[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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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:]
    
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    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

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    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

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