ICLE White Paper Discusses Limits of Labor Economics as an Antitrust Tool

PORTLAND, Ore. (May 1, 2024) – Potential monopsony power in labor markets has drawn growing interest from legal and economic academics in recent years, and is increasingly invoked by policymakers interested in using antitrust law to address concerns regarding labor-market concentration.

But according to a new International Center for Law & Economics (ICLE) white paper, the empirical evidence on the extent and impact of labor monopsony remains mixed, and there are important differences between monopoly and monopsony even as a theoretical matter that complicate applying traditional antitrust tools and standards to labor markets.

While monopsony concerns have been cited in the Federal Trade Commission’s (FTC) recent ban on employment noncompete agreements, its challenge to the proposed Kroger/Albertsons merger, and in the FTC and U.S. Justice Department’s 2023 Merger Guidelines, the antitrust agencies may be glossing over both the unsettled state of the economics literature and the legal difficulties of proving labor-market harms under existing antitrust standards, authors Brian Albrecht, Dirk Auer, and Geoffrey A. Manne note.

The authors explain that traditional efficiencies and increased buyer power are often two sides of the same coin, which would inherently force antitrust enforcers to weigh difficult tradeoffs between, for example, worker harms and consumer benefits. Moreover, defining the relevant market for antitrust claims is significantly more complex in labor markets, where the boundaries between different occupations, industries, and geographic areas can be blurry.

“As labor-market concerns continue to arise in antitrust cases, it will be critical for the FTC and other enforcers to develop more robust analytical frameworks and evidentiary standards to support their claims, and for courts and policymakers to provide clearer guidance on how labor-market harms should be assessed under existing legal standards,” the authors write.

The full white paper can be downloaded here. To schedule an interview with one of the authors, contact ICLE Media and Communications Manager Elizabeth Lincicome at 919-744-8087 or [email protected].