PRACTICAL CHALLENGES CONFRONTING MERGER REVIEWS OF LABOR MARKETS

Written by Joshua Holian and Nitesh Daryanani¹

I. INTRODUCTION

Section 7 of the Clayton Act ("Section 7") prohibits mergers and acquisitions that are substantially likely to lessen competition, or that tend to create a monopoly.²

When reviewing mergers for potential Section 7 violations, the United States Department of Justice’s Antitrust Division ("DOJ") and the Federal Trade Commission ("FTC," and collectively, the "Agencies") historically have focused their analyses on the probable effects that the merger in question will have on consumer welfare. Through decades of case law and enforcement practice, the Agencies have established a relatively well-understood path for connecting product market concentration to anticompetitive effects that—under the right conditions—would negatively impact consumers with higher prices, reduced quality, or lower investments in innovation. The precise boundaries of when a specific merger is substantially likely to lessen competition will of course be heavily contested in any given merger review, but the analytical frames (and areas for debate) are relatively well defined.

Over the past 18 months, the Agencies have expressed interest in expanding merger reviews to analyze the impact of a proposed merger on labor welfare, in addition to consumer welfare.

Incorporating questions of labor welfare into Agency merger reviews may prove challenging in practice. While product and labor markets are governed by the same underlying forces of supply and demand, these segments differ in meaningful ways, as well. In combination, these differences may constrain the ability of the Agencies to use their historical experience with analyzing product markets as a model for how to evaluate a merger’s effects on labor markets.

Of course, the observation that a task will be hard does not make it impossible. The Agencies may find the right case over time to overcome the below-described challenges and establish that a merger is substantially likely to cause a lessening of competition in a labor market. Correspondingly, parties pursuing mergers should bear in mind the risk that an Agency may scrutinize their transaction’s impact on labor markets, in addition to the usual product market-focused analysis. That said, at least

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in the near term we anticipate that the Agencies will tend to look for opportunities to allege labor-based claims in addition to traditional allegations that a merger will impact consumer welfare, rather than pursue a labor-based theory as the sole grounds upon which to challenge a merger.

This article analyzes contemporary scholarship that has evaluated the question of whether merger review is an appropriate tool for analyzing impacts on labor markets. To contextualize that analysis, the article begins with a brief overview of the merger review process, and the typical role of the consumer welfare standard in that analysis, before we turn to an assessment of what a pivot towards assessing labor market competition would look like.

II. BACKGROUND: MERGER REVIEW AND ENFORCEMENT

A. THE BASICS OF MERGER REVIEW

Section 7 prohibits mergers and acquisitions that are substantially likely to lessen competition.³ The Hart-Scott-Rodino Antitrust Improvements Act of 1976 established a framework whereby parties to a proposed merger must notify the Agencies before closing the transaction if the transaction is not exempt and exceeds certain thresholds.⁴

Over the years, the Agencies have issued and reissued guidelines that reflect their approach to evaluation of horizontal and vertical mergers, among other reportable transactions (the "Guidelines").⁵ Courts hearing challenges by the Agencies to mergers have defined a framework for evaluating mergers, as well.⁶

A healthy debate remains open among antitrust practitioners on the exact boundaries and requirements for assessing whether a merger violates Section 7, and who should bear what burden of proof on these issues. At a high level, however, the basic merger review "algorithm" for transactions involving horizontal competitors is as follows:

First, to understand whether a merger will substantially lessen competition, we need to understand the relevant market impacted by the merger.⁷ The relevant market is the field of competition in which meaningful substitutes exist. The courts view market definition as an important threshold issue for merger review (the logic being, we cannot credibly assess the impact of a merger without first understanding what product and geographic markets might be impacted).⁸ Given the prominence of the issue, practitioners have devised a range of tools for identifying or approximating the boundaries of relevant markets to a merger, including economic analysis, ordinary course of business documents, and customer testimony.

After identifying the relevant market at issue, we must understand whether the relevant market is concentrated.⁹ Absent durable concentration, economics tells us that a merger is unlikely to have an anticompetitive effect, since consumers could avoid a price increase or reduction in quality by the merged firm by diverting their business to other suppliers.

