[House Hearing, 116 Congress] [From the U.S. Government Publishing Office] ANTITRUST AND ECONOMIC OPPORTUNITY: COMPETITION IN LABOR MARKETS ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON ANTITRUST, COMMERCIAL AND ADMINISTRATIVE LAW OF THE COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTEENTH CONGRESS FIRST SESSION ---------- TUESDAY, OCTOBER 29, 2019 ---------- Serial No. 116-61 ---------- Printed for the use of the Committee on the Judiciary Available via: http://judiciary.house.gov ANTITRUST AND ECONOMIC OPPORTUNITY: COMPETITION IN LABOR MARKETS ANTITRUST AND ECONOMIC OPPORTUNITY: COMPETITION IN LABOR MARKETS ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON ANTITRUST, COMMERCIAL AND ADMINISTRATIVE LAW OF THE COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTEENTH CONGRESS FIRST SESSION __________ TUESDAY, OCTOBER 29, 2019 __________ Serial No. 116-61 __________ Printed for the use of the Committee on the Judiciary [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Available via: http://judiciary.house.gov ______ U.S. GOVERNMENT PUBLISHING OFFICE 45-126 WASHINGTON : 2021 COMMITTEE ON THE JUDICIARY JERROLD NADLER, New York, Chair MARY GAY SCANLON, Pennsylvania, Vice-Chair ZOE LOFGREN, California DOUG COLLINS, Georgia, Ranking SHEILA JACKSON LEE, Texas Member STEVE COHEN, Tennessee F. JAMES SENSENBRENNER, Jr., HENRY C. ``HANK'' JOHNSON, Jr., Wisconsin Georgia STEVE CHABOT, Ohio THEODORE E. DEUTCH, Florida LOUIE GOHMERT, Texas KAREN BASS, California JIM JORDAN, Ohio CEDRIC L. RICHMOND, Louisiana KEN BUCK, Colorado HAKEEM S. JEFFRIES, New York JOHN RATCLIFFE, Texas DAVID N. CICILLINE, Rhode Island MARTHA ROBY, Alabama ERIC SWALWELL, California MATT GAETZ, Florida TED LIEU, California MIKE JOHNSON, Louisiana JAMIE RASKIN, Maryland ANDY BIGGS, Arizona PRAMILA JAYAPAL, Washington TOM McCLINTOCK, California VAL BUTLER DEMINGS, Florida DEBBIE LESKO, Arizona J. LUIS CORREA, California GUY RESCHENTHALER, Pennsylvania SYLVIA R. GARCIA, Texas BEN CLINE, Virginia JOE NEGUSE, Colorado KELLY ARMSTRONG, North Dakota LUCY McBATH, Georgia W. GREGORY STEUBE, Florida GREG STANTON, Arizona MADELEINE DEAN, Pennsylvania DEBBIE MUCARSEL-POWELL, Florida VERONICA ESCOBAR, Texas PERRY APELBAUM, Majority Staff Director and Chief Counsel BRENDAN BELAIR, Minority Staff Director ------ SUBCOMMITTEE ON ANTITRUST, COMMERCIAL AND ADMINISTRATIVE LAW DAVID N. CICILLINE, Rhode Island, Chair JOE NEGUSE, Colorado, Vice-Chair HENRY C. ``HANK'' JOHNSON, Jr., F. JAMES SENSENBRENNER, Jr., Georgia, Wisconsin, Ranking Member JAMIE RASKIN, Maryland KEN BUCK, Colorado PRAMILA JAYAPAL, Washington MATT GAETZ, Florida VAL BUTLER DEMINGS, Florida KELLY ARMSTRONG, North Dakota MARY GAY SCANLON, Pennsylvania W. GREGORY STEUBE, Florida LUCY McBATH, Georgia SLADE BOND, Chief Counsel DANIEL FLORES, Minority Counsel C O N T E N T S ---------- Tuesday, October 29, 2019 Page OPENING STATEMENTS The Honorable David N. Cicilline, Chair of the Subcommittee on Antitrust, Commercial and Administrative Law from the State of Rhode Island................................................... 1 The Honorable James Sensenbrenner, Ranking Member of the Subcommittee on Antitrust, Commercial and Administrative Law from the State of Wisconsin.................................... 3 WITNESSES Panel One The Honorable Noah Phillips, Commissioner, Federal Trade Commission Oral Testimony................................................. 5 Written Testimony.............................................. 8 Doha Mekki, Counsel to the Assistant Attorney General, United States Department of Justice Antitrust Division Oral Testimony................................................. 16 Written Testimony.............................................. 18 Rahul Rao, Assistant Attorney General, Washington State Office of the Attorney General Oral Testimony................................................. 26 Written Testimony.............................................. 28 Panel Two Sanjukta Paul, Assistant Professor of Law, Wayne State University Oral Testimony................................................. 48 Written Testimony.............................................. 51 Ioana Marinescu, Assistant Professor, University of Pennsylvania School of Social Policy and Practice Oral Testimony................................................. 59 Written Testimony.............................................. 61 Evan Starr, Assistant Professor of Management and Organizations, University of Maryland Robert H. Smith School of Business Oral Testimony................................................. 67 Written Testimony.............................................. 69 Richard L. ``Rick'' Masters, Special Counsel, National Center for Interstate Compacts, The Council of State Governments Oral Testimony................................................. 76 Written Testimony.............................................. 78 Kate Bahn, Director of Labor Market Policy, Economist, Washington Center for Equitable Growth Oral Testimony................................................. 84 Written Testimony.............................................. 87 Robert Topel, Isidore & Gladys Brown Distinguished Service Professor of Economics, The University of Chicago Booth School of Business Oral Testimony................................................. 93 Written Testimony.............................................. 95 LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING Items submitted by the Honorable David N. Cicilline, Chair of the Subcommittee on Antitrust, Commercial and Administrative Law from the State of Rhode Island for the record Statement from the Honorable Jerrold Nadler, Chair of the Committee on the Judiciary from the State of New York........ 110 Statement from the Honorable Doug Collins, Ranking Member of the Committee on the Judiciary from the State of Georgia..... 116 APPENDIX Items submitted by the Honorable David N. Cicilline, Chair of the Subcommittee on Antitrust, Commercial and Administrative Law from the State of Rhode Island for the record An article entitled ``Antitrust, the Gig Economy, and Labor Market Power,'' by Marshall Steinbaum, submitted by Sanjukta Paul, Wayne State University................................. 124 An article entitled ``The Enduring Ambiguities of Antitrust Liability for Worker Collective Action,'' submitted by Sanjukta Paul, Wayne State University........................ 144 An article entitled ``Fissuring and the Firm Exemption,'' submitted by Sanjukta Paul, Wayne State University........... 224 An article entitled ``The Politics of Professionalism: Reappraising Occupational Licensure and Competition Policy,'' Annual Review of Law and Social Science...................... 247 A letter from the National Council of State Boards of Nursing.. 269 An article entitled ``Where are the No-Poach Prosecutions DOJ Promised,'' Law360........................................... 272 A paper entitled ``Accommodating Capital and Policing Labor: Antitrust in the Two Gilded Ages,'' Maryland Law Review...... 275 An amicus brief in the case ``Llacua v. Western Range Association,'' submitted by Open Markets Institute........... 338 A submission from Open Markets Institute, dated September 13, 2019....................................................... 357 A petition for rulemaking to prohibit worker non-complete clauses from Open Markets Institute and labor leaders...... 365 ANTITRUST AND ECONOMIC OPPORTUNITY: COMPETITION IN LABOR MARKETS ---------- Tuesday, October 29, 2019 House of Representatives Subcommittee on Antitrust, Commercial and Administrative Law Committee on the Judiciary Washington, DC The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 2141, Rayburn House Office Building, Hon. David Cicilline [Chair of the subcommittee] presiding. Present: Representatives Cicilline, Neguse, Johnson, Jayapal, Scanlon, McBath, Sensenbrenner, Buck, and Steube. Staff Present: David Greengrass, Senior Counsel; John Doty, Senior Advisor; Madeline Strasser, Chief Clerk; Moh Sharma, Member Services and Outreach Advisor; Amanda Lewis, Counsel; Joseph Van Wye, Professional Staff Member; Lina Khan, Counsel; Slade Bond, Chief Counsel; Matt Robinson, Counsel Daniel Flores, Minority Chief Counsel; and Andrea Woodard, Minority Professional Staff. Mr. Cicilline. This Subcommittee will come to order. Without objection, the Chair is authorized to declare recesses of the Committee at any time. We welcome everyone to our hearing on the state of competition in labor markets, and I'll now recognize myself for an opening statement. Today's hearing is an opportunity to examine the state of competition in labor markets, as well as ways to promote the economic opportunity of hardworking Americans through the robust enforcement of our antitrust laws. Across the political spectrum, Americans know that the economy's not working for them. They feel it in every paycheck, every job application, and every credit card payment. Nobel Laureate Joseph Stiglitz described this as, and I quote, ``a widespread sense of powerlessness, both in our economic and political life. We seem no longer to control our own destinies,'' end quote. That's because for too long waves of consolidation have decimated jobs and wages, while rigging the economy against locally owned businesses, working families, and entrepreneurs. In the midst of this trend, there's overwhelming evidence that corporations are earning monopoly profits that aren't being reinvested in higher wages or our economy, threatening the financial security of working people. As Professor Ioana Marinescu will testify today, because the majority of labor markets in the United States are highly concentrated, employers have market power and are able to pay lower wages than they would in the competitive market, while many workers are unable to find new jobs because there are few alternatives. Simply put, in the absence of competition, employers have virtually no incentive to pay fair wages to attain workers or attract new talent, and workers are trapped in low-paying jobs. While the effects of economic concentration have been devastating for nearly all workers, it most severely harms workers in vulnerable groups, such as women and people of color who have less bargaining power against wage discrimination and other forms of workplace inequality. Today's hearing is also an opportunity to examine anticompetitive conduct in labor markets such as the widespread and growing use of noncompete and no-poach agreements. According to a 2015 report by the Treasury Department, nearly 30 million working Americans at all levels of employment are covered by noncompete clauses. As the Treasury Department reported, these restraints, and I quote, prevent workers from finding new employment, even after being fired without cause, and are widespread even among workers who do not possess trade secrets, such as workers in the fast-food industry. Since then, more recent economic data indicates that noncompetes have become even more prevalent across a variety of occupations. For example, 30 percent of hairstylists, 42 percent of engineers, and 45 percent of physicians are covered by noncompetes, according to a study by Professor Evan Starr. There's also no shortage of examples of employers colluding at the expense of workers through the use of no-poach clauses in employment contracts. Even though these restraints are criminally illegal, no- poach clauses appear in everyday employment contracts, including nearly 60 percent of agreements among major franchises in the United States, driving down wages and preventing workers from moving to better job opportunities. Finally, today's hearing is also an opportunity to examine the effects of occupational licensing requirements on everyday workers. Today, nearly a third of jobs require licensure, including many jobs that have little impact on public health or consumer safety. Although there are many benefits associated with establishing credentials for professions, particularly those with important public health and safety considerations, excessive licensing can create barriers to entering the workplace, impose additional costs on workers, and result in job losses. Moreover, because these standards differ by state, licensing barriers can disproportionately harm military families which are 10 times more likely to relocate across state lines than other working families. As the late economist Alan Krueger explained, the most common jobs for military spouses are nurses and teachers who often have to get licensed in the new state when they move, pay a licensing fee, and by the time they're permitted to work in those state, they often move again. Even worse, many states have begun weaponizing these requirements as leverage to collect educational debt, suspending or even seizing these licenses from firefighters, nurses, teachers, psychologists, barbers, lawyers, real estate brokers, and others who fall behind on student loan payments. According to a New York Times investigation in 2017, there are at least 8,700 cases in which licenses were taken away or put at risk of suspension in recent years, although that tally almost certainly understates the true number. On the other hand, as Professor Frank Pasquale and Sandeep Vaheesan have written, several occupations could benefit from more training requirements, not less, and there are important goals other than consumer welfare that licensing can promote, such as stable employment in decentralized private power. In closing, I look forward to hearing testimony from our esteemed panel of witnesses on these matters and those potential paths forward for fixing these problems. I firmly believe that it's imperative that we explore every path for creating economic opportunity for all working Americans. This must be our top national priority. With that, I now recognize the gentleman from Wisconsin, the Ranking Member of the Subcommittee, for his opening statement. Mr. Sensenbrenner. Thank you, Mr. Chair. Today we conduct oversight of a critical area of antitrust concern: The intersection of labor and antitrust issues. As we look at the relevant labor issues, it is important that we first take a step back and look at the overall strength of the labor scene in our economy. I am happy to say that today the outlook for labor is very good. Since election day 2016, America's economy has added 6.4 million jobs. Our unemployment rate is lower today than it has been since May of 1969, over 50 years ago. That is historically good news. As we measured in the third quarter of 2019, nearly 75 percent of workers entering employment were coming, not moving from among unemployed workers, but from entirely outside the previous labor force. That is in no spark because the Trump economy and the Administration for some time now the number of unemployed people has been lower than the number of open jobs. This is tremendous news for American workers. Another notable statistic is the trend in unemployment insurance claims. As of this September, those claims had remained below 300,000 for 329 consecutive weeks. This is the longest time since 1967, even though our labor force is twice the size of those 52 years ago. I want to also highlight the success of the Administration's Pledge to American Workers initiative. This initiative asks companies to commit to expand programs to educate, train, and re-skill American workers. More than 300 companies have signed the pledge to date. These companies have committed to creating over 14 million new jobs and training opportunities over the next 5 years. In short, a lot of good things are happening for America's workers and the young people who are about ready to enter the workforce. That being said, there are still issues for us to look at and potentially tackle through legislation. Each of the issues we will examine today fits that description. These include occupational licensing, noncompete and no-poach agreements, and labor monopsony issues. In one way or another, each of these issues involves practices that can inhibit the mobility of labor. It would be a good thing if Members on both sides of the aisle could work together to find appropriate and commonsense ways to help workers move freely through the economy as they search for the work they most prefer. I hope that our witnesses today can help us work our way through these important issues; and yield back the balance of my time. Mr. Cicilline. I thank the gentleman for yielding back. We have two panels of witnesses today. It's now my pleasure to introduce today's first panel. Our first witness is Federal Trade Commissioner Noah Phillips. Prior to his 2018 nomination and unanimous confirmation to the FTC, he served as chief counsel to Senator John Cornyn on the Senate Judiciary Committee from 2011 to 2018. In this role, he advised the Senator on issues involving antitrust, constitutional law, consumer privacy, and intellectual property. Commissioner Phillips is also an experienced litigator, having worked at both Cravath, Swaine & Moore, as well as Steptoe & Johnson, before his tenure with Senator Cornyn. Commissioner Phillips received his A.B. from Dartmouth College and his J.D. from Stanford Law School. Our second witness, Doha Mekki, is counsel to the Assistant Attorney General at the United States Department of Justice. She joined the Antitrust Division in 2015 as a trial attorney in the Defense, Industrials, and Aerospace Section, where she litigated merger challenges in the rail, commercial vehicle, and aviation industries. Previously, she was an antitrust associate at Crowell & Moring, LLP. Ms. Mekki received her A.B. from Duke University and her J.D. from the University of Pennsylvania Law School. I'd now like to recognize the gentlelady from