Antitrust Agencies' Scrutiny of Labor

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The Federal Trade Commission and Department of Justice’s Antitrust Division have put labor issues at the center of antitrust enforcement and policy making. The agencies are closely examining companies’ hiring, recruitment, non-compete, and employee classification and compensation policies. They have recently amended the merger review process to require parties to provide granular information about their labor force to screen for potential impact on labor markets, and have signaled they may challenge a proposed merger if it impacts workers but not consumers. The FTC has also recently entered agreements to share investigative files, personnel, and other intelligence with both the National Labor Relations Board and the Department of Labor, and may soon issue its first unfair competition rule that may ban non-compete provisions in employment contracts nationwide. This panel will examine these developments and discuss how big of a role antitrust should play in labor matters.


Andrew Finch, Partner, Paul, Weiss

D. Bruce Hoffman, Partner, Cleary Gottlieb Steen & Hamilton LLP

Daniel J. Gilman, Senior Scholar, Competition Policy, International Center for Law & Economics

Maureen K. Ohlhausen, Partner, Antitrust and Competition, Wilson Sonsini Goodrich & Rosati

James A. Paretti, Shareholder, Littler Mendelson P.C.

Prof. Marshall Steinbaum, Assistant Professor of Economics, University of Utah; Senior Fellow in Higher Education Finance, Jain Family Institute

Moderator: Svetlana Gans, Partner, Gibson, Dunn & Crutcher, LLP; Co-Chair, The Federalist Society, Corporations, Securities & Antitrust Practice Group Executive Committee


As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.

Event Transcript



Emily Manning:  Hello, everyone, and welcome to this Federalist Society virtual event. My name is Emily Manning, and I'm an Associate Director of Practice Groups with The Federalist Society.


      Today, we're excited to host a discussion titled "Antitrust Agencies' Scrutiny of Labor."  We're joined today by Andrew Finch, Bruce Hoffman, Dan Gilman, Maureen Ohlhausen, Jim Paretti, Prof. Marshall Steinbaum, and our moderator today is Svetlana Gans, Partner at Gibson, Dunn & Crutcher and also co-chair of The Federalist Society's Corporations, Securities & Antitrust Practice Group Executive Committee.


      If you'd like to learn more about today's speakers, their full bios can be viewed on our website, After our speakers give their opening remarks, we will turn to you, the audience, for questions. If you have a question, please enter it into the Q&A function at the bottom of your Zoom window, and we will do our best to answer as many as we can.


      Finally, I'll note that, as always, all expressions of opinion today are those of our guest speakers, not The Federalist Society. With that, thank you for joining us today.


      And Svetlana, the floor is yours.


Svetlana Gans:  Great. Thank you so much, Emily, and thank you to The Federalist Society for hosting this discussion on antitrust and labor issue, which has been all the rage in the papers lately. So we are happy to provide you this timely and important content.


      As most have seen, the Federal Trade Commission and the Antitrust Division have put labor issues at the center of antitrust enforcement and policymaking. The agencies are closely examining companies' hiring recruitment, noncompete and employee classification and compensation policies. They've also recently amended their merger guidelines and HSR rules to look more into labor and workforce practices. The FTC, in particular, has entered into agreements with the National Labor Relations Board and Department of Labor to share investigatory files and personnel and other intelligence and may soon issue its first competition rule to ban noncompete provisions in employment contracts.


      So this panel will explore all of these developments and discuss whether these developments are new or not and how they will impact antitrust and labor issues going forward. So I will not go into detail with respect to our panelists' bios. You could get them online. So I will just briefly introduce the panelists and their former title, which are probably most relevant for today's discussion.


      So, first, we have Andrew Finch. He's a partner at Paul, Weiss. He's the former Principal Deputy Assistant Attorney General and the Acting Assistant Attorney General at the DOJ's Antitrust Division.


      Then we have D. Bruce Hoffman. He's a Partner at Cleary and former Director of the FTC's Bureau of Competition.


      Dan Gilman, he's a Senior Scholar of Competition Policy at the International Center for Law & Economics. He's previously served in a Division of Policy Planning at the Federal Trade Commission, among other roles.


      Maureen Ohlhausen, she is a Partner at Wilson Sonsini Goodrich & Rosati. She is the former Acting Chair of the FTC and an FTC Commissioner.


      We have James Paretti. He's a shareholder at Littler Mendelson, and he's a former Chief of Staff and Senior Counsel at the EEOC.


      And Professor Marshall Steinbaum. He's the Assistant Professor of Economics at the Utah University, Senior Fellow in Higher Education and also has a PhD in economics from the University of Chicago and has written extensively on the issue of labor and antitrust law.


      So thank you all for being here.


      I wanted to turn the first question over to Andrew. If you could just explain generally on where we are in the area of labor issues in the nonmerger arena at the antitrust agencies, how are the antitrust agencies looking at labor issues in the conduct world?


Andrew Corydon Finch:  Thanks, Svetlana.


      I'll begin by thanking you, and The Federalist Society, and all my panelists. I think this is a very timely topic and a good idea to do a panel because we're at, I think, a high-water mark for enforcement in labor antitrust issues. It's not really an entirely new area of enforcement for this administration. It's an area of increased emphasis and really a more comprehensive approach than I think we've ever seen before.


      Enforcement in this area—modern enforcement, I would say—really goes back to 2010, which was when the Justice Department entered into a settlement with six tech companies that had been parties to an agreement not to cold call each other's employees, or what people now talk about as a nonsolicitation type of agreement. That was a civil settlement and was followed in 2016 at the end of the Obama administration by a joint statement by the Federal Trade Commission and the Justice Department that gave guidance to HR professionals. And that guidance had a statement that caught a lot of people's attention because it said that the DOJ may prosecute no-poach-type agreements criminally. And so, that came right at the end of the Obama administration.


