Labor Organization in Ride Sharing – Unionization or Cartelization?

By Mark Anderson (University of Idaho) & Max Huffman (Indiana University)

The sharing economy brings together the constituent parts of a business enterprise into a structure that on its surface resembles a business firm, but in crucial ways is nothing like the traditional firm. This includes the ownership of the primary capital assets used in the business, as well as one of the most fundamental features of a firm – the relationship with its labor force. Sharing economy workers are formally contractors, running small businesses as sole entrepreneurs, with the effect that they are excluded from many of the protections made available to workers across the economy. The result is a seeming disparity across the market, with consumers realizing benefits of choice and price that did not exist before, and platforms possibly poised to turn profits as the hubs of massive enterprises with few of the burdens of a dependent workforce.

Proposals for protecting sharing economy workers come in two primary forms. One is to treat the workers as employees, despite their failing to meet the common law “control” test for employment, and impose on the platforms the obligation to provide pay and benefits consistent with state employment laws. Another is to identify exceptions to antitrust laws that would otherwise make illegal efforts by contractors to combine and bargain collectively over wages, hours, and other terms. (A third approach, which some jurisdictions have floated in response to failures of collective bargaining efforts, may be to impose a minimum wage for non-employee sharing economy workers.)

The article engages the antitrust question surrounding collective bargaining. It shows that existing law, both in terms of the basic prohibition of price fixing and the labor exemption, would not allow labor organization by sharing economy workers. Even under a possible Rule of Reason approach, the worker protection goals that underlie collective bargaining are not benefits to competition in the traditional sense, so would not be cognizable as efficiency justifications for collective bargaining. However, the article also shows that existing law ignores the well-developed economic theory that supports labor organization as a response to monopsony, and how that theory supports the idea of labor organization as having pro-consumer effects.

The article applies this understanding of labor organization and its consumer effects to the specifics of sharing economy labor markets. It identifies two primary market structures – the fallow-assets model and the locked-in model – and shows how in the first case the effect of organization would be to increase output in the labor market, leading to increased output and lower price in the consumer market. In the second case the effect of organization is likely to be neutral or negative in terms of labor market output, with the effect that prices will increase and output either decrease or stay static in the consumer market. The ambiguity of outcomes, as well as the newness of the enterprise structure, militate for a Rule of Reason treatment of labor organization in ride sharing. The operation of the Rule of Reason leads to the uncomfortable conclusion that the workers least needing labor protections are most likely to succeed in overcoming antitrust scrutiny, while those most in need of protections are most likely to be subjected to damages and injunctions. As a result, non-antitrust labor protections remain an essential backdrop.