Washington, Ms. Jayapal, to introduce our third witness. Ms. Jayapal. Thank you, Mr. Chair. It's a particular privilege and honor to introduce a constituent of mine and also I would say the Attorney General of the state of Washington as a constituent of mine. We're so proud of the work that the State Attorney General's Office is doing. So, our third witness today is Washington Assistant Attorney General Rahul Rao from the State Office of the Attorney General. Mr. Rao is a key member of the State Attorney General's Antitrust Division, which has eliminated no-poach clauses from over 150 corporate chains in about 160,000 locations in the United States. Mr. Rao clerked for the Honorable Eric T. Washington on the D.C. Court of Appeals and has worked at major firms, including McDermott Will & Emery and Morgan, Lewis & Bockius. Mr. Rao, we're very grateful to you for making the long trip today to be with us. Mr. Chair, I would just again say that our State Attorney General's office has done tremendous work on civil rights, on consumer protection, and, of course, on antitrust. So, we're delighted to have a witness from there today. Thank you. Mr. Cicilline. Thank you very much. We welcome all our distinguished witnesses on the first panel and thank them for participating in today's hearing. Now if you would please rise, we will begin by swearing you in. Please raise your right hand. Do you swear or affirm under penalty of perjury that the testimony you are about to give is true and correct to the best of your knowledge, information, and belief, so help you God? Thank you. Let the record show the witnesses answered in the affirmative. Thank you. You may be seated. Please know that each of your written statements will be entered into the record in its entirety. Accordingly, I ask that you summarize your testimony in 5 minutes. To help you stay within that time, there's a timing light on your table. When the light switches from green to yellow, you have 1 minute to conclude your testimony. When the light turns red, it signals your 5 minutes have expired. I will begin with you, Commissioner Phillips. You are recognized for 5 minutes. TESTIMONY OF THE HONORABLE NOAH PHILLIPS Mr. Phillips. Chair Cicilline, Ranking Member Sensenbrenner, Members of the subcommittee, thank you for the opportunity to appear before you today. Let me just begin by noting it is something today to sit here with the portrait of Mr. Conyers looking down. My name is Noah Phillips, and I serve as a Federal Trade Commissioner. I commend you for convening this hearing to discuss policy issues that bear directly on a pressing problem facing American workers. America has a labor mobility problem. For the past several decades, workers in America have been increasingly unlikely to move new places and start new jobs, even in the same location. That is not what we might expect since the costs of transportation have declined and the costs of communication reduced essentially to zero. This decline in American labor mobility is bad for workers and for the country as a whole. When Americans can move, they can adjust to changing economic or life circumstances, the prospect of opening a business, getting a better job, or moving to help a family member. Labor mobility isn't just about leaving the job you want tomorrow; it's about making the job you have today better. When you can leave a job, you have greater leverage to improve conditions, including to demand a higher wage. When workers cannot move, they have less leverage. So, it is not surprising that scholars point to declining labor mobility as a culprit in slow wage growth. One important solution is competition. The more options workers have, the more firms effectively compete for their labor. Policies that favor labor mobility increase that competition. Policies that inhibit mobility reduce it. Labor mobility stokes commerce and innovation. It reduces inequality, as people who are less well-off can move to areas where the benefits of economic growth are more broadly shared. People get bigger raises when they switch jobs than when they stay put. As Yale Law School Professor David Schleicher describes in his article ``Stuck!'', labor mobility allows the Federal economic policies we choose, whatever they are, to work better, as it brings our national economy together. This isn't about labor versus capital, splitting the pie a different way. It's about matching workers with employers, increasing the productivity of businesses, empowering workers, and growing the pie for everyone. All of that is why I'm so eager to be here today to talk about occupational licensing, no-poach agreements, and noncompete agreements, the risks they pose, and how the FTC is approaching them. I'll focus in my oral statement on occupational licensing and noncompetes. Licensing has a role to play in protecting health and safety, but studies suggest that some 25 to 30 percent of the U.S. workforce is now employed in occupations requiring a license, often in areas where the need for licensing is not apparent. Like the guilds of old, licensing regimes can impede competition and keep people from pursuing the work they want. Scholars estimate they reduced employment by nearly 3 million jobs and cost consumers over $200 billion. That may be good for incumbents and those who make money off licensing, but it's bad for consumers. It is also bad for workers, especially the most vulnerable, the marginal worker, the young person who wants to start their career, the servicemember and their spouse. Part of the problem is that states empower members of professions to erect barriers around themselves. When the North Carolina Board of Dental Examiners tried to ban teeth-whitening services sold to drugstores, the FTC pushed back, and the Supreme Court agreed. Our competition advocacy continues today. For example, in an amicus brief filed this month with DOJ in the SmileDirect case, on noncompetes, Members of the House and Senate and State legislatures are devoting increased attention and skepticism to noncompete agreements. English common law was similarly skeptical, deeming them great abuses by employers that threatened workers with the loss of livelihood and society by depriving it of a useful member. Today, the enforceability of noncompetes is a matter of state law which varies widely. Noncompetes can serve good purposes, incentivizing investment in workers and protecting trade secrets, worthy goals in our knowledge-based economy, but they also reduce labor mobility. A recent Treasury Department study found noncompetes associated with both lower wage growth and lower initial wages. Research reveals a surprising prevalence of noncompetes across the economy. We do not know if they have been increasing in frequency, but they are certainly more ubiquitous than we thought, and occur where the justifications for them are not obvious. That concerns me. The FTC is putting together a workshop on noncompetes. We will consider both competition and consumer protection issues and what Federal approach is warranted. Labor mobility is a complex issue, and examining the inputs to it from both sides has a better chance of contributing to a thoughtful response that will improve a lot of American workers and the nation as a whole. Thank you. [The statement of Mr. Phillips follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Cicilline. Thank you, Commissioner Phillips. I now recognize Ms. Mekki for 5 minutes. TESTIMONY OF DOHA MEKKI Ms. Mekki. Thank you. Chair Cicilline, Ranking Member Sensenbrenner, and distinguished Members of the subcommittee, thank you for holding this hearing on competition labor markets. I am honored to offer the Department's perspective during this critical moment for the American worker. It is also my privilege to appear with my enforcement colleagues, Noah Phillips and Rahul Rao. Today's topic could not be more timely or important. Much of the Division's recent work in this area is reflected in my written testimony. Therefore, I'd like to use my time this morning to make just a few observations about competition and labor markets. As the Subcommittee considers labor competition matters, I hope you will always start with the principle that there's something special about work. Today, we'll talk about the aspects of work that are rooted in economic value and bargaining power, but it's important to remember that labor is also an expression of identity or values. For many Americans, their work is essential to their dignity and purpose. I know as much firsthand. I joined the Department in 2015, as the Chair noted, and nothing I've done professionally has been more worthwhile than investigating and litigating anticompetitive mergers and conspiracies, including collusive agreements and labor markets that harm workers. Representing the American people has been the honor of my life. For some, their first exposure to labor competition matters was the issuance of the DOJ and FTC Antitrust Guidance to Human Resource Professionals in 2016. Of course, our labor antitrust enforcement didn't actually begin with the issuance of the guidance. The Division has for years challenged anticompetitive conduct in transactions in labor markets. Between 2010 and 2012, for example, the Division sued eight Silicon Valley firms for entering into unlawful no-poach agreements. In 2016, the Division challenged the proposed merger of Anthem and Cigna in part based on the ability of the merged firm to suppress reimbursement rates to healthcare providers. The Division has also challenged unlawful wage fixing and information exchange. Our experience in labor matters crystalized important principles and helped set out the Division's priorities in this area. Let me focus on four of them. First, there is no faithful reading of the antitrust laws that excludes competition for the American worker. Congress understood corporate power broadly. The idea that it can harm workers rests in the foundations of U.S. antitrust laws. Senator John Sherman of Ohio, for whom our first antitrust law was named, warned that monopoly power commands the price of labor without fear of strikes for in its field it leaves no competitors. Today, there should be no serious doubt that the antitrust laws seek to preserve the free market opportunities of buyers and sellers, including workers who sell their employment services. Antitrust enforcement and labor markets can go a long way towards restoring the bargaining power of workers that was lost due to anticompetitive restraints or monopsony power. Such action is not only grounded in the Rule of law, but faithful to Congress' intent. Second, agreements that limit worker mobility and suppress wages are found across economic sectors and geographies, and they do not discriminate with respect to the skill, education, or earnings of workers. Anticompetitive no-poach agreements are classic restraints on worker mobility that distort the normal bargaining and price-setting mechanisms that would otherwise apply in the labor context. They sometimes prohibit cold calling, soliciting, recruiting, or hiring of employees without permission. When these agreements are naked, meaning when they serve no purpose but to stifle competition, they are considered, per se, illegal. Beginning in October 2016, the Division announced that it intends to criminally prosecute naked no-poach and wage-fixing agreements because they eliminate competition in the same irredeemable way as agreements to fix product prices or allocate customers for territories, which the Division prosecutes criminally. After his confirmation in September 2017, AAG Delrahim confirmed that under his leadership, the Division would remain committed to the criminal prosecution of labor market conspiracies, and for the first time in recent history, he created a role in the front office for a lawyer to focus on labor competition matters, including criminal enforcement therein. Inaction is not a price the public can afford. So, while the time and resources required to build criminal cases is intensive, corporate and individual liability is necessary to punish criminal conspiracies and deter their occurrence. Third, the Division continues to identify ways to detect and challenge transactions that harm competition and labor markets. In particular, the Division has been busy developing potential screens, including document and information requests and improved search and review technologies, to help agency staff detect mergers that are likely to create or enhance monopsony power. Finally, continued study and research about competition labor markets helps improve our enforcement. The Division continues to think about ways to identify gaps in the legal and economic literature and incentivize areas for continuing study. Thank you again for the opportunity to testify. The Department looks forward to working with the Subcommittee on these important issues. [The statement of Ms. Mekki follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Cicilline. Thank you very much. I now recognize Mr. Rao for 5 minutes for his opening. TESTIMONY OF RAHUL RAO Mr. Rao. First, I would like to thank Congresswoman Jayapal for the kind words and introduction. Chair Cicilline, Ranking Member Sensenbrenner, and all distinguished Members of the Subcommittee, thank you for the opportunity to appear before you today to discuss important issues on competition and labor markets. I'm here on behalf of Attorney General Bob Ferguson, who appreciates the invitation to appear and regrets that he could not attend in person. I'm proud to represent the state of Washington, which, while not alone among antitrust regulators in focusing on labor markets, has been on the forefront of labor competition enforcement. Without a doubt, the effort that has brought the most attention to Washington's leadership on labor competition is our initiative to end the nationwide use of no-poach provisions in franchise agreements. By their terms, franchise no-poach clauses prevent entities in a franchise system from hiring or recruiting employees of another entity within that same system. Viewed through an antitrust lens, by limiting a potential employer's ability to recruit or hire, this restriction decreases competition for the labor of franchise employees, and this decrease in competition for labor has the potential to reduce opportunities and stagnate wages, benefits, and working conditions. As these clauses restrict the recruiting or hiring decision of independent employers who would otherwise compete for the very same workers, they are horizontal restrictions between direct competitors for labor. Analogizing this to product markets, this type of agreement is akin to price fixing or market allocation, and like their product market analogs, we believe that anticompetitive provisions between competing employers are per se violations of antitrust law. We launched our no-poach initiative in January 2018, and in less than 2 years, through our negotiations, have secured binding agreements from corporate chains representing over 160,000 locations throughout the United States to remove no- poach provisions from franchise agreements nationwide. This represents--this frees up competition for millions of workers throughout the country. Although no-poach provisions for all workers raise the same antitrust concerns, low-wage workers, in particular, are uniquely vulnerable and victimized by reduction in labor competition. For low-wage workers, any marginal increase in competition we create for their labor has the potential to create direct, real, and meaningful benefits for those workers. Whether that competition results in better shifts, better benefits, better working conditions, or better wages, that competition creates real value that flows directly to those who need it most. This is work we are very proud of. We have investigated hundreds of companies, negotiated over 150 agreements to remove no-poach clauses, sued one franchise system, and obtained a favorable settlement 2 months before trial, and are nearing the finish line of investigating the final 100 or so targets. As Attorney General Ferguson has said, our goal is to end no-poach practices, period. On top of this initiative, we are also investigating noncompete agreements that some employers impose on workers, including low-wage or low-skilled work employees. And today, I am happy to announce that my office right now is filing a complaint and consent decree against a multilocation Washington coffee shop that uses oppressive noncompetes against all its employees, including its baristas. As set forth in our complaint, this noncompete is an unfair method of competition. Noncompetes used against employees such as baristas serve no legitimate purpose. All they do is stifle competition for labor. An employer that uses noncompetes to eliminate its competitors' access to workers has less incentive to compete to retain those employees. Importantly, these types of noncompetes don't just harm workers; they also harm competing employers by depriving them the opportunity to hire available, qualified employees. When done simply to decrease competition for labor, noncompetes present an unfair method of competition. Finally, I want to reaffirm my office's commitment to evaluating merger effects in merger reviews, including those reviews we do alongside the Federal regulators. Because labor is inherently localized, state attorneys general are uniquely positioned to identify and evaluate mergers with companies who may not necessarily compete or raise monopoly concerns in outbound product markets but may still compete for employees and raise monopsony concerns in a local inbound labor market. We and 17 other state attorneys general set forth the need to evaluate labor markets and merger