LABOR AND ANTITRUST: STRIKING A
BALANCE WITHOUT BALANCING
RANDALL MARKS*
TABLE OF CONTENTS
Introduction ................................................
I. Labor and Antitrust Law and Policy ....................
A. The Development of the Antitrust and Labor Laws
B. Overview of the NLRA ............................
1. Good faith collective bargaining ................
2. Unlawful secondary activity ....................
C. The Antitrust Laws ................................
II. The Economic Effects of Labor Unions .................
III. Overview of the Labor Exemption .....................
A. The Supreme Court's Basic Themes ...............
B. The Section 6 Principle ............................
1. Bona fide labor organization ...................
2. Labor interest .................................
3. Unilateral activity ..............................
IV. The Nonstatutory Exemption ..........................
A. The "Traditional" Approach ......................
1. Facilitation of employer cartels .................
a. Conspiracies to fix prices or exclude
competitors .................................
b. Conspiracies to impose ruinous wages ......
2. Other union-employer agreements .............
a. The "intimately related" test ................
b. The "follow naturally" test .................
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703
703
708
709
710
713
714
717
718
725
727
728
730
730
731
731
732
733
736
736
740
* Attorney, Federal Trade Commission, Washington, D.C. The views expressed
herein are my own and are not necessarily those of the Federal Trade Commission or any of
its employees. I am indebted to many persons for their thoughtful insights. In particular, my
FTC colleagues John B. Kirkwood, James Hurwitz, Kenneth Davidson, Patrick O'Brien, Robert Weaver, Malcolm B. Coate, and Scott Dennis (now with the Association of American Railroads) spent many hours thinking about the issues discussed herein and commenting on
previous drafts. Professors Douglas Leslie of the University of Virginia and Dennis Lynch of
the University of Miami (Florida) also commented on previous drafts.
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c. HarmonizingJewel Tea and Connell ...........
B. The Labor Law Status Approach ...................
1. Unfair labor practices ..........................
a. Connell and what followed naturally .........
b. Conex .......................................
2. Protected activities .........
.............
a. The authority for exempting protected
activities ....................................
b. Identifying protected activities ..............
C. Linking the Exemption Issue to Labor Law
Principles: A Cost Benefit Analysis .................
1. Criticism of linkage ............................
2. Benefits of linkage .............................
V. Antitrust Analysis of Labor Cases ......................
A. The Appropriateness of Per Se Analysis ...........
B. The Impact of the Labor Context on the Rule of
Reason ............................................
1. Restraints solely in the labor market ...........
2. Labor policy justifications ......................
3. The probability of more restrictive alternatives .
4. Liability of coerced employers ..................
Conclusion .................................................
A. Case Evaluation Criteria ...........................
1. The labor exemption ...........................
a. Threshold issues ............................
b. Settled exemption status ....................
c. Criteria for ambiguous cases ................
2. Antitrust violation ...............
.........
3. Other factors influencing the strength of a case.
B. Possible Areas for Antitrust Intervention ...........
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INTRODUCTION
The purposes of the antitrust and labor laws conflict. Whereas
the antitrust laws promote competition, the labor laws encourage
collective action. Whereas antitrust laws seek to prevent combinations of competitors, the labor laws encourage competing workers
to combine to seek common goals. Whereas antitrust policy tolerates business monopoly only as a necessary evil, labor policy favors
allowing workers to attain power in the labor market to balance the
power of their employers.
From the mid-1930s until the mid-1960s, the courts had developed a fairly clear limit to antitrust scrutiny of union activity: union
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LABOR AND ANTITRUST
conduct was exempt unless it facilitated an employer conspiracy. 1
More recently, the courts have attempted to resolve this basic conflict by limiting antitrust to the "product market" and by limiting
labor restraints to the "labor market. ' 2 In particular, while the
courts have allowed workers to organize and bargain collectively,
they have refused to allow unions to orchestrate product market
3
cartels.
While superficially attractive, this product market/labor market
distinction has proven to be of limited value. Consider a retailer's
selection of operating hours. Because this decision determines the
level of service that the consumer receives, an agreement among
competitors concerning operating hours will affect retail competition and thus the product market. Store hours, however, also affect
employee work hours, an aspect of worker compensation. As this
example demonstrates, labor market decisions almost inevitably alter product market outcomes. 4 Consequently, anticompetitive action in the labor market restrains competition in the product
market. The product market/labor market distinction, therefore,
has given the courts little help in determining the bounds of the
labor exemption in all but the easiest cases. Thus, the courts have
tended to fall back on vague balancing-of-interest tests rather than
more objective criteria rooted in conduct and market conditions.
The result has been a complex and confusing body of doctrine.
The thesis of this Article is that careful analysis of the case law and
attention to the purposes of the labor and antitrust laws can produce reasonably clear tests for the labor exemption. Because these
tests generally eliminate the need to balance the interests embodied
in the labor and antitrust laws on a case-by-case basis, they increase
the predictability of the antitrust consequences of labor activities
and agreements. Usually, the tests focus on the legality of challenged activities under the National Labor Relations Act (NLRA).5
For example, activities that the labor laws explicitly sanction are
1. See Handler & Zifchak, Collective Bargainingand the Antitrust Laws: The Emasculation of the
Labor Exemption, 81 COLUM. L. REv. 459, 475-83 (1981) (discussing Supreme Court decisions
holding labor exempt from antitrust laws).
2. See infra note 106 and accompanying text (introducing product market/labor market
theme).
3. See United Mine Workers v. Pennington, 381 U.S. 657, 665-66 (1965) (denying ex-
emption to union that joined employer in agreement to eliminate competition); Allen Bradley
Co. v. Local No. 3, IBEW, 325 U.S. 797, 810 (1945) (denying exemption to labor union that
combined with employers to fix prices and divide up market); see also infra notes 171-95 and
accompanying text (discussing Supreme Court cases denying exemption to union-employer
agreements that facilitate employer cartels).
4. See Local Union No. 189 v. Jewel Tea Co., 381 U.S. 676, 680-81 (1965) (holding
limitation on operating hours exempt).
5. 29 U.S.C. §§ 151-169 (1982). In this regard, my approach resembles that discussed
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likely to be exempt from antitrust proscriptions, whereas violations
of the NLRA are unlikely to be exempt. In brief, I believe the contours of the labor exemption are as follows:
(1) The antitrust laws will treat concerted activity by workers as
that of a single entity if:
(a) the workers' organization is a bonafide association of employees (not, for example, a group of independent
contractors);
(b) the workers act to achieve legitimate labor objectives; and
(c) the workers act independently of any nonlabor group.6
(2) Union-employer agreements are likely to be exempt unless the
challenged activity:
(a) facilitates union support of an employer cartel;
(b) is an unfair labor practice;
(c) occurs outside of a collective bargaining relationship; or
(d) directly restrains the product market more than necessary
to achieve a legitimate labor objective.
Parts I and II introduce the problem courts face when engaging in
antitrust scrutiny of union activity. Part I is an overview of the history, structure, and policy of antitrust and labor law. Part II analyzes briefly the economic effects of union conduct, focusing on
three types of product market restraints that a union can impose to
enhance its labor market power.
Parts III and IV analyze the labor exemption. Part III discusses
the Supreme Court's major labor exemption decisions and introduces three themes that appear to explain the Court's rationale
in these cases. It also discusses the implications of section 6 of the
Clayton Act, which requires the courts to treat a group of workers as
a single entity, rather than an unlawful combination, if they are acting to improve their wages or working conditions. Part IV discusses
the "nonstatutory" exemption for union-employer agreements.
This exemption has the greatest potential to shield activities that
offend the antitrust laws. Section IV.A analyzes the courts' traditional approach to these agreements, which emphasizes the nature,
purpose, and effect of the challenged restraint and the labor policy
interest it serves. Section IV.B evaluates an alternative method that
the courts have developed in the last decade for analyzing unionin Casey & Cozzillo, Labor Antitrust: The Problem of Connell and a Remedy that Follows Naturally,
1980
DUKE
L.J. 235.
6. Courts and commentators generally term the exemption for unilateral union activities the "statutory exemption" because it derives from the Clayton and Norris-LaGuardia
Acts. As discussed below, the courts apply the statutory exemption even when they say they
are denying it. See infra notes 150-52 and accompanying text.
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703
employer agreements. This method focuses on the legality under
the labor laws of the challenged restraint. Section IV.C assesses the
costs and benefits of this approach.
