Putting Antitrust to Work

In January, the Department of Justice (DOJ) sued Google in a landmark antitrust case the likes of which have not been seen since the breakup of telecommunications conglomerate AT&T in the 1980s. The DOJ seeks to end the company’s stranglehold over the digital advertising market, freeing up an essential revenue source for the tottering journalism industry in the process. In announcing the lawsuit, assistant attorney general Jonathan Kanter quoted a Google employee who referred to the company’s ad exchange as an “authoritarian intermediary.”

This recent action is just the latest example of a veritable renaissance of long-dormant antitrust enforcement in the United States. The Biden administration has prioritized the fight against corporate concentration, and the public now widely—and rightly—considers concentrated corporate power a root cause of inequality and a corrosive agent in our political system. Public support has also spurred antitrust enforcement actions by both the DOJ and the Federal Trade Commission (FTC) against dominant corporations that use their power to control vast swaths of the American economy.

Labor is thought to be a primary beneficiary of the antitrust renewal. Antitrust is now regarded by policymakers as a potent tool that can buttress and enhance the power of workers, securing fair wages, improving working conditions, and ultimately fortifying the gains made in the most favorable American labor market in generations. It might be surprising, therefore, that labor groups have been hesitant to fully embrace this philosophical transition. Some labor organizations, for example, have found themselves on the opposite side of antitrust cases initiated by the federal government.

But there are very good historical reasons for labor organizations’ hesitancy to embrace antitrust. Since its inception in 1890, antitrust has, despite its original intention, been deployed as a legal weapon by the government and corporations against collective labor organizing. This distorted form of “antitrust” enforcement has facilitated strike breaking, corporate consolidation, coercive worker contracts, and misclassification of workers as independent contractors. The history of antitrust shows that, despite real progress, more needs to be done by federal enforcers and Congress to convince workers and organizers that antitrust is a friend of labor.

Congress enacted the antitrust laws in the late nineteenth and early twentieth centuries, at a time when large national corporations were threatening every aspect of the public’s economic, political, and social life, upending the very notion of what it meant to be a worker, consumer, entrepreneur, and citizen. Infamous robber baron John Rockefeller’s Standard Oil, to take one prominent example, leveraged its monopoly to obtain highly preferential railroad freight rates, which then allowed the company to engage in predatory pricing to crush smaller rivals. Relentless public outcry—predominantly from farmers, artisans, and workers—erupted over the nefarious conduct of corporations, which increased prices, suppressed workers’ wages, crushed small businesses, squeezed suppliers, and unduly influenced lawmakers for their exclusive benefit. As a result of the scrutiny, members of Congress equated the conduct of these corporations to robbery, dubbed them “a menace” to democratic institutions, and sought to directly regulate their conduct.

Congress had a broad vision for the Sherman Act when it passed the foundational antitrust law in 1890. Acting upon the demands of the public, Congress structured the act to operate, in the words of the Supreme Court, as a “comprehensive charter of economic liberty.” Sen. John Sherman, one of the lead proponents and namesake of the act, forcefully stated, “If [the American people] will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessities of life.” By preventing the use of unfair and monopolistic practices across the economy, Congress specifically meant to ensure widespread and equitable economic opportunity and to protect American democracy from the influence of dominant corporations and other undue aggregations of capital and economic power.

A central aspiration of the Sherman Act was to protect workers. By taking aim at unfair practices and the cornering of markets, Congress intended to buttress labor’s collective organizing efforts and counteract the power of dominant corporations. A review of the law’s extensive legislative history reveals that Congress never intended it to be used against worker actions, such as strikes and unionization drives. Notable members of Congress expressed vehement support for labor during the legislative debates over the Sherman Act. As one author forcefully stated, “There is no evidence available in the records of the debates to show that [Congress]…believed that the [law] would apply to labor.”

Unfortunately, however, the text of the main substantive sections within the Sherman Act was brief and somewhat ambiguous—issuing proscriptions on “restraint[s] of trade” and conduct that “monopolize[s].” Courts and federal enforcers are obligated to faithfully adhere to Congress’s intentions—regardless of the flexibility that imprecise language might afford—but, as soon as the law was on the books, pro-industry forces took full advantage to distort its application. During this time, the federal courts, and in particular the Supreme Court, saw themselves as guardians of the economy and the individual liberty of citizens. Justice David Brewer once stated that “the Supreme Court of the United States is the keystone of the arch that supports our whole system of government.” The Court’s inflated self-importance undergirded a hostility to what it regarded as congressional encroachments on private property and individual liberty.