      That policy actually carried forward into the Trump administration, and the Trump administration did initiate multiple no-poach investigations. The principal deputy in 2018 gave a speech and said that this was going to be an area of focus and that no-poach agreements could be prosecuted as per se unlawful, criminal violations of the Sherman Act. And, in fact, the Justice Department did bring some charges during the Trump administration.


      But it really picked up under the Biden administration. President Biden issued an executive order talking about encouraging the FTC, among other things, to focus on non-competes, which it did. And I'm sure we'll get into that. The Justice Department continued to pursue criminal investigations and prosecutions that didn't quite have the success that I think it had hoped for, and we may get into maybe what some of the reasons were for that.


      And then I'll just touch on it even more recently in putting aside the merger guidelines, which talk about this in merger review, Commissioner Bedoya gave a speech just last week talking about whether or not employee misclassification could be a basis for an unfair method of competition under the FTC Act, the idea being that it one employer misclassifies its employees as independent contractors and another doesn't, that might create a disparity in costs and, for example, give one employer an unfair advantage in bidding for work. So that's also an interesting development.


      So in many ways, I'll just finish by saying it's been like a hockey stick, I think. The enforcement was ramping up, at least in criminal enforcement, and there were some civil settlements, but now it's really expanded to be much more comprehensive.


Daniel Gilman:  So could I just add there have been other sorts of efforts that can be construed as interest in labor issues? NC Dental, when it got to the Supreme Court, was about the State Action Doctrine, but the underlying enforcement matter had to do with scope of practice restrictions, who could deliver some very safe services, South Carolina Dentistry, also, and, of course, Maureen Ohlhausen really spearheaded a lot of advocacy efforts on labor restrictions, and FTC staff—policy staff—and also Bureau of Economics staff had done research on such things. So there's diverse things—not the same kinds of efforts we're seeing now and certainly not the same emphasis—but they're different kinds of roots.


Andrew Corydon Finch:  Good point. That's a very good point.


Hon. Maureen Ohlhausen:  Yeah. Thanks, Dan. Yes. When I was the acting chair, one of my efforts was what we called the Economic Liberty Task Force to really look at occupational licensing restrictions and how they were keeping out kind of innovators and people just stepping on the first rung of the economic ladder from entering a whole host of different job categories and a big impact, also, on military spouses as they moved around and having to get relicensed in every state and the difficulties that created and actually had impacts on readiness in the military because that was one of the reasons people were leaving the military was that challenge for their spouses. So yeah. It's not a totally new topic that I think has some new flavors and some new emphasis.


Svetlana Gans:  So, Maureen or anyone from the panel, what would you say are the key differences between how previous administrations have viewed labor issues and how this administration is doing it? What are the key differences?


Hon. Maureen Ohlhausen:  Well, maybe I'll jump in on the merger -- the merger point there. So previously, well, I think Andrew talked about conduct matters and competition advocacy, where you couldn't really bring an enforcement action or maybe you could against the state board if they were made up of competitors in the marketplace. But I think there's been a little less of a focus on labor issues in the merger space, and that's one of the things that we're seeing here.


      Now, that's not a totally new concept. We called it like monopsony power -- the power buyer kind of issue. And there have been cases brought about a merger having an impact on that side of the market, monopsony side of the market. There was a private one involving fish -- actually, fishermen selling fish to fish processors. The Simon & Schuster case that focused, I think, on the labor, the creators, and their -- the impact on them of that post-merger.


      And then we're seeing it, I think, emphasized quite a bit more in the merger -- in the merger space. So, for example, Chair Khan and Commissioner Slaughter had a separate statement in the Lifespan case saying, well, we would have supported also bringing this as an impact on the, I think, nurses on their ability to get hired or change jobs in the market. And so, now in the merger guidelines, we have a whole section that discusses this. I think it's Guideline 10. And I think one of the real changes there is having this in the guidelines as a particular factor that the agencies are looking at, and with statements along the lines of saying, labor markets frequently have characteristics that exacerbate the effects of a merger between competing employers. I don't think we've seen anything like that previously in a merger contest. I think there is some question about whether that assertion is true, but it's certainly an area of emphasis. And we saw it, also, in the White House a statement surrounding the release of the proposed merger guidelines last year.


      And then, interestingly, we're also seeing it in the HSR rule change, so that the HSR proposed rule about the information that the agencies collect when they're reviewing a merger now have proposed additional collection on issues such as noncompetes on commuting zones for workers on worker classification issues, not quite the same as what Commissioner Bedoya was talking about but like looking at commuting zones. Where do workers commute from? It would be interesting to see if they get included in a final rule, whether that's a basis for challenging if it goes beyond the authorization of the HSR Act, whether non-competes is really something the HSR Act is concerned about, even if there was a different area of concern in that.


      So I think that trying to really, not just emphasize it in mergers but almost argue that it is a primary effect or a primary competitive concern for mergers is really, I think, an unusual and new focus that the current administration has.


Bruce Hoffman:  Can I add a quick point or two on that? I think it's absolutely right. I will say there have been some merger investigations that involved elements of labor, so I actually distinctly remember being yelled out while I was director of the Bureau of Competition on a panel by a private practitioner because we had started including specifications in the second request asking about labor overlaps. And the question posed to me was, "Are you insane?" So we had started asking about that, but it certainly didn't get the focus it's getting today.


      Secondly, to add to the cases that Maureen was listing, which there are actually quite a few when you sum them all up. The one that comes to mind for me was -- I think it was Grifols where it was labor a bit -- you can either view as it as labor or a supply of commodity, but it was an OFSI case. Of course, the market involved was near and dear to most college students. It was supplying blood plasma, which in college towns is a big source of income. You go out drinking the night before, and then you go sell some of your blood plasma to get money to go [inaudible 00:14:35]. And there was actually a monopsony concern in the market for purchasing blood plasma from, I guess, mostly hangover-ridden college students.


