The document discusses issues with the consumer welfare standard in antitrust law and proposes an alternative "effective competition standard." It argues that the consumer welfare standard fails to consider harm to workers and upstream suppliers. The effective competition standard would make preserving competitive market structures for all stakeholders the principal objective. It then discusses how this standard could be applied to labor markets and gig economy platforms, treating workers' interests equally with consumers'. It argues vertical restraints imposed by dominant gig platforms may reduce competition in labor markets.

1. The Deficiencies of the
Consumer Welfare Standard &
Possible Replacements
Marshall Steinbaum
Organization for Economic Cooperation & Development
Competition Committee Meeting
June 5, 2019

2. Why won’t the Consumer Welfare Standard
work?
• Inherent tension between protecting competition in supply chains and the
requirement for consumer harm.
• Horizontal mergers: “efficiencies” interpreted as shifting down marginal costs, but
that can also be the exercise of anti-competitive monopsony power.
• Vertical restraints: good for dominant suppliers and consumers, bad for dealers.
• Franchising no-poach agreements: good for consumers, bad for workers.
• Ohio v. American Express: harm to competition on one side of the platform can be
traded off against ostensible benefits on the other side.
• Output effects cannot be the desideratum of a coherent competition policy regime,
as Amex shows.
• “Antitrust protects competition, not competitors” is only coherent if
barriers to entry are low and competition is usually on the merits.

3. Economy-wide Effects of the Consumer
Welfare Standard
• The Fissured Workplace and antitrust’s firm exemption: efficiency
presumed to inhere within firms, especially large ones. That logic is
extended to vertical restraints, while ruling out horizontal coordination.
• Tech-sector business models: free or cheap to consumers in exchange for
data, use that data against both consumers and publishers to target ads.
• Profits increasingly driven by gatekeeping and toll-collecting.
• Retail and food supply chains: ruthlessly efficient under the consumer
welfare standard, disastrous for society as a whole, including workers.
• AT&T-Time Warner: enormously consequential economic policy decisions
come down to dueling (but econometrically indeterminate) predictions of
consumer price effects.

4. The Effective Competition Standard
• Instead of privileging one set of stakeholders, ECS proposes to
deconcentrate power throughout the supply chain.
Agencies and courts shall use the preservation of competitive market structures
that protect individuals, purchasers, consumers, and producers; preserve
opportunities for competitors; promote individual autonomy and wellbeing; and
disperse private power as the principal objective of the federal antitrust laws.

5. ECS in Labor Markets
• Labor markets and workers get the same status as output markets and consumers in
antitrust analysis, and the two can’t be traded off against each other.
• Harm to wages, wage shares, employment, job-posting, and job quality are all prima
facie evidence of harm to competition.
• Expanded indicia of market power in labor markets.
• Restraints such as no-poaching agreements and noncompetes would be illegal for
any firm with market power.
• Labor market effects in merger review.
• Monopsonization: labor market power plus anti-competitive behavior to acquire or
maintain that power would constitute a monopsonization case.
• Countervailing power:
• Horizontal coordination for gig economy workers outside traditional employment.
• Antitrust scrutiny for gig economy platforms.

6. Monopsony and Gig
Economy Platforms
Marshall Steinbaum
Organization for Economic Cooperation & Development
Competition Committee Meeting
June 5, 2019

7. The basic issue
• In the United States, gig economy labor platforms such as Uber, Lyft,
Handy, Care.com, Wanolo, and others classify the service providers as
independent contractors, not employees.
• The platforms are able to evade legal tests for employment hinging on
control and “profit and loss.”
• This raises antitrust questions: do the contractual restraints dominant
firms impose on independent contractors reduce competition?
• Connected to antitrust policy concerns raised by employer power:
• Consumer welfare standard.
• Economic implications of imperfect competition in labor markets.

8. Background: vertical restraints
• Weakening antitrust played a significant role in legalizing an
exploitative business model.
• Specifically: opened up a legal gray area where there was once a
sharp boundary between labor regulation & antitrust: the border of
the firm.
• Benjamin Klein, commenting on American Needle:
No matter how extensive a franchisor’s contractual control may be over
franchisee conduct, the contractual relationship… is considered in economics to
be an agreement between two separate firms, and not to involve a single
integrated firm.

9. Antitrust and the Economics of Franchising
• Erosion of antitrust liability for vertical restraints thanks to the assumption that
they can benefit consumers.
• Blair and Kaserman (1983) The Economics of Vertical Integration and Control:
The supplier may get improved product promotions from those with exclusive contracts. There
will be added incentive to promote the seller’s product vigorously if that is all the buyer has to
sell to the final consumer. Thus, the supplier can be sure that each of the distributors will work
hard on the seller’s behalf.
• For vertical control to be competitively benign, the dealers (in this example) must
have outside options. The supplier must lack market power.
• The empirical research on labor market monopsony shows that this assumption
does not hold.
• In that case, what Blair and Kaserman treat as efficiency is better interpreted as
the exercise of market power by a dominant firm to expropriate economic
surplus.

10. Labor Platform Facts
• Price-fixing (and wage-fixing). Illegal for service providers to price-fix
among themselves—why is it legal for platforms to do it?
• Price discrimination.
• Platform matches individual service providers to customers
• Market division
• Exclusion
• Non-linear (bonus-based) pay policies penalize multi-homing &
segment markets.
• Bonuses may be exclusionary in effect.
• Termination or demotion for refusal to accept gigs.

11. Ohio v. American Express
• Are gig economy labor platforms covered by the decision?
• If so, the competitive effect of anti-competitive vertical restraints in
the market for service-providers must be weighed against competitive
effect for consumers.
• Footnote 7: antitrust liability for vertical restraints requires
• A showing of market power.
• Established through concentration (and therefore requires market definition).

12. Free to Choose
• Overall migration on the part of the platforms from facilitating
bilateral matching to controlling the marketplace and all its
participants.
• Gig economy labor platforms should choose between employment
classification and losing control of pricing and terms and parameters
of service.
• Status quo—all control in the hands of the platform, with no
responsibility to its workers--puts increasing pressure on the
economic status of workers generally.