Cony A. B00KER sures. United States Senate November 1, 2017 Makan Dera Maureen K. Obthansen Assistant Attomey General ‘Acting Chiman United States Department of fstice Feder! Trade Commission 950 Pennsyvanin Avenue, NW 600 Pennsyvania Avenue, NW Wasingin, BO 20590 ‘Washingon, DC 20380 Dear Mr; Deleahim and Ms, Obihausen 1am writing to request information about the tools that are available to your Agencies for protecting competition in domestic labor markets. ‘A host of different indicators tell a common story about the state of domestic labor markets today: {oo many workers are unable to ensure that theit hard wark and increased productivity translates into better pay and terms of employment, based in part on dominant firms’ market power. That ‘outcome is deeply concerning for American workers, and this evidence provides a timely reminder of the stakes of your Agencies’ responsibilty to protect labor market competition, Although labor and product markets are distinc, the structure of one will end to affect the other— relationship that was recognized by the drafers of our antitrust laws. When the Sherman Antitrust Act was passed almost unanimously in 1890, its congressional sponsors described the law's purpose as being to rein in the power of the “trusts” that had risen to dominate many industries at the time, including by distributing the economic benefits accruing to powerful monopolies cross suppliers of goods and labor. Supporters ofthe law spoke ofthe need restrain predatory business practices that harmed the processes of competition through which ezonomic rewards are dstributed—identifying a range of injuries fom excessive concentration that could incur net only to consumers but also workers, farmers, and other suppliers. Senator John Sherman, for example, observed that a trust “commands the price of labor... for in its field it allows no competitors.” Congress passed antitrust laws in part to ensure that large-scale industry could no longer unilaterally dictate employment terms to workers who were unable to bargain on fre and fair terms." " White Congress subsequently passed lgsatin spocfc to protecting emplayens as market actos, etablshing ‘ni sanded td pricing ce ight oburgais collec, modern cpt paces resnnaly Ue the effectiveness ofthese ater laws-a wend tht concentrated corps power has faced, Far example may tenployers miselsiy thle workers as independent contractors eter than employes, exemsing them rm the Important potions provided by protections ke te Fa Labor Standards Act ad he Nana aber Relations Act. Under condon of monopeony, worker hed with th sort bargain ave litle lg rsourse oe petal aby 'o push back against changes oe Jomand compensation forthe diminished protections. Although this aces have ioe ealleaged by zegulors and in cour, they ean senate tho baraiing poston of dominant companies by ‘edcing workers" ably fay bargin and ensure hat hey are adequately conpensited forte vale of het abr. Rising product market concentration thus allows dominant fms to extract econo eas from consumers and supple: practices ike misclasientin and subcontracting make it ease fr fms to thn avoid dstouing thse power wil tnd to undermine semomicecieneyBut mounting evidence suggests tht exacly this sort of imbalance has come to characterize & significant share of relationships between American workers and their employers—and that declining competion may again be implicated. The existence of concentrated buying power, of ‘monopsony, in U.S. labor markets is supported by economic data showing stagnating wages, rising inequality, an the decoupling of compensation an produsiviy. Although enforeement efforts have focused on the ways that sellers exercise mauket power in output markets, fms can also ‘exercise market power as buyers—by lowering pices o altering terms of trade adversely tothe sellers of inputs, including labor. A firm tat has market power when purchasing inputs o hiring ‘workers—an employer with monopsony power—wil face strong incentives to employ fewer workers, at lower wages, than they would in a competitive labor market. Because wages and cmployment under these conditions are artificially depressed by dominant fms, policy interventions that rebalance power buck in workers’ favor have the effect of correcting a market fulure—thereby improving evonomic eficensy ‘A growing body of evidence suggests thatthe rise of concentration across U.S. industries has helped create a labor market in which fewer workers ae able to fairly bargain with their employers to set their wages on competitive terms, One of the most significant macroeconomic tends ofthe past