Daniel Gilman:  Can I just add a couple little things? One is with the HSR rules. Some of the information they're asking for is a little odd, so labor violations, OSHA violations going back five years from all filing parties. If you go to Labor and go to the OSHA website and look, you will see that OSHA violations are heavily concentrated in not concentrated industries. It doesn't mean you can't have antitrust issues, but they don't look like a good signal of anything that you would look at in a merger investigation. The stuff about the commuting zones and the six-digit occupational codes one is not exactly a geographic market. The other is not a labor market in antitrust terms, and firms don't necessarily keep this information in this form in the ordinary course, so what they're going to do with it is unclear. It could be rather costly to gather.


      Just quickly, I think there's a looming problem here that goes from HSR screening all the way through in the merger case, which is that if you're talking about a fileable merger—maybe in the manufacturing sector, all kinds of sectors—you may have multiple product markets. You may have scores, or even hundreds, of labor markets implicated. And so, if you take the single market theory both literally and seriously, you could get a lot of crosscutting cases where you're trading effects in one labor market against another labor market, effects in a labor market against a very much larger product market with many more consumers, and I don't have a nice neat solution to that, but the guidelines give us no help in how to order or sort these things.


      I think in the price in terms fixing things, and the rent seeking, and the exclusionary conduct, you're much less likely to get these kinds of conflicts. So you can have clean effects, maybe harms in the labor market, but no obvious tradeoffs downstream or even laterally. I don't know that there's -- that this has been sorted out at all.


Hon. Maureen Ohlhausen:  Yeah. And actually, Dan, I should have mentioned talking about the merger guidelines and then switching to the HSR is the merger guidelines are only going to apply to the very, very small percentage of mergers that get a deeper inquiry.


      So, Bruce, when you mentioned asking about this in a separate request, that's a tiny, tiny fraction of the mergers that are filed that are notified every year. But collecting this in the HSR means every deal -- every deal over the threshold, which I think now is slightly over $120 million, so it's almost like a presumption that it's worth collecting this information for every single transaction over the threshold in the U.S. because the parties are going to have to supply that information now, which I think is interesting and possibly a very vast overcollection of information that is very, very unlikely to identify any competitive issue in most mergers.


Svetlana Gans:  So for the audience members who may not be familiar, what is the status of the HSR rule changes? Are those final? Are those still pending? What's the status just for the audience?


Hon. Maureen Ohlhausen:  Right. So they were put out for comment, and the agencies received the comments. And now they are reviewing those comments. But it is possible—possibly this year—the agencies will put out a final rule that could go in effect as early as 30 days after the rule is issued, so it's really looming that these changes could be a new obligation very soon.


Svetlana Gans:  There is a question in the Q&A, so I just wanted to be mindful of that. Since human labor is not an article of commerce under 15 USC 17, what is a source of authority for the FTC's regulation of labor market? Who wants to take that?


Bruce Hoffman:  I'm happy to take a quick shot and then defer to anybody else.


      But number one, that particular statutory provision was designed to protect labor unions. It's the statutory labor exemption, and it's because, though this is not the intent when the NHS laws were enacted, some of the first uses to which they were put were going after labor unions, so Congress had to step in and fix that problem.


      Secondly, I don't think anything we're talking about—with the possible exception of the rulemaking on non-competes—is what I would call direct regulation by the FTC of labor. Instead, it's how you think about purchasing and selling labor and effects on that in the context of enforcing the antitrust law in mergers and acquisitions or in other areas. So just as the FTC, when it's looking at a merger for can manufacturing, for example—or maybe that would be DOJ—I don't know—whoever—whenever somebody's looking at a merger for can manufacturing, you're not regulating cans, I would say that looking at the effects of a merger on labor probably wouldn't be viewed as regulating labor directly. Those are my off-the-cuff reactions to that.


James Paretti:  Yeah. And I think that actually ties into the point we were making earlier to what is different now than seems to be different then. And certainly from my perspective, I think with the non-compete proposed rule, in particular, it's really the first time I've seen that they are going to regulate on a granular level. They are going to each individual employer rather than the effect on the labor market or a business-to-business transaction, and I think that's what's raised everybody's heads. If, in fact, they have even the authority to do that, and we can talk about that. I think there's a strong argument that they don't have the authority for that role, irrespective of the fact that it's relating to labor.


Svetlana Gans:  Great. So yeah. We could talk about that in a bit. I wanted to turn to Marshall, Professor Steinbaum, for a moment to talk a little bit about the evidence in the research that the antitrust agencies are pointing to. I know you've done a lot of the research—I'm familiar with it—suggesting that there is too much power over the workforce. That Treasury Department report recently stated that the review of credible academic studies shows that there has been an increase in market power for employers that has led to a roughly 20 percent decrease in wages relative to the level in a fully competitive market.


      Can you discuss some of this research and why that means that the FTC and DOJ should be looking at labor issues through the antitrust lens?


Prof. Marshall Steinbaum:  Sure. So I think there is very strong reasons underlying the policy shifts that we've been talking about in this discussion so far. And I thought the Treasury report that you just referred to did a very good job of wrapping all of that evidence together in one place in a comprehensive way.


      I'll just say it's been a decade since I left my PhD program at the University of Chicago, and there's been basically a sea change in labor economics since then relative to what I was taught, namely that the canonical model of how the labor market works is perfect competition. You'll get laughed out of the room in any seminar on labor economics for putting forward such a model these days, and that's for a very good reason.