Part V assumes the labor exemption has been denied, and examines the standards for imposing antitrust liability on nonexempt, labor-related conduct. Although the courts often assert that labor
interests are irrelevant after denial of the labor exemption, judges
find it difficult, if not impossible, to exclude labor considerations
from their antitrust analyses. Consequently, this section assesses the
likely influence of the labor context on traditional antitrust approaches. Finally, the Conclusion contains a check list for analyzing
labor/antitrust cases and identifies union activities for which antitrust liability is most justified.
I.
LABOR AND ANTrrRuST LAW AND POLICY
The labor exemption to the antitrust laws is designed to reduce
the conflict between antitrust and labor law. 7 To understand the
exemption, it is first necessary to understand the interests it is
designed to protect. As an introduction to the discussion that follows, this part provides a brief overview of labor and antitrust law
and policy. Section A discusses the evolution of major labor and
antitrust legislation. Section B presents the general principles of labor law. 8 Section C introduces antitrust law.
A.
The Development of the Antitrust and Labor Laws
As might be expected given their conflicting purposes, the histories of the labor and antitrust laws are intertwined. Indeed, among
the earliest labor law statutes is the Clayton Act, 9 a key antitrust statute. Moreover, cycles of union activity, judicial decisions, and Congressional enactments, all affected by the prevailing view of sound
public policy, have created and shaped both statutory frameworks.
A brief survey of the development of the two legal regimes illustrates the conflict in policy that the labor exemption is intended to
regulate.
Congress' first effort to enshrine competition as the central mech7. Connell Constr. Co. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616,
622 (1975); Local Union No. 189 v.Jewel Tea Co., 381 U.S. 676, 689 (1965).
8. I am indebted to my FTC colleague Pat O'Brien for teaching me a great deal about
labor law and for providing me with an unpublished overview from which I have borrowed
heavily. For a current and comprehensive overview of labor law, see THE DEVELOPING LABOR
LAw (C. Morris 2d ed. 1983) (hereinafter cited as LABOR LAw]; see also W. GouLd, A PRIMER ON
AMERICAN LABOR LAW (1982); R. GoRMAN, LABOR LAw (1976).
9. 15 U.S.C. §§ 12-27, 44 (1982); 29 U.S.C. §§ 52-53 (1982).
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anism of the American economy was the Sherman Act of 1892 which
prohibited "conspiracies, combinations in the form of trusts or
otherwise, and agreements in restraint of trade" and "monopolies." 10 The Sherman Act focused on control of free markets by
powerful entities, either alone or in combination with their competitors. 11 It is easy to see how a workers' organization created to increase the price of labor, and perhaps monopolize the supply of
labor, would offend the Sherman Act. 12 Indeed, a number of decisions subjected unions to antitrust liability. In the famous "Danbury
Hatters" case, for example, the Supreme Court held that a unioninduced boycott of nonunion manufacturers' products violated the
Sherman Act.' 3 Such judicial negation of credible strike threats effectively thwarted meaningful collective bargaining and union
organizing.
Ironically, the Sherman Act fared better against the relatively
weak unions of the day than it did in challenges against large corporations. The courts tended to interpret the Act narrowly and
thereby limited its effect. For example, the Supreme Court quickly
decided that Congress intended to prohibit only "unreasonable" re4
straints of trade.'
In response to these decisions, Congress in 1914 passed two statutes designed to close the loopholes it perceived in the Sherman
Act. Congress structured the Clayton Act to regulate specific anticompetitive practices: price discrimination, 15 exclusive dealing, 1
mergers and acquisitions, 17 and interlocking directorates.' 8 In contrast, Congress designed the Federal Trade Commission Act to outlaw "unfair methods of competition" and to establish an
administrative agency, the Federal Trade Commission (FTC or
Commission), to define them. 19 As an expert body, the Commission
would have the flexibility to outlaw activities whose anticompetitive
10.
Sherman Act, §§ 1, 2, 15 U.S.C. §§ 1, 2 (1982).
11. See R. BORK, THE ANTITRUST PARADox 20 (1978).
12. Despite the apparent conflict between the Sherman Act and unionism, the Supreme
Court has suggested that Congress did not intend the Act to outlaw unions. Apex Hosiery
Co. v. Leader, 310 U.S. 469, 512-13 (1940). Nevertheless, until Congress passed the Clayton
Act in 1914, labor unions had virtually no legal protection beyond the constitutional right of
assembly. Strikes and picketing were illegal. Indeed, the Massachusetts Supreme Court had
held that even the suggestion of a work stoppage was unlawful because it was necessarily an
invitation to violence, "however mild the language or suave the manner in which the threat to
strike is made." Plant v. Woods, 176 Mass. 492, 493, 57 N.E. 1011, 1013 (1900).
13. Loewe v. Lawlor, 208 U.S. 274, 307-09 (1908).
14. Standard Oil Co. of NJ. v. United States, 221 U.S. 1, 60 (1911).
15. Clayton Act, § 2, 15 U.S.C. § 13 (1982).
16. Clayton Act, § 3, 15 U.S.C. § 14 (1982).
17. Clayton Act, § 7, 15 U.S.C. § 18 (1982).
18. Clayton Act, § 8, 15 U.S.C. § 19 (1982).
19. Federal Trade Commission Act, §§ 1, 5, 15 U.S.C. §§ 41, 45 (1982).
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LABOR AND ANTITRUST
705
nature Congress could not foresee. 20 With the passage of the Clayton and FTC Acts, Congress established the statutory framework of
antitrust law, a framework that, despite subsequent amendments, remains intact today.
Although concerned about the courts' reluctance to invoke the
Sherman Act against corporations, 21 Congress criticized the judid22
ary's zealous antitrust attack on the budding union movement.
Thus, section 6 of the Clayton Act declares that "the labor of a
human being is not an article of commerce" and that the antitrust
laws do not apply to the otherwise lawful pursuit of "legitimate objects" of labor organizations. 23 Section 20 of the Act generally prohibits courts from enjoining peaceful strikes, picketing, boycotts, or
other employee conduct in the context of a labor dispute involving
24
"terms or conditions of employment."
Although unions and their supporters hailed these provisions as
"the Magna Carta of labor," 2 5 courts continued to impose liability
on unions and their members for collective activity. 26 These decisions, coupled with widespread labor unrest and the general antibusiness sentiment of the Great Depression, led Congress to pass
the Norris-LaGuardia Act in 1932.27 This legislation clarified and
strengthened Section 20's prohibition against the issuance of injunctions in labor disputes and specified that certain activities-including creation of unions, nonviolent picketing, and strikes-do
not violate any law of the United States. 28 As a result, the courts
20. See generally Averitt, The Meaning of "Unfair Methods of Competition" in Section 5 of the
FederalTrade Commission Act, 21 B.C.L. Rmv. 227, 231-37 (1980) (reviewing legislative history of
Act).
21. See 51 CONG. REC. 9260 (1914) (remarks of Rep. McGillicuddy condemning lack of
Sherman Act enforcement against corporations).
22. See id. at 9086-87 (remarks of Rep. Kelly); id. at 9272-73 (remarks of Rep. Carlin); id.
at 13,662 (remarks of Sen. Ashurst); id. at 13,967-68 (remarks of Sen. Hollis).
23. Clayton Act, § 6, 15 U.S.C. § 17 (1982).
24. Clayton Act, § 20, 29 U.S.C. § 52 (1982).
25.
Hoffman, Laborand Antitrust Policy: Drawinga Line of Demarcation,50 BROOKLYN L. Rv.
1, 24 n.110 (1983).
26. For example, the Supreme Court held unions liable repeatedly for refising to handle
nonunion goods. Bedford Cut Stone Co. v. Journeyman Stone Cutters' Ass'n, 274 U.S. 37
(1927); United States v. Brims, 272 U.S. 549 (1926); Duplex Printing Press Co. v. Deering,
254 U.S. 443 (1921). An employer, therefore, could evade the obligations of the agreement
with the union by subcontracting to a nonunion subsidiary, preventing the unions from protecting their members' work by boycotting the subsidiary's product.
27. 29 U.S.C. § 101-115 (1982). See generally United States v. Hutcheson, 312 U.S. 219,
231 (1941) (Norris-LaGuardia Act product of extensive labor agitation); Milk Wagon Drivers'
Union v. Lake Valley Farm Prods., Inc., 311 U.S. 91, 101 (1940) (Act passed to curtail use of
federal injunctions against labor activity).
28. See LABOR LAw, supra note 8, at 22 (discussing impact of Norris-LaGuardia legislation
on Clayton Act).