several decades is the gradual decline inthe Inbor share of national output—the part of GDP that’s allocated to wages. A number of recent studies have suggested that this long-term trend could be connected to an inerease in market power and undistributed corporate profits. Indeed, one recent paper found evidence that monopoly power helped explain not only stagnant worker wages. but also declining labor force participation, slower productivity growth, reduced worker mobility, tnd slow GDP growth: Another group of researchers found tht the concentration of employment has risen from 1982 to 2012 in each of the major covered economic sectors—and that those ustres with the highest increases in concentration had also experienced the sharpest decline in labor share.* “And numerous academic papers have highlighted a long-term downward trend in business dynamism since the 1970s, in particular a deop in new firm ereation-—resulting in fewer ‘competitors where workers might market thet skills, ‘wil so inca income inequality though ise on workers both among fms, based on ther monopoly ‘ens ad als within fs, trough the Fring that monopcny power slows hese dominant mst igo 2 From an efficiency paspective, the exercise of market power implies precisely he same competion conceras whether doioant fs te acing aa buyers or seller, Market power the form of mooopeeny or monopoly powers in agate extemal hat eeate harms acre the eonomy by lading fo nein dseutons ‘tresoures a ab re conptn, > tan De Loser & Jan Beckout, The Rise of Maret Power andthe Aeroceanome Implications (AYE. 20), valabie a pvr Janek con/wp-conteaLplesdsRMP.p, See alo Sicha Bark, Declining Labor (and Capital Shares, U.CuIcAcO NEW WORKING PAPER SEMES NO. 2 (Nov. 2010, awable at Iisscareh. chicago boot edu /neda/S872EBEB 0424S909BSFUAESARISSCO.par ("My resus sbow tha "he detne inthe labor hare stonglyasocaod wit an increase in coneston.” ‘ Devid Autor, David Dor, Lawrence F. Katz, Christina Patterson, & John Van Reenen, The Fall ofthe Lar Share and the Rise of Syporuar Firms, MIT” WOwNG APSR Seuss (2017), avallble af hpslesonomisnitlies/12972; David Autor, David Dom, Lawrence F. Karz, Christina Paterson, John Van Reenen, Concent onthe Fall of th Labor Share, A. ECON, REV. PAPERS PROCEEDEGS 2017, aalable a hipecononis i ede 1244‘Asa legal matter, its nat contested tat our antitrust laws apply to reduetions in competition for ‘employees as readily as they do to reduetions in prodet market competition. In remarks lst yea, ‘Acting Assistant Atomey General Renata esse observed that our ats as target any atempt to obtain or keep economic power untuily by sidewepping normal competitive processes protecting notonly eansumers but also “workers, whose wages won't be driven down by dominant employers with the power to dictate terms of employment.” As Hesse noted, “[!Jhe ultimate concern of antiust lw has always been protecting competition a all evels ofthe ceanomy"— including “among employers to atrat workers” Indeed, in recent decades your Agencles have Inllated ligation against major Silicon Valley ‘employers for entering into no-pouching agreements not to recruit or hire away cach other's workers in violation of the antitrust laws"; an Arizona hospital association for agreeing to set uniform bill rates for paying temporary and per diem nurses; a trade association of fashion ‘signers for agrecing not to compete for modeling services; and a group of Illinois nursing homes forconspingf boyet amuse regity that ad atepted oases prices fr temporary nursing ‘These challenges al targeted explicit agreements between competing employers. Yet our office hhas been unable to identify any enforcement action initiated by either of your Agencies that targeted exclusionary behavior undertaken by individual firms, or any instance in which employment, monopsony concems were cited as a reason to challenge a proposed merger ot acquisition." Nor have we identified other instanees inthe past three decades, apart from these * See ANTTRUSTDIV, U.S. DEF" Jus & Pe, TRADE Cotas, ANTTRUST GLNDANCE FORHLUNAN RESOURCE PROFESSIONALS (Oct 2016), avollable ar hss jase vee fle0351aoemiond (The US. entra laws... apply to competition among ems to hie employes. An agreement among competing enployr ii of fi the ems af employment for potential ies nay vate sire laws if the agrement cons inv fm deiionmaking wih regard to wages sre, or benefits terms of employment; reve job pparunies From an anirust perspective, fms tat compet o hire o rein employees are competitors inte employe ‘maretplce, regards of water th fms male he sme prods compet To provi the sae