Antitrust Law and Collective Bargaining in the Gig Economy

Apurv Jain

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This post is part of our Symposium on Law and Political Economy in India After Covid.


Prior to the coronavirus wrecking the economies of countries around the globe, the gig economy was hailed as the future of work because it offered flexible hours and the ability to work at one’s own pace. However, in the face of the economic despair and aversion to human contact brought about by the coronavirus, the gig economy has taken a serious hit, and many workers now find themselves out of a job as companies are cutting budgets in order to survive. In such a scenario, if these workers had the ability to band together, then they could possibly negotiate better terms for themselves which could in turn protect them against unexpected changes in the gig economy.

There are various differences between traditional employees and workers in the gig economy. Workers in the gig economy are typically classified as independent contractors and consequently cannot avail of the employment rights and protections afforded to employees. As per the ABC test laid down by the Supreme Court of California in Dynamex Operations West, Inc. v Superior Court, a worker would be considered to be an independent contractor if the following three conditions are fulfilled. First of all, the hiring entity should not exercise any control or give any directions to the worker for the performance of the task. Secondly, the worker should perform a task that is not comparable to the duties of the employees. And lastly, the worker should be customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Though they are classified as independent contractors, gig workers resemble employees far more closely. In 2018, in Uber BV v Aslam, the Court of Appeal of the United Kingdom had to decide whether the drivers working for Uber were employees or independent contractors. The terms of the contract between the drivers and Uber stated that Uber was merely an intermediary which provided booking and payment services and the drivers drove the passengers as independent contractors. However, the Court of Appeal held that the terms of the contract did not reflect the real relationship between the parties especially as the contracts were non-negotiable and the parties were in an unequal bargaining position. Uber exercised substantial control over the way in which the drivers performed their duties, and thereby the drivers could not be independent contractors.

This difference in classification has serious consequences, especially when it comes to collective bargaining. This is because in antitrust law, there exists a labour exemption which allows employees to collectively bargain for higher wages and more workplace protections. In the United States, the Clayton Act and the Norris-LaGuardia Act exempt concerted labour activities from antitrust laws because labour is not considered to be a commodity or an article of commerce and federal courts do not have the jurisdiction to issue injunctions in labour disputes. However, as per various decisions of the United States Supreme Court, this exemption does not extend to independent contractors. If independent contractors unionize and coordinate prices, their collective action to fix prices is viewed as collusion and amounts to horizontal price fixing.[1]

Under European Law, the approach is slightly different. There is no legislation that explicitly provides for the antitrust labour exemption; it is a result of judicial interpretation. As per EU antitrust law, any entity which is engaged in any economic activity is considered to be an undertaking and all decisions by such undertaking or associations of these undertakings which lead to the restriction or distortion of competition are prohibited.[2] It has been established that employees in an employment relationship do not meet the standard of undertaking as they work for and under the direction of a particular undertaking.[3] To be classified as an employee and avail the exemption, the worker has to be economically and organizationally dependent upon the company.[4]

Building upon this, the courts have stated that a collective agreement would be exempt from the application of EU competition law if the agreement is the result of collective negotiation between managements and organizations representing the employees and is aimed at improving the working terms and conditions of the employees.[5] Considering the fact that most gig workers are only economically dependent and not organizationally dependent, collective action by them would not be exempted. They would be considered to be undertakings and any union which they are members of would be an association of undertakings and any decision by such an association could be examined within the ambit of European Competition Law. Such a collective agreement would only be permissible if it did not lead to the prevention, restriction or distortion of competition.

The exclusion of gig economy workers from the antitrust labour exemption has been challenged. In the United States, Seattle came out with an ordinance that would allow unionization and collective bargaining rules for rideshare businesses such as Uber, Lyft which were operating in the city. Through the use of collective action, the ordinance allowed drivers to fix their wages and negotiate for better working conditions. The ordinance was challenged on multiple grounds, the most obvious of which was that the ordinance legalized horizontal price fixing among the drivers. Consequently, the ordinance was amended and the provision allowing for collective bargaining for wage related issues was removed.

Seattle then introduced a Fare Share legislation which provided a minimum wage for drivers employed in transportation network companies (TNC). The case against the ordinance was dropped as a result of this legislation and the City of Seattle, Uber and Lyft announced that they would be working together to set up a “social safety net” for TNC drivers and that all three of them would ensure the successful implementation of the Fare Share legislation. In Europe, the European Commission has launched a consultative process to ensure that collective agreements can be used to improve the working conditions of platform workers. Currently, the European Commission has invited stakeholders from both the public and the private sector, and has sought their views on the issue.

Indian Legal Scenario

In the Indian context, Section 3(3) of the Competition Act provides that “any agreement enterprises or between persons or association of enterprises” will be presumed to have an appreciable adverse effect on competition if it leads to the determination of purchase and sale prices, limits the market in any manner (including territorial restrictions) or if it leads to bid rigging or collusive bidding. The Competition Commission of India has, in FICCI v United Producers/Distributors Forum stated that collective bargaining can only be legal if there are demonstrable pro-competitive effects. The Supreme Court of India provided more clarity on the issue of collective bargaining in the Coordination Committee case. Adopting an approach similar to the one in Europe, the Court held that an entity is classified as an enterprise on the basis of the functions performed by it.[6]

The Court then stated that if a trade union is only engaged in collective bargaining on behalf of its members and does not perform any economic activity it would not meet the standard of enterprise under the Act. Therefore, in such a scenario, the trade union could engage in collective bargaining.  However, in case the members of the trade union are engaged in economic activity, then the members would be classified as enterprises. Consequently, as the trade union would be supporting the cause of the enterprises, it would amount to an association of enterprises and its actions could be examined under Section 3(3) of the Competition Act.[7] In the gig economy, the workers would be classified as enterprises, and any union of which they are members would be categorized as an association of enterprises and collective bargaining by such an entity would only be allowed if there are demonstrable pro-competitive effects.

