How Antitrust Perpetuates Structural Racism

This commentary is part of The Appeal’s collection of opinion and analysis.

Congress enacted the antitrust laws to check corporate power, but today these laws maintain the corporate domination of people of color. Corporations, which are overwhelmingly owned and run by whites, exploit and control Black and brown workers and business proprietors, thanks, in part, to conservative reinterpretations and applications of antitrust. White workers and business owners suffer similar injuries too. But like so many nominally race-neutral laws, policies, and practices in American society, antitrust appears to inflict a disparate impact on people of color, from college athletes and Rocky Mountain shepherds left at the mercy of colluding employers to fast-food franchisees dominated by multinational chains to Uber drivers thwarted from forming unions.

Antitrust law is not destined to remain a tool of racial injustice. Its present perpetuation of hierarchy is a product of the conservative takeover of the federal judiciary and executive branch that began in the 1970s. Supreme Court justices and antitrust officials appointed by Presidents Nixon, Ford, and Reagan reoriented antitrust law to focus on “consumer welfare” and, to advance this aim, loosened various restrictions on corporate behavior—legal and policy choices that the Clinton and Obama administrations accepted. What judges and technocrats did, the American public can reverse. A reconstructed antitrust would control the size and discretion of corporations and permit workers and independent firms to build power. It would serve as an important weapon against corporate hegemony over the working and small proprietor classes and advance the freedom of people of color in the United States.

Take the exploitative system of collegiate sports. College basketball and football players generate billions in annual revenues for their colleges and universities but receive a small fraction of this wealth. College basketball’s March Madness and football’s playoff are among the most popular events in American sports. Operating collectively through the National Collegiate Athletic Association (NCAA), colleges capped the compensation of players at the cost-of-attendance. The Supreme Court called such collusion among rivals “the supreme evil of antitrust.” In practice, players, including the stars, receive around $40,000 of in-kind annual compensation. If colleges competed for players by offering wages and salaries, basketball and football players would earn an estimated $140,000 or more on average. The racial injustice of the system is clear: Some members of the mostly white college coaching ranks make millions of dollars annually while the disproportionately Black athletes subsist.

A May 2020 court decision preserved this system of economic and racial exploitation. Current and former basketball and football players challenged the NCAA’s collusion in an antitrust suit. At trial and on appeal, two federal courts declined to strike down the NCAA’s wage-fixing cartel. (The Open Markets Institute filed an amicus brief in support of the players on appeal.) They invalidated one piece of the NCAA system—limits on payments related to education—but left the rest intact. Elevating the interests of consumers over workers, the judges reasoned that some fans value watching athletes who are not paid like professionals for their talents and hard work. In other words, two courts sacrificed the players’ interest in the name of catering to viewers’ taste for labor exploitation.

Shepherding in the Rocky Mountains is a demanding and thankless job performed by a captive workforce. Ranchers in Colorado, Wyoming, and other Western states recruit shepherds from Peru on guest-worker visas. The terms of the visa bind the shepherds to the ranch that employs them, and the workers live under the constant threat of deportation for any or no reason at all. The laws ensure a supply of low-wage, powerless workers for ranchers. Until recently, these shepherds made less than the standard federal minimum wage and endure the harsh elements of the Rockies without basics such as electricity, running water, or a toilet. Ranchers view the shepherds as “indentured servants who should be subject to even criminal sanction if they refuse to work.” While the shepherds work under exceptionally harsh conditions, their employment relationships are quite representative of work arrangements in agriculture: Farm sector employers hire guest workers, mainly from Latin America, with few rights and pay them appallingly low wages.

Last year, the federal judiciary dismissed the shepherds’ efforts to modestly improve this system through litigation. A group of shepherds alleged that the ranchers had conspired through two hiring associations to all offer the same lowest possible legal wage for job openings in their state. In the absence of this wage-fixing, the shepherds might have earned an hourly wage of $10 or more instead of $4.50. A trial court and court of appeals in Colorado tossed the shepherds’ suit, concluding that the shepherds had failed to show collusion among the ranchers even though the ranchers had set the wage through collective action. (The Open Markets Institute supported the shepherds’ unsuccessful petition for a rehearing.) As in the NCAA litigation, a mostly white class of actors (ranchers) was permitted to collude and profit at the expense of workers of color. Reports indicate wage-fixing occurs in other food and agricultural sectors too.

Fast-food franchises are an important source of work and income for people of color, especially immigrants. Minorities are more likely to own a franchise business than a non-franchise business. Certain chains are so heavily dependent on South Asians that they have become associated with the community in popular media. Dunkin’, McDonald’s, Subway, and other chains present franchising as a straightforward path to becoming an independent businessperson, exercising autonomy that employees do not enjoy. 