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rarely invoked the antitrust laws in labor disputes for over three
decades.
Three years later, Congress passed the National Labor Relations
Act (NLRA),29 which shifted the federal government's approach to
labor matters from a detached neutrality to affirmative support of
union organization. Both the NLRA and the Norris-LaGuardia Act
state a congressional intent to improve the economic position of labor and express a policy favoring the peaceful resolution of labormanagement disputes through the collective bargaining process. 30
In addition, the NLRA evinces Congress' willingness to sacrifice
competition over wages and working conditions in order to
strengthen workers' bargaining power vis a vis their employers. 3 '
The NLRA and subsequent Supreme Court decisions favoring organized labor created a legal environment which placed few barriers
to the exercise of union power.3 2 Although unions flourished, crippling strikes heightened Congressional concern about union power
and practices. 33 Congress responded in 1947, curbing union power
in several ways. The Taft-Hartley amendments to the NLRA estab29. 29 U.S.C. §§ 151-169 (1982). The National Labor Relations Act (NLRA or Act) also
is known as the Wagner Act.
30. National Labor Relations Act, § 1, 29 U.S.C. § 151 (1982); Norris-LaGuardia Act, 29
U.S.C. § 102 (1982); see 79 CONG. REC. 7565, 7573 (1935) (remarks of Sen. Wagner); LABOR
LAW, supra note 8, at 22-23, 27-28 (reviewing legislative history of NLRA and Norris-LaGuardia Act).
31. National Labor Relations Act, § 1, 29 U.S.C. § 151 (1982). Professor Campbell
notes that in passing the labor laws "Congress intended a wealth transfer, not merely efficiency enhancement." Campbell, Labor Law and Economics, 38 STANFORD L. REV. 991, 995
(1986).
32. See, e.g., United States v. Hutcheson, 312 U.S. 219, 233 (1940) (holding union strike,
picket, and attempted boycott protected labor activity); Apex Hosiery Co. v. Leader, 310 U.S.
469, 512-13 (1940) (holding union strike that stopped production and distribution for three
months not violative of antitrust laws).
The original NLRA was one-sided. It created a triad of substantive rights for unions: the
right of employees to organize into a union, the right of that union to act as the collective
bargaining representative of all of a firm's employees, and the right ofemployees to engage in
strikes and picketing through that union. National Labor Relations Act, § 7, 29 U.S.C. § 157
(1982); see LABOR LAw, supra note 8, at 28-29 (describing one-sided nature of rights secured
under NLRA). The law, however, did not limit effectively the exercise of these rights. Indeed,
under the original NLRA only employers could commit unfair labor practices. NLRA, § 8(a),
29 U.S.C. § 158(a) (1982). As the key feature of the government's more interventionist approach to labor matters, the NLRA established a regulatory agency, the National Labor Relations Board (NLRB), to ensure compliance with the Act and to reduce judicial control of labor
activities. See NLRA, §§, 3, 10, 11, 29 U.S.C. §§ 153, 160, 161 (1982) (detailing creation,
powers, and jurisdiction of NLRB); LABOR LAw, supra note 8, at 28 (discussing purpose of
NLRB).
33. For example, the United Mineworkers struck twice during World War II breaching a
formal agreement to defer union demands until national security needs were met. Immediately after the war, strikes shut down the steel, automobile and ocean shipping industries
among others. LABOR LAw, supra note 8, at 35-36; see Reilly, The Legislative History of the TaftHartley Act, 29 GEO. WAsH. L. REV. 285, 287-89 (1960) (discussing destructive union activity
during war and post-war years).
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LABOR AND ANTITRUST
707
lished the right of workers to refrain from joining labor unions and
authorized the states to enact "right to work" laws that prohibit unions from signing collective bargaining agreements that require employees to join a union.34 Also, the amendments declared some
35
union activities to be unfair labor practices.
With the passage of the 1959 Landrum-Griffin amendments to the
NLRA, 36 Congress had legislated the basic principles of current labor law. The NLRA allows workers to choose whether to organize
into unions. If workers unionize, they may use collective economic
pressure, such as a strike, to force their employer to grant them
higher wages or more favorable working conditions. On the other
hand, an employer may use countervailing economic pressure, such
37
as a lockout, to force the union to accept its terms.
Congress recognized that the use of economic power by employers and unions to resolve labor disputes might have painful consequences, not only for the firms and workers involved, but also for
consumers, other firms, and their employees. Hence, the NLRA
takes two steps to protect the interests of those not directly involved
34. National Labor Relations Act, §§ 7, 14(b), 29 U.S.C. §§ 157, 164(b) (1982).
35. National Labor Relations Act, § 8(b), 29 U.S.C. § 158(b) (1982). Other changes included the addition of a definition of the duty to bargain collectively, a restructuring of the
NLRB, modification in union representation procedures, regulation of union internal affairs,
and provision of limited injunction authority. See generally LABOR LAW, supra note 8, at 40-45
(discussing Taft-Hartley changes to Act).
36. 29 U.S.C. §§ 411-415 (1982). Congress enacted the Landrum-Griffin Act in response to reports of union corruption and widespread efforts to pressure secondary employers to deal only with unionized firms. The Act sought to close several perceived loopholes in
the NLRA and imposed substantial financial reporting requirements on unions in an effort to
expose and curb corruption by union leaders. See generally LABOR LAw, supra note 8, at 49-60
(discussing Landrum-Griffin Act).
37. See American Ship Bldg. Co. v. NLRB, 380 U.S. 300, 318 (1965) (holding employer
may shut down plant and lay off workers to assert economic pressure in pursuit of legitimate
bargaining goals). Moreover, employer combinations without union participation are exempt
to the extent that they are in response to, and no broader than, union activity. See Amalgamated Meatcutters & Butchers v. Wetterau Foods, Inc., 597 F.2d 133, 135 (8th Cir. 1979)
(finding no antitrust liability in agreement between employers providing each other with
workers during labor strike); Plumbers & Steamfitters Local 598 v. Morris, 511 F. Supp. 1298,
1306 (E.D. Wash. 1981) (holding agreement among employers to force union to accede to
negotiating demands not antitrust violation); I P. AREEDA & D. TURNER, ANTrrRUST LAw,
229d, at 198-200 (1978) (discussing antitrust exemption for joint employer restraints within
scope of bargaining activity); Scheinholtz & Kettering, Exemption Under the Laws for Joint EmployerActivity, 21 DuQ. L. REv. 347, 354 (1983) (favoring employer's exemption based on policy that both sides have available equal economic weapons).
The NLRA provides a substantive and procedural structure for this battle of interests. It
does not, however, require that collective bargaining agreements be "fair" (however "fair" is
defined). Within broad limits, the NLRA allows the parties to agree to almost any work related provision, no matter how one-sided. The underlying assumption is that the contents of
collective bargaining agreements will be determined by the economic leverage of the parties.
See LABOR LAw, supra note 8, at 630 (collective bargaining process requires good faith and
availability of economic pressure devices on each side) (citing NLRB v. Insur. Agents Int'l
Union, 361 U.S. 477, 488-89 (1960)).
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[Vol. 35:699
in a labor dispute. First, it encourages the use of peaceful negotiation and agreement-collective bargaining-to establish wages and
working conditions.3 8 Although neither side is required to agree to
39
anything, the NLRA requires "bargaining in good faith."
The second way the NLRA protects "noncombatants" is by regulating secondary activity directed against firms not involved in a labor dispute. For example, a business and union may not agree that
the business will cease handling another firm's product. 40 Moreover, a union may not strike or picket to force a firm to cease doing
41
business with another firm.
In sum, national labor policy includes four fundamental principles: first, employees have the right tojoin or to refrain from joining
labor organizations; second, an employer and the union representing that employer's workers are required to engage in bona fide collective bargaining on wages, hours, and working conditions; third,
both employers and unions may exercise whatever legitimate economic leverage they possess to obtain their objectives in the bargaining process; and fourth, a party to a labor dispute generally may
not seek to coerce neutral third parties to pressure the opposing
party to capitulate (secondary activity). These principles, however,
are not concerned primarily with competitive consequences.
Rather, they are designed to enhance worker welfare and preserve
industrial peace by promoting workers' collective exercise of market
power.
B.