In only the second lawsuit applying the Sherman Act, just three years after it was enacted, the DOJ sought to use the antitrust law to stop a general strike of longshoremen. A few years later, in a 1908 case known as Loewe v. Lawlor, the Supreme Court provided its full blessing to apply the Sherman Act to labor activities. The federal courts justified their holdings by construing the collective actions of workers as “gigantic and widespread combination[s]” analogous to those of corporations. In his opinion, Chief Justice Melville Fuller classified union secondary boycotts (when workers strike in support of other striking workers at a different company) as vehicles that “restrain and destroy interstate trade and commerce” rather than as practices designed to improve working conditions and wages. He thus held that such boycotts violated the asserted intent of the Sherman Act.

To fix this clearly unintended application of the Sherman Act, Congress passed the Clayton Act just six years later in 1914. Section 6 of the Clayton Act explicitly exempted labor and other labor-organizing activities from the purview of antitrust laws. But, even then—with Section 6’s broad and direct language in place—a reactionary Supreme Court, in a 1920 case known as Duplex Printing, heavily restricted its meaning to apply only to workers directly involved in a labor dispute. The Court decided that actions involving secondary boycotts and certain strikes were not covered and thus still in violation of antitrust law. That is to say, unilateral judicial decree effectively gutted much of the democratically enacted protections offered to labor by Section 6. Public and private enforcers heeded the Supreme Court’s signal in Loewe and Duplex Printing and vigorously deployed the antitrust laws against labor-organizing activities. Between 1890 and 1929, almost 80 percent of antitrust cases initiated in the country challenged labor activities, helping to fracture and suppress America’s budding labor movement in the early twentieth century.

The 1930s finally saw a paradigm shift in the relationship between antitrust enforcement and labor, as the Great Depression and Franklin Roosevelt’s New Deal ushered in a more progressive ethos. One event was particularly critical. After the Supreme Court nullified the keystone sections of FDR’s National Recovery Act, Congress conducted a wholesale assessment of the legislative tools at its disposal to regulate businesses. In a landmark series of hearings known as the Temporary National Economic Committee (TNEC), Congress concluded that antitrust enforcement was a powerful regulatory tool. As a result, federal antitrust enforcement was not only revitalized but refocused on monopolies and other dominant corporations as originally intended.

Buttressed by other pro-worker laws like the National Labor Relations Act of 1935, which guaranteed pathways to unionization, antitrust activity benefited workers and brought on a period of relative economic justice. Between the 1940s and the 1970s, unionization rates reached their zenith. Wages grew in tandem with productivity increases. The wealth gap between the richest and poorest shrank to its lowest in U.S. history. A progressively minded Supreme Court ruled against mergers, powerful buyers, and other monopolistic tactics—including instances of tying (forcing buyers of one product to buy others), exclusive deals, and price discrimination. Deterred from growing through unfair rents and profiteering, large corporations focused on more organic and socially beneficial forms of growth, like research and development.

Despite these New Deal–era advancements, explicit protections for workers remained narrowly defined by Congress. Workers had to be considered “employees” to garner protections, but employers were largely in control of classification and incentivized to “misclassify” their workers. Aggrieved workers struggling to receive the rights of an employee had to rely on judges considering a set of opaque and highly subjective factors.

Misclassification, which continues to this day, construes workers as “independent contractors” nonetheless subject to employee-like controls (typically using contracts), such as the inability to make changes to their work schedules, tasks, and responsibilities, or to obtain better employment at another firm, which non-compete clauses prohibit. This gives employers what economist Brian Callaci (my colleague at the Open Markets Institute) has coined “control without responsibility”: employers can direct workers’ activities without providing benefits like minimum wage, overtime, or the right to unionize. According to one report, such misclassification affects nearly 30 percent of all workers. This creates a two-tiered system of workers: employees with some labor rights and independent contractors with effectively none. Workers can litigate to have their employment status determined by a judge, but this costly endeavor places much heavier burdens on workers than on their corporate counterparts.

The 1970s saw the tide shift back toward reactionary forces, who once again undermined the intentions of antitrust law. As part of a mission to weaken much of the New Deal political economy, conservative economists and lawyers—including figures like Aaron Director, Richard Posner, and Robert Bork—pushed a neoliberal agenda backed by a false history of the antitrust movement. Members of what was dubbed the Chicago school of economics, they argued that antitrust law should be restricted to explicitly collusive conduct, while viewing monopolistic conduct like mergers as efficient and beneficial rather than a wasteful practice designed to stifle competition. Broadly speaking, the Chicago school sought to restrict antitrust enforcement to cases in which firms raised consumer prices. Bork declared values other than consumer welfare “superfluous.” Since the 1980s, this consumer welfare standard has predominated within intellectual circles, academia, and the antitrust agencies themselves.