reviews in public comments submitted to the FTC earlier this year. In closing, Washington state looks forward to working with the subcommittee, the Department of Justice, the Federal Trade Commission, and other state regulators as we all further explore efforts to preserve free and open competition in labor markets. Mr. Chair, thank you for your time, and I look forward to your questions. [The statement of Mr. Rao follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Cicilline. Thank you, Mr. Rao. I thank the witnesses for their opening statements. We'll now proceed under the 5-minute Rule with questions. I will begin by recognizing the gentleman from Georgia, Mr. Johnson, for 5 minutes. Mr. Johnson. Thank you, Chair Cicilline, for holding this important hearing. In all of our discussions about the impact of anticompetitive behavior in the labor market, I think it's important that we remember who we're protecting. This is about making sure that workers have options, and when they do, it helps both our economy and the worker. I'm particularly concerned about the rampant use of noncompete clauses, not just in Silicon Valley, but across the worker spectrum. Three years ago, the sandwich chain Jimmy John's got their noncompete clauses for their workers as part of a settlement in a lawsuit, but the use of noncompete clauses between fast food companies and their workers is rampant. These clauses are often conditions of employment, and many employees don't know what rights they're signing away. On any given day, around 18 percent of the U.S. labor market is governed by noncompete clauses, and they are prevalent among workers who don't have access to trade secrets that these clauses purportedly protect. So, I'm looking forward to hearing your answers to Committee questions about this important issue. Mr. Rao, I'm concerned about low-income individuals being most affected by noncompete clauses because they have fewer options and less bargaining power. In your written testimony, you note that noncompete clauses can undermine competition in labor markets, even if they are never enforced. How does that happen? Mr. Rao. Thank you, Congressman. How that happens is through what is best described as a chilling effect. Whether a noncompete is enforced or not is actually of no moment in the analysis. We may have no ability to fully quantify how many potential employees never apply for a job because they feel that they are subject to a noncompete, how many turn down a solicitation, how many potential employers who may be aware of an applicant's noncompete throws that application into the waste bin. So, the enforcement of the noncompete is a relevant fact but is not dispositive of the negative impact that noncompetes have on labor markets, especially for low-wage workers who don't have the resources to hire lawyers or fight a lawsuit and are just in a very unequal bargaining position with respect to their current employer as well as a potential future employer. Mr. Johnson. Thank you. Ms. Mekki, in your written testimony, you state that labor market competition issues are a high priority for the Antitrust Division and that DOJ is devoting significant resources in this area. How does the Antitrust Division evaluate labor effects in merger enforcement? Ms. Mekki. Thank you, Congressman. The horizontal merger guidelines that the agency uses as a starting point for its merger analysis expressly contemplate buy-side merger effects, just as you might think of mergers potentially enhancing market power and the sale of tangible goods and services. The horizontal merger guidelines expressly lay out that the labor market effect in a merger would--I'm sorry--the buy-side effect in a merger would employ a similar framework for analysis as sell-side effects. We've done this in the past. In Anthem-Cigna, for example, we demonstrated that, in certain geographies, the merged firm would have the power to suppress reimbursement rates to physicians. In Aetna-Prudential--that was a merger in 1999-- similarly, there was a buy-side harm alleged rooted in the suppressed reimbursement rates paid to physicians. So, the task for the Division really is to separate alleged efficiencies from the creation or enhancement of monopsony power, the latter of which is a problem. Mr. Johnson. Exactly how does the Division evaluate labor effects in merger enforcement? Ms. Mekki. As I mentioned, it employs a similar analysis as any other kind of merger analysis. It's certainly aided by ample data. Mr. Johnson. Well, what information does the Division request when evaluating whether a transaction may harm workers? Ms. Mekki. That's an excellent question. We are still developing specifications to include in our second request and civil investigative demands. As we think about labor market competition, one of the most helpful pieces of information is switching information. So, if you have a good sense of where a buyer of a good or service is likely to turn in response to a suppression in wages, then you have some sense of the degree of concentration potential for effects in that market. Mr. Johnson. Thank you. Are there any examples of transactions that have been reviewed by the Justice Department within the last 2 years that have raised labor monopsony concerns? Mr. Cicilline. The gentleman's time has expired, but the witness may answer the question. Ms. Mekki. Thank you, Chair. Mr. Johnson. Thank you. Ms. Mekki. Thank you for the question, Congressman. Sitting here, I'm not aware of a merger in the last couple of years that actually led to an enforcement action based on labor market effects. Again, thinking through investigations, it was probably considered during the investigative phases. Mr. Johnson. Thank you. I yield back. Mr. Cicilline. Thank you. I thank the gentleman. I now recognize the distinguished gentleman from Wisconsin, the Ranking Member of the Subcommittee, Mr. Sensenbrenner, for 5 minutes. Mr. Sensenbrenner. Thank you, Mr. Chair. Before I came here, I spent 10 years in the Wisconsin legislature, and during every session, there was always legislation in various occupations to tighten licensing requirements, always with a grandfather clause, and we refer to those as fence-me-in legislation. As a matter of fact, I remember one debate on the senate floor where the author of the bill, who had a rather bizarre wig that was somewhat blue-gray, where one of the opponents of the bill accused the author of having a barber turning him prematurely blue. Now, that was during speech or debate immunity. So, nothing happened to that, aside from a few chuckles in the press. That being said, licensing requirements are a state prerogative. I think it would be very difficult to win an antitrust case when the licensing requirements were tightened as a way of preventing sideways mobility of people in a licensed profession or people trying to get into a licensed profession. Now, the question I have, is there any way, Mr. Phillips, that the FTC could announce some type of guidelines that could be used in state legislatures when the regular fence-me-in bills come up for debate and vote there? Mr. Phillips. Ranking Member, thank you for the question. I'm reminded of the song, ``Don't Fence Me In.'' Mr. Sensenbrenner. Yeah. Mr. Phillips. The agency has been working for decades on this critical question, and you're right to know that there's often a sympathetic story when licensing requirements are adopted. What we've seen over decades is a trend of them increasing and often in areas where they don't make as much sense. We do two things that are really important. The first thing is that we do competition advocacy. So, when invited, because we want to respect federalism, we will give advice to state legislatures and others formulating policy on the potential competitive impacts of what they're doing. Occasionally, we go to court. We are less often protecting, saying--protecting against a particular limitation; more often focused on the process. So, in the North Carolina dental case that I described, what the Supreme Court said is that when the state takes a licensing regime and gives it to the power of a board of people who participate in that industry, there are two things that are required for antitrust law not to apply. The first thing is that the state has to have a clear and evinced policy of displacing competition. They have to have a reason, and they have to be accountable for that reason not to allow competition. Second, they need to actively supervise what's going on. It can't just be the Members of that profession fencing themselves in. We brought that case in court and will continue to look for opportunities to articulate that principle. A few weeks ago, we joined with the Department of Justice in the SmileDirectClub case to protect that principle in, I believe, the Eleventh Circuit. Mr. Sensenbrenner. Thank you very much. Mr. Rao, I'm sure you got fence-me-in bills that are introduced in the Washington legislature. Do the state of Washington Attorney General's Office express concerns when the effect of those bills are to prevent either horizontal transfers or to prevent more people from coming and practicing the licensed occupation? Mr. Rao. Thank you, Ranking Member. To answer your question, as a general matter, the attorney general's office does comment and provide--you know, does weigh in on prospective legislation. The Antitrust Division, whom I represent today, I don't know specifically if it has done that. We have other divisions within the attorney general's office that do focus on occupational licensing. That is a bit outside of the scope of my division's work. So, I am not fully prepared to maybe answer your question as thoroughly as you would like. I'm happy to provide supplemental comments afterwards from the other divisions, if requested. Mr. Sensenbrenner. Please do. I yield back the balance of my time. Mr. Cicilline. I thank the gentleman. I now recognize the gentlelady from Washington, Ms. Jayapal, for 5 minutes. Ms. Jayapal. Thank you, Mr. Chair. I have mentioned and you have heard today about the excellent work that our Washington State Attorney General's Office is doing, specifically to end no-poaching provisions in franchise agreements. Now, the Washington AG's Office is also looking at how major industries may be harming low-wage workers' economic prospects in other ways as well, and also carefully reviewing the impacts that mergers will have on workers, a crucial reminder that enforcement agencies must aggressively protect consumers, workers, and businesses against monopsonies. One of the things I have appreciated about our State AG's office is that you don't wait for people to come to you. You actually identify a problem, and in this case, no-poach agreements, based on stories that were in the news, economic analysis, and consumer complaints, and then you Act aggressively, pursue an enforcement strategy that has resulted in positive gains for millions of workers across the country. Mr. Rao, what can other enforcement agencies learn from your division's very successful example? Mr. Rao. Well, I don't want to be necessarily looked that-- put in a position to tell other agencies how to behave or where to get their cues. But at least what we have done in the attorney general's office is we take inspiration where we can find it. Our attorney general is very aggressive, in the best way possible, with respect to protecting the rights of Washingtonians, and he understands the use and power of the office to do that. We get our inspiration for our potential enforcement actions from everywhere. With no-poach, it specifically came from a New York Times article and underlying research by Professors Orley Ashenfelter and Alan Krueger. We have also received consumer complaints. We are plugged into the academia, including with Members of the second panel that will be appearing before you. We also receive consumer complaints, as well as we are open to hearing complaints from competitors. Competitors are on the front line of being harmed by anticompetitive practices. We listen to it all and we evaluate it all, and my advice is, be aggressive and be open and look for opportunities to help. Ms. Jayapal. What's your relationship with some of the Federal agencies like, the FTC and the Department of Justice? How do you interact with them? Do you collaborate a lot with those agencies? How does that work? Mr. Rao. We actually, I believe--I'll let the other agencies speak from their perspective. I believe we have a very good working relationship with our federal enforcers, as well as with other state regulatory antitrust enforcers. Antitrust inherently is large. It crosses state borders. It sometimes crosses national borders. Being able to collaborate and share each other's resources is something that all the regulators value about antitrust enforcement specifically. Ms. Jayapal. Excellent. Why did your office choose to investigate antitrust violations in the context of labor markets? That's not always what antitrust enforcers are doing. So, why did you make that choice? Mr. Rao. Well, one is, at least on the front end, a lot of times, the antitrust community, to butcher a term that the labor economists would use, we're trailing actors. Part of labor is historically in over a hundred years-plus of antitrust jurisprudence. Ms. Mekki is right, the labor has always been a focus of antitrust. Maybe in the last few decades, it has been forgotten to a certain extent or at least overlooked, and we are seeing more research and more data coming up from labor economists that's showing and evidencing that there's a real problem out here. Part of our focus is that there is a real problem. We know that now, and we see this with growing wage disparity. We're seeing the data that's pointing to our understanding of monopsony markets is no longer the company town or the single- factory town outside of Pittsburgh. In what it looks like a robust market like Seattle, there are pockets of monopsony power, and we know that now, and using our guide of being aggressive enforcers, we are looking at labor markets. Ms. Jayapal. So, let me ask you about labor market effects of mergers, in particular, because your office pays close attention to how working people might be harmed when large corporations try to get even bigger. You submitted a letter to the FTC, along with 18 other states, arguing that enforcement agencies must take labor market impacts into account when evaluating mergers. Why is it so important for enforcement agencies at the state and local--state and federal levels to pay attention to the ways in which mergers might impact working people? Mr. Rao. Well, labor--in general, with merger reviews, we have always looked at outlook markets and products, but we've also looked at input markets. Labor is an input, and it is a critical input. It's one that directly affects people's lives in that, when there's a monopoly power, the effect is increase in prices for consumers. When there is monopsony power of a dominant buyer, it decreases wages for workers. Because labor is inherently localized, that effect may not be fully appreciated when looking at a macrolevel, which is where the State Attorneys General can come in, because we're on the ground floor and we're on the front lines. Ms. Jayapal. My time is almost--oh, actually, my time is expired. I yield back, Mr. Chair. Mr. Cicilline. I thank the gentlelady for yielding back. I now recognize myself for 5 minutes. Commissioner Phillips, several states, and you make reference to this in your written testimony, including the state of California, have banned the use of noncompete agreements. What effects have these bans had on innovation and investment and workers? Do you believe that this kind of state- based activity has been procompetitive as a general matter? Mr. Phillips. Thank you, Chair, for the question. What's really interesting that we've seen is a variety of different things that states have done. You're going to hear from some of the academic experts who will speak to these effects and the studies that they have done. So, you see in Washington State-- rather, excuse me--Oregon, looking at low-wage workers, noncompetes with respect to low-wage workers. You see in Hawaii tech workers being the focal point. I think we've seen, from the data, some positive effects, both with respect to wages and with respect to innovation, and there is information from California. What I will say also is that we do see, in the studies, some nuance, and we do know that there are some benefits that noncompetes also provide. Mr. Cicilline. Did you see any evidence, as a general principle, that the banning of the noncompetes in California has undermined the protection of a firm's trade secrets? That's an argument that's often advanced. Mr. Phillips. That is an argument, and there are data to support that argument. The banning of noncompetes in California goes back a very long way, I believe to the 19th century. I think it is fair to say that California has been a hub of innovation. Mr. Cicilline. Thank you. That's my point. Thank you. Ms. Mekki, is it the position of the Antitrust Division that no-poach agreements are a per se violation of antitrust laws? Ms. Mekki. Thank you for the question, Chair. The Antitrust Division has certainly made statements that naked no-poach agreements are essentially just market allocations. It is a species of market allocation, and there's no need to distinguish between allocations of labor markets, like no-poach agreements, and allocations of territories or customers, which, for the last century, the Federal dockets are replete with examples of enforcement there. Mr. Cicilline. So, I take that as a yes. I'm not sure if a no-poach agreement is different