      There is longstanding evidence about the effect of the minimum wage not -- or increase in the minimum wage not leading to a reduction in employment. That's consistent with the model of labor market power, not consistent with the model of perfect competition. We've got direct measures of marginal product of labor and of the wages that workers are actually paid, and you can show that wage is less than the marginal product. We've got evidence of increased inter-firm earnings and equalities. So in a perfectly competitive labor market, basically, no matter the skills or characteristics of a given worker, they should be making the same wage no matter which firm they work for in that market. And that is pretty demonstratively falsified by investigations into the phenomenon of inter-firm earnings and equality.


      So to speak to a point that Maureen dropped off earlier in this conversation, I think the consensus among labor economics is that it is actually true that frequently labor markets are defined by imperfect competition and some degree of market power on the part of employers.


      I've just been speaking about the evidence coming from the labor economic side. Even the industrial organization economists, who are typically more involved in the antitrust policymaking and enforcement, have now -- I like to think of IO economists as being motivated by a t-shirt that I used to see people wearing at the University of Chicago, which was, okay, I understand how it works in practice. How does it work in theory?


      IO economists tend to care more about economic theory than empirical evidence, and yet, now there's plenty of theoretically grounded in traditional IO type methodologies regarding imperfect labor market type competition. So I'm referring to differentiated products, discrete choice type models, estimated on labor market data and job postings and applications, also the traditional production function estimation approach from industrial organization, where you're measuring the marginal costs and then seeing what the wage is in comparison to that. We've got papers doing that and showing that labor market power has risen over time. So I think, kind of across the spectrum of economics research, there's really no doubt about this question anymore.


      That raises the second part of your -- that leads to the second part of your question, which is why is it having so much of an effect on policy? It's not just a sort of academic trend or development in the literature. Those happen all the time, and they don't all feed through to the policy world, so the question is, why is this one different in this respect? And my interpret- -- so   your question prompts me to consider the process by which intellectual developments affect policy more broadly. I think it's because the idea that employers systematically exercise power in the labor market is just flatly inconsistent with a lot of the received wisdom in antitrust enforcement with respect to the disposition of the laws vis-à-vis certain practices of types of mergers.


      So what do I mean by that? If you think about horizontal mergers, the basic policy analysis, so to speak, is there's the potential for exercising market power in the output market by raising price. There's also the potential for efficiencies from a horizontal merger in the basic practice. And horizontal merger enforcement would be to weigh the anticompetitive effect in the output market vis-à-vis pricing power against those efficiencies. Well, if the labor market is systematically uncompetitive, those—what we've been calling efficiencies all these years—are actually anticompetitive exercises in market power in the labor market. So that means both forces that you're weighing against each other in a horizontal merger actually go in the same direction, and therefore, the correct legal analysis for horizontal mergers is a per se rule against them, not that basically quasi rule of reason with a structural presumption, which is the disposition of enforcement now.


      Thinking also about my work as more oriented towards vertical restraints and the exercise of market power across the boundary of the firm and into different markets, there I would refer to that kind of way this is conceptualized by my colleague Sanjukta Paul that different areas of law draw different boundaries of the firm, different notional boundaries of the firm. So in antitrust, we typically have had lax enforcement or no enforcement against vertical restraints.


      The implication is basically that the firm has a wide boundary; that a lead firm can tell a subordinate firm formally—at least legally speaking—an independent contractor what to do, and that's economically efficient. I see the intellectual lineage of that idea stemming from the Coasian theory of the boundaries of the firm that basically vertical control is a mechanism for a productive efficiency, whereas if the labor market's uncompetitive, you can think of the subordinate economic actors as basically being coerced. That's the thrust of the noncompete role. And consequently, that idea that exercising this control across the boundaries of the firm, that's pro-competitive because it's productively efficient. That idea gets drawn into severe question, and so this leads to a sea change in our disposition towards vertical restraints rather than a rule of reason, which is how they're considered now, which is pretty weakly enforced if at all. That's, as a per se rule against vertical restraints, basically. If you're outside the boundary of the firm, you can't be told what to do under any circumstances.


      And then, finally, I would say this idea that labor markets are systematically uncompetitive from an economic perspective justifies something like what Bruce referred to, the labor exemption, that is to say, the exemption from liability under Section 1 in equivalent statutes with respect to bona fide labor unions. The basic idea is, basically, horizontal coordination on the part of workers can be pro-competitive if they're otherwise at a disadvantage vis-à-vis market power.


      Aside from the labor -- the statutory labor exemption itself and that area of law, we have basically a per se rule against horizontal coordination. And so, the implication here is that should actually be a rule of reason. That's the one that's really up for case-by-case analysis. So things like the occupational licensing that Maureen was focused on in her tenure at the FTC, that could be anti-competitive. I'm not saying it never is, but that should really be where we have the kind of back-and-forth that is stated in the rule of reason.


Bruce Hoffman:  So -- oh, go ahead, Dan.


Daniel Gilman:  No. Go ahead, Bruce.


Bruce Hoffman:  Yeah. So a couple thoughts on the data. One, I don't doubt the basic proposition that increased market power, or in the form of increased concentration -- increased concentration among employers can have monopsonistic effects on labor supply. I think that's actually rudimentary. It makes complete sense, and I think it's empirically demonstrable. But I think there's a number of other points or a number of other things bound up in what Professor Marshall said that I think—Professor Steinbaum. Sorry, Marshall—that bear a little bit of discussion.


      One, perfect competition, I think, is not what most people would say characterizes labor markets today. But that doesn't mean that labor markets are monopsonistic. There's a wide gap between the true monopsony and perfect competition. And almost all markets operate at some point in between those, which means, in general, we don't draw bright-line rules based on the concept that they're pure monopsony is pure monopolies or perfectly competitive. We look instead at what's actually going on in terms of how firms are interacting.


