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On the Practicalities of Unionization as a Remedy for Employer Monopsony Power

Current human resources personnel at Activision-Blizzard

Given antitrust enforcers’ expressed interest in employer power and the potential for market structures and conduct within the remit of antitrust enforcement to harm workers, one natural remedy they might consider is unionization. There is already considerable empirical research to the effect that collective worker organization is an effective counterweight to employer market power. And while no public agency can (or should) force workers to join and be represented by a union, they can encourage (indeed, mandate) that employers remain neutral as workers consider whether to unionize, and with which union. That ‘neutrality’ amounts, in effect, to employers not availing themselves of the range of tactics at their disposal to discourage unionization—tactics the videogame development studio Activision Blizzard is currently making full use of in the face of a nascent union drive, an early effort in an industry that has historically had deplorable labor standards, trading on both the workers’ loyalty to the product and the fact that they tend to be young and hence to have fewer social ties and obligations that would lead them to demand better working conditions. Such tactics aren’t surprising in a company with “an open frat boy environment [that] fostered rampant sexism, harassment, and discrimination,” according to the complaint in a sexual harassment lawsuit filed this past October.

But Activision Blizzard—makers of Call of Duty and other popular franchises—has also agreed to be bought by Microsoft for $68.7 billion and merged into its Xbox Game Studios, a transaction that is currently pending before the FTC and European enforcers. Microsoft entered into a neutrality agreement with the Communications Workers of America for Activision Blizzard that promises to make the path to unionization in the videogame development industry much smoother if the merger is consummated, a development that would be a major step toward cementing the increased worker militancy to have erupted in recent years, particularly among younger workforces. Hence, if the merger is approved, the path forward for unionization in the industry appears bright.

The Microsoft-CWA neutrality agreement represents a union taking advantage of an improved negotiating position due to merger review to score a win on behalf of workers (or rather, to make such a win much more likely in future). A clearer-cut example of the utility of neutrality agreements in merger remedies would concern a merger alleged to harm workers, to which the remedy would be unionization (a second-best outcome to outright blocking a merger). A worthy example when a union neutrality remedy could have been used was Uber’s 2020 merger with Postmates, which the Justice Department declined to challenge but which removed one of very few alternative platform employers for already-disadvantaged gig workers in the rideshare and food delivery business. DOJ should have tried to block the merger, and in the event that attempt was unsuccessful, sought not only employment classification for rideshare and food delivery drivers as a condition for permitting the merger to go forward, but neutrality in any subsequent organizing campaign. Indeed, gig workers are particularly likely to benefit from collective bargaining, but in the past antitrust enforcers have sought to prevent it on the grounds that collective bargaining by non-employees would violate the Sherman Act, in a kind of circular reasoning that has frustrated the thousands of gig workers consigned to an independent contractor status without employment protections, but without any ability to truly operate independently, including by choosing to bargain collectively.

(An alternative remedy would have been to enforce the independence gig platforms promise to workers by ending resale price maintenance and Most-Favored Nations clauses, mandating full, unconditional data-sharing, and prohibiting non-linear loyalty pricing. But that sort of behavioral remedy to a merger has been shown to be difficult to enforce once the merger is concluded, so while the antitrust agencies should indeed enforce the economic independence of bona fide independent contractors, merger control is probably not the best way to do it. Rather, the FTC should look to Section 5 enforcement. The utility of union neutrality as a remedy is that it creates an independent agency to police labor standards.)

Which brings up another example of what not to do in negotiating or sanctioning a neutrality agreement: the proposed legislation to permit “sectoral bargaining” for rideshare and food delivery workers that the New York state legislature considered (but luckily didn’t pass) in 2021. That would have surrendered employment status and already-won labor standards for rideshare and food delivery workers, in exchange for nominal “representation” by company unions who stood to receive a hefty agency fee, plus antitrust immunity for the arrangement and a no-strike pledge. That cautionary tale is a good example of what regulators should not allow, even if (some) unions ask them for it. Which raises the issue that discerning what types of representation are in workers’ best interest requires specialized knowledge and experience with labor relations—exactly the purpose to which the federal antitrust agencies should put their memoranda of understanding with the NLRB and Department of Labor.

There remains one important (depending on whom you ask, paramount) consideration in the Microsoft-Activision Blizzard merger review: whether the merger would harm consumers, even if the neutrality agreement means it would likely benefit workers. This is a vertical merger wherein the manufacturer of one gaming console would acquire the supplier of must-have content for those consoles, potentially disadvantaging manufacturers of rival consoles if the merged firm withholds the must-have content and makes it exclusive to Microsoft’s Xbox. In this case, the leading rival is Sony, the manufacturer of the Playstation console, which competes for the same customer base of avid gamers with Xbox and which would be a substantially weaker price competitor if its products couldn’t carry Call of Duty. On its face, this vertical deal is ripe for a challenge, since Xbox and Playstation are such close rivals for the same consumers and Call of Duty is likely must-have content. However, there have been public reports of a 10-year deal to license Call of Duty to Sony’s Playstation, which would obviate the foreclosure theory of harm if done on similar terms as XBox’s access to it post-merger. It’s possible for Microsoft to make Call of Duty available to Sony, but still disadvantage Playstation-compatible versions of the game relative to Xbox-compatible ones. In such a case, it is hard to distinguish between merger harms—disadvantaging Sony—and merger efficiencies—advantaging Microsoft. What that means is that the success of any challenge would come down to whether Sony is willing to state a public position against it.

Those of us who have encouraged antitrust enforcers to center worker welfare in their competitive analysis have consistently taken the position that harming workers should not offset or counterbalance consumer benefits, as has too often been the case in antitrust policy in the past, when agencies credited merger “efficiencies” that amounted to labor exploitation. Hence, it is difficult now to say that benefits to workers (in the form of much-increased probability of union representation at an otherwise-hostile workplace) should offset would-be harm to consumers. Notwithstanding the neutrality agreement, the proposed merger may still violate the Clayton Act. However, the lesson from this episode is that unions and would-be unions can and should use the tools made available by antitrust enforcers’ interest in labor markets to score victories on behalf of workers and, hopefully, re-engineer the internal political economy and corporate culture of dominant firms with continued business before the antitrust agencies and courts. At the same time, enforcers should be vigilant about ensuring that accommodations reached by unions and employers do in fact benefit workers.

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