Gig Workers Need Antitrust Reform

Gig Workers Need Antitrust Reform

Instead of attempting to create an economists’ utopia of “perfect competition,” policymakers should reform antitrust to democratize power in the economy.

There have been more significant antitrust developments over the past two months in the United States than over the past twenty years. Last Wednesday, the Federal Trade Commission (FTC) and forty-six states, the District of Columbia, and Guam filed twin monopolization suits against Facebook alleging illegal competitive practices and acquisitions of WhatsApp and Instagram. The suits, if they succeed, likely would lead to a breakup of the company. And in October, the Department of Justice (DOJ, the FTC’s sister antitrust enforcer at the federal level) and eleven states sued Google for exclusionary conduct in the online search and search advertising markets. Now this week, two multistate coalitions (one led by Texas, the other by Colorado) filed their own antitrust lawsuits against Google that could force the search monopolist to sell off one or more lines of business.

After prolonged inaction against monopoly, the trustbusters have woken from their slumber. Congress, building on the House Antitrust Subcommittee’s fall report on Amazon, Apple, Facebook, and Google, may soon be drafting new legislation that restricts mergers and monopolistic practices and breaks up tech conglomerates. If the trustbusters succeed in these ventures, it would be a good thing. Breaking up these monopolies would weaken the power of individual corporations—and their managements and shareholders. Paired with clear rules on fair competition, breakups can also promote socially beneficial forms of business rivalry, such as offering better terms to customers and workers and marketing higher quality goods and services. Cutting down the size, and simplifying the structure, of corporations is important. But it leaves the collective prerogatives of the management and shareholder classes intact.

Congress could (and should) go further to break the monopoly of executives and financiers on economic decision-making and grant small actors in the economy the right to build collective power. Just as we need to reduce the size and discretion of corporations, we need to withdraw the use of antitrust against working people and small firms in the gig economy, fast food, and elsewhere—where it can be used to squash labor organizing and other forms of collective action for a more just economy. Instead of attempting to create an economists’ utopia of “perfect competition,” policymakers should use antitrust to redistribute and democratize power in the economy. Along with breaking up large corporations and establishing rules of fair conduct, antitrust reform should grant all workers, as well as businesses confronting powerful entities like Amazon and McDonald’s, the freedom to organize.

Consider the brutally one-sided gig economy. It is, in the words of economist Brian Callaci, a world of control without responsibility. Uber, DoorDash, and others classify their drivers and deliverers as independent contractors—a status that the passage of Proposition 22 has unfortunately enshrined in California—but afford them little independence on the job. They use apps and contracts to manage workers, directing where they go and setting their prices and pay. By classifying them as independent contractors, the platforms evade wage-and-hour laws and workers’ compensation obligations. As a result, many Uber and food delivery drivers earn hourly net incomes less than the local minimum wage. Gig platforms have maintained the control of traditional employers while shedding the legal duties they owe their employees.

Because the platforms misclassify them as independent contractors, gig workers are deprived of another basic right: the right to form unions and engage in other collective action. Ironically, the antitrust laws, enacted to tame the likes of John D. Rockefeller and J.P. Morgan, prevent them from unionizing. In the late nineteenth and early twentieth century, federal courts applied the Sherman Antitrust Act of 1890 (the first federal antitrust law) to outlaw certain forms of strikes and boycotts by unions. Legislation passed in 1914 and 1932 granted unions the right to act free from antitrust interference. Due to narrow judicial interpretations of these statutes, however, antitrust law’s labor exemption only protects workers classified as employees and does not cover independent contractors. Accordingly, workers in traditional employment relationships have the right to collectively bargain, but gig worker organizing may constitute an illegal “restraint of trade.” In a 2017 brief, the DOJ and the FTC supported a Chamber of Commerce lawsuit against the City of Seattle for permitting drivers to unionize. The government argued that a union of Uber and Lyft drivers would be a categorical violation of antitrust rules.

At the time of passage, antitrust law was envisioned as a democratic measure to distribute power more broadly. The late-nineteenth-century Populist movement, composed of farmers, small proprietors, and workers, agitated for the enactment of the Sherman Act, among other measures to control corporate power. The irony of antitrust law today is that it does little to check the power of Amazon, Comcast, and most other dominant firms, while preventing independent contractors and small firms from organizing against them. The law protects and strengthens the prerogatives of executives and financiers to direct economic activity and control millions of nominally independent workers, distributors, and suppliers. These counterparties, regardless of how weak they are, cannot legally organize to build power and improve their terms of trade.

Uber encapsulates the upside-down world of contemporary antitrust law. The DOJ and the FTC have permitted Uber to burn billions of dollars in an effort to dominate the taxi business around the world, supported the ride-hailing firm in local regulatory fights, and recently allowed it to acquire rival food delivery service Postmates. At the same time, as their backing of the Chamber of Commerce’s suit against Seattle indicates, the purported federal trustbusters stand ready to thwart efforts by drivers to organize.

As Uber illustrates, who wields market power, and who does not, is a product of legal and policy choices, including in antitrust law. Despite the libertarian rhetoric of “free markets,” all markets and firms have rules and are governed by someone. As legal scholar Sanjukta Paul said recently, this governance could be done “by a large dominant firm,” but it can also be “by a trade association of smaller firms, through public market management, through a producers’ or buyers’ cooperative, or . . . through a labor union.”

A more democratic society requires granting workers and small producers the freedom to build power in economic life. To transfer firm and market governance away from the privileged, mostly white few to the multiracial many requires permitting all workers to organize. Regardless of whether Uber chooses to comply with employment laws, drivers should be allowed to unionize and use their collective power to obtain higher wages, full benefits, and the right to co-govern Uber—or to start their own cooperative ride-hailing services.

Similarly, antitrust law must be updated to allow firms to organize against more powerful actors. Fast-food franchisees, for example, which are typically at the mercy of franchisers, should be permitted to organize against McDonald’s and Burger King, and online sellers should be allowed to bargain collectively with the platform on which they depend: Amazon.

Permitting organizing among small businesses is already the law in agriculture. For nearly a century, farmers and ranchers have had the right to organize (subject to federal oversight) under the Capper-Volstead Act. (Fishers have a comparable right under the Fishermen’s Collective Marketing Act.) Farmers can form marketing cooperatives to bargain with powerful agricultural middlemen and establish cooperative enterprises to manufacture packaged foods in competition with corporate entities. Cooperatives sell familiar brands such as Land O’Lakes, Ocean Spray, and Sunkist. This law should be broadened and strengthened to include other comparatively powerless actors and grant them the effective right to band together to build power and cooperative businesses.

The gig platforms’ triumph in Proposition 22 helped highlight the poor wages and precarity of gig workers. The Biden administration, Congress, and state legislatures should correct this injustice and institute employment protections for all workers directed and managed like employees. But the rising antimonopoly movement should also address the atomization of gig workers and small firms, which is partly a function of the perverse interpretation and application of antitrust law. The lawsuits against Facebook and Google and the House Antitrust Subcommittee report are harbingers of a root-and-branch reconstruction of antitrust law. In building on this work, Congress and the Biden administration should aim to break up monopolies, to enact rules of fair competition, and to allow individually powerless workers and businesses to act in solidarity.

Sandeep Vaheesan is the legal director at the Open Markets Institute and previously served as a regulations counsel at the Consumer Financial Protection Bureau. He has published articles and essays on a variety of topics in antimonopoly law and policy.