      Second, in terms of what the empirical research shows, you could dig into this in a lot of detail. We could do an entire panel on it. But just looking -- if you just look through the Treasury report, it talks about a number of studies—which I'm reasonably familiar with independently—and there are conclusions from those studies that are worth pointing out. One, it looks at a study about merger effects on wages. And that particular study involved hospital markets. It's one of the few that actually found a direct link—direct effect—between mergers and wages.


      But it had two findings that I think are quite important in this context. One was that the effects of the price reductions were limited to highly specialized jobs and that there were not price effects for less specialized jobs. So that suggests that market concentration in employment is going to vary significantly based on the types of jobs you're talking about, which, of course, makes sense. If I'm doing something in a hospital that I can also do at a restaurant, then I'm not that worried about a hospital merger. But if I'm a doctor or a nurse, then I might be worried. But secondly, it also found that the merger increased employment, and that's contrary to a monopsony. The basic concept of a monopsony is you reduce employment, and that's what drives the labor wage down. So that's a highly ambiguous finding.


      Two other things about the data supporting the basic points we're talking about. One, again, if you go through the Treasury report, one of the things it points out is that labor market concentration in the U.S. has actually been falling over time in a sustained way, and that continues to be the case. So it is not the case that we're looking at an increase in labor market concentration over time, unless you look solely at the national level, which, of course, is not the level at which most people seek employment. But if you look at local labor markets where people actually seek employment, concentration's been declining.


      And last point on this, even the studies -- and I'm mindful, Marshall, the study that you did involving the relationship between concentration and wages. I think those are good studies. They're very worthwhile to look at, but they have an issue, which is that there is confounding variables. So when I look at your study, for example, it's a good study, but it also shows -- what I interpret it is basically saying is, wages, employment -- wages and employment and job opportunities are very highly correlated with population. So, in essence, if you look at markets across the country where you have a whole lot of people. You got a lot of employers, and a lot of jobs and wages are higher. And when you have very few people, you have very few employers, very few workers, and wages are low. So I don't know what's causing what.


      Again, I don't doubt the fundamental model, but I think the data on the direct effect of concentration in existing markets, as opposed to market power and maybe some other mechanisms in concentration, are kind of ambiguous and hard to support large-scale policy proposals from.


Daniel Gilman:  I guess, to add a couple of things --


Svetlana Gans:  Hold on, Dan. Should we have Professor Steinbaum do a --


Prof. Marshall Steinbaum:  Yeah. If you don't mind, well, I will briefly respond to those points.


      So on the idea that increase in employment is inconsistent with the exercise monopsony power, I just fundamentally don't agree with that. That's what happens in some models of monopsony, like a [inaudible 00:34:02] monopsony, would have employment and wages going in the same direction. But not all models of monopsony predict that outcome. Some can have a wage-suppressing effect while increasing the employment or hours worked; however you want to measure quantity in the labor market. And that's because, basically, when you have monopsony power on the part of employers, it can be wise for them to grant a lot of jobs, basically, low-wage jobs that are very economical for them to fill. So you can get a model that predicts the proliferation of poor jobs, basically, and I think that's a pretty good model, actually, to explain broad scale macro trends.


      On the question of whether concentration either has been increasing or decreasing over time or can be interpreted to reduce wages and labor markets, I'm happy to litigate with this with you. I've been doing that for five years. I don't perceive that as being the key point here about the pervasiveness or lack thereof of labor market power, but I'll respond briefly to it.


      So there's a question of how do you define labor markets. The papers that I've written that you're referring to do so by means of the six-digit SOC occupation. And that, I presume, is why that is the classification that appears in the proposed changes to the HSR filings. You can get a lot more complicated than that. There's a new version of the excellent paper by Schubert, Stansbury, and Taska that look at the transition rates of workers in a given occupation to other occupations, or rather the non-transition rate, the rate at which they remain in their same occupation when they leave their job versus leave. You can redefine labor markets where you're basically, if you have an occupation that has high mobility out, that kind of gets grouped with another occupation versus occupations that don't have high mobility out there. They're on their own. And what that paper shows is, basically, the increase in concentration in those more calibrated labor markets is more associated with a decline in wages. So that just says what we did with the SOC occupations. That's one way of defining labor markets.


      You could get a lot fancier with a lot better data. They're using resume histories, basically, of occupations, and you'll get a potentially better labor market definition. But the basic point holds in the labor markets that are defined by SOC occupations -- or six-digit SOC occupations, I should say.


      Then, finally, on the question of whether concentration has gone up or down over time, I'm pretty agnostic on that point. I think the force that says concentration has been going down over time in locally defined labor markets is basically about the expansion of national chains into local markets, despite the kind of stereotype that you hear about national chains displacing local employers. The implication is basically the entry of national chains doesn't fully displace all the local employers, so therefore concentration goes down when national chains enter. It's not that I disbelieve that. I just think that there's other overwhelming evidence that labor market competition has been declining over time that doesn't send firm concentration. So I'm kind of surprised that a lot of the kind of question about has labor market power increased or decreased over time comes down to has concentration increased or decreased over time, since I would be the first to admit, and I would have assumed that's true of everyone who has called a concentration isn't necessarily the only measure of market power in any market.


Daniel Gilman:  I think it's right. I'm not sure that there's -- I don't know. I don't think we have a prayer in hell of really going through all of the literature here.


      I think in terms of perfect competition, I don't know how many IO economists were, and I trust enforcers were really thinking in terms of perfect competition. And, honestly, I'm no spring chicken, and as a child, I was getting lectures on labor econ from my dad, who was a very old, old-school labor economist. Greg Lewis and a very young Harry Johnson were dissertation supervisors in my first or second or third econ class, I said -- started talking about perfect competition assumptions, and he just started laughing at me. I don't -- and so we are talking about a previous century.