Though the Chicago school’s influence is most associated with the Reagan administration, Democrats, seeking to advance the means by which government can be used to solve social and economic problems, also adopted an economics-based approach to regulation. As sociologist Elizabeth Berman aptly describes in her recent book Thinking Like an Economist, this eventually undermined policies based on “universalism, equality, and rights.” No longer did policymakers see the law as a means for structuring the economy to ensure a decent life for everyone, but they instead regarded regulation as a neutral mathematical problem for economics to solve. The goal was not economic justice, but to move society from Problem A to Solution B in the most “efficient” way possible.

This efficiency fetish and the bipartisan rightward shift in economic policy led to two main outcomes. First of all, antitrust shed many of its moral and social goals, turning antitrust policy into another tool for imposing conservative market ideology. Secondly, the judiciary systematically overturned many long-held rulings that had prohibited firms from engaging in various unfair business practices. Whereas certain practices, such as resale price maintenance (the setting of a specific price floor or ceiling) or the allocation of exclusive geographic regions to downstream retailers, had once been simply illegal under antitrust law, they were now reviewed under the “rule of reason.” This meant courts engaged in detailed analyses balancing the purported harms of business conduct against its benefits. But recent studies have found that the rule of reason has effectively been a tool for the legalization of previously illegal practices. One comprehensive study found that in 90 percent of the nearly 900 cases since 1977 where courts evaluated business conduct under the rule of reason, rulings went against plaintiffs, who were unable to demonstrate adverse effects sufficient to trigger antitrust violations.

By the 1970s, enforcers would also capitalize on legal vagueness to revert to an anti-worker application of antitrust. Enforcers chose to once again equate worker organizing efforts with corporate collusion, which the Supreme Court deemed “the supreme evil of antitrust” in a 2004 case known as Verizon v. Trinko. Meanwhile, corporations’ pursuit of monopoly control was seen as “induc[ing] risk taking that produces innovation and economic growth.” Put another way, misclassified independent contractors organizing to improve their working conditions or wages are prosecuted for violating antitrust law, while monopolies using their dominance to weaken worker power are praised for “innovation” and given a free pass.

Contrary to Congress’s intent, enforcers vigorously used antitrust law as a legal bludgeon against workers seeking to increase their wages and working conditions. To name just a few examples, antitrust was used against Washington D.C. public defenders in 1990, music teachers in 2014, and electricians in 2015. Even as late as 2017, in a brief submitted to the Ninth Circuit Court of Appeals, the DOJ and FTC publicly denounced collective bargaining efforts by Uber and Lyft drivers, claiming their actions amounted to antitrust violations.

In conjunction with deregulation and reduced union density, misdirected antitrust enforcement resulted in a growing inequality from the 1970s onward. Today, even with the most favorable labor market in generations, workers throughout the economy remain in a highly precarious state. They face historically concentrated labor markets, further weakening what little bargaining power they have and suppressing wages. One landmark study found that 75 percent of U.S. industries have increased in market concentration since the late 1990s. Despite prodigious unionization efforts at Amazon, Starbucks, and elsewhere, union membership continues to hit historic lows. Meanwhile, wealth disparities between the top 1 percent and the bottom 50 percent are higher than they were during the Gilded Age.

Thankfully, the tide seems to be shifting yet again. The Biden administration recognizes the pivotal role antitrust policy can play in bolstering the collective organizing efforts of labor. Just six months into his term, President Biden signed a comprehensive executive order directing administrative agencies to “enforce the antitrust laws to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly and monopsony—especially as these issues arise in labor markets.” Although light on details or guidance as to the conduct the agencies should target, President Biden’s order effectively threw the entire force of America’s administrative state against concentrated capital and behind workers.

In response, federal antitrust agencies have taken some critical steps. The DOJ has filed several laudable amicus briefs supporting a fairer application of antitrust laws to promote worker welfare and prevent employers from unduly restricting worker freedom. For example, in a brief for a National Labor Relations Board (NLRB) case called Atlanta Opera, the DOJ encouraged the NLRB to broaden its definition of employee so that more workers can obtain the benefits that come along with that designation. The DOJ has also called for the prohibition of no-poach agreements, which prevent franchise owners from hiring workers from similar franchises, and for the repeal of the antitrust exemption for minor league baseball players. (My organization also wrote an amicus brief in the no-poach case.) Both practices limit worker freedom and suppress wages—most minor league players earn under $15,000 a season.

Although their record has not been perfect, rather than initiating antitrust cases against workers, both the FTC and DOJ have used their prosecutorial discretion to direct enforcement at dominant corporations. In addition to the DOJ’s case against Google’s advertising business, the FTC initiated a case against Facebook to unwind its acquisitions of WhatsApp and Instagram, which have allowed the company to monopolize social media and hold sway over elections and political expression. The DOJ has also initiated at least six criminal investigations against no-poach and wage-fixing agreements. Compare this with the government’s previous approach: in 2011, the DOJ and FTC settled with Silicon Valley companies like Apple and Google caught flagrantly violating the antitrust laws by engaging in wage-fixing and no-poach agreements. By some estimates, these agreements restrained more than a million workers. But the settlement required no admission of guilt, simply that Apple and Google not break the law for five years.