servis") Reman Hess, Assistant Atty Gen, Amitwt Di Dept of Juste, Remarks ot the 2016 Global Anmiast Enforcement Ssmposiun: dnd Never te Tein Shall Mea? Connecting Popular and Profsionol Vsons for Antrat Enforcement (Sept. 20, 2016), cvalable ot ki: justice govlopalpecclVactng assume ‘uta tenatesse-anirst-dvsion-deliver-opning.Exsing that workers hve mening choles wen hey fate be bor marke is fundamental lo ou governs align to ese economic fines she explained, because i yes higher wages, etx beetis, and er working conditions” Complaint, Adobe, 2010 WL 1141784; Complaint, eBay, 2012 WL ST2T4NS; Complint, Lacan, 2010 WL sna * Compl Unie Sis v. zs How & Hear i'n No, CVOT-IONO-PHX (DAS. 2, 207, hums govatrase document ompain-28 * Council of Fashion Designers of America 120 F.C. 817 (1995. "Debes Comp, SEC. 701 (191), " Nox he Deparment of Juste has sued to block mergers on onopsonygrounds—though i appears that hese ations hive ll efereaced effects on produces, rer tan worker, Far example, the Deparent sed In 201 Dock proposed merper between chicken process on th grounds fa ik would hand these companies excessive ower over pouty farmers See Complain a 2-13, Uled Sts v. Georges Food, LLC, No: 1-¥-O0083 2 (WD. Ve May 10,2011) vate ct ioe sie ves document e974 /dovloa erguing da ‘compiny's aoullon ofa chien complex “akesK more Ukly tat defendants] wil engage in stconpettivechallenges, where your Agencies initiated enforcement actions against competing employers for colluding to impede workers’ ability to freely choose among potential employers. In other words it appears 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. This is no recent development: ithas been the case under administrations from both parties, stretching back decades ‘This is true even though evidence suggests that today, just as in the days of industrial trust, product ‘market concentration is limiting labor market competition am writing to seek information about how your Agencies consider this sor of competitive harm, and the constraints you might face in your efforts to monitor threats to competition in labor markets ‘and prevent firms from acting to aequre or maintain monopsony power. ‘To better understand your Agency's approach to this issue, we kindly ask that you respond by December 1, 2017, othe following questions: 1, Does your Agency consider efforts to maintain competition in labor markets to be a legitimate goal of our contemporary antitrust regime? 2. Is it the experience of your Agency that Inbor market competition can be affected by product matket structure? 3. In the remarks cited above, Acting Assistant Attomey General Renata Hesse also stated that “a merger that gives a company the power to depress wages or salaries or fo reduce the prices it pays for inputs is illegal whether or not it also gives that company the power {o increase prices downstream.” Is it the position of your Agency that you have the legal authority to consider potential harms that could derive from the exercise of market power inthe purchase of labor inputs, as distinct from the harms that could result from the exercise cof market power in the sale of products in output markets? 4, Legal authorities relating to competition in labor markets 4) Is it comect that our antitrust laws apply equally to agreements not fo compete by buyers, including purchasers of labor, as well as sellers? ) Section 7 of the Clayton Act prohibits mergers and acquisitions where the effect, may be substantially to lessen competition” in an affected market. Does your “Agency consider the sale and purchase of labor services to constitute potentially ‘worinaton To depress pees for broler grower services” and would “substantially lessen compaiton for the phan of bor bower [hike fer] services in violation of Secon Toft Csyton Ae") Thi ipton Umomstatcs tht your Agencies do have a story mandate to consider, daring the merge review proces, ‘ampeitv hims ssid wih sonopsny (as seprate fom consumer welfare) even as Your record Sige tat your Agencies have no pried ths Sor of harm in your enoreement efor especialy with respec fo abo mae competion,relevant markets for which competitive effects should be considered during the merger review process? ©) Section 2 of the Sherman Antitrust Act makes it unlawful to willflly acquire or ‘maintain market power in a relevant market through improper means. consider the sale and purchase of labor services to ly relevant markets to which your iavestgative and enforcement authority under this law would extend? fi, Inthe past thirty years, has your Agency initiated any enforcement action targeting exclusionary behavior undertaken by individual firms, in the ‘context of labor market competition? 