Overview of the NLRA
The most significant NLRA provisions for antitrust purposes are
sections 7 and 8. Section 7 establishes an employee's right to join
or refrain from joining a labor organization, 4 2 and Section 8 proscribes certain unfair labor practices by employers and unions. 43 For
example, section 8(a)(4) prohibits an employer from retaliating
against an employee that files charges with the Natiorial Labor Relations Board (NLRB) or participates in an NLRB proceeding. 4 4 Section 8(b)(5) prohibits a union from charging excessive or
38. National Labor Relations Act, §§ 1, 7, 29 U.S.C. §§ 151, 157 (1982).
39. E.g., National Labor Relations Act, § 8(d), 29 U.S.C. § 158(d) (1982) (requiring employer and union to meet and confer at reasonable times and to bargain in good faith).
40. National Labor Relations Act, §§ 8(e), 8(b)(4)(A), 29 U.S.C. §§ 158(e), 158(b)(4)(A)
(1982).
41. National Labor Relations Act, § 8(b)(4)(ii)(B), 29 U.S.C. § 158(b)(4)(ii)(B) (1982).
42. 29 U.S.C. § 157 (1982).
43. Id. § 158.
44. Id. § 158(a)(4).
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LABOR AND ANTITRUST
709
discriminatory initiation fees or dues. 4 5 Because the provisions of
section 8 dealing with good faith bargaining and secondary activity
are likely to be most relevant to antitrust enforcement, this Article
discusses them in more detail below.
1.
Goodfaith collective bargaining
Sections 8(a)(5) and 8(b)(3) of the NLRA prohibit both labor and
management from refusing to engage in good faith collective bargaining. 4 6 Furthermore, section 8(d) of the NLRA requires the employer and union to meet and confer at reasonable times and to
bargain in good faith. 4 7 Good faith bargaining means essentially
that each party must make an effort to reach an agreement and must
participate in negotiations to that end. 48 The concept is a source of
ongoing controversy because an impasse, or lack of agreement in
bargaining, does not indicate necessarily a lack of good faith. 4 9 Section 8(d) does not compel either party to accept any proposal or
make any concession. 50
Unions and employers must discuss mandatory subjects of bargaining.5 1 Section 8(d) states that mandatory subjects of collective
bargaining are "wages, hours and other terms and conditions of employment. ' '5 2 A refusal by either a union or an employer to bargain
45. Id. § 158(b)(5).
46. Id. §§ 158(a)(5), 158(b)(3).
47. Id. § 158(d).
48. See NLRB v. Truitt Mfg. Co., 351 U.S. 149, 152 (1956) (holding good faith requires
honesty and, if claim is significant, also proof of accuracy). In Truitt, the employer claimed
that it was unable to pay wage increases, but refused to produce financial data to justify its
claim. The Court held that its refusal violated the good faith criterion. Id. at 152-53.
49. See id. at 152 (Congress did not compel agreement between employers and labor in
NLRA); NLRB v. Highland Park Mfg. Co., 110 F.2d 632, 637 (4th Cir. 1940) (NLRA does not
require parties to agree, but does require good faith negotiations with view of reaching
agreement).
50. 29 U.S.C. § 158(d) (1982). When the NLRB imposed a seemingly reasonable agreement on an employer that had demonstrated clearly total opposition to agreeing on anything,
the Supreme Court overruled the NLRB order on the rationale that the labor laws require
only bargaining, not agreement. H.K. Porter Co. v. NLRB, 397 U.S. 99, 108-09 (1970).
If either side fails to bargain in good faith, the Board under § 10(c), 29 U.S.C. § 160(c)
(1982), may order the recalcitrant party to engage in good faith bargaining and, in extraordinary circumstances, may award attorney fees and litigation expenses to the aggrieved party.
H.K. Porter Co. v. NLRB, 397 U.S. 99,99 (1970); International Union of Elec. Radio & Mach.
Workers v. NLRB, 502 F.2d 349, 352 (D.C. Cir.), cert. denied, 417 U.S. 921 (1974). The Board
may order an employer to bargain also when its practices have impaired the section 9 electoral process. NLRB v. Gissel Packing Co., 395 U.S. 575, 610 (1969).
51. NLRB v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342, 348-49 (1958).
Mandatory subjects are also termed "compulsory subjects" of bargaining.
52. Although "wages" and "hours" are relatively easy to define, the last phrase--"other
terms and conditions of employment"-is broader and more flexible. As a result, the Board
and courts have held such issues as work assignments, grievances, safety rules and practices,
and the consequences of a shutdown of a business unit to be mandatory subjects of collective
bargaining. See, e.g., First Nat'l Maintenance Corp. v. NLRB, 452 U.S. 666, 682 (1981) (hold-
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[Vol. 35:699
over a mandatory subject constitutes an unfair labor practice. 5 A
union may strike, however, and an employer may lock out its employees because of a failure to reach agreement on a mandatory subject. 54 Moreover, because of their centrality to labor relations,
collective bargaining agreements concerning mandatory subjects receive the greatest protection from antitrust scrutiny. 5 5
Unions and employers may bargain about any other subject unless it is illegal under the terms of the NLRA. Permissive subjects of
collective bargaining are those for which bargaining is neither
mandatory nor illegal. 5 6 Unlike negotiations on a mandatory sub57
ject, however, a party may refuse to discuss a permissive subject.
Moreover, a party may not strike or refuse to sign a collective bargaining agreement if bargaining on a permissive subject reaches an
impasse. 58 Permissive subjects may include the size and composition of the supervisory force and other general business practices. 5°
2.
Unlawful secondary activity
Congress designed sections 8(b)(4) and 8(e) of the NLRA to insulate neutral third parties from disputes between unions and primary
employers. 60 Most recent labor/antitrust cases have concerned allegations that illegal secondary activity constituted a boycott with substantial anticompetitive effects in a product market. 6 1 Moreover,
aside from union participation in an employer cartel, secondary acing effects of employer's decision to shutdown is mandatory subject, but not shutdown decision itself); Fibreboard Paper Prods. v. NLRB, 379 U.S. 203, 222 (1964) (concluding safety
practices are condition of employment and, therefore, mandatory subject); NLRB v. Independent Stove Co., 591 F.2d 443, 446 (8th Cir.) (holding procedures for arbitration of
grievances mandatory subject of bargaining), cert. denied, 444 U.S. 829 (1979). See generally
LABOR LAW, supra note 8, at 772-844 (discussing mandatory subjects of collective bargaining).
53. 29 U.S.C. §§ 158(a)(5), 158(b)(3) (1982).
54. See First Nat'l Maintenance Corp. v. NLRB, 452 U.S. 666, 675 (1981) (asserting both
employer and union may use economic weapons when they bargain to impasse).
55. Local Union No. 189 v. Jewel Tea Co., 381 U.S. 676, 689 (1965).
56. NLRB v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342, 349 (1958).
57. Id.
58. LABOR LAW, supra note 8, at 770.
59. See, e.g., NLRB v. Sheet Metal Workers Local 38, 575 F.2d 394, 397-98 (2d Cir. 1978)
(holding industry promotion fund contributions too insubstantial to constitute mandatory
subject for bargaining); NLRB v. Corsicana Cotton Mills, 178 F.2d 344, 346-47 (5th Cir.
1949) (finding employer may bargain for, but not insist on, clause concerning nonunion participation in union meetings); Southern Cal. Pipe Trades Dist. Council 16 (Aero Plumbing
Co.) 167 N.L.R.B. 1004, 1010, 66 L.R.R.M. 1233, 1234 (1967) (holding contract terms of
supervisory personnel not mandatory subject of bargaining), enforced, 449 F.2d 668 (9th Cir.
1971); see generally LABOR LAw, supra note 8, at 845-69 (discussing permissive and illegal subjects of collective bargaining).
60. Nat'l Woodwork Mfrs. Ass'n v. NLRB, 386 U.S. 612, 624-33 (1967).
61. See, e.g., Connell Constr. Co. v. Plumbers & Steamfitters Local No. 100, 421 U.S. 616,
635 (1975) (finding union-coerced agreement with general contractor to deal only with union
subcontractors was direct restraint on market with "substantial anticompetitive effects"); Consolidated Express, Inc. v. N.Y. Shipping Ass'n, 602 F.2d 494, 519-20 (3d Cir. 1979) (holding
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LABOR AND ANTITRUST
tivity is the most likely form of union restraint to have severe an62
ticompetitive consequences.
