Why is the federal government deploying antitrust laws to help unions in collective bargaining? This is the question facing President Trump’s FTC and it may stop mergers for that reason. Now, California is also considering passing its own antitrust law to do the same.
One of the first, and most surprising, actions of the Trump FTC was to announce its adherence to the 2023 Merger Guidelines, which the Biden Department of Justice and FTC had promulgated. There have been several editions of the Merger Guidelines since their 1982 creation. The Biden version was the first to ask how a merger would affect the bargaining position of labor with the merged firm as employer.
The FTC was quick to apply this new test. In early 2024, the Lina Khan led FTC claimed the proposed merger of two companies, Tapestry and Capri, would violate the antitrust laws. Each was a parent company that sold handbags under various high-fashion brand names. Among the reasons the FTC gave for considering the merger in violation of antitrust was that employees in the two companies would have less bargaining power with their employer after the merger than before. Before the merger, if the wages that a Tapestry brand offered weren’t high enough, those employees could seek a higher wage at a Capri brand—but not if Capri and Tapestry offered identical terms which, presumably, they would after they merged.
The FTC won its case, and the merger was stopped. It was a victory for President Biden, who had proclaimed himself as “the most pro-union president in American history.” What is odd is that the Trump FTC appears to be seeking the same title.
Current Chairman Andrew Ferguson created a new Task Force at the FTC “to prioritize rooting out and prosecuting unfair labor-market practices that harm American workers.” The use of words is instructive: “unfair labor practices” are the jurisdiction of the National Labor Relations Board (NLRB), not the Federal Trade Commission.
The NLRB is constituted to be the impartial referee between management and labor, as they engage in the economic contest of collective bargaining. In announcing its asserted jurisdiction over “unfair labor-market” practices, the FTC surprisingly aspires to a role not as arbiter, but as an advocate for labor. This development would make more sense had Senator Elizabeth Warren won her bid for the White House, not President Trump’s return to the Oval Office.
Future mergers and acquisitions are likely to provide the FTC with new opportunities to advance its self-asserted advocacy for labor. Suppose Toyota (a non-union auto manufacturer) proposes to acquire a plant from Ford (a unionized employer). The FTC would have jurisdiction to approve or to challenge such a move. The Ford employees would, upon becoming Toyota employees, lose the bargaining power they had as part of the United Auto Workers, a nationwide union that represents all the employees at Ford, GM, and Stellantis (formerly Chrysler) and selectively targets one of them when contracts are renegotiated every four years. When the bargaining power of the autoworkers at the Ford plant has diminished, “that reduction in labor market competition may lower wages or slow wage growth,” which, according to the 2023 Merger Guidelines where that phrase appears, would constitute a reason to stop the acquisition. Toyota’s prospect of saving labor costs, allowing it to offer American consumers a less expensive product, would have been converted from a reason to favor a merger into a reason to stop one.
Additionally concerning, this impact goes beyond the federal level. The California Law Revision Commission is currently preparing a merger law specific to California, at the request of the California Legislature. One draft now under consideration by the Commission would make the 2023 FTC-DOJ Merger Guidelines statutory law. At the federal level, the Guidelines can be changed by any new administration. Not so in California if the FTC-DOJ Merger Guidelines are made part of permanent law, as is being proposed.
Before that happens, the Trump FTC and DOJ should remove the pro-labor bias from the Merger Guidelines that were supposed to enforce antitrust. Antitrust law, the Supreme Court has ruled, has consumer welfare as its intended goal. Consumers paying higher prices for goods as unions drive up costs may serve the political purpose of favoring big unions, but that cannot be considered an enhancement of consumer welfare.