From the above discussion, it is abundantly clear that one would have to jump through a lot of hoops in order to establish a trade union that could espouse the cause of workers in the gig economy without falling foul of antitrust law. Under these circumstances, it becomes necessary to examine if the extension of the antitrust labour exemption to workers in the gig economy can be justified. While the purpose of antitrust law is to always ensure the welfare of the consumer, the antitrust labour exemption is a recognition of the fact that antitrust law should not stand in the way of employees getting better wages and safer working conditions. The distinction made between employees and independent contractors was done in an era when there was a meaningful difference between the two; the employees were governed by the diktats of their employers whereas independent contractors had the freedom to choose their clients and were competing against one another.

The Way Ahead: Extending the Antitrust Labour Exemption to Gig Workers

In the present-day gig economy context, the lines have blurred and there is hardly a difference between an employee and a worker in the gig economy. While the workers have more control of their working hours and can switch between platforms, they do not enjoy the independence and freedom from control that is the sine qua non of an independent contractor. The platforms control the amount of remuneration that can be charged by the workers and they also keep a track of the customer ratings of every individual worker. Dismissal for poor customer ratings is a possibility that hangs over the head of every worker like the Sword of Damocles. The workers also have to adhere to the conditions stipulated by the companies while performing their duties. For example, as a result of the coronavirus, TNC drivers have to extensively sanitize their cars and take safety precautions to ensure the safety of both themselves and their passengers. Moreover, given the number of workers available, they hardly have any bargaining power and are not in a position to negotiate the wages offered to them by the platform.

If workers in the gig economy were allowed to collectively bargain, the consequent increase in their negotiating power would enable them to seek better wages and benefits from the platform for which they work. Extending the antitrust labour exemption to workers in the gig economy makes even more sense when considering the fact that these workers do not compete against one another. They cannot ask the platform to reduce the revenue split in order to gain more customers, nor can they charge the customers a lesser amount to attract more customers. Their position is very different from the independent contractors who were not afforded the benefit of the antitrust labour exemption as they were in competition with one another either on price or for customers.

In 2019, the Dutch Competition Authority released the Draft Guidelines for tariff agreements for self-employed persons. As per these guidelines, freelancers who work side by side with the employees of the company and cannot be distinguished from those employees when it comes to the day to day business of the company would not be an enterprise (undertaking) under the Dutch Competition Act and could enter into collective agreements to bargain for higher wages. While this may not be strictly applicable to gig economy workers, this shows that Competition Authorities have recognized the need to improve the position of self-employed people. The rationale of the antitrust labour exemption was to remedy the power imbalance that exists between employees and employers. Considering the fact that the position of workers in the gig economy is more similar to employees than to independent contractors, the antitrust labour exemption should be extended to include them as well.


[1] Columbia Rivers Packers Association v Hinton, 315 U.S. 143 (1942); L.A. Meat & Provision Drivers Union, Local 626 v United States, 371 U.S. 94 (1962).

[2] Consolidated Version of the Treaty on the Functioning of the European Union, [2012] OJ C 326, art 101.

[3] Case C-22/98 Becu and Others [1999] EU:C:1999:419 para 26.

[4] C-413/13, FNV Kunsten Informatie en Media, EU:C:2014:2411.

[5] C-67/96, Albany [1999] EU:C:1999:430.

[6] Competition Commission of India v. Co-Ordination Committee of Artists and Technicians of W.B. Film and Television and Others, (2017) 5 SCC 17, para 40.

[7] Competition Commission of India v. Co-Ordination Committee of Artists and Technicians of W.B. Film and Television and Others, (2017) 5 SCC 17, para 41.

Apurv is a Batch of 2020 graduate from National Law School of India University, Bengaluru. He is an aspiring lawyer interested in the way antitrust law can affect our lives and plans to join a law firm soon.

Picture Credits: Conde Nast Traveller India

4 thoughts on “Antitrust Law and Collective Bargaining in the Gig Economy

  1. Antitrust labor exemption to gig workers does not resolve the problem of gig platforms mandating prices for gig workers. It is still collusion between two separate entities to provide a service to a third party (consumer requesting the service.)

    Plus, such exemption would be exploited with higher price professional services, such as an attorney or broker. One would merely create a platform that sets prices for these professionals the same way a gig platform sets prices for gig drivers, etc. Attorney services would be effectively sold as a commodity, with rates price fixed in scale easily.

    In this sense, antitrust law protects competition, and all independent contractors must always compete with one another. The mere fact that Uber-like models violate antitrust law when they set prices for independent contractors does not allow for any other solution to this problem except one that: (1) requires a platform to hire all gig workers as employees (2) allows all gig workers to compete in the open market without any pricing coordination with the platform https://www.justice.gov/atr/page/file/1284066/download

    There is no need for a third solution, if both the labor law and antitrust law is enforced.

    Like

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