      Of course, there's been a lot of good research, a lot of interesting research. I think some of it stronger than others, and some you're talking about the strength of a paper. There are a lot of areas here where you have very smart, thoughtful people writing very good papers with -- there are some good data sources. There's some really terrible data sources. And there are areas of the literature where these things really could use improvement.


      I will say I'm not in any position to share prior drafts of the Treasury report with anybody. But you can imagine—not to blame Treasury, not to blame this administration—you can imagine a scenario where smart people in a department like Treasury would work on something, share drafts with staff from other agencies, and the second or third draft would be just a lot better and more nuanced than the final thing that's gone all the way up the chain and published. And I think the final report has lost some nuance that was there before in quite a few areas, and I really think it matters. The stronger the intervention you want to tout—whether it's a change to per se or something like a per se rule—the better the foundation I'd like to see.


      And so, you see some interesting things like with the non-compete rule. There's some -- there's some good work in there. There's some good literature summary. I know exactly who did it, and that draft has been assuaged a lot of -- there are a lot of things even still in the draft that qualify a lot of the papers. And then you get the high-level comments, where all the qualifications disappear.


      One interesting -- in that body of literature is everybody knows that there are not just data problems in the sense that the data's imperfect. Of course, the data's imperfect. But you have certain kinds of problems running throughout the body of literature. And one interesting -- it is odd. You have a good literature summary. It cites every single paper, as far as I can tell, that Evan Starr had written up until that point, and Norman Bishara. Evan's a very smart and thoughtful guy. He's done a lot of good work, but one thing you see in one of his papers -- the one paper of Starr and Bishara that is not cited there is a paper—it's not ancient—where they go through problems running through much of the prior literature. And it's not that there's a little problem here and a little problem there; it's overreliance on survey data throughout. And some of the survey data is errable.


      Evan, to his credit, has worked to improve it first with a fancy patched-up convenient sample. But then, by hounding the people at BLS and finally getting them to include one question in the National Survey of Youth, it's going to produce some longitudinal data. They've got one paper already, but Evan's a smart, thoughtful guy. He wrote one question. They stuck it in there. There could be more questions. It's not validated. It's not tested against any direct measures. The FTC could be collecting direct evidence if they want. A whole bunch of papers -- I could spend forever on this. There's some regulatory comments we filed, and I've also got a paper coming out in Health Policy & Finance Journal. There's a sort of interesting attempt to measure the enforceability of law changes, and it's, I think, charitably a soft, fuzzy measure of nobody's exactly clear what the heck it is. Maybe less charitably, it's just a black box.


      There've been a lot of state law changes that can provide us opportunities to do event studies that don't use this. Because there have been much cleaner changes, instead of having research assistants read published opinions and try and dream up what the heck kind of difference they made for some unspecified endpoint, I think that, look, there are good papers in non-competes. I don't mean to suggest people couldn't have competitive concerns about non-competes or that I'm definitively right. I talk about some under rule of reason in the healthcare space, but I think that it's the kind of thing where you want to make a sweeping rule. You might want to know more, even just to how to pull apart average effects and what effects on whom. You look at --


Svetlana Gans:  And Dan, let me turn the enforceability point that you were mentioning because I think that kind of runs into our next question for Bruce.


      Bruce, Professor Steinbaum mentioned a few things in the literature, which could all perceptually be a Section 5 violation under the new Section 5 policy statement that the FTC adopted. He mentioned economic actors that are coerced, kind of per se condemnation of vertical restraints. He mentioned, kind of echoing some of the remarks that Chair Khan had made about mergers impacting working conditions and wages and schedules and those types of things should be viewed through an antitrust lens.


      So, Bruce, the question for you is, given the standard in the new Section 5 policy statement, kind of where would one draw the line from an enforcement perspective? We've heard Professor Steinbaum talk about the research and the literature and the evidence, but as an enforcer, where would you draw the line in terms of legality and illegality from bringing actual cases on this?


Bruce Hoffman:  Sure Svetlana. And actually, this goes directly to point Marshall made. So Marshall made the point that why do we care about concentration? So you could make an argument about ambiguities in the literature on labor market concentration and effects of concentration on wages. Parenthetically, just to answer that, I would say because of the merger context, the first thing you measure tends to be changes in concentration. So, obviously, if that's the heuristic you're using for anti-competitive effects, then you're going to look for relationships between concentration and wage levels.


      But leaving that aside, to your point, Svetlana, that gets us into this question of conduct cases and behavior and Section 5 enforcement outside the context of mergers, I'd say that Commissioner Bedoya just gave a really interesting speech, which I recommend reading. It's a fascinating read and very well done. He gave it at GCR Live in Miami, and it's up on the FTC website. And it covers a lot of these questions with some very interesting kind of storytelling about misclassification specifically. And so -- and what he talks about is by misclassification -- what he's talking about is where employer X classifies certain types of what you might debate about being employees or not as independent contractors, and so the cost of employing those people is lower to that employer than the cost of employing somebody directly where you're paying benefits and so on and so forth.


      And so, the argument that Commissioner Bedoya is making is, in essence, misclassification of workers not only reduces the compensation in all forms to those workers, but also, it could be viewed as an unfair method of competition under Section 5 of the FTC Act because it creates an unfair competitive advantage. So if you can imagine if I've got a group of firms that are "correctly" classifying workers as employees and incurring higher costs, and they're competing with rivals that aren't, then they're going to be at a competitive disadvantage.


