In most countries competition policy plays a role in fighting the problems that arose from the characteristics of our economies. Indeed, the history tells us that each economic system has its specific features and, thus, its own problems (besides the existence of some common features): in what is commonly referred to as “market economies”, characterized by the role of competition, the problem of markets behaving in an anti-competitive manner seems to be intrinsic to the economic structure. Authorities seem to admit this reality and make legislation for avoiding it.
Cartels are one of the key areas of intervention of competition authorities. These are fought by the fact that firms join themselves to charge higher prices to consumers: society seems to loose with the existence of cartels. However, the criterion in competition policy is that the key aim of interventions is supposed to be enhancing society’s welfare (the key concern is, in several countries, such as Portugal, consumers). When we aim at solving the problem of double marginalization with a mechanism such vertical integration, we are admitting implicitly that the advantages that the elimination of this externality imply compensate for the fact that it creates risks of market foreclosure (surely, the UE may forbid them if a great risk of market foreclosure is created). The problem that competition policy addresses is, in this sense, the abuse of market power that puts welfare at stake.
Unions are organizations of workers aiming at defending their collective rights and interests. When you say that, necessarily, “if they [workers] decide to disagree with employment contract, they may submit a notice of termination of contract, let a feed by husband/wife, find another job or start a business”[i], your reasoning can also be used to defend that if you consider to be a victim of a cartel, you are able to stop consuming its products or build your own. The problem of abuse of dominant position exists in a cartel and it seems to be wiser – or at least fairer -, to admit the issue than ignoring it. In an equivalent way, as the law (up to me, properly) considers that employers might abuse of their dominant position, it makes sense that it predict that workers can organize themselves to fight these abuses.
The power of the buyers seems to be a way of fighting the abuses on the supply side of the economy in what concerns trade of goods. In this relation, the “real power” is on the supply side, and thus the risk of its abuse is on there. In the labor market, the power is on the demand side, i.e., on firms’ owners: these are the ones having the power to make the decisions, and workers submit to them. It seems logical that the supply side (workers) does something to combat, at least partially, abuses from the firms.
Finally, it is not true that “employees will not be punished for the strike”[ii]: so as if, for instance, oil consumers decide not to consume it to protest against its abusive prices are incurring in a sacrifice, workers are incurring in a sacrifice while being on strike, since they are not collecting a wage (it the days of strike are covered by the labor unions, through workers fees, it is a form of insurance, it does not change the big picture). With a difference: one can probably survive relatively easily without oil, while without a wage – if no other sources of income are available -, one can only survive temporarily.
Original blog post: “Cartels, Trade Unions and the right to strike”