The reality is quite different. Under a franchise arrangement, the parent company exercises tight control over franchisees, dictating virtually everything in the franchisee’s operation, including menu, prices, store layout, and hours of operation, and conducting regular audits. Franchisees can lose their business for any or no reason at all, and they continue at the whims of the franchisor and its managers. At the same time as they have little independence, a Subway franchisee, for example, bears the economic loss if their restaurant fails. Subway keeps the power but transfers the risk.

The present franchising system is a direct result of judicial reinterpretations of antitrust law. Economist Brian Callaci has studied the legal changes that produced the franchising model in fast food and described the franchising system as “control without responsibility.” Due to a 1977 Supreme Court decision and subsequent rulings building on it, firms can control trading partners (distributors, suppliers, franchisees) through contract. They can mandate what a franchisee purchases and sells and on what terms, among other requirements. Franchisors, by depriving franchisees of reasonable margins and discretion over virtually everything except wages, have forced franchisees to rely on a high-turnover, low-wage workforce. Before the 1970s, a firm that wanted to exercise such authority had to directly employ the workers and provide the rights and benefits that come with employment. A firm could not control independent businesses and workers through contract. 

Unfortunately, exploitative relationships between nominally independent workers and dominant firms have exploded in the new “gig economy.” Low-paid and precarious gig workers are disproportionately people of color. A study of ride-hailing drivers and delivery workers in San Francisco found that more than 60 percent were Asian, Black, or Latino. This is in line with national data: A survey commissioned by Uber in 2015 reported that about 50 percent of drivers are people of color. Among other anti-worker policies and practices in the sector, Uber and Doordash drivers and Instacart deliverers do not have the right to organize and form unions. The National Labor Relations Act grants a legally enforceable right to unionize to workers in traditional employment relationships. Because Uber and other gig economy firms (mis)classify their workers as independent contractors, however, these workers do not have the right to build collective power. 

Even as they attempt to monopolize taxi markets around the world through below-cost pricing and flouting labor laws and taxi regulations, Uber and Lyft have used antitrust law to ensure that their drivers remain atomized and powerless. After the City of Seattle enacted an ordinance granting drivers in the city the right to form unions, the U.S. Chamber of Commerce, on behalf of its members Uber and Lyft, filed a suit alleging that the city was authorizing an antitrust violation. Their theory was that organizing among drivers would constitute a restraint of trade. The Chamber triumphed on appeal and ultimately forced Seattle to revise its ordinance and deny drivers the right to bargain over the central term of employment—wages. 

The Chamber and Uber and Lyft had an important ally in their legal fight—the federal government. In November 2017, the Department of Justice (DOJ) and Federal Trade Commission (FTC) filed a joint amicus brief arguing that Seattle did not have the authority to enact the ordinance and that the drivers’ potential unionization and collective bargaining would violate antitrust law. This anti-worker deployment of antitrust law has a long, ugly history, dating back to the early years of the Sherman Act. The FTC has brought numerous antitrust suits against independent contractors and professionals for organizing—targeting workers outside traditional employment relationships. While the DOJ and the FTC have allowed powerful corporations to take over and dominate entire markets, they crush attempts by independent workers and small firms to challenge that power.

Considering these four case studies, Americans fighting for racial and economic justice might simply conclude that repealing the antitrust laws is the right course—they appear impotent against corporate power and are unleashed against workers’ collective power. But this would be a mistake. Present-day antitrust dates only to the late 1970s. Starting in that decade, the Supreme Court, joined by the DOJ and the FTC of the Reagan administration in the 1980s, rolled back rules on corporate monopolies, mergers, and coercive practices. This intellectual and legal attack on the antitrust of the New Deal and postwar era was bankrolled by big businesses and succeeded in creating market rules extraordinarily favorable to the Fortune 500.

Antitrust law, which was once a top line cause of populist and progressive movements fighting for a fair and democratic society, did control corporate authority in the past and can do so again. Imagine laws that stopped employers from fixing wages, prevented franchisors from dominating independent franchisees through contract, prohibited firms like Uber from burning through billions of dollars in a campaign to monopolize markets, and protected the rights of workers and independent firms to organize. These rules would break the economic and political dominance of corporate executives and rentiers. Such an antitrust enforcement system, backed by a popular movement, would redistribute power downward from a class of mostly white economic royalists to the multiracial majority in American society.

Sandeep Vaheesan is legal director at the Open Markets Institute and previously served as a regulations counsel at the Consumer Financial Protection Bureau. He has published articles and essays on a variety of topics in antimonopoly law and policy.