4) In addition to the Clayton, Sherman, and Federal Trade Commission Acts, what ‘other legal authorities affect your Agency's authority and ability to investigate or regulate labor market competition? 5. Constraints limiting your A ively © promote competition in labor markets: 8) In separate remarks before the American Bar Association, Hesse stated that “going orward employers who conspire to hold down wages or restrict hiring of each other's workers will be investigated criminally and, if appropriate, prosecuted criminally." To the extent that you have authority to investigate threats to competition in domestic labor markets, what are the constraints that have prevented ‘you from pursuing such investigations? +b) To the extent that you have pursued such investigations and identified evidence of anticompetitive behavior of other threats to labor market competition, what ‘constraints might prevent you From bringing a case? ©) Do judicial precedents impair your ability to investigate and pursue enforcement behavior in labor markets? Iso, which ones? extemal constraints other than judicial precedent—such as access to information from employers or available Agency resources—prevented you from bringing cacosrolating t9 competition in labor markets or impedod your iy o pursue effective investigations in this area? (©) Does any administrative guidance impair such action? If'so, which guidance? " Renata Hose, Assan Atty Gen, Andst Div, Dep't of lusie, Proeting Competition Aerts 50 Untied ‘Advoeney and Cooperation in dntrant Enforcement (NON. 17,2016)1) To what extent have other factors at your Agency's diseretion—such as informal Agency policy, lack of relevant expertise or analytical capacity, of internal allocation of staff resourees—prevented you fram bringing cases relating to competition in labor markets or impeded your ability to pursue effective investigations inthis area? 8) To advance your Agencies’ shared goal of protecting competition across the ‘economy, would it be helpful to have resources specifically dedicated to monitoring, ‘threats to competition in labor markets and supply chains? 66, Consideration of factors affecting labor market competition inthe merger review process In analyzing proposed mergers and acquisitions, does your Agency consider the prospective impacts on wages and other terms of employment, or the bargaining position of workers employed inthe affected labor markets or supply chains? ') Are the information-gathering tools available in merger review sufficient to permit your Agency to analyze the effects of mergers with respect to labor market ‘competition? Does your Agency have the capacity to model competition in labor markets? Ifnot, what sort of resources would you need to develop this capacity? ©) In which of your recent merger investigations have you sought evidence regarding the effects of the merger on labor market competition, including the potential for snti-competitive behavior? ) Ae there any circumstances under which your Agency's current merger review process would not include an analysis of the exercise of monopsony power or the ‘degroe of competition in affected labor markets? ©) If your Agency's review process generated evidence that a merged entity would be shielded from the normal price-setting mechanisms that apply inthe labor seting— either because it may be more likey to use its market power to unilaterally set terms and conditions of employment, or to actin concert with other powerful buyers of labor to achieve the same end—would this affect your Agency's decision about ‘whether 10 approve a proposed merger or acquisition, or the terms under whieh approval was granted? 1) Tn the past thirty years, were there any occasions in whieh the prospective impact fon employment or wages was a factor in your Agency's decision to challenge & proposed merger or acquisition? Were there any occasions during this time when concem about either concentration of monopsoay power ot potential anticompetitive conduct affecting teams of employment resulted in resteetive conditions on an approved merger? 2) What public guidance is available on when labor and employment consequences of 1 proposed merger or acquisition will be considered in the goverament review‘process? Does your Agency have any intemal guidance on how and when these factors should be considered? ‘Thank you for your attention to this important matter, and for your efforts to protect competition and ensure faimess at all levels of the economy. Sincerely, ‘Cory A. Booker United States Senator