Monopoly power harms labour – competition authorities must learn to protect the vulnerable

July 5, 2023 -

Atypical work such as self-employment, part-time or seasonal work is a frequent feature in the media, arts and entertainment industry. This is also the case in many other sectors. Of course, being highly adaptable may have to come with the job. But there is also a fine line between looking for flexibility and enforcing precarity. Flexibility is a sought-after soft skill. Precarity is a consequence of workers having to accept any working condition in order to get a job.

Economic dependency is a feature of today’s labour markets, largely evidenced in the US and increasingly researched in Europe. In this article, we look at some drivers for workers’ economic dependency. We argue that excessively unbalanced labour relations, i.e. workers not having much of a say in their employment conditions, is a by-product of rising economic power. Imbalance of power can also arise from abusive employment clauses specifically designed to maintain a docile workforce.

It is often said that employment terms and conditions are a matter exclusively for labour authorities. Certainly, employment law and labour inspections  have a strong role to play, in particular to fight fake self-employment and to maintain decent working conditions for all workers. This article argues that trade unions can also deploy their strategies outside the traditional realm of employment law.  As far as economic dependency is concerned, the root causes of the problem must be addressed. There is a competition problem in labour markets and competition authorities should address this.

A dominant company is also a dominant employer

Concerns about mounting corporate power are often associated with the rise of “superstar” firms, in particular highly digitalized businesses. For instance, we can watch thousands of series, at a time of our choosing and from the comfort of our own homes. The range of possibilities is vast but all our choices lead to the same few companies. Online platforms such as Netflix, Amazon or HBO Max dominate a whole side of the industry, both from a production and a user perspective.

Particularly pronounced for digital businesses, increased corporate concentration is a general phenomenon.

Industry concentration refers to the weight of the largest firms within an industry. The OECD has documented such concentration in Europe as well as in North America. Another indicator of increasing corporate power is the increase in markups, i.e. the ability of a firm to charge excessive price, well above the cost of production. Markups have been consistently increasing in the last two decades. A third measurement is the size of extraordinary profits, the so-called “economic rents”. Here again, the indicator is pointing at an increase.

In sum, all indicators point at an increase of corporate power across all sectors of the economy, with multinational enterprises becoming fewer, larger and thus more powerful.

In contrast with mounting corporate power, workers’ ability to collectively bargain for a higher share of corporate profits is shrinking. Collective bargaining coverage and trade union density have been on the decline for more than a decade.

Thus, there is an increasing asymmetry between corporate and labour power. The growing imbalance of power between employers and labour feeds into lower employment levels, declining job quality and wages.

In a labour market that is “fully competitive”, employers compete with each other to attract and retain workers. Any attempt at paying a wage below market equilibrium would result in all workers leaving the firm immediately to take up a job elsewhere.  Things are quite different where the employer is unlikely to be confronted with a complete lack of workers on offer. Instead, the employer can itself, to a certain degree, set the wage below a certain level while still being able to command a certain volume of labour.

A labour market that is dominated by a few employers is known as “labour market concentration” or “labour market monopsony”. Labour-market concentration is now a lasting trend throughout the OECD countries, particularly pronounced in the US but also increasingly researched in the European Union.

Non-compete and other unfair labour clauses artificially maintain economic dependency

Labour market concentration should be understood as a dynamic concept.

Outsourcing and subcontracting are increasingly relied upon by large corporations in order to reduce costs while still remaining in control as powerful main contractors. Splitting off functions that were once managed internally weakens bargaining positions and drives down labour costs.

Economic dependency also arises where firms impose terms and conditions that seek to reduce workers’ ability to seek additional and/ or better employers.   Such unfair labour practices include for instance “wage fixing” and “non-poaching” agreements, whereby firms agree not to compete on wages or not to “poach” workers from each other. In arts and entertainment, the practice is well known with the holding of writers and talents under exclusive deals for long periods of time.

Firms can also engage in giving workers irregular schedules, to prevent part-time workers from finding additional employers.

How to address the imbalance? An offensive and coordinated trade union strategy under competition law

The first response to unbalanced labour relations is to protect and promote collective bargaining. Trade union positions on this are well documented in this blog.

The recently published Commission Guidelines on the application of Union competition law to collective agreements clarify that collective bargaining is a legitimate and important means to improve the imbalance that individual self-employed workers experience in terms of bargaining power vis-à-vis corporations.  Competition authorities are thus encouraged to shield collective agreements from the application of competition principles, in particular with regard to cartel prohibitions.

In addition to ensuring a safe space for collective bargaining, competition authorities could play a much more active role in the protection of workers’ interests. Unfair labour practices where they seek to reduce workers’ mobility should be treated as an abuse of corporate dominance.

Trade unions could develop an offensive strategy under EU and national competition law, bringing formal complaints against firms engaging in wage fixing or imposing non poaching/ non-compete clauses.

The EU Commission appears to be increasingly willing to investigate such practices in the short-term. And precedents can already be found in national law. In February 2021, the Dutch competition authority initiated an investigation into supermarkets which made arrangements regarding a limited wage increase of 2.5% for their employees. The mutual arrangements were made after collective agreement negotiations broke down and without trade union consent. In a 2021 report, the Portuguese competition authority raised awareness of the potential negative effects for workers and consumers resulting from anti-competitive agreements in the labour markets. This report provides several examples of how non-poaching and wage-fixing agreements deprive workers of the opportunities of an open and competitive labour market. Labour markets were among the priorities set for the Portuguese competition authority in 2021.

A related aspect is for trade unions to coordinate regular interventions in the course of antitrust proceedings. Whenever a large company is brought under investigation under a suspicion of abuse of dominant position, and one should expect an increase of such cases at least as far as online platforms are concerned, trade unions should systematically document the impact of corporate power on wages and employment.

Bringing the spotlight on the impact of corporate power on employment may in the long run be a game changer. A fundamental debate must be held on the objectives and tools of current competition policies. Competition authorities must upgrade their game so as to better capture the reality of economic power as a whole, as opposed to a narrow focus on consumer interests as is currently the case.

* This article draws upon an upcoming ETUC report on Competition and labour – A trade union reading of EU competition policies. Publication foreseen for May 2023.

About the author

Séverine Picard

Séverine Picard is a lawyer and trade unionist. She founded in 2021 "Progressive Policies", a research and training consultancy specialised in labour rights and industrial relations. Séverine Picard has nearly two decades of experience in European and global policies. From 2018 to 2021, she was Senior Policy Adviser at the Trade Union Advisory Committee to the OECD (TUAC), where she followed issues relating to corporate governance, competition, trade, investment and international taxation rules. From 2007 to 2018, she was Senior Legal Adviser at the European Trade Union Confederation (the ETUC).  Her main areas of expertise included labour law, company law and EU institutional matters. She previously worked at the European Parliament and in the NGO sector in a research role related to the European Union. Séverine Picard graduated in 2000 in European Law from the University Panthéon-Sorbonne, France and obtained in 2002 an LL.M at the University of Manchester, United Kingdom.

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