Once we sufficiently understand the market we are talking about, we assess whether the merger is likely to cause an anticompetitive effect. In a horizontal merger between two competitors, an anticompetitive effect could be the product of coordinated effects—that is, a collective relaxing of competitive tension between the surviving competitors in the industry—or unilateral effects—a single firm relaxing its competitive behaviors without losing so many customers to alternatives as to render that reduced competition unprofitable.¹⁰ In assessing competitive effects, we consider not only the incentives of the parties to the transaction, but also the incentives of actual competitors, potential competitors, and new entrants.

Antitrust agencies use essentially the same framework to evaluate horizontal combinations of buyers, as opposed to sellers.¹¹ Monopsony power is, in essence, market power exercised by a buyer against sellers of a good or service.¹² A merger of employers that compete for the same pool

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of employees can enhance market power in the labor market, just as mergers of competing sellers can enhance market power on the selling side of the market.¹³

B. THE MOVE TOWARDS INCLUDING LABOR MARKETS IN MERGER REVIEW

The move towards including labor markets in antitrust reviews starts from the general observation that labor welfare in the United States has declined over time. Research shows that wage growth in the United States has stagnated since the 1980s,¹⁴ which is attributed, at least in part, to the diminishing relevance of unions and the collective bargaining process during that time.¹⁵ Unions have gone from representing more than a third of American workers in the twentieth century to representing a tenth of the labor market, most of whom are in the public sector.¹⁶ Scholars argue that a "fissured" labor environment is stacked against workers trying to organize and bargain collectively, i.e., labor markets are geographically fragmented and heavily reliant on contractors, staffing agencies, and franchises.¹⁷ Labor market enforcement actions brought by government agencies have also declined in recent years, and COVID-19 sharpened the decline.¹⁸

The Biden administration has looked for a range of solutions to address these challenges, including antitrust. In July 2021, President Biden issued an executive order emphasizing the importance of competitive labor markets to create more high-quality jobs and foster economic freedom to switch jobs or negotiate a higher wage.¹⁹ The administration explained that industry consolidation has led to depressed wages because employers have market power and are able to pay lower wages than they would in a competitive market, while many workers are unable to find new jobs because there are few alternatives.²⁰ Monopsony theory predicts that a firm faced with less competition for labor may cut wages and benefits, or wastefully degrade conditions of employees to take advantage of employees who are "stuck" or locked into the job.²¹ Declining labor mobility undercuts wage growth because employees have less leverage to demand higher wages and better benefits.²²

The administration has specifically looked at antitrust merger review as an opportunity to address challenges in the labor markets. In January 2022, the Agencies explicitly addressed labor markets in their request for comments on revising and updating the Agencies’ Guidelines.²³ Specifically, the Agencies raised the following questions relating to labor markets:

1. whether the guidelines adequately assess whether mergers may lessen competition in labor markets, thereby harming workers;
2. whether there are factors beyond wages, salaries, and financial compensation that the guidelines should consider when determining anticompetitive effects; and
3. whether cost savings generated through layoffs or reduction of capacity should be treated as cognizable efficiencies.²⁴

In June 2021, FTC Chair Lina Khan expressed an intent to prohibit mergers that reduce competition in labor markets based on a mandate to "protect[] everybody, including workers."²⁵ Relying on economic studies which suggest a link between employer concentration and low wages,²⁶ antitrust agencies and academics argue that wage stagnation in the United States economy is the result of allowing too many mergers that have increased concentration in labor markets go unchallenged.²⁷

Beyond merger control, in the last decade the Agencies have prioritized enforcement against specific forms of conduct by employers, like illegal agreements amongst employers to fix wages and the imposition of no-poach agreements on high-skilled workers.²⁸ While outside the scope of this article, those enforcement efforts underscore the focus that the current administration is bringing to these issues.