from a naked no-poach agreement. I assume you mean a no-poach agreement that's really a no-poach agreement is a per se violation of antitrust laws? Ms. Mekki. In a matter of speaking, certainly. I would say that the law does not treat all no-poach agreements equally. For example-- Mr. Cicilline. I'm asking--I'm sorry to interrupt, but I'm asking what the Department of Justice's position is. Ms. Mekki. The Department of Justice's view is that naked no-poach agreements are per se unlawful, and there may be circumstances where an otherwise naked no-poach agreement might be taken out of the per se category because it is, for example, ancillary to the sale of a business. Mr. Cicilline. So, in various briefs, the Antitrust Division has argued that no-poach agreements entered by franchisors should be analyzed under the far more permissive Rule of reason standard. The idea that we would want to ever protect the right of a powerful franchisor to block workers from switching between franchises seems, to me, really outrageous. I can't--I'm trying to understand why the Department of Justice would engage in this kind of anti-worker advocacy. What's the explanation for carving out this exception for no-poach agreements in franchising contracts, which is some of the places where it happens most frequently with low-wage workers? It seems like a really odd exception for a carveout. Ms. Mekki. The Antitrust Division has filed a number of briefs in no-poach cases. In two instances, it took the view that no-poach agreements in the Seaman v. Duke University case are per se unlawful, and in the In Re: Railway matter, which I personally had the honor of arguing, that those agreements were per se unlawful. In the franchise context, it was the Department's view that there's a spectrum for rules of analysis. For the Department, on one end of the spectrum, naked agreements are routed towards potential felony prosecution and resolution. On the other hand, the Department also views certain economic literature as being persuasive, that there are sometimes benefits when such restraints were imposed in joint ventures or franchise collaborations and, therefore, strict intra-brand competition. As I understand the Department's brief, it also left open the possibility that there can be cartelization of a labor market, even in the franchise context when, for example, the franchisees get together and it's at their behest that a no- poach agreement is implemented. Mr. Cicilline. That doesn't sound like a per se Rule then, to me. Ms. Mekki. It is not a per se rule, but it is also not an endorsement or a belief that these agreements are useful, procompetitive, lawful-- Mr. Cicilline. If the Department of Justice is not taking the position that they're not, and challenging them in the fact that, you say, it's not a statement that they're useful, by implication, your position that you will do that sort of analysis and provide that quite different standard is, in fact, an invitation, isn't it? Ms. Mekki. It is the Department's view that courts should undertake a balancing. Even in the event that the restraints were upheld in a low percentage of the time, it is the Department's view that some balancing might be warranted in cases like franchise context. Mr. Cicilline. I thank you. I now recognize the gentlelady from Georgia, Ms. McBath, for 5 minutes. Ms. McBath. Thank you, Mr. Chair. Thank you so much to each and every one of you that are here today. I apologize I was not here earlier, but I do have your testimony. So, the questions that I'm asking are based upon that testimony. Thank you for sharing your expertise. I'm especially pleased that we can come together as Republicans and Democrats to focus on issues that truly are affecting millions of people as they earn a living and provide for their families. Any competitive labor practices affect so many sectors of our economy. A number of the experts that we're hearing from today have--you've specifically noted how these issues have affected nurses. My mother was a registered nurse. She taught nursing for many years. So, my home State of Georgia has one of the worst nursing shortages in the Nation. I'm concerned about how these practices can hurt nurses, people who are thinking about becoming nurses, and also our ability to make sure that people can get the care that they need. I do remember spending--my mother would oftentimes spend a lot of time tutoring a lot of the young students, the young nurses, and so I understand the gravity of being able to make sure that we have enough nurses in the country to care for our patients. I also come at this from the perspective of being a working mom. I know what it's like to provide for my family, and I know how important it is for people to have good options and employment mobility to be able to do that. This is a conversation that's been going on for some time in some government and academic circles, but, for me, it's critical that we think about it in terms of what it means for people who are working hard to provide for their families. Ms. Mekki, my question is for you. You also mentioned nurses in your testimony. You describe two separate instances where anticompetitive practices were used to target nurses specifically. You mentioned that DOJ sued a trade group in Arizona for fixing nurses' wages at a rate lower than healthcare providers would have otherwise been paid. DOJ also sued a group of hospitals in Utah that impermissibly shared nonpublic information such that they could similarly pay nurses less. Notably, both of those cases you mentioned settled within a matter of months, and both resulted in agreements by the defendants to stop their anticompetitive practices. These cases are especially concerning, given that artificially low nursing wages could discourage people from going into nursing, when our communities really, really need nurses. What do these cases say about the importance of robust government action to address these violations? Ms. Mekki. Thank you so much for that excellent question, Congresswoman. I have often marveled at the number of labor market cases that seem to locate harm against workers myself. You've noted two cases, and I would also note that at a labor workshop we held last month, we invited in Dr. Elena Krieger from Northwestern University, who published a wonderful paper about the effect of hospital consolidation on the wages of several groups, including nurses. For me, this only underscores why it is so important that the Department announced in 2016 that it would prosecute wage- fixing agreements. To me, they're indistinguishable from price fixing. In the future, if the Department were to find examples of naked wage fixing, perhaps like the Arizona hospitals case, that is the kind of thing that the Department has committed to investigating criminally and potentially leading to a felony conviction. Ms. McBath. Thank you. So, what can Congress do to reduce this kind of behavior which is already illegal and harms both our workers and the needs of our country? What can we do? Ms. Mekki. Respectfully, I don't think I can comment on any proposed legislation or specific actions that Congress can take, but as the Department's representative and witness here today, what I can say is that we are fully in a position to exercise all of the lawful law enforcement authority that is prescribed to the Antitrust Division. It is the AAG's commitment that we will, in fact, exercise that authority, because this is important, because we value the work of all Americans. Truly, who is more honorable than people like nurses and teachers, et cetera? Ms. McBath. Thank you so much. I yield back the balance of my time. Mr. Cicilline. I thank the gentlewoman. We're going to do a second round of questions, if we can have the indulgence of the witnesses. I'll recognize the gentleman from Georgia for 5 minutes. Mr. Johnson. Thank you. Commissioner Phillips, how have anticompetitive contracting practices such as no-poach and noncompete agreements affected labor mobility? Mr. Phillips. Congressman, thank you for your question. Just a caveat at the beginning. It's not clear that at in every instance, let's say, a noncompete is anticompetitive. One of the things that we're seeing with the prevalence of no-poach agreements and the prevalence of noncompetes, about which you're going to hear in the next round of testimony, is that a lot of people are facing legal barriers and even barriers, as Mr. Rao described, that aren't necessarily legal in states where noncompetes are not necessarily enforced, to leaving their job, to starting a new job, and with respect to licensing, to starting a new business. All of these can be thought of as friction for labor mobility. Mr. Johnson. Friction? Mr. Phillips. Yes, sir. Mr. Johnson. What do you mean by that? Mr. Phillips. What I mean is it's something that keeps a person where they are maybe when they don't want to be there. Another consideration they have to add to the mix when they think about their options, when they approach their boss to quit or to ask for a raise. That's what I mean by friction. Mr. Johnson. I see. So, you're concerned that the prevalence of noncompete agreements has harmed economic opportunity for working Americans? Are you concerned? Mr. Phillips. Yes. Not in every case, but I think we're seeing them as more prevalent than we thought they were. Mr. Johnson. In his written testimony, Professor Topel suggests that restrictions on noncompete agreements would be, quote, ``a dangerous law that would prohibit a widely used business practice, a practice used even in situations where the employer could not have substantive monopsony power,'' end quote. What is your response to that quote? Mr. Phillips. Well, I think there's some truth to that. I think, as with all kinds of policy, what you want to look at is, in terms of the thing you're looking at, how is it operating in the market, right? When you talk about a blanket ban, that isn't necessarily reflective of what the state of play is. One of the things we see in the research, for instance, is that the effects for workers, where a noncompete is made apparent to them, where it's negotiated, where there's consideration for it, the effects are better. So maybe that's an area you want to protect. We also see that there may be different justifications, depending on whether someone is high wage or low wage. Those are all kinds of nuances that Federal policy ought to have in mind. Mr. Johnson. So, you do see a Federal need--you do see a need for federal legislation to address some of the ills of noncompete agreements and the impact on workers? Mr. Phillips. What I said in my testimony is that we're convening a workshop to look at this question, and I think it's a little too early to answer that particular question on the need for federal legislation. One of the things we've seen in the last few years in states is a tremendous flowering of different kinds of legislation. As I said before, Hawaii's looking at tech workers. Oregon is looking at low-wage workers. That's federalism at work, and I think we want to understand the effects of what the states are doing before we arrive at a federal solution. Mr. Johnson. Thank you. In connection with the workshop that you're planning, are you already or will you be collecting data on the use of noncompete clauses in low-wage employment scenarios? Mr. Phillips. I'm not sure about the precise plans. My expectation is that we'll hear from experts who have studied that. There are also proposals to take other measures to collect a lot more data, and that's something at which we're going to look. Mr. Johnson. Can you commit to compiling data that can be used to analyze this issue moving forward? Mr. Phillips. We can certainly compile information. I can't commit at this point to like a 6(b) study, for instance, but we're absolutely undertaking this effort in order to get the right information to determine how best to proceed. Mr. Johnson. Thank you. In his written testimony, Professor Topel also argues that noncompetes allow, quote, ``the employer to capture some of the returns on its investments in identifying and recruiting and training talented workers,'' end quote. Even if true, wouldn't this rationale also justify wage fixing and other collusive behavior by employers that is criminally illegal? Mr. Phillips. I hope nothing would justify wage fixing or any criminal behavior. My understanding of the evidence is that noncompetes can function to help support worker training, and worker training is an important thing, and that's part of the nuance that I think we all need to take into account. Mr. Johnson. Well, do you believe that there are less restrictive ways to recoup the cost of hiring new workers? Mr. Phillips. There may be, depending on the--on the context. Noncompetes are pretty ubiquitous in the economy, and they're not always bad. Mr. Johnson. Thank you. Mr. Cicilline. Thank you. The gentleman yields back. I now recognize myself for 5 minutes. I just want to continue, Ms. Mekki. You made reference in your opening statement to the criminal prosecutions, and I realize this is not you, this is Mr. Delrahim's. So, I recognize these decisions aren't being made by you, but you're here, so I want to ask you this question. Because you're quite right, Mr. Delrahim has made quite a bit of this commitment to criminally prosecute for these no-poach agreements. In fact-- and I'm quoting him--he said, ``in the coming couple of months, you will see announcements, and to be honest with you, I've been shocked about how many of these there are, but they're real.'' There's been this sort of suggestion that the Department of Justice was going to take this no-poach agreement enforcement so seriously that it would begin to criminally prosecute. In this article as of October 3, they write, but for all of its talk of putting executives behind bars, the agency hasn't brought a single criminal no-poach case in the nearly 3 years since this guidance was announced. So, my first question is, is that true that there hasn't been a single criminal prosecution brought for a no-poach case in the last 3 years? Ms. Mekki. There have been no public filings with respect to criminal no-poach cases. As AAG Delrahim has confirmed, there are a number of active criminal investigations. Mr. Cicilline. Okay. I will just say, for those of us who consider these no-poach agreements to be a substantial violation of law but also a very powerful force in keeping workers in place and stagnating their wages, the promise to be rigorous in their enforcement and not in 3 years have brought a single criminal case, frankly, rings hollow. I hope you will bring that message back to Mr. Delrahim, that those of us who think this is key to ensuring that labor markets work think that this is a valuable tool. Alhough, he's spoken very forcefully about it, it doesn't seem to be playing out in the way that he's suggested. I know investigations take time, but 3 years is a long time to not be able to bring a single case. I just want to finally say that with respect to the franchising position that the Department of Justice has argued, there have been a number of filings in which the right of franchises to enter no-poach agreements have been recognized, and particularly one of the cases involved Washington State. So, I'd like to ask Mr. Rao, tell us a little bit about that pleading. Then I'm going to ask Ms. Mekki whether this was a useful expenditure of resources, the limited resources at the DOJ, because it seems as if your attorney general had concluded that no-poach agreements were a per se violation. Mr. Rao. That's right. Just for quick background, we're talking about three class actions that were filed in the Eastern District of Washington involving private parties where during the motion to dismiss phase the Department of Justice filed statements of interest in all three cases. They were consolidated for argument purposes. Our office, the Washington Attorney General, filed an amicus brief articulating the state's position that--Department of Justice position, I will let Ms. Mekki articulate better what DOJ's position is, but generally was that these were not per se violations and were subject to the rule of reason. The state of Washington filed amicus briefs that took the opposite position and also articulated that state claims were made. Part of the rational here, at least for the state's position, is that in DOJ's briefing they made the point that agreements that would otherwise be per se violations of antitrust law may escape per se liability if they're ancillary to a broader agreement. It's called the Ancillary Restraint Doctrine. The Ancillary Restraint Doctrine, however, is triggered only when that provision is reasonably necessary to further effectuate the broader purpose of the agreement. We in Washington, in the antitrust division, are on the forefront of franchise no-poach. We have, at that time, it was a little less than a 100, but we're over 150 companies that have voluntarily removed these provisions on their own accord. We have heard first-hand from parties that have removed these provisions prior to our investigation. We have heard from the parties that some of these provisions were never enforced, that they didn't know they exist. All in all, the facts that we have understood is that these provisions were--they're just not necessary. I describe them as vestigial organs. The franchises don't necessarily know how they got in the agreement to begin with. They're like an appendix. You don't know what it is, you don't know what it does, and you're happy to get rid of it when it causes a problem. That does not trigger the Ancillary Restraint Doctrine if it's not necessary and, therefore, per se