Defining Relevant Labour Markets in EU Competition Law

by Jan Broulík (University of Amsterdam)

Workers have long been neglected as victims of competition law violations. That is nevertheless changing. Enforcement against anti-competitive employer actions has been spearheaded – perhaps somewhat surprisingly – mainly by the United States. To give a recent example, in January 2025, the DOJ and the FTC published their Antitrust Guidelines for Business Activities Affecting Workers. 

Competition between employers is receiving an increasing attention also on the old continent. We have seen enforcement cases in various European countries (see here). The European Commission reported last summer that it started its first ever formal investigation into no-poach agreements. In 2024, the Commission also published a policy briefcalled Antitrust in Labour Markets.

Yet, markets on which undertakings compete for labour are completely absent from the revised Market Definition Notice (Notice), which the Commission adopted last year. This is a missed opportunity because including labour markets would have given more credibility to the Commission’s mission to intervene in these markets and it would also have provided guidance to other enforcers of EU competition law. I am discussing this omission as well as the very definition of relevant labour markets in a working paper. This post provides a short summary of the main conclusions.

Why to define relevant labour markets?

As explained by the Notice, relevant markets are defined for the purposes of applying EU competition law. Labour markets then need to be defined for cases in which the conduct or concentration under investigation concern the purchasing of labour, i.e. employer conduct or employer concentrations.

There are good reasons to intervene against anti-competitive conduct and concentrations of employers. To start with, the exercise of employers’ market power may ultimately have negative consequences also for downstream consumers (see here). This will be the case when the exercise leads to a lower output of the undertakings in question, which is then not offset by their downstream competitors.

EU competition law should nevertheless defend workers against competitive harm even if consumers are not impacted negatively (see here). This can happen for instance when undertakings are able to suppress wages without decreasing the amount of procured labour and, thus, also of the produced output. The law ought to protect workers even in such situations not only because most people receive income primarily from work (see here) but also because we tend to spend a good portion of our lives at work and hence care deeply about our working conditions (see here).

Market Definition Notice and labour markets

The Notice does not say anything about labour markets. The only somewhat related provision is paragraph 7, which maintains that the guidance set out in the Notice applies also to the definition of ‘purchasing markets’, i.e. ‘when defining relevant markets for the purchase of particular products in a particular area’. Since labour markets are markets on which employers purchase labour, the Notice arguably recognises the existence of relevant labour markets.

Paragraph 7 further advises to define purchasing markets ‘taking into account their specificities’. Such advice, however, has little value when these specificities are not spelled out. The only specificity of purchasing markets mentioned by the Notice is the obvious point that actual competitors of a buyer are given by whom the sellers consider as alternative buyers. 

Relevant labour market

The relevant labour market is ‘a group of jobs, between which workers can switch with relative ease’ (see here). The starting point of the definition are the jobs concerned by the investigated agreement between employers, potentially abusive conduct of a potentially dominant employer or concentration of employers. The question is then which other undertakings these employers are competing with over the respective labour. That is to say that the process of defining the relevant labour market starts from the respective jobs provided by the undertakings involved, to which other jobs constituting the same market are then being added.

The first dimension of labour markets to discuss is their occupation dimension, which corresponds to the product dimension of product markets. As observed by the Notice, ‘in purchasing markets the substitution assessment focuses on alternatives available to suppliers, rather than alternatives available to customers.’ The occupation dimension is thus given by the alternatives available to workers.

Which alternatives are available to suppliers is always constrained by the customers: suppliers can switch only to those customers who want to buy from them. The same holds also for labour markets: the alternatives available to workers depend on whom employers want to hire. Labour markets in this regard bear a resemblance to markets for differentiated products. In those markets, buyers do not see the offered goods as identical but distinguish between them. Consider for instance the market for cars: ‘the buyer cares about the identity, nature, and features of the product in question – the car’ (see here). The alternatives available to car suppliers are then very much contingent on the preferences of buyers.

Employers have preferences over various worker characteristics. Most obviously, they have need for certain skills. In this respect, a position in another company will belong to the same market as the jobs in question of the undertaking involved if the workers holding these jobs have the necessary skills for the position. Many employers nevertheless have further requirements beyond skills that have to do for instance with time availability (see here) or the match of workers’ personality traits to their culture (see here). All such further requirements imposed by other employers do limit the set of alternatives available to workers and, thus, narrow the scope of labour markets.

What makes labour markets special – so-called matching markets – is that their scope depends also on the preferences of sellers, i.e. workers. Let’s think about the market for cars again. Car sellers usually do not care about who buys the car. Which alternatives are available to suppliers thus depends just on the preferences of buyers: whether a buyer is in competition with another one depends on whether the latter prefers the same car suppliers as the former (see here).

Workers, in contrast, do have preferences over various aspects of jobs (see here). An important consideration is of course financial compensation. Also the actual content of work usually plays a significant role. Workers may further have preferences concerning practical issues such as shift flexibility, vacation and sick time (see here). They may nevertheless also favour a certain workplace culture (see here) or the identities of the other workers at a workplace (see here). Other relevant features of a job may include job security, job autonomy, job prestige, work intensity, participation in training, skill development, relationship with the employer, and potential adverse effects of work on private life (see here).

The preferences of workers further narrow down the scope of labour markets. A job at another company imposes a competitive constraint on an employer only to the extent to which its workers are both qualified for the job and willing to consider it. As a result of this dual limitation, there may be not so many actual employment alternatives for a particular worker. This is why labour markets can be rather narrow in their substantive scope (see here).

The question which alternative jobs are available to workers has also a geographic dimension. In particular, a job is an actual alternative only if workers are willing to commute or even relocate to it (see here). This will vary across different groups of workers. ‘For example, younger workers may be willing to commute farther or even move from one location to another, while older married workers or those with children may be less mobile’ (see here). Also, workers who are high-skilled tend to be more mobile than those who are low-skilled (see here). While some jobs do not require physical presence, which gives workers more alternatives, complete remoteness remains rather rare.

As people are generally not that mobile, labour markets will often be rather narrow in geographic terms. Some even argue that the geographic scope of labour markets is generally smaller than that of product markets. 

Conclusion

In principle, EU competition law is enforceable also against employers. The wording of the relevant legal provisions is sufficiently flexible and we are indeed already seeing some actions being taken by enforcers. To ensure that interventions against employer market power reach their full potential, however, the possibility of these interventions needs to be recognised across the entirety of EU competition law, including the definition of relevant markets. The Commission should hence quickly find a way to declare its readiness to define relevant markets for labour.

This post is a shortened and slightly adjusted version of a post published on the Kluwer Competition Law Blog: https://competitionlawblog.kluwercompetitionlaw.com/2024/12/17/how-to-define-relevant-labour-markets/