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Competition Laws and Industrial Action - Part II

Sam Vaknin, Ph.D. - 10/23/2006

B. HISTORICAL AND LEGAL CONSIDERATIONS

Why does the State involve itself in the machinations of the free market? Because often markets fail or are unable or unwilling to provide goods, services, or competition. The purpose of competition laws is to secure a competitive marketplace and thus protect the consumer from unfair, anti-competitive practices. The latter tend to increase prices and reduce the availability and quality of goods and services offered to the consumer.

Such state intervention is usually done by establishing a governmental Authority with full powers to regulate the markets and ensure their fairness and accessibility to new entrants. Lately, international collaboration between such authorities yielded a measure of harmonization and coordinated action (especially in cases of trusts which are the results of mergers and acquisitions).

There is no reason why not to apply this model to labor. Consumers (employers) in the market for labor deserve as much protection as consumers of traditional goods and commodities. Anti-competitive practices in the employment marketplace should be rooted out vigorously.

Competition policy is the antithesis of industrial policy. The former wishes to ensure the conditions and the rules of the game - the latter to recruit the players, train them and win the game. The origin of the former is in the USA during the 19th century and from there it spread to (really was imposed on) Germany and Japan, the defeated countries in the 2nd World War. The European Community (EC) incorporated a competition policy in articles 85 and 86 of the Rome Convention and in Regulation 17 of the Council of Ministers, 1962.

Still, the two most important economic blocks of our time have different goals in mind when implementing competition policies. The USA is more interested in economic (and econometric) results while the EU emphasizes social, regional development and political consequences. The EU also protects the rights of small businesses more vigorously and, to some extent, sacrifices intellectual property rights on the altar of fairness and the free movement of goods and services.

Put differently: the USA protects the producers and the EU shields the consumer. The USA is interested in the maximization of output even at a heightened social cost - the EU is interested in the creation of a just society, a mutually supportive community, even if the economic results are less than optimal.

As competition laws go global and are harmonized across national boundaries, they should be applied rigorously to global labor markets as well.

For example: the 29 (well-off) members of the Organization for Economic Cooperation and Development (OECD) formulated rules governing the harmonization and coordination of international antitrust/competition regulation among its member nations ("The Revised Recommendation of the OECD Council Concerning Cooperation between Member Countries on Restrictive Business Practices Affecting International Trade," OECD Doc. No. C(86)44 (Final) (June 5, 1986), also in 25 International Legal Materials 1629 (1986).

A revised version was reissued. According to it, " …Enterprises should refrain from abuses of a dominant market position; permit purchasers, distributors, and suppliers to freely conduct their businesses; refrain from cartels or restrictive agreements; and consult and cooperate with competent authorities of interested countries".

An agency in one of the member countries tackling an antitrust case, usually notifies another member country whenever an antitrust enforcement action may affect important interests of that country or its nationals (see: OECD Recommendations on Predatory Pricing, 1989).

The United States has bilateral antitrust agreements with Australia, Canada, and Germany, which was followed by a bilateral agreement with the EU in 1991. These provide for coordinated antitrust investigations and prosecutions. The United States has thus reduced the legal and political obstacles which faced its extraterritorial prosecutions and enforcement.

The agreements require one party to notify the other of imminent antitrust actions, to share relevant information, and to consult on potential policy changes. The EU-U.S. Agreement contains a "comity" principle under which each side promises to take into consideration the other's interests when considering antitrust prosecutions. A similar principle is at the basis of Chapter 15 of the North American Free Trade Agreement (NAFTA) - cooperation on antitrust matters.

The United Nations Conference on Restrictive Business Practices adopted a code of conduct in 1979/1980 that was later integrated as a U.N. General Assembly Resolution [U.N. Doc. TD/RBP/10 (1980)]: "The Set of Multilaterally Agreed Equitable Principles and Rules".

According to its provisions, "independent enterprises should refrain from certain practices when they would limit access to markets or otherwise unduly restrain competition".

The following business practices are prohibited. They are fully applicable - and should be unreservedly applied - to trade and labor unions. Anti-competitive practices are rampant in organized labor. The aim is to grant access to to a "cornered market" and its commodity (labor) only to those consumers (employers) who give in and pay a non-equilibrium, unnaturally high, price (wage). Competitors (non-organized and migrant labor) are discouraged, heckled, intimidated, and assaulted, sometimes physically.

All these are common unionized labor devices - all illegal under current competition laws:

1. Agreements to fix prices (including export and import prices);

2. Collusive tendering;

3. Market or customer allocation (division) arrangements;

4. Allocation of sales or production by quota;

5. Collective action to enforce arrangements, e.g., by concerted refusals to deal (industrial action, strikes);

6. Concerted refusal to sell to potential importers; and

7. Collective denial of access to an arrangement, or association, where such access is crucial to competition and such denial might hamper it. In addition, businesses are forbidden to engage in the abuse of a dominant position in the market by limiting access to it or by otherwise restraining competition by:

a. Predatory behavior towards competitors;
b. Discriminatory pricing or terms or conditions in the supply or purchase of goods or services;
c. Mergers, takeovers, joint ventures, or other acquisitions of control;
d. Fixing prices for exported goods or resold imported goods;
e. Import restrictions on legitimately-marked trademarked goods;
f. Unjustifiably - whether partially or completely - refusing to deal on an enterprise's customary commercial terms, making the supply of goods or services dependent on restrictions on the distribution or manufacturer of other goods, imposing restrictions on the resale or exportation of the same or other goods, and purchase "tie-ins".

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