The law regulating secondary activity is among the most complex
in the field of labor law. In general, unlawful secondary activity in-
dudes any attempt to influence the labor-management practices of
neutral third parties, either by union pressure to force a firm to refuse to deal with another firm (a secondary boycott) or by a contractual agreement between a union and an employer not to deal with a
third party (a "hot cargo" agreement). 63 The courts have had great
difficulty in determining whether challenged activity is designed to
influence a neutral third party, or whether a truly primary agree-
ment merely has had accidental and unintended secondary effects.64
Section 8(e) of the NLRA prohibits hot cargo agreements, which
it defines as written or implicit understandings whereby an employer refuses to deal with another employer. 65 A complementary
provision, section 8(b)(4)(A), prohibits union strikes or picketing
designed to force an employer to sign a hot cargo agreement. 66 Finally, section 8(b)(4)(B) prohibits secondary boycotts, which it de-
fines as unilateral union activity that constitutes or induces a refusal
to handle goods; threatens, coerces, or restrains any person in order
to secure a hot cargo clause in a collective bargaining agreement; or
otherwise forces one person to cease doing business or handling the
union contract calling for secondary boycott not exempt from antitrust liability), vacated and
remanded on other grounds, 448 U.S. 901 (1980), on remand, 641 F.2d 90 (3d Cir. 1981).
62. For a discussion of the economic effects of union activity, see infra notes 91-99 and
accompanying text.
63. See generally LABOR LW, supra note 8, at 1129-44 (discussing types of secondary activity, including hot cargo agreements).
64. See, e.g., Texas Distrib., Inc. v. Plumbers Local 100, 598 F.2d 393, 399-400 (5th Cir.
1979) (crucial test in secondary boycott case is whether intent of union activity is directed at
primary employer alone or also at secondary employers); Ramey Constr. Co. v. Local Union
No. 544, 472 F.2d 1127, 1131 (5th Cir. 1973) (noting difficulty in determining whether union
picketing on situs common to primary and secondary employers involved unlawful secondary
activity).
65. 29 U.S.C. § 158(e) (1982).
66. Id. § 158(b)(4)(A). Section 8(e), however, contains exceptions ("provisos") for the
garment industry and on-site construction work. Id. § 158(e). The garment exemption is
broad, completely exempting the industry from §§ 8(e) and 8(b)(4)(B) and, therefore, from all
secondary boycott prohibitions.
The construction industry proviso is limited to the contracting or subcontracting of work to
be done at the job site. It was enacted primarily because of concerns over conflicts that arose
between union and nonunion members working side by side on the same job site. Connell
Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 630 (1975). Hence the proviso does not apply when construction union members refuse to handle materials of a nonunion manufacturer. Moreover, the Supreme Court has held that the construction proviso
applies only in collective bargaining situations. Id. at 633. The Court's opinion in Connell
implied a second limitation also: that the proviso applies only when union and nonunion
workers must work at the same jobsite. Id. The Court later held that the proviso was not so
limited. Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 648 (1982).
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[Vol. 35:699
products of another. 67
The basic defense to a charge of unlawful secondary activity is
that the activity is truly primary. In particular, the union (or employer, in the case of a section 8(e) violation) must show that the
challenged activity (or agreement): (1) benefits the employees of the
firm subject to the activity and (2) is not "tactically calculated to satisfy union objectives elsewhere." 68 The NLRB and courts have developed some general principles to distinguish primary activity from
secondary activity. For example, activity against a nominally independent firm is primary if that firm is related functionally to the
primary employer. 69
Activity is primary also if it is designed basically to retain work
that traditionally the firm's employees have performed ("work preservation") as opposed to work traditionally done by others ("work
acquisition"). 70 Under this principle, certain restrictions on an employer's right to subcontract work to nonunion firms are primary
and legal whereas other kinds of clauses are secondary and illegal.
For example, "union standards" clauses, which require the primary
employer to contract with firms whose compensation is equivalent
to union firms, are considered virtually always primary and therefore legal. 7' Similarly, courts generally hold prohibitions on all subcontracting to be primary. 72 By contrast, they generally hold
"union signatory" clauses, which limit subcontracting to firms who
have signed a collective bargaining agreement with a union, secon73
dary and illegal.
Action by the NLRB is the only explicit NLRA remedy for a hot
cargo agreement violative of section 8(e). 74 Section 303 of the La67.
29 U.S.C. § 158(b)(4)(B) (1982). This section makes exceptions for primary strikes
and otherwise lawful picketing.
68. National Woodwork Mfrs. Ass'n v. NLRB, 386 U.S. 612, 644 (1967).
69. See Radio & T.V. Local 1264 v. Broadcast Serv. of Mobile, Inc., 380 U.S. 255, 256
(1965) ("single employer" defense: two nominally independent firms actually a single entity);
Boire v. Greyhound Corp., 376 U.S. 473, 481 (1964) ("joint employer" defense: second employer has substantial control over first employer); NLRB v. Business Mach. (Royal Typewriters), 228 F.2d 553, 558 (2d Cir. 1955) ("ally" defense: strike target contracts to have
independent firm do work of striking employees).
70. NLRB v. International Longshoremen's Ass'n, 447 U.S. 490, 504-05 (1980); LABOR
LAW, supra note 8, at 1214.
71. In re Bituminous Coal Wage Agreements, 756 F.2d 284, 289 (3d Cir.), cert, denied sub
nom., Duquesne Light Co. v. International Union, United Mine Workers, 106 S. Ct. 180
(1985); LABOR LAw, supra note 8, at 1223-24, 1208-10, 1213.
72. LABOR LAw, supra note 8, at 1208-10, 1213, 1223-24.
73. Id.; In re Bituminous Coal Wage Agreements 756 F.2d 284, 290 (3d Cir.), cert. denied
sub nom., Duquesne Light Co. v. International Union, United Mine Workers, 106 S. Ct. 180
(1985). If, however, such a clause preserves the work of the employees of the firm agreeing to
the provision, the provision is primary. National Woodwork Mfrs. Ass'n v. NLRB, 386 U.S.
612, 624-33 (1967).
74. 29 U.S.C. § 160(a) (1982).
1986]
LABOR AND ANTITRUST
bor Management Relations Act,7 5 however, creates a private remedy
for a section 8(b)(4) violation. Under section 303, any person injured by a secondary boycott may sue for actual damages. 7 6 Section
303 may also provide a remedy for many section 8(e) violations,
since many hot cargo agreements may result from coercive behavior
that violates section 8(b) (4).77
C. The Antitrust Laws
The most relevant provision for antitrust analysis is section 1 of
the Sherman Act, which prohibits "every contract, combination....
or conspiracy" in restraint of interstate or foreign commerce. 7 8 To
establish a section 1 violation, a plaintiff must demonstrate that the
defendants have engaged in (1) concerted activity that (2) reduces
competition. 79 The basic method of analysis is the "rule of reason"
which condemns practices that on balance restrain competition.8 0
Certain activities, however, are so likely to be anticompetitive and
so unlikely to have any procompetitive effect that they are per se
illegal. In such cases, the plaintiff need not show an anticompetitive
effect and the defendant may not prove that the practice has any
81
procompetitive effect. Courts generally have held price fixing,
market division,8 2 and certain boycotts or concerted refusals to
deal8 3 per se illegal. Nevertheless, the trend in antitrust law is
75. Id. § 187.
76. Id. § 187(b). The § 303 remedy is not injunctive, but § 10(1) of the NLRA, id.
§ 160(1), requires the NLRB to seek an injunction in § 8(b)(4) cases.
77. The availability of the § 303 remedy poses a problem for private antitrust enforcement, because arguably Congress may have sought to balance conflicting interests and policies by creating § 303 as the only damage remedy for unlawful secondary boycotts or hot
cargo agreements. See Connell Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S.
616, 646-54 (1975) (Stewart, J., dissenting) (tracing legislative history of § 303).
78.
15 U.S.C. § 1 (1982).
79. In addition, the defendants' conduct must have affected interstate or foreign commerce. 1984 A.B.A. ANmrrusT L. DEv. 2.
80. See Standard Oil Co. v. United States, 221 U.S. 1, 66 (1911) (establishing rule of
reason as prevailing standard of analysis); see also Chicago Bd. of Trade v. United States, 246
U.S. 231, 238 (1918) (rule of reason requires factfinder to weigh circumstances of case to
determine whether activity imposes unreasonable restraint on competition).