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III. PRACTICAL CHALLENGES WITH DEFINING LABOR MARKETS AND CONCENTRATION LEVELS

As noted above, merger investigations traditionally begin with market definition. When the facts show that a cognizable market exists and that it is concentrated, the analysis then turns to whether anticompetitive effects are likely to follow, or if instead one or more features of the marketplace would tend to render an attempt to exert market power unprofitable.²⁹

Scholarship suggests that a labor market may be defined as a group of jobs between which employees can switch with relative ease.³⁰ Within a labor market, employers are "buyers" of labor who compete with each other for employees.³¹ A labor market is defined relative to the alternatives available to employees, just as a product market is defined relative to the alternatives available to consumers.³² Labor markets are concentrated if prospective employers are few in number relative to employees. Because labor is an input that merging parties buy, the question is whether a proposed transaction would allow the merged firm to reduce competition substantially in a labor market and use its enhanced bargaining power to depress workers’ wages and benefits, including salary, commissions, and reimbursements.³³

The human element of human capital makes defining the boundaries of a labor market in a given merger extremely complex. First, labor markets generally are highly fragmented.³⁴ Most employees will only consider prospective employers within a commutable zone, i.e., a "geographic area in which they already live and work, not a position requiring a long commute or move."³⁵ Indeed, even if a firm competes in only one product market, it may have employees in numerous labor markets.³⁶ This fragmentation creates practical analytical difficulties for an Agency reviewing a merger. For example, a smartphone manufacturer may sell its phones nationally, but its labor markets—for employees at its factories, retail outlets, and corporate offices—may be scattered throughout the country. To review a merger of smartphone manufacturers, the Agency would define the product market based on substitutes available at the national level, but the labor markets presumably would need to be examined individually, at the local level, because there is likely a high degree of variation in employer concentration across each market.³⁷ Some professions may lend themselves to more geographic portability than others, and some professions may lend themselves to national markets, but for the most part, the Agencies would need to account for the observation that most employees are making hyper-local decisions based on their own individual needs and preferences.

Second, the question of which employers stand as substitutes to one another is complex. Unlike commodities and inputs, labor markets involve a high degree of differentiation, both in terms of jobs and employees.³⁸ Employees may consider a range of different work options at any given time.³⁹ At the same time, employee mobility may be limited by "frictions," such as employees’ preferences (including their willingness or unwillingness to relocate), search and transaction costs (collectively, switching costs), and information asymmetry.⁴⁰ Firm-specific considerations include unfavorable features like commuting costs, which include time and convenience in addition to the price of a subway ticket or gasoline, and these preferences vary from one employee to another.⁴¹ Employees may be willing to commute farther for some types of jobs than others.⁴² Employees perceive and value these dimensions differently given their individual tastes over commutes and workplace benefits.⁴³ Given these factors, market definition based on a hypothetical monopsonist test—which asks whether a collection of buyers would be able to sustain a small but significant non-transitory decrease in wages—may not be an accurate reflection of competitive reality if observed wages do not reflect an employee’s entire consideration for their job.⁴⁴

The complexities of how people choose (and switch) jobs makes labor market definition difficult in practice. As one example, in 2022, a federal district court rejected an argument that a distinct market for

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"McDonald’s employees" could exist.⁴⁵ Plaintiffs had sought to certify a class against McDonald’s non-solicitation restrictions, and the plaintiffs argued that the relevant market for their labor was limited to McDonald’s outlets. The court rejected the plaintiffs’ position as implausible. The court held that McDonald’s and its franchisees did not have market power because there were almost 50 other quick-serve restaurants within three miles of the plaintiff’s home.⁴⁶ More generally, industry consultants who have analyzed the so-called "great resignation" of 2021 noted that employers of all stripes struggled to hire and retain personnel at all levels of the organization in part because employees were willing to leave for alternatives in entirely different fields that offer more favorable conditions, even if they involved deeply different work environments.⁴⁷ The above observation has its limits—not every potential employer competes for every potential employee.⁴⁸ From the perspective of merger review, however, the Agencies would face practical challenges in defining reasonably clear labor markets around a given merger or acquisition and demonstrating that those particular markets were concentrated.

The combination of these two factors—fragmented markets and diverse employment preferences—complicates market definition dynamics well beyond what we typically see in product market merger reviews. That is not to say that these challenges are insurmountable. The Agencies have experience dealing with complex markets, and there could in principle be a situation where the range of employers is so limited and the needs of employees so clearly defined that the Agencies could comfortably define a labor market in a merger investigation. But the practical difficulties of reducing complex employment dynamics to a recognizable market in a specific merger investigation suggest that, in most cases, merger review may not be the preferred tool for addressing actual or perceived inequities in labor markets.