liability would still attach. Mr. Cicilline. Am I correct, Mr. Rao, that as a result of the enforcement actions by the Washington Attorney General, there are already over 60 corporate chains that have dropped their no-poach clauses from their franchise agreements? Mr. Rao. Point of correction, Mr. Chair, it's over 150 corporate chains. Mr. Cicilline. One-hundred and fifty, okay. So, it seemed like that enforcement action, this notion of its necessity for business purposes has been completely refuted by subsequent events. Mr. Rao. Just by the plain facts that surround the enforcement would more than suggest that these provisions are not reasonably necessary. Mr. Cicilline. Thank you. I see my time has expired. I recognize the gentlelady from Georgia for 5 minutes, Ms. McBath. Ms. McBath. Thank you, Mr. Chair. Mr. Phillips, you spoke about how state licensing can be restrictive anti-competitive practice. Georgia is now part of an agreement with 32 other states that allow nurses to maintain their licenses across state lines. What are the effects of agreements like these that allow workers to work across state lines? Mr. Phillips. Congresswoman, thank you for that question. I think the effects are really good. These kinds of agreements, like the one into which Georgia has entered, allow for precisely the thing that I'm asking the Committee and policymakers generally to focus on, and that is labor mobility. You're licensed in Georgia, you can go work elsewhere. Let me give you an example. I'm going to borrow from psychology. A psychologist has a patient that they treat regularly, but the patient goes and travels. When the patient's on travel, they want to have that regular appointment, they want to get that care. Because the patient is travelling, that could be the unlicensed practice of psychology. The same thing applies to nursing. These kind of interstate compacts allow for the ability of care providers to provide that care more generally. They allow for innovation in telemedicine. They also empower the worker. If the worker needs to move to care for a family member or go with a spouse who got a different job or just needs to get out of the state, they don't also have to go through these licensing burdens. You talked about working moms. They can focus on caring for their children and doing their work. Ms. McBath. Thank you for that. I have often spoken to healthcare providers, nurses, who have said that, I'm licensed in a particular state, but I'm not licensed, here, to work here. So, on behalf of, you know, the mindset of my mother, who was a registered nurse, who when we moved from Illinois to Washington, DC, to Columbia, Maryland, she then, again, had to take the licensing testing all over again. I remember her studying, and I remember her being stressed that if she didn't pass the licensing here that she wouldn't be able to practice as a nurse. So, thank you for that. I appreciate that. I give back the balance of my time. Mr. Cicilline. I thank the gentlelady for yielding. I thank the witnesses. In keeping with our committee's practices, the witnesses are at this point excused. We thank you very much for coming here today to share your thoughts about the state of competition in labor markets. This was a very informative hearing, and it will help us as we consider these issues moving forward and we really appreciate it. Members of the second panel please are invited now to take your seats once our staff has made the administrative arrangements. That is, put the new name cards up. Mr. Cicilline. Welcome. I will now introduce our second panel of witnesses. The first witness on our second panel is Professor Sanjukta Paul, Assistant Professor of Law at Wayne State University and a fellow of the Thurman Arnold Project at Yale University. Professor Paul's scholarship and teaching focus on the intersection of antitrust law and labor regulation. Prior to joining the faculty of Wayne State University, Professor Paul was a public interest attorney in Los Angeles focused on labor and civil rights. She is widely published, with her work having appeared in the UCLA Law Review and the Berkeley Journal of Employment and Labor Law. Her paper, ``The Enduring Ambiguities of Antitrust Liability for Worker Collective Action,'' was granted the Jerry S. Cohen Memorial Fund Award for Best Antitrust Scholarship of 2016. Professor Paul received her B.A. from the University of Iowa and her J.D. from Yale Law School. Our second witness is Professor Ioana Marinescu. Professor Marinescu currently serves as Assistant Professor at the School of Social Policy and Practice at the University of Pennsylvania. Before going to Philadelphia, Professor Marinescu was an Assistant Professor at the Harris School of Public Policy at the University of Chicago as well as a postdoctoral researcher in economics at Harvard University. She's a Faculty Research Fellow in labor studies at the National Bureau of Economic Research as well as a Research Fellow at the Institute of Labor Economics. Professor Marinescu received her master's degree from the Pantheon-Sorbonne and her Ph.D. from the London School of Economics. Our third witness on the panel is Evan Starr, Assistant Professor of Management Organization at the Robert Smith School of Business and Management at the University of Maryland. Professor Starr's research focuses on employer-employee contracting practices, particularly the impacts of post- employment restrictive covenants. His work was used predominantly by the White House and Department of Treasury when they compiled their report on noncompete agreements in 2016. He also worked to coordinate a 2016 White House convening on noncompete agreements. Prior to joining the faculty at the University of Maryland, Professor Starr taught economics at the University of Illinois. Professor Starr received his B.A. from Denison University and his Ph.D. from the University of Michigan. Our fourth witness is Rick Masters, Special Counsel for Interstate Compacts at the Council of State Governments' National Center for Interstate Compacts. A national expert on interstate compacts, Mr. Masters is the principal draftsman of the Interstate Compact for Adult Offender Supervision enacted by all 50 states, the Interstate Compact for Juveniles enacted by 46 states, and the Interstate Compact in Educational Opportunity for Military Children enacted by 31 states. He has testified numerous times in front of various state legislative committees on these compacts. Mr. Masters has also worked with the National Highway Traffic Safety Administration, Department of Defense, and the Department of Justice on various interstate compact projects. Mr. Masters received his B.A. from Asbury College and his J.D. from the Louis D. Brandeis School of Law at the University of Louisville. Our fifth witness is Kate Bahn, the Director of Labor Market Policy at the Washington Center for equitable growth. Dr. Bahn's research focuses on gender, race, and ethnicity in the labor market, care work, and monopsonistic labor markets. Before joining the Washington Center, Dr. Bahn was an economist at the Center for American Progress. She also serves as the Executive Vice President and Secretary for the International Association for Feminist Economics. She's been published in a wide range of journals and periodicals, including The Guardian, the Nation, Salon, and Newsweek. Dr. Bahn received her B.A. from Hampshire College and her Ph.D. from the New School for Social Research. Our last witness, Robert Topel, is joining us today via video conference, to our left, from the Booth School of Business at the University of Chicago where he's served as professor of economics since 1979. His research revolves around labor economics, industrial organization and antitrust, economic growth, and public policy. He's the author of several books on labor and health economics and has been published by multiple academic journals, including the American Economic Review and the Journal of Political Economy. Professor Topel also serves as a Research Associate at the National Bureau of Economic Research and has held visiting positions at the World Bank, the RAND Corporation, and the Board of Governors at the Federal Reserve. Professor Topel received his B.A. from the University of California at Santa Barbara and his Ph.D. from the University of California at Los Angeles. Welcome all our distinguished witnesses on our second panel and thank you for participating in today's hearing. Now, if you would please rise, I will begin by swearing you in. Please raise your right hand. Do you swear or affirm under penalty of perjury that the testimony you are about to give is true and correct to the best of your knowledge, information, and belief, so help you God? Thank you. Let the record show the witnesses answered in the affirmative. Thank you. You may be seated. I think you heard about the lights, because you were all in the room, so I won't repeat that. I'll ask now that you summarize your testimony in 5 minutes. We'll begin with Professor Paul. There's a microphone button right there. TESTIMONY OF SANJUKTA PAUL Ms. Paul. Thank you. Chair Cicilline, Ranking Member Sensenbrenner, and Members of the subcommittee, thank you so much for holding this important hearing on the place of labor markets and workers in antitrust law. I'm honored to offer my perspective at a moment that is critical both for antitrust law and for workers. In addition to the important issues that are being highlighted in the rest of this hearing, noncompete and no- poach agreements, occupational licensing, as well as emerging empirical research concerning the power that employers wield over workers in labor markets, I also want to draw attention to numerous other implications that antitrust law has for workers and labor markets. First, antitrust law currently functions as an obstacle to the collective action of workers who find themselves beyond the bounds of labor regulation. Second, and relatedly, the lax regulation of vertical restraints has contributed to what's been called the fissured workplace, which includes, in fact, the proliferation of work beyond the bounds of employment. Third, harms to workers across areas of antitrust, including but not limited to employer cartelization and corporate mergers, are insufficiently scrutinized under the consumer welfare standard as currently applied. In my remaining time, I'll focus on framing the overall issue of antitrust law's relationship to workers by summarizing the legislative history on this topic and will describe the antitrust obstacles to workers' collective action in the fissured workplace. To start with the legislative history, the Sherman Act, of course, is the statutory foundation of antitrust on which subsequent statutes have built. The statute was a response to a broad social movement focused on a particular phenomenon: The rise of corporate power, especially as manifested in the legal form of the business trust. The farmer-labor coalition that pushed for federal antitrust legislation was specifically concerned with the concentration of control over the economy in fewer and fewer hands and with the accompanying disempowerment of many American working people who had previously enjoyed some level of autonomy and control over their economic lives. Legislators, like the political coalition to which they were responding, were concerned mainly with dispersing control over the economy rather than with the lowest consumer prices or even with competition for competition's sake. Legislators spoke again and again about the harms caused by the powerful new business trusts which were the precursors to the industrial megacorporations that would emerge over the next decade or two. At one point, Senator Sherman read the following statement in the record, and I want to read it now: ``The trusts and combinations are great wrongs to the people. They operate with a double-edged sword. They increase beyond reason the cost of the necessities of life and business and they decrease the cost of raw material, the farm products of the country. They regulate prices at their will, depress the price of what they buy, and increase the price of what they sell. They aggregate to themselves great, enormous wealth by extortion, which makes the people poor. Then they make this extorted wealth the means of further extortion from their unfortunate victims, the people of the United States . . . till they are fast producing that condition in our people in which the great mass of them are the servitors of those who have this aggregated wealth at their command.'' I just want to remind us that this is the statutory purpose of antitrust law, the affirmative purpose. Furthermore, from a review of the legislative record, it's also evident that legislators manifestly did not intend to target collective action, joint price setting, or collective bargaining among workers, small producers, or entrepreneurs, the very people the statute was intended to help, with or without any expressed labor exemption, as is further set out in my written testimony. The courts nevertheless interpreted the statute in just the way Congress had thought to avoid, turning it into a weapon against working people's collective action during an era when such action was one of the few limited checks upon sweatshop labor, child labor, and the general dispensability of workers' lives. It was not until the New Deal era that further legislation and subsequent court decisions finally, although only partially, reinstated legislators' original intent. Fast forwarding to today's labor market, this original worker welfare, if you will, legislative purpose has been inverted. In the so-called gig economy, dominant firms can fix prices across thousands of supposedly independent businesses while antitrust law functions to prevent individual workers and entrepreneurs from engaging in collective bargaining to improve their pay and working conditions. The fissured workplace refers to business arrangements in which firms have vertically disintegrated, but in which lead firms are nevertheless able to maintain control over smaller firms and workers in their orbits while largely disclaiming responsibility for what happens outside their formal firm boundaries. This is true when Uber, for example, sets the prices charged by the very drivers the firm insists are independent businesses, and it is also true when franchisers control their franchisees' business decisions. Antitrust law's lax attitude toward vertical restraints since the 1970s has allowed this sort of control to proliferate. Indeed, the ride share platform's price setting as to ride services, services they do not sell, tests the bounds even of existing antitrust law. Importantly, the economic arguments for relaxing the law of vertical restraints have generally been premised upon largely hypothetical benefits to consumers without considering the effects upon workers, franchisees, or other smaller actors in the orbits of dominant firms. The Department of Justice Antitrust Division engaged in this style of reasoning recently when it filed a brief in favor of franchisors' impending cases involving no-poach agreements, which you were just discussing, pointing to speculative consumer benefits as legitimate justifications for restraints upon competition in labor markets. Mr. Cicilline. Professor Paul if you could just summarize. Your time has expired. We're going to have lots of time for questions. Ms. Paul. Okay. Well, I will just summarize by saying that given the original purposes of antitrust law, it should do more to restrain the control exerted by powerful firms over workers and small players and at the same time it should not impose obstacles upon workers' attempts to engage in collective action to balance the bargaining power of more powerful contracting parties. [The statement of Ms. Paul follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Cicilline. Thank you. Dr. Marinescu is recognized for 5 minutes. TESTIMONY OF IOANA MARINESCU Ms. Marinescu. Chair Cicilline, Ranking Member Sensenbrenner, and Members of the subcommittee, thank you so much for inviting me to testify today. My name is Ioana Marinescu. I'm a professor of economics at the University of Pennsylvania. I am particularly glad to be here today because since 2017 I have coauthored nine papers, all on the topics of competition in the labor market, both in economics and law scholarship. I have recently been invited to speak about my research in the federal antitrust enforcement unit, that is the Federal Trade Commission, as well as the Department of Justice Antitrust Division. So, in my testimony I want to make four points. The first is that employers can suppress wages due to limited competition in the labor market. The second is that the majority of U.S. labor markets are highly concentrated. The third is that this kind of concentration, higher concentration, tends to lower wages. The fourth is that antitrust enforcement in labor markets should be strengthened, and this fourth point is based on the current evidence that I'm going to be describing today, together with existing antitrust law principles. So, to my first point, employers can suppress wages due to limited competition in the labor market. Think about an example. Let's think about a legal secretary in Columbus, Ohio. She's the mother of three small kids, like me, and her employer tells her, you know what, this year we won't give you a pay raise, which will make it harder for her to afford the necessities of life. Will she quit? Well, it depends. It depends on what other jobs are available close to her home. With small kids she cannot afford to move or commute far away to go to another job. There might be other jobs, other administrative