Academic journal article Columbia Journal of Law and Social Problems

Measuring the Impact of Mergers on Labor Markets

Academic journal article Columbia Journal of Law and Social Problems

Measuring the Impact of Mergers on Labor Markets

Article excerpt

While the Department of Justice (DOJ) traditionally reviews mergers solely in terms of their impacts of prices for consumers, the antitrust laws were enacted to deal with broader socio-political problems like industrial concentration as well as prices. A new line of research on labor market concentration suggests an additional area of concern for antitrust law, noting that even as mergers decrease prices, they can increase labor market concentration, keeping wages low for employees of merging companies.

This Note analyzes a merger through the lens of its predicted impact on wages, rather than prices. Part II lays out the evolution of antitrust law and merger review from its early multifaceted socio-political focus to its current narrow economic angle. Part III then questions whether the pricefocused consumer welfare standard is as complete as it appears to be. Next, Part IV reviews the literature on labor market concentration and demonstrates how the tools that measure concentration in the product market can easily do the same in the labor market. Part V conducts a retrospective empirical analysis of a past merger, assessing whether it would have passed DOJ muster had the agency considered its effect on wages. Finally, Part VI suggests possible changes to the merger review process in light of the research and case study.

In the years following the Great Recession, the economy has steadily strengthened, with productivity growth high and unemployment low.1 Yet even as these global indicators have improved, most workers have not seen an accompanying increase in their wages.2 This discrepancy has led commentators to suggest a range of possible explanations.3 Antitrust scholars have posited one novel reason: even as the economy has improved, a large number of mergers has reduced the number of potential employers competing for employees. In a strong labor market, employers would typically compete for employees by offering higher wages.4 Yet instead of competing, employers have consolidated, thereby restricting competition for employees by giving them little choice in whom to work for and therefore not needing to raise wages. This line of thinking is relatively new in antitrust law, which is typically concerned with the impact of mergers (and other antitrust activities) on prices rather than wages.

This lacuna in the antitrust laws should be explored further. The Department of Justice (DoJ) reviews mergers to determine whether they will substantially harm competition under Section 7 of the Clayton Act.5 Today, effects on competition are primarily assessed using the consumer welfare standard, which is only concerned with the increased prices of products, despite a long history of antitrust laws being used to remedy labor market concentration as an evil in itself.

Although barely relevant in current DOJ analysis, concentration in labor markets arising from mergers can have multiple harmful effects. Even under the consumer welfare standard, extensive labor market concentration can cause suppression of wages, which is an effective price increase for those whose wages are artificially pushed below market value, especially when jobs in many markets are concentrated. Moving beyond the traditional theory of harm, the DOJ should begin to see labor market concentration as a harm in itself. This theory is supported by existing case law and doctrine, as well as the legislative history and intent behind the major antitrust laws, yet it is rarely invoked explicitly today.6

This Note pulls together several strands of existing research to show that there is a lengthy history of using antitrust laws to attack industrial concentration, that labor market concentration is measurably high, and that many labor markets are highly concentrated.7 This Note builds on this work and presents a case study that illustrates how to measure labor market concentration by using the inverse of the DOJ's existing methods to measure product market concentration. …

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