IV. CHALLENGES WITH ANALYZING LABOR MARKETS’ COMPETITIVE EFFECTS

As noted above, merger review ultimately seeks to answer the question of whether a proposed combination is likely to have an anticompetitive effect. In the case of labor markets, that would mean effects like wage stagnation, lower benefits, or other losses of quality.

As it relates to labor markets, the relationship between concentration and competitive effects is complex. In some cases, employee mobility may be limited in labor markets even when there are many prospective employers, for reasons that are unrelated to concentration and the number of employers competing for new hires.⁴⁹ At the same time, some academic studies into the effect of mergers on wages have not found a significant link between wages and labor market concentration. Labor market concentration at the national level has increased since the 1980s; at the local level—which is the relevant labor market for most workers—concentration has consistently decreased during that time.⁵⁰ The Treasury Department for its part has noted that the relationship between concentration and labor market power is ambiguous.⁵¹

Prager and Schmitt, who studied the effect of hospital mergers on the wages of hospital workers, found that increased employer labor market power via mergers may contribute to wage stagnation, but that such effects may apply in relatively narrow circumstances.⁵² They grouped workers into three categories: unskilled workers whose job tasks are generally not specific to the hospital industry, such as janitors and cafeteria workers; skilled workers in non-medical occupations, such as workers in the employee benefits department; and skilled health care professionals, specifically nursing and pharmacy workers. For unskilled workers, they did not find evidence of differences in wage growth post-merger, irrespective of the change in employer concentration induced by the merger. For the two categories of skilled workers, they found evidence of reduced wage growth, but only in cases where the concentration increase induced by the merger was

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large. These results suggest that monopsony power can persist even in large labor markets where there are many prospective employers.⁵³

The complexity of workers’ preferences further complicates the process of assessing whether a merger would have an anticompetitive effect on a labor market. An employee’s job may be optimal if it uniquely fulfills some of the employee’s personal needs, even if his wage is not "competitive" based on the alternatives available to him in the labor market.⁵⁴ Employers that offer favorable amenities attract labor at lower-than-average wages, because employees may be willing to sacrifice higher pay for better non-pay job characteristics, whereas employers offering unfavorable features pay a premium to attract employees.⁵⁵

Any analysis of labor markets that focuses only on employer concentration and wages, while ignoring employee preferences and job differentiation, could result in false positives. Even academics who support the labor antitrust movement acknowledge that "antitrust can do little . . . if market power is generated by search frictions or heterogeneous, privately known costs and preferences."⁵⁶ Instead, they argue that employees can use the collective bargaining process to negotiate with employers to obtain fair wage and benefits,⁵⁷ and also overcome "frictional" market power by facilitating contracting and overcoming information asymmetries.⁵⁸

V. CHALLENGES WITH BALANCING WORKER WELFARE AND CONSUMER WELFARE

The final challenge we consider for the Agencies is a question of policy: how to balance worker welfare and consumer welfare in a merger review. If the evidence tends to show that a merger will lead to efficiencies that benefit consumers (lower prices, more innovative products, etc.), but the parties to the merger would achieve some of those efficiencies by reductions in labor force costs, how should the Agencies think about that merger? Should they reject the merger in the face of evidence that it will benefit consumers in order to protect workers, or clear the transaction with the knowledge that some workers will lose their jobs or incremental bargaining power?

Historically, the Agencies have favored consumer welfare in this analysis.⁵⁹ Courts that have considered the question have found that wage effects or employment losses following a merger are not the kind of injuries the antitrust laws were intended to protect.⁶⁰ Reduced labor usage at a given firm due to increased efficiency of production is not anticompetitive under the consumer welfare standard.⁶¹ Agency leadership has over time acknowledged that antitrust enforcement against specific forms of anticompetitive conduct may be important to preserve competition in labor markets, but the antitrust laws are not a panacea for resolving every concern relating to labor.⁶²

To overcome this hurdle, scholars have proposed a "worker welfare" standard, whereby harm to workers is sufficient to trigger antitrust scrutiny.⁶³ They lean on the U.S. Supreme Court’s "dynamic potential" and willingness to revise antitrust doctrine as economic understanding evolves to better understand the competitive consequences of firm’s behaviors.⁶⁴ It remains to be seen, however, how the Agencies would balance a worker welfare standard against the welfare of consumers in a specific merger review.