assistant jobs, but not a legal secretary job, and those jobs may pay less and do not make full use of her skills. So simply put, workers cannot easily find alternative jobs, and so this allows employers to suppress wages. Particularly, our research shows that workers produce as much as 17 percent more than what they are paid. Furthermore, we use an accepted antitrust test, the SSNIP test, which you apply to the labor market, and we find that essentially all labor markets defined by an occupation and a commuting zone, like in my example, a legal secretary in the Columbus, Ohio, commuting zone, all these kinds of markets are valid antitrust markets that can be used to analyze competition in the labor market. My second point is that the majority, or 60 percent more precisely, of U.S. labor markets are highly concentrated. These are defined as an occupation by a commuting zone. So, what does that mean, highly concentrated? They have in the Herfindahl- Hirschman Index, HHI, above the 2,500 high concentration threshold that has been established by the horizontal mergers' guidelines. Concretely, what turns out to be the case is that the average market in the U.S. has only barely above two effective employers competing at any point of time to hire workers. Now, it is true that larger cities are generally much less concentrated. So, if our legal secretary in Columbus, Ohio, were instead looking for jobs here in Washington, DC, she would face a less concentrated labor market, more competition for her labor. Third, my third point, is that higher labor market concentration tends to lower wages. This is true in general, but I want to focus on the example of hospitals. There's been a recent study of hospital mergers showing that they decrease wages by increasing labor market competition. Specifically, the wage growth of specialized personnel, like pharmacy workers, has decreased by 25 percent in the aftermath of wages that have significantly increased labor market concentration. So given that workers in concentrated labor markets are underpaid, there is room to increase the minimum wage, for example, without reducing employment, as our recent work shows. My fourth point, and to conclude, is that antitrust enforcement in labor markets should be strengthened. This is based on the current evidence together with existing legal principles. There is currently a big, a large antitrust enforcement gap that you guys have just been talking about in that there is almost no enforcement of the antitrust law in labor markets, a point we demonstrate in my paper with Eric Posner. Yet it is straightforward to take into account the anti-competitive effects on the labor market in mergers, in particular, as shown in my paper with Herb Hovenkamp. So, to conclude, legislative action could facilitate antitrust enforcement and more generally antitrust litigation in the labor market by codifying and clarifying the antitrust law. I invite you to consider our legislation proposal that Eric Posner and I wrote. So, I thank you for your attention, and I really look forward to your questions. [The statement of Ms. Marinescu follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Cicilline. Thank you, Doctor. I now recognize Dr. Starr for 5 minutes. TESTIMONY OF EVAN STARR Mr. Starr. Chair Cicilline and Ranking Member Sensenbrenner and Members of the committee, thank you for the opportunity to testify on the important topic of competition in labor markets. My name is Evan Starr, and I'm an assistant professor at the University of Maryland's Robert H. Smith School of Business. I'd like to focus my testimony on an employment practice which by definition restrains trade in the labor market, the use of covenants not to compete, which prohibit departing workers from joining or leaving competing firms. If you're unfamiliar with these so-called noncompete agreements, please allow me to read the text of one signed by a temporarily employed Amazon packer making $12 an hour in 2015: ``During employment and for 18 months after the separation date, employee will not engage in or support the development, manufacture, marketing, or sale of any product or service that competes or is intended to compete with any product or service sold, offered, or otherwise provided by Amazon that employee worked on or supported or about which employee obtained or received confidential information.'' The reason noncompetes like this are important for labor market competition is that they may prevent workers from working where they want and earning what they could in a competitive labor market. In my research, I've sought to understand how common noncompetes are, how they influence workers and firms, and what sort of effects banning them has on economic activity. In my testimony today I'd like to make the following points. First, noncompetes are everywhere. Doggy daycare workers, unpaid interns, volunteer coaches, janitors, yoga instructors, and hair stylists are just some of the jobs in which noncompetes have been found. In a study of 11,500 U.S. workers, my colleagues JJ Prescott, Norman Bishara, and I estimate that approximately one in five private sector workers were bound by noncompetes and that approximately 40 percent of labor force participants had ever signed one. We also find that while noncompetes are more common among highly paid workers, hourly paid workers actually make up the majority of those bound by noncompetes because they represent such a large part of the labor force. Second, noncompetes are negotiated over just 10 percent of the time and are regularly asked of workers when they have limited bargaining power, such as on the first day of the job. Third, despite reasonable arguments that noncompetes might benefit workers and firms by spurring investment, most research suggests that the use and enforceability of noncompetes reduces wages, entrepreneurship, and job-to-job mobility, making it harder for firms to hire and creating negative spillovers for others in the market. For example, in a study of Oregon's 2008 ban on noncompetes for low-wage workers, my colleague Mike Lipsitz and I find that hourly worker wages rose to 6 percent 5 years after the ban while job-to-job mobility rose 12 to 18 percent. In another study, my coauthors and I examined a ban on noncompetes that Hawaii implemented in 2015 for only high-tech workers, an occupation in which the potential benefits of investment are much more salient. Yet, similar to the low-wage setting, we find that Hawaii's tech noncompete ban raised quarterly earnings for new hires by 4 percent and job mobility by 11 percent. These results suggest that noncompetes were indeed preventing workers from working where they wanted and earning what they could in a competitive market. Fourth, and importantly, even in states that do not enforce them, noncompetes still cover 19 percent of the workforce. Moreover, these unenforceable noncompetes also appear to chill employee mobility. Fifth, noncompetes are blunt tools to protect legitimate business interests because they explicitly limit employment options for departing workers. However, other tools can do similar jobs for the firm without constraining worker options so severely. For example, nondisclosure agreements and trade secret laws can protect trade secrets, while nonsolicitation agreements can protect clients, yet neither of these provisions limit job options for departing workers. The efficacy of noncompetes should be judged based on the relative value of these alternatives. Sixth, despite recent advances, data on the actual use of noncompetes in similar provisions remains scarce. With a mandate from Congress, the FTC would be well-suited to gather and analyze employment contracts under section 6(b) of the FTC Act. Finally, I'd just like to note that this is not a classic firm-versus-worker issue because firms are on both sides of the equation. Firms certainly would not like to lose their employees to competitors, but firms also engage in hiring as well. Second, I'd like to note that it's also not a conservative- versus-liberal issue, as we've seen several recent bills proposed by both Republicans and Democrats, which has been uplifting. Thank you. [The statement of Mr. Starr follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Cicilline. That it was uplifting, we don't hear that often enough. Mr. Masters, you're recognized for 5 minutes. TESTIMONY OF RICHARD L. ``RICK'' MASTERS Mr. Masters. Yes. Chair Cicilline and Ranking Member Sensenbrenner, I'm pleased and honored to testify before you today on ways in which interstate compacts can provide for multi-state licensure for occupations, including health professionals. In my work with the Council of State Governments as the Special Counsel for Interstate Compacts, I have written all the existing health occupational licensure compacts for medicine, nursing, physical therapy, EMT, psychologists, and more recently, speech pathologists. Currently, there is more activity among state legislatures with regard to occupational licensure compacts than any other category of interstate compacts with which our organization is working. Currently, 34 legislatures have adopted the nurse licensure compact; 31 legislatures, the medical licensure compact; half the states, 25, have adopted the physical therapy licensure compact; 17 states have adopted the EMT licensure compact; and 12 states have adopted the psychology licensure compact. All these interstate agreements provide for license portability based on the mutual recognition model, which is exemplified by the driver license compact, where you only need to get one license in the state where you reside and then you can practice in all the other member states based on a common set of criteria that are set forward in the compact. I've also appeared before the FTC's Liberty Task Force, which studied the various issues related to license portability, and in our 2018 report, called ``Options to Enhance Occupational License Portability,'' they recognized the interstate compacts that used this mutual recognition model as a tool to improve licensure portability nationwide. FTC staff also encouraged stakeholders, licensees, professional organizations, and licensing boards, as well as state legislators, to consider the likely competitive effects of options to improve license portability across state lines. They also found that reducing barriers for multi-state practice and considering the mutual recognition model will allow States to harmonize their standards using the least restrictive standards that can gain the support of the state legislatures. Moreover, said the FTC, by unhanding the ability of licensees and licensing boards regarding the provision of services in multiple states and to allow them to become quickly licensed upon relocation, license portability initiatives can benefit consumers by increasing competition, choice, and access to services, especially where providers are in short supply. We have also been involved in discussions with the Department of Defense, and there is currently a provision in the National Defense Authorization Act which would provide funding for states that are interested in developing increased license portability for spouses of military Members involved in occupations such as cosmetology, teaching, mental health counseling, dental hygiene, and occupational therapy. Even as we speak, just a few blocks from here, I'm involved with some discussions with occupational therapists over at the Hall of the States with the CSG headquarters. So, we certainly believe that these issues are served and competition is promoted and antitrust is ameliorated through interstate compacts, and by creating these governing structures to collectively exercise power the states are creating fair and uniform and efficient ways of addressing occupational licensure, which ameliorates these antitrust concerns, continues to allow states to provide reasonable standards to protect public safety, while facilitating multi-state employment opportunities for licensed professionals. We believe interstate compacts provide a shared power approach that preserves state sovereignty in areas such as occupational licensure while transcending individual state boundaries and can remain under the jurisdiction of the several states. Thank you. [The statement of Mr. Masters follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Cicilline. Thank you, Mr. Masters. I recognize Dr. Bahn for 5 minutes. TESTIMONY OF KATE BAHN Ms. Bahn. Thank you, Chair Cicilline, Ranking Member Sensenbrenner, and the rest of the committee, for inviting me to testify today. My name is Kate Bahn. I'm the Director of Labor Market Policy and an economist at the Washington Center for Equitable Growth. We seek to advance evidence-backed ideas and policies that promote strong, stable, and broad-based growth. The United States is in the longest labor market expansion in U.S. history, yet many workers still feel stuck with few opportunities, or they're changing jobs, but without advancing their skills or improving their incomes. The U.S. economy has been suffering from stagnant wage growth, rising income inequality, and a general decline in the dynamism that once produced a vibrant labor market. Economists and policymakers are increasingly recognizing that monopsony is a major cause of these dynamics. Monopsony refers to a labor market that lacks competition among employers when hiring workers, the equivalent of the product-and-services markets phenomenon of monopoly that refers to a lack of competition among sellers. While monopoly means consumers pay higher prices or receive lower quality than a competitive market, monopsony in labor markets means workers receive lower wages or worse working conditions than if there were a more competitive market for their services. Monopsony has traditionally been thought of as a rare circumstance where a labor market only has one or very few employers, such as would be the case in a geographically remote mining town where workers aren't moving in between jobs in search of higher pay. This is because they face so-called frictions, which I know Representative Johnson had asked about, which is anything that inhibits the ability to search for and find jobs that would be a better match for workers. In a dynamic monopsony model such as this, so-called search frictions and differences between jobs and workers, including workers having imperfect information about employers, caregiving responsibilities outside of work, and other constraints to job mobility, would give employers more power to set wages below competitive levels while still maintaining a sufficient supply of workers. These dynamics will foster inequitable outcomes for workers. Research by Doug Webber of Temple University uses high- quality restricted-access data from the U.S. Census Bureau's Longitudinal Employer Household Dynamics Survey to estimate economy-wide elasticity of 1.08. What that means, in Webber's estimations, is that wages are 50 percent lower than economists would expect in a competitive labor market. Yet there's still a lot of variation among firms. Examining monopsony by industry, Webber finds that wages in manufacturing appear to be more competitive, while healthcare and administrative support are the least competitive, giving employers the most wage-setting power in these industries. Evidence further points to monopsony being particularly detrimental to women workers. Further research by Webber finds that monopsony contributes to the overall gender wage gap. This research estimates that women's greater job search frictions compared to men leads to 3.3 percent lower earnings. That is equivalent to $131 monthly penalty for the median female worker and is essentially a tax on women workers equivalent to half the taxes that workers pay on their income under the Federal Insurance Contributions Act, or FICA. Webber's analysis concludes that the majority of this difference is due to marriage and child penalties that women face that have no similar effect on men. The gender-specific social expectations that women face not only impact their disproportionate burden for caretaking in their families, but also reduces their economic opportunities in the labor market. Furthermore, gender-based discrimination in hiring and treatment at work may leave women captive to accept jobs in less-than-ideal conditions or quit and go into potentially lower-paying, lower-quality jobs. Research suggests that sexual harassment is significantly underreported due to barriers in the complaint process and fears of retaliation. This often leaves women workers with two options: Leave their jobs without a better employment opportunity or put up with harassment with little recourse. A 2017 study by sociologists McLaughlin, Uggen, and Blackstone finds that sexual harassment has negative financial costs on women. Rather than changing jobs based on better opportunities, women are changing jobs to avoid sexual harassment and taking jobs that pay less or offer less growth, thus stifling their career trajectory. This is reinforced by additional research from the U.S. military finding that sexual harassment increases the turnover of servicewomen, even when controlling for factors that would predict increased job attachment, such as job satisfaction and organizational commitment. In cases of decreased competition for workers, workers who have experienced harassment on the job may simply not be able to find another adequate job and could stay in a hostile work environment. As McLaughlin, Uggen, and Blackstone note in their recent study on the financial consequences of sexual harassment, firm-specific human capital is closely linked to earnings, which means that workers may be disinclined to leave their