81. Arizona v. Maricopa County Medical Soc'y, 457 U.S. 332, 348 (1982); United States
v. Socony-Vacuum Oil Co., 310 U.S. 150, 218 (1940). Traditionally, any concerted activity
that has the purpose or effect of affecting price is per se illegal. Socony-Vacuum, 310 U.S. at
221-24. The Supreme Court, however, has held that even a price-fixing agreement may be
saved by dearly demonstrable efficiencies. National Collegiate Athletic Ass'n v. Board of Regents, 104 S. Ct. 2948, 2960-61 (1984); see also Broadcast Music, Inc. v. Columbia Broadcasting Sys., 441 U.S. 1, 19-20 (1979) (holding that blanket licenses are not species of price-fixing
that Sherman Act forbids categorically).
82. See United States v. Topco Assocs., Inc., 405 U.S. 596 (1972) (finding territorial restrictions on wholesaling per se illegal). A market division involves allocating customers
among competitors, thereby insulating each competitor from competition.
83. See, e.g., United States v. General Motors Corp., 384 U.S. 127, 145 (1966) (holding
that collaborative effort to eliminate business group's access to market is per se violation of
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THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 35:699
against per se condemnation. For example, although both tying8 4
and vertical nonprice restraints 85 were once considered per se illegal, they now are judged under the rule of reason.
Section 2 of the Sherman Act prohibits monopolization, attempted monopolization, and conspiracy to monopolize.8 6 Possession of a monopoly is legal as long as the monopolist did not set out
willfully to acquire the monopoly by means other than lawful competition. 8 7 The use of monopoly power to restrain competition,
however, is illegal. 8 8 Moreover, if a company engages in conduct
with the intent to establish a monopoly and there is some
probability that the conduct will result in monopoly, it has engaged
in an unlawful attempt to monopolize. 89 Of course, section 6 of the
Clayton Act almost certainly precludes a suit against a labor union
for monopolizing a labor market, although it allows such a suit for
monopolizing a product market. 90
II.
THE ECONOMIC EFFECTS OF LABOR UNIONS
Labor unions may reduce or increase the efficiency of labor and
product markets. 9 1 In seeking to maximize its members' compensation,9 2 a union may have both detrimental and beneficial effects on a
Sherman Act); Klor's, Inc. v. Broadway Hale Stores, Inc., 359 U.S. 207, 213 (1959) (finding
group boycott violative of Sherman Act).
84. Tying involves requiring a customer to buy one product to obtain another, less desirable product. Recently, the Supreme Court has conditioned "per se" condemnation of tying
arrangements on showings of market power and an anticompetitive effect, essentially mandating rule of reason analysis. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 104 S. Ct 1551, 1559
(1984); see DEPARTMENT OFJUSTICE, GUIDELINES FOR VERTICAL RESTRAINTS 41-42 (1985) (VERTICAL GUIDELINES).
85. A vertical restraint is one involving the distribution of a manufacturer's products. An
example is the allocation of exclusive sales territories to distributors. Only eight years after
holding such restraints per se illegal, the Court reversed itself and held that such restraints
should be tested under the rule of reason. Continental T.V., Inc. v. G.T.E. Sylvania, 433 U.S.
36, 58 (1977); see generally VERTICAL GUIDELINES, supra note 84, at 21-37.
86. 15 U.S.C. § 2 (1982).
87. United States v. Aluminum Co. of Am., 148 F. Supp. 416,432 (2d Cir. 1945); United
States v. United Shoe Mach. Corp., 110 F. Supp. 295, 346 (D. Mass. 1953), afd, 347 U.S. 521
(1954).
88. See United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966) (distinguishing willful acquisition or maintenance of monopoly power from growth as consequence of superior
product, business acumen, or historic accident).
89. See Lorain Journal Co. v. United States, 342 U.S. 143, 149 (1951) (finding illegal
attempt to monopolize interstate market); E.I. duPont de Nemours & Co., 96 F.T.C. 653, 725
(1980) (listing three elements of attempt offense as specific intent to control prices, anticompetitive conduct, and dangerous probability of success). For a comprehensive review of the
law of monopolization, see III P. AREEDA & D. TURNER, ANTrRUST LAW 3-35, 311-58 (1978).
90. See Allen Bradley Co. v. Local No. 3, IBEW, 325 U.S. 797, 808 (1945) (noting § 6 of
Clayton Act does not prohibit labor unions).
91. This part borrows heavily from the thinking of FTC economists Malcolm B. Coate
and Scott Dennis. See also Campbell, supra note 31 (general economic analysis of the labor
laws).
92. Of course, a union may have other goals, such as job security for its senior members.
1986]
LABOR AND ANTiTRUST
market. Three types of rent maximizing conduct tend to foster inefficiency. First, a union may cartelize the supply of labor, raise compensation to noncompetitive levels, and thus misallocate resources.
Second, a union may increase artificially the demand for a unionized
firm's products relative to those of competing firms, for example, by
organizing a boycott of nonunion firms. Third, a union may restrict
the substitution of more efficient capital equipment for union labor,
through restrictive work rules, for example.
Unions may increase efficiency also in several ways. First, a union
may sponsor training programs. Although firms often will find it
profitable to train their workers in firm-specific skills, employers
may be reluctant to provide training that is readily transferable
throughout the industry. Rivals who do not provide the training
may lure the trained workers away before the firm's educational investment is repaid. Union sponsored apprenticeship and post-ap93
prenticeship training programs can avoid this free-rider problem.
As a result, unions may provide more training per worker than any
single firm would supply. If union training is more cost-effective
than employer provided training, then provision of such training
could increase efficiency. Second, unions virtually always establish
grievence procedures. If these procedures provide a superior channel of communication to the employer, they may increase morale,
reduce turnover, and stimulate increased productivity. 94 Finally, if
an employer or group of employers has monopsony power,9 5 union
activity could increase wages and output toward the competitive
level by offsetting this power.
Most of the efficiency effects described above apply to the labor
market. More relevant to antitrust analysis, however, are union effects on the product market. Fundamentally, a union might affect
the product market by cartelizing workers, raising wages, and elevating prices in consequence. Such union activity is analogous to any
other input or "upstream" cartel; it causes elevated prices and reduced output in "downstream" markets. The magnitude of these
downstream effects depends on both the degree of union organiza93.
See generally L. REYNOLDS, LABOR ECONOMICS AND LABOR RELATIONS 441-43 (8th ed.
1982) (discussing union training programs).
94. See Freeman & Medoff, The Two Faces of Unionism, PUBLIC INTEREST 69, 78 (1979)
(asserting that union grievance procedures or "exit voicing" lowers quit rates and thereby
encourages the firm to invest in more firm-specific training); see also R. EHRENBERG & R.
SMITH, MODERN LABOR ECONOMICS 360-61 (1982) (discussing positive effects of unionism on
productivity).
95. Monopsony power is the ability of buyers to affect the price of the product that they
purchase. F. SCHERER, INDUSTRIAL MARKET STRUCTURE AND ECONOMIC PERFORMANCE 11 n.5
(2d ed. 1980).
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[Vol. 35:699
tion and the competitive nature of the product market. Welfare loss
will tend to be greatest in a product market in which the union has
organized virtually all of the workers. Welfare loss will tend to be
smaller but still significant in a partly organized product market that
is monopolistically competitive, oligopolistic, or regulated. Welfare
loss is likely to be de minimis in a partly organized market that is
96
competitive.
The Clayton and Norris-LaGuardia Acts, however, make pure
cartelization of workers by a union immune from antitrust scrutiny.
The following three models involve union-employer restraints on
the product market that do not possess this statutory immunity and,
therefore, are of greater relevance to antitrust enforcement.
Cartel Model: The union conspires with the leading firms to
cartelize the product market. Pursuant to the agreement, the union
plays an active role in cartel management and enforcement. For example, the union may monitor member firms' behavior or adopt
policies designed to drive nonmembers out of business or block entry. Such a cartel may reduce the leading firms' resistance to
supracompetitive compensation because management is in essence
paying higher wages to buy the union's assistance in maintaining a
collusive product market.
Exclusion Model: The union and one or more firms agree to exclude
or disadvantage nonunion firms for the ostensible purpose of protecting union work. The agreement might specify, for example, that
the unionized firms will not hire nonunion firms as subcontractors.
Alternatively, the union and the unionized firms may agree to lobby
the government to block nonunion competitors, especially importers, from the market.
The exclusion of nonunion firms may harm efficiency in three
ways. First, it may facilitate collusion among the unionized firms. 97
Second, the excluded firms may be more efficient because of factors
other than their lower compensation levels. Finally, even absent
these effects, the exclusion may reduce output.98
Suppression Model: Unions may suppress laborsaving technological
changes and thereby preserve union jobs. For example, a collective
96. Even in such markets, however, unions may raise prices if nonunion firms incur costs
to deter unionization.