VI. CONCLUSION

Labor markets are complex. The impact of any given merger on a labor market may be difficult to detect using the predictive tools that the Agencies use today to assess competitive effects in product markets. Should the Agencies decide to pivot towards assessing mergers’ impacts on labor markets in earnest, the Agencies will likely need to develop specialized iterations of their analytical models to account for the hyper-localized and personal dynamics of the choices that workers make in the face of employer concentration. The Agencies will also need to balance the application of those tools with their long-standing mandate to protect consumer welfare.

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The Agencies have used antitrust laws as a tool to address competition in labor markets in other ways. For example, the Agencies have successfully targeted so-called "no-poach agreements" (where a bloc of employers agree not to hire each other’s employees) as anticompetitive.⁶⁵ The Agencies have also used merger reviews to curb the use of non-compete clauses.⁶⁶ Given the complexities of challenging a merger on labor market effects alone, however, we anticipate that for the time being at least, the Agencies will take on a merger’s impact on labor markets as an add-on theory of harm, rather than a standalone basis to challenge a merger.

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Notes:

^1. Joshua Holian is a partner and Nitesh Daryanani is an associate in the San Francisco office of Latham & Watkins LLP. Megan Pynes, Megan Warren, Eric Gonzalez, and Ryleigh Chen provided research assistance for this article. The opinions expressed in this article are those of the authors and do not necessarily reflect the views of Latham & Watkins LLP or its clients.

^2. 15 U.S.C. § 18 ("No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.").

^3. Id.

^4. 15 U.S.C. § 18a.

^5. The current Horizontal Merger Guidelines were issued by the Agencies in 2010. U.S. DEP’T JUST. & FED. TRADE COMM’N, HORIZONTAL MERGER GUIDELINES (2010) ("HMG"). The current Vertical Merger Guidelines were issued by the Agencies in 2020. U.S. DEP’T JUST. & FED. TRADE COMM’N, VERTICAL MERGER GUIDELINES (2020). On January 18, 2022, the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice launched a joint review of the Guidelines.

^6. Courts generally assess Section 7 cases through a three-part burden-shifting framework. Typically, the plaintiff establishes a prima facie case by showing that the transaction in question will significantly increase market concentration, thereby creating a presumption that the transaction is likely to substantially lessen competition. Once the plaintiff establishes the prima facie case, the defendant may rebut it by producing evidence to cast doubt on the accuracy of the plaintiff’s evidence as predictive of future anticompetitive effects. Finally, if the defendant successfully rebuts the prima facie case, the burden of production shifts back to the plaintiff and merges with the ultimate burden of persuasion, which is incumbent on the plaintiff at all times. See New York v. Deutsche Telekom AG, 439 F. Supp. 3d 179, 199 (S.D.N.Y. 2020).

^7. HMG, supra note 5, § 4.

^8. Deutsche Telekom AG, 439 F. Supp. 3d at 199.

^9. HMG, supra note 5, §§ 5.2, 5.3.

^10. Id. §§ 6, 7.

^11. Id. § 12.

^12. The term "monopsony" was adopted by Joan Robinson in 1932 to refer to a single buyer of a good or service. Robinson recognized that the common term for a single buyer at the time—"monopoly buyer"—was illogical since it literally means "a single seller-buyer." See Robert J. Thornton, Retrospectives: How Joan Robinson and B.L. Hallward Named Monopsony, 18 J. ECON. PERSPECTIVES 257, 257 (2004).

^13. Todd v. Exxon Corp., 275 F.3d 191, 202 (2d Cir. 2001).

^14. Thomas Piketty et al., Distributional National Accounts: Methods and Estimates for the United States, 133 Quarterly J. Econ. 553, 557 (2018) (finding that pretax income per adult for the bottom 50% of the distribution in the United States has stagnated at about $16,000 a year).

^15. Kate Andrias, The New Labor Law, 126 YALE L.J. 2 (2016).

^16. Id. at 5 ("American labor unions have collapsed."); see also Press Release, U.S. Bur. Lab. Stat., Union Members Summary (Jan. 20, 2022), https://www.bls.gov/news.release/union2.nr0.htm (in 2021, the union membership rate was 10.3%, and the union membership rate of public-sector workers (33.9%) was more than five times higher than the rate of private-sector workers (6.1%)).

