The DOJ and FTC clarify the role of labor market power ("monopsony") in the 2023 draft merger guidelines. The draft states in Guideline 11 that the structural presumption threshold applies to labor market concentration, while also suggesting that a stricter threshold may be warranted in labor markets. The post-merger Herfindahl-Hirschman Index (HHI) that defines a highly concentrated market is 1800, which is lower, and so stricter, than the 2010 guidelines. We provide five comments on the draft guidelines based on our recent work Berger, Hasenzagl, Herkenhoff, Mongey, and Posner (2023).
(1) Explicitly addressing monopsony in the draft guidelines is grounded in economic theory and empirical research. (2) Workers benefit from the lower threshold for highly concentrated markets. (3) The narrow nature of labor markets and high degree of monopsony power in the U.S. may warrant an even lower threshold. For example, merger simulations indicate that workers would benefit if the agencies lowered the HHI threshold further—to 1500 or 1000. (4) Worker welfare is central to the 2023 draft guidelines but the language is not always clear about this. The guidelines should make clear that degradations of "worker welfare" or "total compensation" indicate anticompetitive effects. (5) Dominant firms that can slow wage growth – but not freeze or cut wages – are subject to Guideline 7.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.