Rethinking Breakups

Abstract

Trust-busting is once again a subject of national attention. And the attention is well-deserved: unprecedented levels of corporate concentration, firm dominance, and inequality demand robust debate about how antitrust solutions can ensure that our economy works for everyone. One simple remedy to “bigness” has stolen the spotlight within that debate—“breaking up” big firms into smaller ones to decrease corporate power and lower prices. But calls to break up firms from Big Tech to Big Ag have focused on how breakups could benefit consumers and, in some cases, small businesses. Absent from these debates is how breakups benefit or harm the workers and labor markets affected by firm dismantling.

This Article is the first to focus on how firm breakups—and antitrust enforcement and remedial design more generally—can and have significantly impacted workers’ countervailing power and earning potential. Firm structure matters for worker power. Dismantling dominant firms can result in more firms competing for workers’ services, which can lift their wages. But it can also dismantle structures of worker power that have arisen to successfully counter dominant employers. A leading example, as this Article documents, is the devastating effect of the breakup of the Bell System in the 1980s on the Communications Workers of America, gutting union density within the telecommunications industry from 56% pre-breakup to 24% by 2001. Breakups, much like workplace “fissuring”, can decimate labor market institutions that advocate on workers’ behalf, but also have and can result in layoffs, increased obstacles for worker coordination, lower overall wage rates, and dramatic reductions in earned benefits, job security, and the quality of working conditions.

The Article fills the gap in antitrust scholarship and policy debates that have ignored the effects of antitrust remedies on workers. It offers the first comprehensive scholarly treatment of these effects and argues that, for historical, theoretical, and empirical reasons, antitrust enforcers and scholars must attune their prescriptions and remedial mechanisms to ensure that antitrust remedies do not perpetuate the long history of antitrust’s alternating hostility or disregard for worker welfare. It begins by summarizing the debates around firm breakups and reveals their disregard for labor market competition and worker welfare. It then unearths case studies and social scientific analyses to assess the effects of breakups and offers both a theoretical and empirical overview of when breaking up firms can benefit or harm labor market competition and workers’ countervailing power against dominant employers. It concludes by proposing alternative remedies to monopolization and corporate consolidation that better secure worker welfare.

Keywords: Antitrust Law, Remedies, Labor Law, Employment Law, Administrative Law, Law and Economics, Law and Social Science