^17. Andrias, supra note 15, at 6 ("The NLRA, with its emphasis on firm-based organizing and bargaining, is mismatched with the globalized economy and its multiple layers of contracting."); Lynn Rhinehart & Celine McNicholas, Collective Bargaining Beyond the Worksite, Econ. Pol’y Inst. (May 4, 2020), https://www.epi.org/publication/collective-bargaining-beyond-the-worksite-how-workers-and-their-unions-build-power-and-set-standards-for-their-industries.

^18. U.S. DEP’T TREASURY, THE STATE OF LABOR MARKET COMPETITION 37 (Mar. 7, 2022), https://home.treasury.gov/system/files/136/State-of-Labor-Market-Competition-2022.pdf ("STATE OF LABOR MARKET COMPETITION").

^19. Press Release, The White House, Executive Order on Promoting Competition in the American Economy (July 9, 2021), https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy.

^20. Id.; Press Release, The White House, Fact Sheet: Executive Order on Promoting Competition in the American Economy (July 9, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy; Antitrust and Economic Opportunity: Competition in the Labor Markets: Hearing before the Subcomm. on Antitrust, Com. & Admin. L. of the Comm. On the Judiciary, 116th Cong. 2 (2019).

^21. Suresh Naidu et al., Antitrust Remedies for Labor Market Power, 132 HARV. L. REV. 537, 559 (2018), https://harvardlawreview.org/2018/12/antitrust-remedies-for-labor-market-power.

^22. STATE OF LABOR MARKET COMPETITION, supra note 18, at 51.

^23. Press Release, U.S. Dep’t Just., Justice Department and Federal Trade Commission Seek to Strengthen Enforcement Against Illegal Mergers (Jan. 18. 2022), https://www.justice.gov/opa/pr/justice-department-and-federal-trade-commission-seek-strengthen-enforcement-against-illegal.

^24. Fed. Trade Comm’n, Remarks of Chair Lina M. Khan Regarding the Request for Information on Merger Enforcement at 3, Docket No. FTC-2022-0003 (Jan. 18, 2022), https://www.ftc.gov/system/files/documents/public_statements/1599783/statement_of_chair_lina_m_khan_regarding_the_request_forjnformation_on_merger_enforcement_final.pdf.

^25. Bryan Koenig, FTC’s Khan Says Labor ‘Absolutely’ Part of Merger Probes, LAW360 (June 9, 2022), https://www.law360.com/articles/1501293/ftc-s-khan-says-labor-absolutely-part-of-merger-probes.

^26. See, e.g., José Azar et al., Labor Market Concentration, 57 (Suppl.) J. Hum. Res. S167 (May 2020), http://jhr.uwpress.org/content/57/S/S167.full.pdf+html; Efraim Benmelech et al., Strong Employers and Weak Employees: How Does Employer Concentration Affect Wages? 57 (SUPPL.) J. HUM. RES. S200 (Sept. 2020), http://jhr.uwpress.org/content/57/S/S200.full.pdf+html.

^27. See, e.g., COUNCIL ECON. ADVISERS, LABOR MARKET MONOPSONY: TRENDS, CONSEQUENCES, AND POLICY RESPONSES (Oct. 2016), https://obamawhitehouse.archives.gov/sites/default/files/page/files/20161025_monopsony_labor_mrkt_cea.pdf; loana Elena Marinescu & Herbert Hovenkamp, Anticompetitive Mergers in Labor Markets, 94 IND. L.J. 1031 (2018), https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=2967&context=facultyscholarship.

^28. Between 2010 and 2012, DOJ sued Adobe Systems Inc., Apple Inc., Google Inc., Intel Corp., Intuit Inc., Lucasfilm, Pixar, and eBay for entering into unlawful no-poach agreements. In 2016, DOJ announced its intent to prosecute naked no-poach and wage-fixing agreements criminally. See U.S. DEP’T JUST. & FED. TRADE COMM’N., ANTITRUST GUIDANCE FOR HUMAN RESOURCE PROFESSIONS 4 (Oct. 2016), https://www.justice.gov/atr/file/903511/download ("ANTIRUST GUIDANCE"). In 2021, the DOJ brought its first indictment charging naked no-poach/wage fixing agreements. See Press Release, U.S. Dep’t Just., Health Care Staffing Company and Executive Indicted for Colluding to Suppress Wages of School Nurses (Mar. 30, 2021), https://www.justice.gov/opa/pr/health-care-staffing-company-and-executive-indicted-colluding-suppress-wages-school-nurses.

