Jan Broulík writes that the interest and willingness of European competition authorities and courts to intervene in markets to protect labor has made critical strides over the last few months. However, it still has a ways to go to even catch up with its American counterpart.
The application of competition rules to labor markets is finally gaining momentum in Europe. While stricter enforcement of labor antitrust in the United States has been on the rise for some time, the old continent has been—perhaps surprisingly, given Europe’s reputation for protecting workers and actively enforcing its competition laws—showing reservations about interventions against employers based on competition law. Nevertheless, the last two months have seen major developments portending that times are changing, even in Europe.
The previous situation
Admittedly, European labor antitrust had not been completely dormant of late. Individual European Union member states have pursued a number of interventions against wage-fixing and no-poach agreements over the last few years. The European Commission also started two of its own investigations into potential no-poach agreements: in 2023 in the online food delivery sector and in 2024 in data center construction. In 2024, the European Commission also published a policy brief titled “Antitrust in Labour Markets,” reflecting its renewed interest in labor antitrust in parallel with the antitrust authorities of the previous Biden administration in the U.S.
Nonetheless, much remained lacking. Until this year, only state authorities had found any violations of competition law by employers. Moreover, all enforcement and the aforementioned policy brief focused almost exclusively on wage-fixing and no-poach agreements—arguably the most blatant forms of anticompetitive conduct by employers. Less straightforward issues like non-compete clauses in employment contracts or the accretion of monopsony power through mergers, which can allow large firms to set the prices at which they “buy” labor, among other adverse effects, received only very limited attention. Labor markets were also completely overlooked in the Commission’s recent soft law guidance on defining relevant markets for competition oversight, published in February last year.
New developments
But then three notable developments occurred between May and June of this year.
First, on May 8, the Commission launched a public consultation on its merger guidelines. The consultation includes a general part, which asks high-level questions on how the Commission should assess mergers, as well as an in-depth part, which asks more specific questions. The latter includes questions about whether and how the merger assessments should consider labor market effects. The current guidelines include only a brief section on buyer power, without any reference to labor markets. In practice, the Commission has analyzed buyer power only very rarely, and it never considered how a merger impacts the market power of employers. It will be some time before the new guidelines are issued, but the fact that the Commission is even posing these questions suggests that a shift may be underway towards labor markets receiving attention even in merger cases.
Second, on May 15, the European Court of Justice (ECJ) spoke out on the legal test applicable to no-poach agreements. In 2020, the Portuguese competition authority found that an agreement between Portuguese soccer clubs to restrict the mobility of players between them during the extension of the 2019/2020 season due to Covid-19 had infringed Article 101 of The Treaty on the Functioning of the European Union (TFEU). The clubs challenged the decision before a Portuguese court, which then asked the ECJ for guidance on the applicable legal test. Now, the advocate general—essentially a senior legal advisor to the Court—has issued an opinion in the case. The opinion suggests that the no-poach agreement in question should not be rendered unlawful without careful consideration of its effects. While the actual judgment will arrive in a few months, this is the first occasion on which the EU’s highest court has addressed employer collusion.
Finally, on June 1, the European Commission imposed a fine in the food delivery case mentioned earlier. Delivery Hero had acquired a minority stake in competitor Glovo in 2018 and gradually increased its stake until it became a controlling one in 2022. Between these dates, the companies engaged in multiple forms of collusion. At first, they agreed to reciprocal no-hire clauses for certain employees. The firms later expanded this strategy to a general agreement not to actively poach each other’s employees. After the Commission opened enforcement proceedings, the companies admitted wrongdoing and agreed to settle. This marks the first time the European Commission has found a cartel in a labor market.
Taken together, these developments suggest that the outlook for labor antitrust in Europe is more promising than it seemed just a couple of months ago.
Remaining question
One crucial question nevertheless remains unresolved: Are we protecting workers for their own sake or only insofar as doing so ultimately benefits consumers?
To be sure, the interests of workers and consumers often align, since market power exercised against labor frequently leads to downstream harm. If a firm achieves lower hourly wage by employing fewer workers, its output decreases and consumers consequently may have to pay more per unit. But as argued for instance by Scott Hemphill and Nancy Rose in their paper “Mergers That Harm Sellers,” there are scenarios in which workers are harmed while consumers are not. This is the case for example when the firm faces strong competition on the downstream product market and its lower output is thus compensated by other firms. It is a key question whether competition law should intervene even in such cases.
The prevailing answer in the U.S. appears to be: “Yes, harm to workers alone can justify intervention.” This impression is based on the academic literature and the U.S. antitrust enforcers’ approach taken in the 2023 Merger Guidelines. That approach reflects the trading-partner welfare standard, which looks at the effects of competitive restraints on actors on the other side of the market—in this case, workers.
It is far from certain that EU competition law is ready to serve workers themselves. The Commission’s current merger guidelines condemn buyer power only where it harms downstream consumers. In fact, under the guidelines, savings resulting from buyer power—arguably including lower wages—can even count as an efficiency defense if they are passed on to consumers. A disregard for competitive harm inflicted by buyers on sellers also underlies the Commission’s guidelines on horizontal agreements from just two years ago.
As regards the current public consultation on the merger guidelines, it actually does include a question whether harm to workers alone should be a sufficient reason to intervene. The Commission is thus clearly thinking about overhauling its approach. But even if it decides to go this way in mergers, it will take a decade before we get a new version of the guidelines on horizontal agreements.
Moreover, it’s unclear whether competition law interventions based solely on harm to workers will be accepted by the ECJ as the ultimate arbiter of EU law. It is true that the ECJ has occasionally remarked that the law protects competition as such, arguably including competition between employers. However, its 2009 judgment on buyer-side collusion stated that such collusion can violate competition law even in the absence of “direct” downstream effects. This wording implies that some downstream effect—albeit indirect—may be required. And perhaps even more concerningly, the advocate general’s opinion on the agreement between the Portuguese soccer clubs appears to suggest that consumer impact may play a role in no-poach cases.
Conclusion
In summary, the past two months have seen significant progress in European labor antitrust. But there’s still a long road ahead, especially on the question whether we are protecting workers for their own good.
Author Disclosure: The author reports no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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