product markets, leaving it utterly unwise to pore over concentration ratios in thousands of discrete labor markets. Any concern with monopoly influence in labor markets should seek to weaken the hold of public and private unions, consistent with the consumer welfare standard.