Labour markets have been a “trending” antitrust topic for a while (see, e.g., here). And for our readers in the US, and even more so in South Africa, linking labour markets to merger control might not be so new, after all. But if one listens closely in Europe, the effects of M&A deals on labour markets could be the next prominent “new” topic in European merger control.
In essence, merger control is about assessing the effects of a transaction on competition and markets. The traditional focus is of course on markets on which the transaction parties face their customers, i.e. compete in selling their products. However, companies can also be competitors on procurement markets, on which companies purchase products or services.
So far, so good. Where do labour markets come in? In an economic sense, companies also “purchase” labour, paying staff in return for work. And companies looking to hire staff with similar skills in similar locations are competitors on the respective labour market(s). Depending on the companies and their HR approach, this might be exacerbated by how common working from home has become: If employees do not physically have to be in a given location or live close to it, the radius in which employers compete for staff might expand vastly.
But back to merger control:
- As the theory goes, M&A transactions can have an effect on labour markets by concentrating power on the relevant labour markets.
- Where the competition for staff decreases and fewer potential employers will be looking to hire staff as the result of a transaction, salaries, benefits, other salary components or working conditions might also decrease.
- This could be a result of a reduced demand for staff due to synergies or a result of larger “buyer” power of the merged entities post-transaction.
Is this really something new?
That depends on how you define “new”. The topic is admittedly not brand new, and has been debated in academia and in the US for a least a few years. It was also touched upon during the OECD’s Competition Open Day 2020, where the then-Chairman of the US FTC said that all merger divisions had been instructed to consider labour market issues during merger control review, while the European Commission said that further reflection was required.
The South African perspective
The South African merger control regime is ahead of the curve when it comes to public interest considerations. In South Africa, the effect of M&A deals on the public interest has to be considered during every merger control proceeding. And employment is one of the most important public interest factors.
So, part of a merger control assessment is the question whether a transaction will have adverse effects on employment in South Africa. Merging parties have to put forward whether they expect job losses as part of a transaction. While it might be difficult to image the very same questions coming up during European merger control proceedings anytime soon, it could be worth looking at experiences in South Africa if labour markets indeed turn out to become a more important topic in Europe.
European Dutch perspective
At a conference last month, the head of the Dutch competition authority said that national competition regulators in Europe should focus on the effects of transactions on labour markets. He further said that the European Commission was not the only authority driving developments in European antitrust law.
Considering that the Dutch regulator was and is (also) at the forefront of the debate around sustainability and antitrust, one should take such statements seriously. That is also because, in the end, developments at national level tend to spread across national regulators (even when views on details diverge) and tend to trickle “up” to the European Commission. The same could be observed regarding sustainability and the more general discussion on antitrust and labour markets (e.g., regarding wage-fixing and no poaching-agreements).
I would take away three key points regarding labour markets in merger control:
- There is an ongoing debate that should not be ignored. While it is unlikely that a deal will be prohibited just because of labour market concerns in the near future, transaction parties might well get questions on the effects of their deal on labour markets.
- This will be more relevant for deals where the parties are located in close(r) proximity to one another, or where they are hiring employees with similar skills across a region.
- In particular in those deals, it will be worth preparing for questions and considering labour market effects in internal and public communications from a merger control perspective. That is also something to keep in mind for communications and public affairs advisors.
Overall, there is a good chance that labour markets will become part of a list of trending issues that were and are hotly debated in merger control, such as “gap cases” (that lead to an impediment of competition without leading to a dominant position), killer acquisitions, innovation/pipeline competition and common ownership.