^29. In a labor market merger analysis, this analysis would follow a "monopsony" theory. Monopsony power is, in essence, market power exercised by a buyer against sellers of a good or service. See Exxon Corp., 275 F.3d at 202 (noting that because "the equation for measuring market power in monopsony is a mirror image of the relationships that create market power in a seller[,] . . . [a] greater availability of substitute buyers indicates a smaller quantum of market power on the part of the buyers in question" (internal quotation marks and citation omitted)). The enforcement theory thus posits that employees are susceptible to the market power of employers, and that a merger that reduces competition for employees can enhance market power in a labor market, just as mergers that reduce competition among sellers can enhance market power. See Allan Shampine et al., Workers, Wages, and Mergers: A Back-to-Basics Guide, Antitrust Mag. Online 2 (June 2022), https://www.americanbar.org/content/dam/aba/publications/antitrust/magazine/2022/june/workers-wages-mergers.pdf.

^30. Naidu et al., supra note 21, at 538.

^31. ANTITRUST GUIDANCE, supra note 28, at 2 ("From an antitrust perspective, firms that compete to hire or retain employees are competitors in the employment marketplace, regardless of whether the firms make the same products or compete to provide the same services.").

^32. Shampine et al., supra note 29, at 3.

^33. Press Release, U.S. Dep’t Just., Counsel to the Assistant Attorney General of the Antitrust Division Doha Mekki Testifies Before House Judiciary Committee on Antitrust and Economic Opportunity: Competition in Labor Markets ("Doha Mekki Testifies Before House Judiciary Committee") (Oct. 29, 2019), https://www.justice.gov/opa/speech/counsel-assistant-attorney-general-antitrust-division-doha-mekki-testifies-house.

^34. Suresh Naidu & Eric A. Posner, Labor Monopsony and the Limits of the Law, 57 (SUPPL.) J. HUM. RES. S284, S298-S299 (2022) ("While some product markets are fragmented in this way, the problem for labor market antitrust is that fragmentation is pervasive if not universal.").

^35. DeSlandes v. McDonald’s USA, LLC, No. 17 C 4857, 2021 WL 3187668, at *12 (N.D. Ill. July 28, 2021); Herbert J. Hovenkamp, Competition Policy for Labour Markets, FAC. SCHOLARSHIP PENN CAREY L. ¶ 13 (2019) ("[M]ost labour markets are geographically quite small, many of them no larger than the commuting range of employees.").

^36. Shampine et al., supra note 29, at 3.

^37. Caius Z. Willingham & Olugbenga Ajilore, The Modern Company Town, CTR. AM. PROGRESS (Sept. 10, 2019), https://www.americanprogress.org/article/modern-company-town/ (noting that labor market concentration has declined over time, but some labor markets in the Great Plains and Appalachia may be highly concentrated).

^38. The Clayton Act recognizes that "[t]he labor of a human being is not a commodity or article of commerce." 15 U.S.C. § 17.

^39. Naidu & Posner, supra note 34, at S299.

^40. Id. at S300.

^41. Marinescu & Hovenkamp, supra note 27, at 1048.

^42. Naidu et al., supra note 21, at 575.

^43. Naidu & Posner, supra note 34, at S291.

^44. See Thibaut Lamadon et al., Imperfect Competition, Compensating Differentials and Rent Sharing in the U.S. Labor Market, 112 AM. ECON. REV. 169, 169 (2022).

^45. DeSlandes v. McDonald’s USA, LLC, No. 17 C 4857, 2022 WL 2316187, at *6 (N.D. Ill. June 28, 2022) ("They could have sold their labor to other buyers.").

^46. Id.

^47. Aaron de Smet et al., Gone For Now, Or Gone For Good? How to Play the New Talent Game and Win Back Workers, MCKINSEY & CO. (Mar. 9, 2022), https://www.mckinsey.com/business-functions/people-and-organizational-performance/our-insights/gone-for-now-or-gone-for-good-how-to-play-the-new-talent-game-and-win-back-workers.

