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In a recent article, economists from George Mason’s Mercatus Center surveyed a persistent but little-noted problem in American labor markets: union monopolies. They noted that in many markets, one or two unions effectively dominated the supply of workers. For example, two unions effectively control the labor supply at 100% of domestic ports. Similarly, a single union has a stranglehold on package delivery, representing nearly all delivery workers at the nation’s largest delivery company. These unions control key chokepoints in the stream of commerce, and they hurt consumers by artificially raising prices. The economists observed that the Federal Trade Commission has shown interest in keeping labor markets competitive. But they concluded that there was little the FTC could do directly, as federal antitrust law exempts unions. Any solution, therefore, would require statutory change.

That is the standard perspective on the state of the law. But it may not be right. Federal antitrust law does indeed exempt unions from liability for certain activities—including strikes, boycotts, and similar economic tactics. But those tactics are all classic “restraints on trade” covered by Section 1 of the Sherman Antitrust Act. The relevant statutes say nothing about liability under Section 2, which covers monopolies. Nor has the Supreme Court ever held that unions are immune under section 2. So it’s far from clear that the so-called “statutory” labor exemption would stop the FTC from enforcing section 2 against a true union monopoly. And perhaps, given its commitment to labor-market competition, the FTC will do just that.

Labor Unions, the Sherman Act, and Restraints of Trade

The first (and still most important) federal antitrust law is the Sherman Antitrust Act. Passed in 1890, the Act has always distinguished between two offenses: restraints of trade and monopolization. Restraints of trade are covered in section 1. They include things like price fixing, market division, coordinated boycotts, and other agreements to restrain trade. Monopolization, by contrast, is set out in section 2. Section 2 doesn’t define monopolization, but courts have identified two elements. First, the defendant has to have “market power,” which is roughly the power to raise prices without losing sales. Second, the defendant has to engage in some kind of exclusionary conduct. For example, it might try to block competitors from the market by signing exclusive-dealing contracts with suppliers. Or it might buy an emerging competitor outright. Both elements are necessary, and both are distinct from restraints on trade under section 1.

Section 1 has a long history in labor markets. Shortly after it became law, courts started applying it to unions. They reasoned that in essence, a union is an agreement among workers to restrain trade for labor. The union’s members collectively agree not to work to extract better wages from the buyer (i.e., the employer). So courts treated unions no differently from any other cartel. They enjoined unions from using strikes, boycotts, picketing, and traditional union tactics. They saw those tactics as classic restraints on trade and therefore blocked them under section 1.

Congress responded with a series of statutes. The first was the Clayton Act of 1914. The Clayton Act declared that unions were not themselves “conspiracies” to restrain trade. It then barred courts from enjoining certain union tactics—including those tactics courts had previously treated as violations of section 1. Courts, however, read the Clayton Act narrowly; for example, they found that it did not apply to certain “secondary” union tactics. So Congress followed up with a second statute, the Norris–LaGuardia Act of 1932. The Norris–LaGuardia Act mostly stripped courts of jurisdiction to enjoin those same union tactics (e.g., strikes, boycotts). If a union engaged in those tactics during any “labor dispute,” courts had no choice but to stay their hands.

Today, when lawyers talk about a “statutory” exemption for unions, they typically mean the leeway granted by these statutes. But a true exemption is hard to find in the statutes’ text. Neither statute says that unions have an all-purpose antitrust exemption. Instead, they protect specific activities that had been treated as trade restraints under section 1. They say nothing about whether a union can be liable for monopolization under section 2.

A Statutory Exemption—But from What?

To be sure, the U.S. Supreme Court has sometimes referred broadly to a union “immunity” from antitrust. The case most often cited for that immunity is United States v. Hutcheson. There, union leaders staged a “jurisdictional” strike—i.e., they were protesting the assignment of work to another union. They were later indicted for restraining trade. The strike, however, was protected from an injunction under the Clayton and Norris–LaGuardia Acts. And the Supreme Court reasoned that if the strike couldn’t have been enjoined, it also couldn’t be used as the basis for criminal liability. In other words, even though the Clayton and Norris–LaGuardia Acts spoke only about injunctions, the Court read them as giving the union a broader immunity. If a tactic was insulated from an injunction, it was also protected from other liability.

That conclusion stretched the statutes beyond their literal terms. But even as stretched, they don’t necessarily insulate unions from all possible antitrust liability. Unions may not be liable for using the tactics listed in the statutes. But again, those tactics are classic restraints of trade under section 1, not monopolization under section 2. And Hutcheson said nothing about monopolization. It was a classic section 1 case.

So despite common belief, neither the relevant statutes nor the caselaw suggest that unions are free to maintain monopolies. Courts may be able to hold them liable under section 2. But should they? The Mercatus Center article offers at least one reason to say yes. In key sectors of the economy, unions have chokeholds on the streams of commerce. One or two unions effectively control the entire market. That control allows them to extract higher than competitive costs from businesses. And those costs are ultimately paid by the American consumer. No less than any business monopoly, labor monopolies raise prices.

That effect should concern competition officials. The FTC recently reaffirmed its commitment to protecting competitive labor markets. As the Mercatus Center suggests, a good place for the FTC to start would be addressing true labor-market monopolies.