      So the question is, what does this mean, and what can you really do with it? And this, to me, brings up something that Chair Muris at the FTC said a long time ago. He wrote a report that was called "Everything Old is New Again." And I was reading. I went back and read some of then-Chair Mike Pertschuk's statements about the meaning of Section 5. And Pertschuk wrote, among other things, "No response" -- this is in 1970s. He said, "No response of competition policy can neglect the social and environmental harms produced as unwelcome byproducts of the marketplace, resource depletion, energy waste, environmental contamination, worker alienation, the psychological and social consequences of marketing-stimulated demands." And then he went further and said, under Section 5, "can the FTC enjoin businessmen from employing illegal aliens? Could we enjoin a company from cheating on its taxes to gain a competitive advantage? Could we obtain an order requiring that an environmentalist be placed on the board of a company that repeatedly violates the pollution control laws? I leave you to ponder these and related possibilities."


      So this is not a new discussion. And Commissioner Bedoya was not unaware of this, and he points out and—nor is the FTC—so Commissioner Bedoya in his speech pointed out that, well, in our Section 5 statement that we recently issued, we actually say that we're not just talking about legal violations that impose cost advantages or disadvantages. So it's got to be something more than that. But then he goes on and says, but I still think misclassification can be a "method of competition that lets lawbreaking employers win business from honest ones." And therefore, his argument is the FTC can prohibit misclassification as an unfair method of competition under Section 5 of the FTC Act.


      I think that this -- I think that it's useful that Commissioner Bedoya of the FTC recognized that the FTC Act does not turn the FTC into the super regulator of everything in the United States because ultimately compliance with any law or regulation or noncompliance with any law or regulation could create a competitive advantage or disadvantage. There's no way to -- there's no limiting principle that you can apply to that. What I'm struggling with is how to draw the line. Commissioner Bedoya says, there's a line, and this is on one side of it and other things are on the other, but he doesn't tell me how I should draw that line. I can't discern the principle that he's using to separate misclassification from, say, hiring of legal aliens as employees, as Mike Pertschuk talked about in the 1970s.


      I have in the past talked a little bit about using antitrust law, monopolization law, in the context of conduct and thinking about what kind of conduct is anticompetitive. When we talk about competition on the merits versus anticompetitive behavior, or we talk about unfair competition versus fair competition, there's got to be some metric other than I know it when I see it. And I think the real difficulty here for the FTC or for anybody attempting to enforce these laws is figuring out what is a principle which would identify a type of behavior that would be anticompetitive or an unfair method of competition. I would suggest that one thing you could think about would be behavior that's unambiguously welfare-reducing.


      And so, for example, torts in the form of inflicting physical harm, destroying people's factories, you could easily say those are welfare-reducing. False advertising is welfare-reducing on net. There's no pro-competitive benefit of it. But it's a little bit difficult to think about with classification or misclassification of employees. I just don't know. I haven't thought enough or looked into the research to know whether I could describe that as well for reducing an aggregate. But I do think some principle would have to be articulated here in order to figure out how you draw the line that separates some kinds of conduct from any kind of violation of any law.


Andrew Corydon Finch:  I think one thing to think about, though, with a test like that, Bruce, is how you weigh the welfare of different constituencies, the employees versus the business versus the consumers. When I was -- I actually had the pleasure of being at GCR and watching that speech as well, and I thought that maybe one clear area is what's the business rationale that's actually adopted. What are the contemporaneous business records show about why a business is misclassifying workers, or why is it not? Are they doing it consciously to get a competitive advantage? In that way, they're viewing it as a method of competition as opposed to just another business practice or a failure to do something correctly in compliance with the law. That seems like if there were going to be a court set of types of instances that the FTC might pursue, that would be a starting point.


Svetlana Gans:  All right. I'm going to go to Maureen first, and then -- because I want to get Jim in here. He's been waiting patiently to talk about the labor lawyer perspectives. So I want to get him in here.


      But, Maureen, I'll go to you next.


Hon. Maureen Ohlhausen:  Thank you. I'll just touch on this really briefly.


      And Bruce, you mentioned principle, and we're -- brings up the idea of an intelligible principle, certainly, and then the unfair method of competition policy statement, which a lot of this debate or these discussions are being grounded in really raises this, I think, really important issue of the major questions doctrine as can the FTC as a constitutional matter at the separation of powers matter kind of step into all of these areas based on the kind of vague unfair methods of competition authority?


      And while you talked about Pertschuk, it raised concerns back then, but we have a Court that has embraced, I think, a much more searching question of can the agency—which right now is just operating with three commissioners from the same party—take on these sweeping powers? And if they pair that with rulemaking, you almost end up with a three-person legislature. So I think that looking at these things, we also have to keep in mind kind of those kinds of due process separation of powers constitutional issues.


Prof. Marshall Steinbaum:  Sorry, Svetlana, I have to respond to that because I think there is no doubt that this is within the agency's power. I thought the best part of the Bedoya speech was the reference to Peckham's decision in Trans-Missouri Freight, saying that the competitive harm in here is in the removal of independent decision-making power. It's a longstanding principle in antitrust law no sense in which the agency is transgressing its boundaries. And it is not the standard that Bruce just articulated.


      I don't think that a welfare-reducing standard is administrable at all. I think the standard should be does the misclassification reduce independent source of decision-making power. That is where the harm to competition lies. And I think that is why the idea of misclassification of an economic employee as an independent contractor says, well, you're basically exercising control over the boundaries of the firm. That reduces the competition because it's controlling an agent that should be independent.


Svetlana Gans:  All right. I want to get Jim's opinion on that because that seems like a labor question.


      But, Dan, one minute, and then we have to turn to Jim because he's been waiting for 54 minutes.


Daniel Gilman:  Well --


Svetlana Gans:  Go ahead.


Daniel Gilman:  Yeah. We want to hear from Jim.


James Paretti:  [Inaudible 00:54:10].


