Eric A. Posner argues that merger review would benefit from involving union representatives to protect labor interests.

The Kroger-Albertsons merger proposal has sparked objections from unions which represent workers at the two grocery chains. The unions are understandably upset. The state of Colorado alleged in its complaint challenging the merger that during a 2022 strike by Kroger workers, Albertson agreed with Kroger not to hire them away. If the companies merge, workers’ bargaining power will likely be further eroded.

The merger controversy raises questions about the role of unions in merger review. Under current law, unions representing merging firms have no formal role, but may pressure one or both firms to drop or modify merger plans; unions may also demand concessions in return for union support. Before the Microsoft-Activision merger in 2023, a union representing Activision workers persuaded Microsoft to maintain neutrality if the union tried to organize former Activision workers after the merger was completed. In return, the union dropped its opposition to the merger. Unions can also petition regulators and share information with them, though unions have no way to compel regulators to take their concerns seriously.

Ad hoc union involvement in merger review is not uncommon. I have reviewed 46 attempted mergers with union involvement over the last 25 years. Unions supported seven of those mergers, opposed 34, and took mixed positions (or disagreed with one another) on five. Examples include the Amazon-MGM Studios merger (2021), Abbvie-Allergan (2019), Fiat Chrysler-General Motors (2015), Kraft-Heinz (2015), and Continental-United Airlines (2010). While one cannot draw firm conclusions about the value added from union involvement based on such sparse evidence, the record does show that many unions are well-motivated to participate in merger negotiations.

In some cases, unions even pushed for mergers that management opposed. In 2011, American Airlines filed for bankruptcy because of rising labor costs and increasing competition from other airlines. When US Airways proposed an acquisition, American’s unions negotiated directly with US Airways management and then demanded that American’s management consent. The deal gave workers better terms than they would have received if American had remained independent after bankruptcy.

The current system of merger review could benefit from more systematic involvement of unions when they represent the employees of one or more of the merging companies. Antitrust regulators and courts evaluate mergers based on a narrow legal standard of whether the merger substantially lessens competition in any relevant market, which typically boils down to a truncated cost-benefit analysis of that market. A merger that increases prices or reduces wages, for example, is supposed to be blocked. In practice, however, regulators and courts have disregarded labor market effects, which are often complicated because labor markets are usually local and most firms draw from many different labor markets.

Giving unions a seat at the table in merger reviews would help address this problem. Unions are well-positioned to assess the impacts of a merger on workers in their industry and to advocate for their interests. They can provide valuable information and perspective that might otherwise be overlooked by regulators.

For example, the proposed merger between T-Mobile and Sprint in 2018 sparked opposition from the Communications Workers of America. The union argued that the merger would lead to job losses in the wireless industry. Despite the union’s efforts, the merger was eventually approved by regulators in 2020, albeit with certain conditions aimed at addressing some of the concerns raised by the CWA and other critics.

The argument for union involvement is particularly strong in industries where both merging firms are highly unionized. In these cases, unions can credibly claim to represent the interests of a significant portion of the affected workforce. Regulators and courts should give substantial weight to union concerns in these circumstances, possibly including the right to block mergers that would clearly harm workers (though Congress would need to create a legally enforceable right).

To be sure, unions may support bad mergers or try to block good ones. Critics of the American Airlines and US Airways merger argued at the time that the merger would harm consumers. (The evidence is mixed.) Union involvement would not obviate the need for agency and judicial review to ensure that mergers benefit consumers. The goal is to protect employees, but not at the cost to consumers.

One might see the proposal for union involvement as part of a larger effort to reform merger review to better incorporate a range of social welfare considerations beyond just consumer welfare. One promising approach is to move towards a system of “structured bargaining” in which mergers are negotiated between the various affected parties—including workers, consumers, and other stakeholders—rather than evaluated through a top-down regulatory process.

The model is corporate bankruptcy, where stakeholders bargain over the reorganization of the debtor, typically through representatives such as creditor committees. The bankruptcy court supervises the bargaining and enforces baseline entitlements, rather than using a cost-benefit analysis or other top-down evaluative criterion. Corporate bankruptcy puts far less of a burden on courts than merger review does. It takes a decentralized, Coasean approach: the court acts as a backstop that protects those baseline entitlements and requires good-faith negotiation but otherwise allows the parties to reach any deal they please.

For merger review, unions would protect only workers who are unionized, so a full-blow system of structured bargaining would require protections for other stakeholders. One possibility is to authorize courts to appoint independent advocates to protect consumers and nonunionized workers. A mechanism could be put in place to enable affected people to vote on the final decision (though this seems more practical for workers than for consumers). Or regulators could take the role of protecting unorganized counterparties while allowing unions to represent workers, with the bargaining taking place under the supervision of the court. The American Airlines-US Airways merger originated in the bankruptcy proceedings of American, where unions objected to management’s plan to maintain the airline as an independent entity after stripping workers of their collective bargaining agreement and ultimately helped engineer the merger.

Reforming merger review in this way could lead to better outcomes. It would also improve the legitimacy of antitrust enforcement and public support for mergers. By giving workers and other affected groups a voice in the process, structured bargaining could help address concerns that antitrust has become too narrowly focused on technical economic analysis, which, evidence suggests, has not lived up to its promise.

Note: For further discussion, see Eric A. Posner, Should Unions Play a Role in Merger Review?