97. Where this effect is important, the Exclusion Model would merge with the Cartel
Model. In many cases, however, there may be little evidence that the restrictions on nonunion
firms would facilitate collusive pricing among the unionized firms. For example, the unionized sector may be unconcentrated and exhibit numerous signs of vigorous price competition,
98. The market, although price competitive, may be in disequilibrium. If entry by new
unionized firms is slow or impeded, the exclusion of nonunion firms could temporarily or
permanently depress output below the equilibrium level.
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LABOR AND ANTITRUST
717
bargaining agreement can mandate retention of an existing technology or impose artificial restrictions on the adoption of a new technology. Such provisions would reduce efficiency and, in contrast to
the other two models, typically would not benefit any unionized
firms.9 9
These three models of union restraints on the product market
help illuminate the legal analysis that follows. As Parts III and IV
demonstrate, however, these three restraints are not equally subject
to antitrust challenge. Although virtually all Cartel Model and many
Exclusion Model restrictions that involve an unfair labor practice
are open to challenge, most Suppression Model and some Exclusion
Model restrictions are likely to be exempt from the antitrust laws.
III.
OVERVIEW OF THE LABOR EXEMPTION
This part introduces the labor exemption. Specifically, Section A
discusses the Supreme Court's major labor exemption rulings, highlighting the basic themes that recur in these cases. The first theme
is the product market/labor market distinction. Although inadequate by itself to define the exemption, this distinction nevertheless
seems to influence the Court. The second theme focuses on the independence of the labor union. When a union acts independently
of business entities, the Court has recognized that the Clayton and
Norris-LaGuardia Acts confer broad immunity from antitrust scrutiny. The final theme focuses on the labor law status of the challenged activity. The Court has tended to exempt activities that the
NLRA sanctions and expose to antitrust scrutiny activities that the
NLRA prohibits.
Section B focuses on the independence theme and, in particular,
on the implications of section 6 of the Clayton Act. Before Congress enacted section 6, the Supreme Court held that because a
union was a group of competitors pursuing a common objective, it
was a combination within the meaning of the Sherman Act.' 0 0 Since
enactment of section 6, however, the Supreme Court has treated
each union as a single entity, refusing to characterize unilateral
99. Some unionized firms may benefit if the restriction on technical change is intended
by one group of unionized firms to put another group of unionized firms at a relative disadvantage and thereby protect a cartel from fringe competition. If so, the case would involve
the Cartel Model also.
100. Loewe v. Lawlor, 208 U.S. 274, 301-02 (1908). In this case, known as the "Danbury
Hatters" case, the Supreme Court reversed the dismissal of a complaint that alleged that a
product boycott by a union and its members was a restraint of trade that violated Section 1.
Id. at 274-75. In upholding the complaint, the Court assumed that the union and its members
were a combination and noted that Congress had rejected efforts to exempt unions from the
Sherman Act. Id. at 301.
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AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
union activity, such as a strike or boycott, as concerted.' 0 ' Such
treatment is a striking departure from the way that conventional antitrust analysis characterizes concerted activity of other persons selling their labor.' 0 2 As a result of the Clayton and Norris-LaGuardia
Acts, moreover, unilateral activity by unions enjoys a broad immunity from antitrust scrutiny.
A.
The Supreme Court's Basic Themes
In passing the antitrust and labor laws, Congress embraced inconsistent views regarding the virtues of competition and cooperation.' 03 The labor exemption represents an effort to buffer the
potential clashes of conflicting regulatory regimes. This section discusses the major themes evident in the Supreme Court's attempts to
resolve the labor/antitrust conflict.
The labor statutes protect core labor activities,1 0 4 but do little else
to ease the tension. The primary burden, therefore, has fallen on
the courts. Struggling with this burden, the Supreme Court has developed three themes or principles to distinguish between permissi05
ble labor activity and impermissible restraint of trade.'
The first and most important theme is the "product market/labor
101. The Supreme Court restricted application of the Clayton Act by limiting the term
"labor dispute" to "disputes between persons in a direct and current employer-employee
relationship," Duplex Printing Co. v. Deering, 254 U.S. 443, 451 (1921), and holding that the
Act did not legalize the secondary boycott and other tactics. Bedford Cut Stone Co. v. Journeymen Stone Cutters' Ass'n, 257 U.S. 184 (1921); see Handler & Zifchak, supra note 1, at 470
(discussing Bedford). Since Congress passed the Norris-LaGuardia Act, the courts have given
§ 6 its full effect.
102. See, e.g., American Medical Ass'n v. FTC, 638 F.2d 443, 453 (2d Cir. 1980) (joint
effort by medical association members to restrain advertising and solicitation violates FTC
Act), afd by an equally divided court, 455 U.S. 676 (1982). Farmers, however, receive similar
treatment. They are allowed to create agricultural cooperatives that may fix prices and restrict output. Capper-Volstead Act, 7 U.S.C. § 291 (1982). While the cooperative is treated
as a single entity, rather than a combination of farmers, it is prohibited from monopolizing or
restraining trade. Id. § 292.
103. See, e.g., Casey & Cozzillio, supra note 5, at 235-36 (citing friction between antitrust
and labor law policies); Leslie, Principlesof Labor Antitrust, 66 VA. L. REV. 1183, 1184 (1980)
(discussing fundamental conflict between antitrust and labor law: antitrust statutes promote
competition while labor statutes restrict it).
104. For example, the Clayton Act treats as a single entity concerted activity by workers,
rather than condemning such activity as a "combination" in restraint of trade. See supra notes
100-01 and accompanying text. For a discussion of the labor exemption in § 6 of the Act, see
infra notes 147-70 and accompanying text. The Clayton and Norris-LaGuardia Acts restrict
the issuance of injunctions (including antitrust injunctions) in labor disputes. The NLRA
mandates collective bargaining on key aspects of labor conditions.
105. See also Ackerman-Chillingworth v. Pacific Elec. Contractor's Ass'n, 579 F.2d 484,
502-03 (9th Cir. 1978) (HufstedlerJ., concurring and dissenting) (discussing similar themes),
cert. denied, 439 U.S. 1089 (1979).
While this article stresses the consistencies of the Court's decisions, other commentators
have been very critical of what they perceive as inconsistencies. See, e.g., Leslie, supra note
103, at 1214 (criticizingJustice White's analysis in Jewel Tea); Handler & Zifchak, supra note 1,
at 486-91 (discussing Supreme Court's application of antitrust law to unfair labor practices).
1986]
LABOR AND ANTITRUST
719
market" distinction.' 0 6 This principle reflects the Supreme Court's
tolerance of employer and union restraints whose primary effect is
on the labor market and the Court's distaste for restraints whose
primary effect is on the product market. Of course, the product
market/labor market distinction is not pristine; any labor market restraint will affect necessarily the product market as well. Nevertheless, the distinction is useful at the extremes: pure union wage fixing
is exempt and union-employer product price fixing is subject to antitrust scrutiny. In addition, between these extremes, the courts
have tried to determine where the primary effect of the restraint is
restraints that do not substantially
felt and to exempt labor market
10 7
affect the product market.
The Court's second, or "independence," theme favors independent action by unions to achieve their goals and carefully scrutinizes
union-employer combinations. Thus, the Court rarely, if ever, has
condemned unilateral union activity, but has denied the exemption
to unions that participate in employer cartels even though the unions acted in their members' interests. The independence theme
does not mean, however, that the Court has condemned all unionemployer agreements. To the contrary, a key purpose of national
labor policy is to promote collective bargaining and generally the
Court has shielded collective bargaining agreements from antitrust
08
scrutiny.1
106.
The labels of the themes are mine. I deemphasize another theme, the "true union"
theme, because it rarely is at issue. The Court has limited the exemption to true organizations
of workers acting in their legitimate self-interest. See infra notes 162-68 and accompanying
text (discussing requirement of legitimate labor interest). While the theme has not been a
factor in the major cases, the Court has denied the exemption to independent businessmen
masquerading as a union. See Columbia River Packers Ass'n, Inc. v. Hinton, 315 U.S. 143,
145 (1942) (denying exemption to independent fishermen who denominated themselves a
union for purpose of entering into a "collective bargaining agreement" that set prices for
fish).
107. Professor Campbell suggests, as an admittedly "over-and underinclusive" rule, that
"labor unions may not derive benefits from manipulating the product market, although much
of what it may do will have an incidental effect on the product market." Campbell, supra note
31, at 1062.