Daniel Gilman:  The one-minute thing is two pieces. We don't know what the bounds of Section 5 are in this space. Everyone agrees on a tiny bit of extension past the antitrust laws. The commission released a very, very bold restatement of Section 5, and who the heck knows? It's not been tested in the courts at all on authority. And the subject matter may be sure, but it's a very weird -- maybe it's because there are no litigators sitting on the commission right now, but the prologue to the non-compete NPRM seems to have been written to beg the courts of appeals and the Supreme Court to look at a non-compete rule through the lens of the major questions doctrine.


      What they would say? What's the right answer? I'm not going to argue. I'm just going to stop. It looks like they wanted that to be tried.


Svetlana Gans:  All right. Jim, back to you --


James Paretti:  I know the --


Svetlana Gans:  Yes. You get the --


James Paretti:  I know the answer. I got --


Svetlana Gans:  You get the last ten minutes.


James Paretti:  Yeah. I'm not even going to take that.


Svetlana Gans:  We have a lot of questions for you, Jim.


James Paretti:  Sure.


Svetlana Gans:  Is this giving you concern from a labor perspective in terms of wages, working conditions, kind of this inherent allegation of inherent power and balance, and how that is necessarily an antitrust issue? Tell us your thoughts, Jim.


James Paretti:  Sure. I think from my perspective, it -- now, if they want to take that position by way of an enforcement action, that may be one thing. But if the agency wants to do rulemaking in this area, I think, looking at Sections 5 and 6, it is very difficult to read that as permitting them.


      So before we get to the constitutional issue of major question, which I do think is a very legitimate question, it's very difficult to read Section -- any reading of Section 5 and 6 to come up with the authority for the agency to issue rules on the unfair method of competition side. Obviously, on the deceptive acts and practices, there's an extensive regulatory scheme for what they can do there. I would say that the absence of that on the unfair competition side strongly counsels to me that they're beyond their statutory authority in doing this.


      I also do agree with Maureen that once we get -- if we get past that, I do think we have pretty significant major questions doctrine concern. It's fashionable right now to have briefings with major question, but here is one where, when I talk about this with folks, I say it's not like this is a relative -- non-competes are not a relatively new development. They're quite literally older than the United States itself. We brought them over from the common law in England. And for them to have gone on for literally hundreds of years, not having been raised -- not having been raised as an issue by the FTC in the last however many it's been, to me, that's a fairly strong reversal of position.


      And when you look at major questions issues, one of the things they'll always look at is where an agency suddenly, after years and years, purports to find the authority to regulate something that up until now, it never suggested it had the authority to regulate. That to me, suggests that is when it's at the ebb of its power, is my opinion. So that's a lot.


      I'm honored and flattered to be among the professors and the economists here today because, I can tell you, having done labor and employment law for more than 25 years now, I don't know that before last year or the year before that, I'd spend much time even looking at the FTC. They, really, in this space when it gets to particularly the regulation of individual employees and the -- their relationship with their employer, this is to me fairly novel. But I defer to the experts in terms of what that means as more broadly and how the agency might bring it as an enforcement matter because, to my knowledge, the first step they took here—might have been January 4th of last year, or maybe it was the 5th—said, oh, we are now. We have settled three complaints about non-competition agreements. The next day—quite literally the next day, so I think it was the 4th and then the 5th—with that 24 hours of experience, they then held themselves out to be subject area -- subject matter experts on the field of non-competes.


      So from my perspective, it'll be interesting to see what rule they come down with. I don't know that they can draw a limiting principle. And I will say looking at it through a purely political litigator's angle, because there is such a concern that if allowed to regulate in this area, in this way in rulemake, where is the FTC going to go next? I suspect even the most modest -- and non-compete rule that everyone on this call would agree is -- seems reasonable, is not going to dramatically upset anything. I suspect that's going to be subject to challenge, simply put, on the principal thing.


Svetlana Gans:  All right. So we are at time, but I just want to throw out one last question in terms of counseling clients in this area—whether labor clients or antitrust clients, whether mergers or otherwise—kind of what are some kind of learning lessons or key takeaways in navigating kind of the labor antitrust dimensions going forward in this administration? Any kind of last words from anyone on this subject?


James Paretti:  I will just say, this administration in particular, they have taken—and I think they've done an admirable job, particularly if you're in line with what they think—a whole of government approach that really is somewhat unprecedented. In the past, we've seen, oh, there's memoranda of understanding, or maybe sister agencies will share some data, share some information about investigations. But to -- again, to use the issue of non-competes, you have the FTC in it, the National Labor Relations Board. And the general counsel of the NLRB has been agitating that these are violations of the National Labor Relations Act, again, a law that's been on the books for 90-some years, and this has never been an argument that's really been presented.


      So with respect to this administration, they have all of their boats rowing in the same direction. If you like that direction, you give them credit. If you don't like that direction, you do what I do and make money suing them.


Svetlana Gans:  All right. Anyone else?


Hon. Maureen Ohlhausen:  I think it's just be prepared that you might get these kind of questions and that if the HSR rule goes through as proposed, you're going to have to provide a lot more information and be prepared to do that, and also take a hard look if you have non-competes. Why do you have them? Do you still need them? Is there something less restrictive that would protect your interests in the way that you're trying to protect them because the states are moving a lot on non-compete issues as well?


Svetlana Gans:  All righty. Well, we are at time, so I wanted to thank the panelists again for your generosity of time in being here and preparing with us. It's really great to have your expertise. And thank you to Emily and The Federalist Society for hosting us today.


Emily Manning:  On behalf of The Federalist Society, thank you all for joining us for this great discussion today. And thank you also to our audience for joining us. We greatly appreciate your participation.


      Check out our website,, or follow us on all major social media platforms, @fedsoc, to stay up-to-date with announcements and upcoming webinars.


      Thank you once more for tuning in, and you are adjourned.