^48. See Exxon Corp., 275 F.3d 202-03 (noting that "[t]he question is not the interchangeability of, for example, lawyers with engineers . . . [a]t issue is the interchangeability, from the perspective of an [] employee, of a job opportunity in the oil industry with, for example, one in the pharmaceutical industry").

^49. Nancy Rose, Thinking Through Anticompetitive Effects of Mergers on Workers (Feb. 2019), https://economics.mit.edu/files/20284.

^50. STATE OF LABOR MARKET COMPETITION, supra note 18, at 25 (citing Kevin Rinz, Labor Market Concentration, Earnings Inequality, and Earnings Mobility (U.S. Census Bur., Working Paper No. 2018-10, 2018)).

^51. Id. at 26 (collecting sources).

^52. Elena Prager & Matt Schmitt, Employer Consolidation and Wages: Evidence from Hospitals, 111 AM. ECON. REV. 397 (2021). For skilled workers, they found an effect on wage growth only for (i) workers with industry-specific skills and (ii) in markets where the concentration increase due to the merger was large.

^53. Naidu & Posner, supra note 34, at S295-S296.

^54. Lamadon et al., supra note 44.

^55. Id. at 170.

^56. Naidu & Posner, supra note 34, at S295-S296.

^57. Id. at S314-S315. See also Lynn Rhinehart & Celine McNicholas, Collective Bargaining Beyond the Worksite, Econ. Pol’y Inst. (May 2020), https://www.epi.org/publication/collective-bargaining-beyond-the-worksite-how-workers-and-their-unions-build-power-and-set-standards-for-their-industries.

^58. Naidu & Posner, supra note 34, at S315. As we noted earlier, Prager and Schmitt found evidence of reduced wage growth in cases where the concentration increase induced by the merger was large, but this effect was attenuated in markets with strong labor unions. Prager & Schmitt, supra note 52. They found harm to workers only in right-to-work states, i.e., states that prohibit mandatory union membership in some manner. Id. Benmelech, Bergman, and Kim found that the relationship between labor market concentration and wages is weaker in industries with high unionization rates. Benmelech et al., supra note 26.

^59. See Hiba Hafiz, Labor Antitrust’s Paradox, 86 U. Chi. L. Rev. 381, 393 (2020) (some antitrust decisions on college football suggest that courts will tolerate harms to student-athletes in favor of the benefit of delivering college sports to downstream consumers (citing O’Bannon v. Nat’l Collegiate Athletic Ass’n., 802 F.3d 1049 (9th Cir. 2015))). For a description of the consumer welfare standard, see Naidu et al., supra note 21, at 586 ("[T]he ‘consumer welfare’ standard implies that the efficiency gain must be large enough that, on net, consumer welfare increases despite an increase in market power.").

^60. Int’l Ass’n Machinists & Aerospace Workers, AFL-CIO, Loc. Lodge No. 1821 v. Verso Paper Corp., 80 F. Supp. 3d 247, 274-75 (D. Me. 2015) ("[L]oss of employment alone is insufficient for an antitrust injury."); Tugboat, Inc. v. Mobile Towing Co., 534 F.2d 1172, 1176 (5th Cir. 1976).

^61. Shampine et al., supra note 29, at 6.

^62. Doha Mekki Testifies Before House Judiciary Committee, supra note 33.

^63. Naidu et al., supra note 21, 586-87 ("[M]ergers that trigger scrutiny by reducing labor market competition should be subject to a ‘worker welfare’ standard."); C. Scott Hemphill & Nancy L. Rose, Mergers That Harm Sellers, 127 YALE L.J. 2078 (2018).

^64. Kimble v. Marvel Ent., LLC, 576 U.S. 446, 461 (2015).

^65. See Naidu & Posner, supra note 34, at S300.

^66. U.S. DEP’T JUST. & FED. TRADE COMM’N, TRANSCRIPT OF FTC-DOJ DECEMBER WORKSHOP, DAY 1 (Dec. 6, 2021), https://www.ftc.gov/system/files/documents/public_events/1597830/ftc-doj_day_1_december_6_2021.pdf.

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