jobs when they have invested in their skills at their current employer. Employer monopsony power such as exists in many rural labor markets today may just make it impossible to find another job. When women workers are more likely to quit their jobs for reasons other than seeking a better fit and higher pay or they stay in bad jobs, they ultimately will appear to have lower pay sensitivity. Employers are able to take advantage of women revealed lower pay sensitivity by offering them lower pay without being worried about not being able to compete for a sufficient supply of workers. Contrary to theories of discrimination that believe discrimination can be competed away, in monopsony markets women will have worse outside options when experiencing harassment at work. Understanding the myriad of causes of the U.S. labor market monopsony is crucial to implementing policies to address employer wage-setting power. No silver bullet policy solution can solve monopsony when it's the result of multiple factors, such as historical barriers and repressive social norms faced by women. So, research that looks at the several causes of wage exploitation is a crucial step in increasing worker well-being. Instituting policies that increase the outside options available to workers, including-- Mr. Cicilline. Dr. Bahn, your time has expired. If you could just conclude. Ms. Bahn. Yeah, sure. Thank you. Instituting policies that increase the outside options available to workers, including policies that reduce search costs or make it easier for workers to change jobs is a necessary step towards limiting the ability of employers to suppress wages and take advantage of workers. Thank you. [The statement of Ms. Bahn follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Cicilline. Thank you so much. We now recognize Dr. Topel, who is going to testify from Chicago via video. You're recognized for 5 minutes, sir. TESTIMONY OF ROBERT TOPEL Mr. Topel. Thank you. Let me just make sure you can hear me. Mr. Cicilline. Yes, we can. Mr. Topel. Okay. Good. Thanks for having me. Thanks for accommodating my need to be here in Chicago at the university. I'm going to skip a few details because a lot has come up in the discussion from other witnesses. As I understand things, the legislation being considered by the Committee would seek to regulate or prohibit certain business practices or conduct that might harm workers when used by employers with a degree of monopsony power, as defined by other witnesses here today. In those situations, I've not found it useful to use a merger guidelines type exercise of market definition, which asks what is the labor market in which an employer or employers might have some degree of market power. Rather, as in the analysis of alleged anti-competitive practices in product markets, it's more useful to analyze the practice directly, weighing punitive harms of the practice against any possible pro-competitive effects. Such an analysis has several steps. First, does the challenged practice, such as a noncompete clause, have a pro- competitive justification? The existence of such a justification is often demonstrated by the fact that employers without substantive monopsony power use it. Second, if the practice does have a pro-competitive rationale, does it also have a plausible anti-competitive impact? Third, if the practice has both a possible anti-competitive impact and a pro-competitive justification, do the benefits of the latter offset the costs of the former? Further, even if the pro-competitive effects dominate, is there a less restrictive practice that would achieve the same pro-competitive benefit? That's the basic framework I have applied in no-poach and noncompete agreements, but it also applies to state-imposed occupational licensing schemes. Let me say a little bit about no-poach agreements. Under a no-poach agreement, a set of business entities agree they will not recruit or hire certain types of employees from other parties to the agreement. In evaluating the competitive effects of such agreements, it is important to distinguish between collusive agreements that are meant to suppress labor market competition without much pro-competitive justification and agreements among Members of a joint venture or a franchise business model where no-poach agreements have clear pro- competitive justifications. Because of this, I believe a uniform prohibition on no- poach agreements would be unwise and that additional legislation restricting such agreements is unwarranted. In other words, we have the tools. Certain no-poach agreements are nakedly collusive and can be challenged under existing antitrust law. For example, in high tech employees, it was found that Apple, Pixar, and other Silicon Valley employers have entered into a set of bilateral agreements to refrain from actively recruiting each other's employees via cold calling. Individuals who unilaterally sought to move from, say, Apple to Pixar by applying for a position were not covered by the agreement, and so Pixar could hire them without violating the agreement with Apple. Even so, this is a horizontal agreement among competitors who were not engaged in any formal joint venture. As such, the agreements were found to be per se violations of section 1 of the Sherman Act, which prohibits horizontal agreements in restraint of trade. Though the agreements might have certain pro-competitive benefits, it's unlikely that any benefits derived from applying a ``rule of reason'' analysis to every no-poach agreement that might be challenged would offset the cost of such case-by-case evaluation. Subject to carve-outs for joint ventures in related business models, per se illegality of horizontal no-poach agreements is justified in my view. But, existing law is sufficient to achieve this. As I tell my students, don't do that. Even in such per se situations, there's a separate issue related to the extent of harm caused by an illegal no-poach agreement. I'm going to skip over this part of my testimony because others can read it, and I want to get down to the economics of no-poach agreements that are different in the case of joint ventures or franchises, because there's typically a pro-competitive justification. Suppose that instead of the horizontal agreement described earlier, Apple and Pixar were engaged in a pro-competitive joint venture that required cooperation among teams of software engineers in each company. It's reasonable to assume that Apple and Pixar invest into identifying, recruiting, and training these skilled employees who are now going to work together. The cooperating firms are thus partners in the joint project and competitors in the market for talent. The simple Act of project cooperation reveals information on employee talents, and both firms know that other workers have been trained in firm-specific methods that might be valuable. They'd like to steal the best who were discovered as a result of the cooperation, but in so doing they reduce the incentive to cooperate in the joint venture and reduce the incentive to invest in identifying, recruiting, and training talented people. A no-poach agreement with specified parameters, such as a fixed duration and types of workers covered, protects these investments and, therefore, has a credible pro-competitive justification. Mr. Cicilline. Dr. Topel, your time has expired, so if you could just summarize. Mr. Topel. Sure. Whether such an agreement is pro-competitive overall is a question of balancing these effects against possible harms, which means that such agreements should not be considered per se illegal. My analysis of no-poach agreements for franchise agreements is very similar and, also my analysis of noncompete clauses. I'll close there. Thank you. [The statement of Mr. Topel follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Cicilline. Thank you, Dr. Topel. We'll now proceed under the 5-minute rule, and I recognize the gentleman from Georgia, Mr. Johnson, for 5 minutes. Mr. Johnson. Thank you. Dr. Starr, you talked about the camp counselors, yoga instructors, temporarily employed packers at Amazon being subject to an 18-month noncompete agreement. Professor Paul, have courts ruled on the legality of an 18- month noncompete clause applicable to jobs such as those that I just mentioned? Mr. Cicilline. Please put your microphone on. Ms. Paul. Sorry. I keep doing that. So currently, without the intervention of antitrust law, state law as to noncompete agreement varies state by state, so as was discussed, in some states take a very--ban noncompete agreements entirely. Most other states use what's called a reasonableness test, and they look at whether, first, the purpose of the noncompete agreement is a legitimate one and then whether the geographic-- usually the geographical and the temporal duration of the noncompete agreement is reasonable given that objective. So, it would be context dependent on the facts of that case, that sector, that particular labor market, and the text of the agreement. In my opinion, under that reasonableness test, none of those should be reasonable-- Mr. Johnson. Courts have been finding, however, that these types of clauses affecting those kinds of occupations that don't involve trade secrets or proprietary information, state courts have been ruling in favor of these noncompete clauses. Is that correct? Ms. Paul. There are a variety of decisions going both ways. I think there are, unfortunately, too many decisions that uphold such noncompete agreements. Mr. Johnson. Dr. Topel, do you see a problem--I know your testimony is pretty much limited to poaching agreements and those pretty much apply to high end, high tech employment. But, I'm speaking of just regular, average workers out here who don't have access to trade secrets or proprietary information. Do you believe that these types of noncompete agreements should be enforced against those workers by state courts or do you think that perhaps a Federal remedy may be necessary? Mr. Topel. I believe that the remedies are in hand in the nature of current antitrust law and that these should be judged on a case-by-case basis because in many situations the practice itself has a pro-competitive justification. Mr. Johnson. Well, cite me some of those justifications that could exist for these types of positions that we just talked about--camp counselors, yoga instructors, packers temporarily employed at Amazon. What could be a justification for a noncompete agreement in those fields? Mr. Topel. Let me come back to what I said. In my testimony about non-poach agreements here, or no-poach agreements-- Mr. Johnson. I'm talking about noncompete agreements here. Mr. Topel. I understand. I was about to finish my sentence by saying in the context of noncompetes, similar forces matter because, after all-- Mr. Johnson. Cite me some of those factors. Mr. Topel. That's what I'm getting to, sir. In these contexts, employers invest heavily in locating talented people. Talented people are not easy to come by, and you invest in finding them, recruiting them, training them, and it's reasonable to expect that people would want to get the returns on those investments. Having said that, it depends on the context-- Mr. Johnson. Well, let me stop you right there and ask Dr. Starr, what do you think about that response? Mr. Starr. I think that Dr. Topel makes a good point that the courts have made for years, actually, I think that the evidence doesn't quite support that position. Mr. Johnson. Dr. Marinescu, what is your response? Ms. Marinescu. I agree with Dr. Starr that the evidence doesn't seem to support that position. Mr. Johnson. Dr. Topel? Mr. Topel. Yes? Mr. Johnson. Do you disagree with those two responses? Mr. Topel. Remember that both of those responses are making a sweeping statement. As I said, it depends on the context, which is why I think it should be judged on a case-by-case basis. If we can't establish here that a business practice that's so broad, that has existed for so long even for firms that don't have substantive monopsony power, is uniformly anti- competitive or should be subject to a uniform prohibition. That's why I think it shouldn't be judged under the usual methods for section 2 violations. Mr. Cicilline. The gentleman's time is expired. I now recognize the gentlelady from Pennsylvania, Ms. Scanlon, for 5 minutes. Ms. Scanlon. Thank you. I'd like to start by thanking our panelists for their written testimony and for appearing, whether virtually or otherwise, before the Committee today. I represent southeastern Pennsylvania, and we've faced a lot of economic hardship in recent years and felt the effects of stagnant wages. Recent studies have shown that families at the median income, around $75,000 a year, end up underwater or in debt every year once they pay for basics like childcare and healthcare. There's no money left for retirement, for education funding in the future. About 70 percent of the families in my district make less than that. So, we've seen some major disruptions in our local economy, our local labor force this year, and I'd like to explore that with Dr. Marinescu because she's from that area, from my alma mater, University of Pennsylvania. Seeing as you work in the Philadelphia region, I'm sure you're aware of the closure of Hahnemann Hospital. Can you speak a little to the sensitivity of healthcare workers to labor monopsony and why these folks might be at greater risk and what the Hahnemann closure means for our region? Ms. Marinescu. Thank you for raising this question. So fundamentally, the effects of a merger or a closure are to affect the competition for workers. So, in the case of a closure, there is one particular hospital that now is no longer hiring workers, which means that there is less competition in the labor market. Especially if we're talking about a more isolated labor market where there aren't many hospitals, such a closure is likely to negatively impact wages. This is for two reasons, I want to be clear. One is simply a reduction in labor demand, what we call-- there are simply fewer jobs, and that's a natural consequence that wages will go down. Furthermore, based on my work, I expect a second impact which is, on top of that, a reduction in competition will tend to reduce wages even more. Based on the analysis of a hospital merger, which also reduces competition, we can tell that this can reduce wage growth by as much as 25 percent. Again, this is a double warning that comes on top of the fact that we have fewer jobs, which already reduces wages by itself. Ms. Scanlon. Okay. We have a similar example. We have the PES refinery in Philadelphia which recently had an explosion and shutdown, and we've heard reports about, since that was sort of a unique kind of a job prospect, we're hearing that the workers there have to move to other states and do things like that. Can you talk about the impact of something like that? Ms. Marinescu. Yes. Thank you so much. So, an argument that I hear a lot when I talk about labor market concentration, and I define it by occupation, is people will tell me, low-wage workers, they don't have a lot of skills and they can do any job. Go be a fast-food worker or a cashier, it doesn't matter. The reality is what we see in our data is that no matter the skill, workers are similarly attached to their occupation. Of course, we could also expect that if your skill is particularly unique and there aren't many other uses of it, this is a situation where your current job disappearing puts you in a much worse situation. So that even if you're able to find a job, this job is not the right job for your skills and you're going to get paid less than you would have gotten paid in a situation with lots of employers vying for exactly the type of skill you have. So, we have a lot of competition in the labor market. Ms. Scanlon. Thank you. Dr. Bahn, I wanted to translate a little bit of your paper maybe into English. So, you said that monopsony is detrimental to female workers because they have greater job search friction. So, I translate that to mean they have a harder time changing jobs because they have childcare obligations and there's a threat in some job situations of harassment or a hostile work environment. Can you talk a little bit about some of the policies that might help reduce job search friction? The ones that come to mind for me are increasing access to childcare and enforcement of sexual harassment policies. Ms. Bahn. Yeah. So, job search frictions are anything that make it hard to change jobs, and one topic people have talked about is mobility across space. Particularly if you are a secondary income earner or have primary responsibility for caretaking in your family, it may be hard for you to get up and move to another state. So, what you want to do in the case where you're not able to maybe move far for a new job is increase your bargaining power, making anything easier for you to bargain with your employer for higher wages. There's evidence that I think women can have higher bargaining power if they have a higher floor that they're starting from, that they have things like any sort of universal policy that allows for them to afford childcare, have access to paid leave, paid sick, flexible scheduling, scheduling that they know of in advance. All these types of policies that just sort of raise the floor for the types of jobs that workers are working and the types of support they need to have a job will make it easier for them to bargain with employers so they can have higher wages and reduces their employer's wage-setting power so employers are less likely to undercut their wages. Ms. Scanlon. Okay. Thank you very much. I yield back. Mr. Cicilline. I thank the gentlelady for yielding back. I now