The recent actions by the DOJ and FTC are necessary—indeed noble—but executive orders and agency policy statements can be withdrawn in future administrations, and legal briefs do not have significant legal weight or lasting impact. That said, the Biden administration’s DOJ and FTC have taken two other significant steps that will have a lasting impact on workers and form a broad foundation for enhancing the power of workers.

The first is the DOJ’s victorious suit against Penguin Random House, the world’s largest bookseller, which was attempting to acquire Simon and Schuster, its direct competitor and the third-largest bookseller. In initiating the lawsuit, the DOJ took a significant risk. In antitrust enforcement, plaintiffs are required to allege a “theory of harm” that links the contested conduct (in this case, a merger) to some type of harm to a particular group. Since the 1970s, enforcers have depended on the conservative consumer welfare standard, where the alleged harm is future price increases. But, in its lawsuit against Penguin Random House the DOJ did not allege consumer harm at all.

Instead, the DOJ focused only on the harms authors would face from the increased concentration in the book-selling industry. The DOJ claimed, with considerable evidence, that increased concentration would bring down author advances. In other words, rather than increasing the firm’s monopoly power over consumers, the merger would increase its monopsony power over authors as a buyer of their labor. The success of the DOJ’s lawsuit has therefore established enhanced buyer power as grounds for declaring a merger illegal. With a favorable ruling now on the books, antitrust enforcers can apply a similar argument when workers in other industries face risks from corporate concentration or other unfair practices.

Secondly, on January 5 the FTC proposed a rule to ban non-compete agreements, restrictive contracts that rob workers of the most basic freedom to accept a new job with a competitor. In its proposed rule—the first of its kind under its congressionally delegated unfair-methods-of-competition powers—the FTC rigorously analyzed the empirical literature on the harmful effects non-competes have on society and workers. Non-competes are not only dubious in their justifications; they also deter the creation of new businesses, reduce wages for workers, unfairly restrict their opportunities, and effectively keep them subjugated by their employers. In one particularly egregious example, during the height of the COVID-19 pandemic, a non-compete prohibited a group of nurses in Wyoming from providing home health care to patients. Non-competes also disproportionately affect low-income workers as well as women and people of color, and they can force workers to endure discriminatory and hostile work environments.

If enacted, the FTC’s rule will liberate between 30 and 60 million Americans from non-competes, prevent their future usage, and transfer over $300 billion to workers from corporations. But enactment is not a foregone conclusion. After the end of the public comment period, the rule will almost certainly be challenged in the courts and, given the judiciary’s conservative bent, it faces a significant risk of being invalidated. Nevertheless, the FTC’s bold action is a significant step using all its congressionally delegated powers to provide tangible benefits to workers and enhance their power.

The Biden administration has made it clear that the philosophy at the antitrust agencies has changed, but even more can be done. The actions so far amount to a new foundation that can be further built on to redistribute power and wealth away from dominant corporations to consumers, small businesses, and workers.

First of all, Congress, with support from the administration, should bolster and modernize antitrust and labor law to enhance worker power and protections. But antitrust enforcers can also implement policy changes under existing law that facilitate those goals. The DOJ and FTC—both through lawsuits and through the rulemaking process—should challenge the use of coercive contracts, misclassifications of workers, and other unfair practices that restrict workers’ opportunities and rights. The DOJ and FTC should also continue to vigorously prosecute employer collusion that undermines workers’ opportunities and suppresses their wages, as well as to file briefs articulating to judges how and why the antitrust laws should be favorably interpreted to enhance worker power. Both agencies can further tailor their merger enforcement to build off the legal victory against Penguin Random House and stop mergers based on buyer and employer power. Finally, both the DOJ and FTC should make unequivocal pronouncements that they will not initiate antitrust litigation against worker-organizing conduct or independent contractors.

With time already running out on President Biden’s first term, the administration needs to act fast and take even bolder action to continue to convince the public and workers that the law is designed to enhance their power and should be enforced rigorously to do so.

Antitrust is only part of a much larger set of changes needed to support labor rights—including rights around secondary strikes and sectoral bargaining—and to democratize the economy. And the threat of a hostile and reactionary judiciary inhibiting, blocking, or undoing many recent efforts persists. But antitrust law is fundamental to enhancing worker power and operates in tandem with labor law to diminish the power corporations have over our lives. Workers in particular should welcome the Biden administration’s philosophical shift and use this moment to double down on their organizing and advocacy efforts to pressure the administration and Congress to go even further.