recognize the gentlelady from Washington, Ms. Jayapal, for 5 minutes. Ms. Jayapal. Thank you, Mr. Chair. An increasing number of workers earn some or all their living working through online platforms such as Uber. Still, more workers are classified as independent contractors, a status that comes with very few protections and many barriers when they organize. These workers face problems on the job like low compensation rates, little recourse if the company decides to terminate their account, and rating systems that are inherently biased against workers of color. Although in some cases antitrust laws may provide some protections for these workers, in other cases, the law falls short or may even harm workers who try to organize together and improve their working conditions. Professor Paul, we've seen instances where on-demand companies crack down on worker organizing. For example, a group of Uber drivers here in DC worked together to generate higher pay in a system in which they're not classified as employees, since rates of pay for those drivers are unpredictable, can be as low as $8.77 an hour. In essence, they were acting together for higher pay in a system in which they're not classified as employees. When their activities were exposed, these workers were kicked out of the Uber app. When workers on these platforms try to organize, are they protected under antitrust law? Ms. Paul. They are not. Ms. Jayapal. So, they are not actively protected. Are they, in fact, impeded? Ms. Paul. They are, in fact, impeded. I can elaborate if you would like me to. Ms. Jayapal. Yes, please. Ms. Paul. Yes. So, for example, in addition to the example that you gave, as you know, the city of Seattle a few years ago passed an ordinance providing for collective bargaining rights for rideshare drivers in Seattle, taking advantage of what's known as the state action exemption to antitrust law. That was met by a Federal preemption lawsuit by the U.S. Chamber of Commerce. I'm sad to say that the Department of Justice and the Federal Trade Commission actually filed a brief in favor of the Chamber and against workers, some of the most vulnerable workers in the gig economy. Rideshare drivers currently do not enjoy collective bargaining rights in Seattle or anywhere else in the country and neither do other gig economy workers. So, that this is really kind of a perverse position for our antitrust institutions to take, given the original purposes of antitrust law that I described in my testimony and given that legislators were very clear that they did not intend to prescribe this type of cooperation, and instead, intended to proscribe precisely the type of coordination that is currently being permitted by our antitrust institutions, namely, Uber and other dominant platforms, fixing prices across thousands, hundreds of thousands of putatively independent businesses. Ms. Jayapal. Thank you for that excellent explanation. We were devastated in Seattle to see that happen. Under current law, workers classified or misclassified as independent contractors are prevented from collective bargaining, as you've talked about. How can antitrust law be reconfigured to better protect workers when they join together to protect their economic interests? Ms. Paul. Yeah, that's a great question. So, I think in the first instance, we could see a reordering of enforcement priorities among our enforcement agencies. So, currently, it seems like the Federal Trade Commission is actually prioritizing, cracking down on the cooperation--reasonable cooperation of, frankly, not just gig economy workers, but also other workers beyond the bounds of employment. So, it's really not just the gig economy. It's thousands, hundreds of thousands of truck drivers in this country are independent contractors. That continues to be an important job for low-wage workers and mid-wage workers, and it's also independent professionals and entrepreneurs. So, the FTC has filed actions involving an investigations from everyone from church organists to truck drivers. We could see, so in the first instance, a reordering of enforcement priorities, let's perhaps consider the coordination top down control firm dominant platforms like Uber are engaging in, rather than workers and independent professionals. Then, secondly, it might be, given decades of some unfavorable decisions since the 1970s or so, there might be room for congressional action here. Ms. Jayapal. There's a major power imbalance between these large cooperation that classify workers as independent contractors and the workers that enrich the corporations. That sounds like a monopsony where one powerful buyer is controlling all the sellers. How do we address that particular imbalance of power? Ms. Paul. So, that antitrust law, as configured, has the ability to go after powerful buyers. I would say a couple of things. It goes beyond monopsony, because that assumes already that we're defining coordination--economic coordination rights in terms of firms. But antitrust law unfortunately prioritizes--current antitrust law as currently constituted, prioritizes the coordination rights of large firms at the expense of small players. I think that we really need to see a reversal of that again, so that we make a priority of coordination that's engaged in by dominant platforms and dominant firms rather than small players. Ms. Jayapal. Very helpful. Thank you so much. I yield back. Mr. Cicilline. I now recognize the gentleman from Colorado, Mr. Neguse, for 5 minutes. Mr. Neguse. Thank you, Mr. Chair. Just to follow up on a point, a salient point that my colleague from Washington had raised, Professor Paul, in your testimony, you note that Congress in the Clayton Act exempted organized labor from being a target of antitrust laws. Of course, today, the rampant misclassification of workers as independent contractors is exposing collective action by working people to antitrust attack. It was interesting the example you noted. The ordinance passed by the city of Seattle that would have given independent contractors like Uber drivers the right to collectively bargain was struck down in part on antitrust grounds and that the antitrust agencies actually filed a brief against the workers in favor of the Chamber of Commerce. So, given that trend, are there specific steps Congress should take to ensure that independent contractors receive protections that lawmakers intended to cover workers? Ms. Paul. Thank you for that question. My own opinion is that Congress should consider a broad exemption for work--all workers, whether they're defined as employees or not, anyone who sells labor or services, even if they have small capital investments, independent professionals. I would actually suggest that Congress consider an exemption for small businesses as well, because, again, when we look at the history, this is very much what was intended. I think that this is sustainable. I would point to an example, because there are other jurisdictions, other countries that have implemented this type of exemption. Australia's competition authority has recently implemented such a broad exemption. This is ultimately good for workers and small business in three ways. First, it helps small businesses gain sustainable returns that allows them to reinvest in their businesses, in workers, and in communities. It also prevents the kind of gaming the borders that we are going to see, unfortunately, as we've already seen, with any kind of labor exemption. I fear that if we just broaden the labor exemption, that we will then see a new kind of gaming of the borders by businesses where we just-- where businesses sort of have truck drivers line up at the office and, okay, now we're going to incorporate three of you as an LLC. You don't get the labor exemption. We've seen that kind of gaming at the border, so we need broad action to reinstate the original congressional purposes. Mr. Neguse. Thank you. Separate subject, obviously tangentially related on noncompetes. So, I just would like to try to achieve some consensus amongst the many witnesses, all of whom we appreciate your testimony. So, Mr. Starr--sorry--Dr. Starr--I apologize--I take it you would concede that noncompetes may be justified under certain circumstances. Is that a safe assumption for you to-- Mr. Starr. For example, I have no problem with executives signing noncompetes with their legal teams at their side. I have no problem. Mr. Neguse. Mr. Topel, I know you'll agree with that, and obviously your written testimony attests to that, correct? Mr. Topel. Yes. Mr. Neguse. Okay. By that same token, Mr. Starr--I'm sorry--Professor Starr, in your testimony you note this. There's no public interest for low-wage workers at Jimmy John's, by way of example, to be tied into these noncompete agreements. You agree with that? Mr. Starr. As Dr. Sanjukta said, in most states, they require some sort of protectable interest. I think that in many of these cases, these low-wage workers don't have access to what would be a traditionally protectable interest. Mr. Neguse. Mr. Topel, I presume you'd agree with that as well? Mr. Topel. I mean, the example of Jimmy John's, I don't know the details, but it's hard to imagine why the noncompete, other than the franchising argument we had about nonpoaching. So, if they said you can't work at Wendy's, I would view that as kind of a competitive problem. Mr. Neguse. Precisely. Right. So, I guess my point here is that, clearly, there's somewhere in the middle here where I think we all can come to an agreement that noncompetes may be appropriate in certain circumstances, but the way in which they're being abused in a variety of different industries and across the labor market in the aggregate is clearly not conducive to wage growth, nor in the public interest. So, I'd be interested--I know my time will soon expire--but interested to hear from this panoply of panelists about solutions that we could potentially get through this Congress that would meet that consensus. Dr. Starr, perhaps your recommendation to the Congress that we compel the FTC to commission a study, a 6(b) study, to help expand our understanding of potentially anticompetitive employment contracting practices, I suspect that might be, in fact, one way for all of us to kind of move forward to get better data so that we can ultimately craft a solution that addresses this in a surgical way. So, with that, I would yield back the balance of my time. Mr. Cicilline. I thank the gentleman. I now recognize myself for 5 minutes. Dr. Marinescu, I want to start with you. I want to give you an opportunity to respond to some of the criticism from others. Some scholars have argued that there's no causation between market concentration and wages, and that wage stagnation in the United States is actually attributable to other factors, such as weakening of labor law. What is your response to that criticism? Ms. Marinescu. Thank you. So, for the point about wage stagnation, I think the evidence right now does not clearly point that an increase in concentration is the cause of wage stagnation. Nevertheless, my research and others clearly show that this is a contributor in making wages today lower than they would otherwise be. So, case closed. This needs to be addressed, whether it has historically contributed. So that's the first point. Second, some people in academia have criticized--so just let me read from this very briefly. Does it make any sense to ask if labor market concentrations cause lower wages? There might be other factors at play. So, our work is very careful in controlling for a number of factors, but we have two additional--since that original study, we have two additional things. First, the study on hospital mergers that I told you about is a very well quasi-experimental study that goes in the same direction. Secondly, the same person who criticized that, Steve Berry at Yale, is now a coauthor, and we're doing it the right way and are still finding that there's a lot of monopsony power. Mr. Cicilline. Thank you. Also, some have argued that labor monopsony is not really an antitrust problem, and that making labor markets more competitive will not actually result in a reduction of employer power. What is your response to that? Why do you think an antitrust framework is an appropriate lens through which to view labor monopsony in particular? Ms. Marinescu. Not all monopsony can be addressed by antitrust. For example, the fact that people prefer to work close to home is not something that antitrust can do something about. But there are many dimensions through which behavior of agents in the labor market affects competitions, including things like mergers, noncompetes, and so on. This is where antitrust has a role to play in combating monopsony power that suppresses wages today in the U.S. labor market. Mr. Cicilline. Finally, in your testimony, you described the legislative proposal developed by you and Eric Posner to amend the Sherman Antitrust Act to prohibit labor market monopsony, which we'll certainly look at very carefully. Are there other ways that you think that Congress should think about addressing this issue, whether through legislation or oversight? Ms. Marinescu. I believe that short of doing legislation, allowing the current antitrust federal agencies more resources to be able to invest in antitrust labor enforcement, which they have started doing, is probably something that would be helpful in making progress on that front. Mr. Cicilline. Thank you. Dr. Starr, you mentioned California as one of the few states that does not allow for the enforcement of most noncompete agreements, and we recognize California as one of the country's most innovative states. What might this tell us about the importance of noncompetes for innovation? Is it true that, as some businesses claim, wide use of noncompete agreements is essential in order for firms to invest and to innovate? Mr. Starr. That's a great point. I think that the point about California and its ban on noncompetes, which was adopted in 1872, as a kind of one of the causes for the rise of Silicon Valley, it relates to the ways that innovation occur, and there's two ways. One is you can protect intellectual property like we have with our patent system. A second way is you can spur mobility such that people share ideas across firm boundaries, which results in a recombination of ideas, and so you get new ideas and better ideas. So, Silicon Valley benefited from that immensely, though it is debatable. I think on the investment front, we have to keep in mind that there are many alternatives to firms. They can rely on trade secrets. They can rely on patents. They don't necessarily need to use noncompetes, per se, to invest in trade secrets. I will note that we do see a little bit higher trade secret litigation in California. It's unclear if that's because the tech giants are over there or if it's because of the noncompete laws. But, in general, in the academic literature, there's a little bit of mixed evidence on the effect of noncompete laws on innovation. There is some evidence that investment is lower in states that more vigorously enforce noncompetes. In some states, some studies find that when states kind of increase their enforceability, that firms do invest in a little bit riskier innovation. So, there's some evidence cutting both ways there. Mr. Cicilline. Thank you. Professor Paul, my last question. As you know, the Department of Justice considers no-poach agreements between competitors to be per se illegal. However, as you pointed out, the Department supports exemptions in the franchise context, essentially green-lighting vertical no-poach agreements. Do you see any reason there should be a distinction between so-called naked no-poach agreements and franchise no-poach agreements? You heard the testimony, so do you see any basis for that distinction? Ms. Paul. I really do not. Both restrain competition-- horizontal competition, so the effect is the same. If anything, my opinion based on what I said about vertical restraints, is that vertical restraints should be regulated much more stringently than horizontal restraints, because they often embody top down control by a more powerful firm, which is exactly what franchisors do to franchisees. I see no benefit. The final point I want to make about that is that, at least in the DOJ briefs that I looked at, there were very speculative consumer benefits that were being used to justify this. I think this is one problem. If antitrust law is saying it's going look at workers and labor markets as well, we can't use consumer-- speculative consumer benefits to justify harms to workers. Mr. Cicilline. Thank you. I now seek unanimous consent to include a number of letters and statements in the record regarding the state of labor competition, without objection. I will also ask unanimous consent to include the statement of Chair of the full Committee, Mr. Nadler, and the statement of the Ranking Member of the full committee, Mr. Collins, as part of the record, without objection. [The information follows:] MR. CICILLINE FOR THE RECORD ======================================================================= [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Cicilline. This concludes today's hearing. Thank you again to our very distinguished witnesses for attending and for your very useful testimony. Without objection, all Members will have 5 legislative days to submit additional written questions for the witnesses or additional materials for the record. Without objection, the hearing is adjourned. [Whereupon, at 12:15 p.m., the Subcommittee was adjourned.] APPENDIX ======================================================================= [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]