108. Similarly, the courts have been reluctant to immunize union-employer agreements
reached outside of a collective bargaining relationship. See, e.g., Connell Constr. Co. v.
Plumbers & Steamfitters Local 100, 421 U.S. 616, 625-26 (1975) (finding antitrust liability
where union and employer had no collective bargaining relationship and agreement imposed
direct restraint on market).
Moreover, they have denied the exemption where the extent of collective bargaining was
suspect because of the weakness of the union vis-a-vis the employers. Compare McCourt v.
California Sports, Inc., 600 F.2d 1193, 1198-1203 (6th Cir. 1979) (granting labor exemption
after citing extensively to evidence of collective bargaining) with Mackey v. National Football
League, 543 F.2d 606, 615-16 (8th Cir. 1976) (denying exemption after stressing absence of
bona fide bargaining). This rationale is questionable to the extent that it denies the exemption because one side had more economic leverage than the other. National labor policy
stresses the process of collective bargaining and will not interfere simply because the results
are one-sided. See supra note 37 (NLRA assumes economic power of parties will dictate terms
720
THE AMERICAN UNIVERSrrY LAW REVIEW [Vol. 35:699
Finally, the "labor law" theme reflects the Court's interest in determining the Congressional labor policies supporting the challenged restraint. Even before the 1975 decision in Connell
Construction Co. v. Plumbers & Steamfitters Local 100 109 -which analyzed the challenged activity's labor law status at some length-the
Court's opinions gave considerable weight to labor law precedent
and policy. These decisions tended to exempt union and employer
agreements that were lawful under the labor laws and to expose to
antitrust scrutiny union and employer practices that fell outside of
the law's letter or spirit.
A brief review of the six most significant Supreme Court labor
exemption cases illustrates the interplay of these themes. The product market/labor market theme provided the first definition of the
proper scope of antitrust. In Apex Hosiery Co. v. Leader,1 10 a union
seeking a dosed, or all union, shop staged a violent sitdown strike
and prevented manufacture and shipment of finished goods for
three months.1 1 1 In reversing a district court finding of antitrust liability, the Court held that the Sherman Act applies only to union
activity that restrains commercial competition. 1 2 The Court defined such impermissible activity as conduct that is "shown to have
or is intended to have an effect upon prices in the market or otherwise to deprive purchasers or consumers of the advantages which
they derive from free competition." ' 1 3 Although reduced competition over labor standards might affect the product market, the Court
explained that "this effect on competition has not been considered
to be the kind of curtailment of price competition prohibited by the
Sherman Act." 1 4 The Court also stressed that the union acted independently and that the union was not "being used by combinations of those engaged in an industry" to restrain competition." 5
The independence theme became prominent a year later in United
States v. Hutcheson.' 1 6 In Hutcheson, a union involved in a jurisdicof agreement). A rationale more consistent with labor policy is that the courts believed that
effectively the employers had refused to bargain in good faith and thus had violated at least
the spirit of the NLRA. Although the cases do not articulate this rationale, denial of the
exemption on this theory would be consistent with the courts' tendency to deny the exemption on the basis of an unfair labor practice.
109. 421 U.S. 616, 626-35 (1975).
110. 310 U.S. 469 (1940).
111. Id.
112. Id. at 470-76.
113. Id. at 500-01.
114. Id. at 503-04. Recently, the Court reaffirmed this labor market/product market distinction. Associated General Contractors v. California State Council, 459 U.S. 519, 526-28
(1983).
115.
116.
Apex Hosiery Co. v. Leader, 310 U.S. 469, 501 (1940).
312 U.S. 219 (1941).
1986]
LABOR AND ANTrIrRUST
tional dispute with a rival union struck the employer, picketed the
employer and its tenant, and attempted to organize a consumer boycott of the employer's products. 117 In affirming the dismissal of
Sherman Act criminal conspiracy charges, the Court held that:
So long as a union acts in its self-interest and does not combine
with nonlabor groups, the licit and illicit under § 20 of the Clayton Act are not to be distinguished by any judgment regarding
wisdom or unwisdom, the rightness or wrongness, the selfishness
or unselfishness 18of the end of which the particular union activities
are the means.'
The Court used the independence theme to supplement, rather
than supplant, its product market/labor market analysis. The Court
believed that the dispute involved essentially a labor market restraint. 119 Accordingly, the Court ruled that it must "dispose of this
case as though we had before us precisely the same conduct on the
part of the defendants in pressing claims against Anheuser-Busch
for increased wages, or shorter hours, or other elements of what are
120
called working conditions."'
Both the independence and product market/labor market themes
underlieAllen Bradley Co. v. Local No. 3, IBEW,12 1 in which the Court
upheld an injunction against a combination of unions, electrical
contractors, and electrical equipment manufacturers. The union
and employers had agreed that the employers, consisting of electrical contractors, would purchase electrical equipment only from
manufacturers that had signed agreements with the union and that
the manufacturers would sell only to signatory contractors. 12 2 The
Court found that the agreements "expanded into industry-wide understandings looking not merely to terms and conditions of employment but also to price and market control."' 12 3 Moreover, the
manufacturers, contractors, and unions had established joint agencies to boycott nonlocal and recalcitrant contractors and manufac117. Id. at 224.
118. Id. at 232.
119. The Court held that the union was involved in a labor dispute within the meaning of
the Norris-LaGuardia Act. Id. at 233-34. It based its conclusion in part on the practical observation that "strife between competing unions has been an obdurate conflict in the evolution
of so-called craft unionism." Id. at 232. Justice Stone, concurring, would have based the
Court's decision exclusively on the lack of a restraint on commercial competition (the product
market/labor market theme), as in Apex Hosiery, rather than on the independence of the union.
Id. at 237-43 (Stone, J., concurring). Similarly, Professor Leslie criticizes the Court for focusing on the independence theme and asserts that it could have disposed of Hutcheson using the
approach in Apex Hosiery. Leslie, supra note 103, at 1198-99.
120. United States v. Hutcheson, 312 U.S. 219, 232-33 (1941).
121. 325 U.S. 797 (1945).
122. Id. at 798-800.
123. Id. at 799-800.
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
turers. The Court held that the combination "quite obviously"
violated the Sherman Act unless "immunized by the participation of
124
the union."'
In finding liability, the Court declared that "Congress never intended that unions could, consistently with the Sherman Act, aid
non-labor groups to create business monopolies and to control the
marketing of goods and services."' 12 5 This statement reflects the
Court's concern with both the union's combination with businessmen and the major restraint on the product market.12 6 Today, Allen
Bradley is authority for denying the exemption to any union participation in an employer cartel, such as the Cartel Model discussed in
Part II.
Thus, the major cases between the passage of the NLRA and the
Taft-Hartley amendments-Apex Hosiery, Hutcheson, and Allen Bradley-demonstrate the Supreme Court's concern with product market
restraints imposed by a union acting jointly with employers. 127 The
Court reaffirmed these product market and independence themes in
United Mine Workers v. Pennington.128 In that case, a small coal operator alleged that the United Mine Workers and larger rival coal companies conspired to drive the small operators from the industry by
imposing high wages on all operators without regard to their ability
to pay.' 2 9 The Court held, in an opinion written by Justice White,
that the agreement to impose wages on all operators was not ex124. Id. at 800. The secondary boycott of nonunion companies in Allen Bradley was legal
under the NLRA when the case was decided. Id. at 809. Two years later, Congress enacted
the Taft-Hartley amendments, in part to prevent a similar situation from arising again. See
Nat'l Woodwork Mfrs. Ass'n v. NLRB, 386 U.S. 612, 654-55 (1967) (discussing legislative
history of what is now § 8(b)(4)(B)). Moreover, if Allen Bradley arose today, it would involve
violations of § 8(a)(3) (closed shop) and § 8(e) (hot cargo agreement). Handler & Zifchak,
supra note 1, 482 n.133. Hence, the Court's opinion in Allen Bradley may have reflected a
parallel judicial perception of a need to establish limits on union secondary activity.
125. Allen Bradley Co. v. Local No. 3, IBEW, 325 U.S. 797, 808 (1945).
126. Hunt v. Crumboch, 325 U.S. 821 (1945), decided the same day as Allen Bradley,
stressed the independence theme. A trucking firm sued the union because it refused to bargain with or permit its members to work for the firm. Id. at 822. Moreover, the union enforced closed shop agreements with the firm's customers to force cancellation of their
contracts with the firm. Id. at 822-23. Even though the union forced the firm out of business,
apparently because it believed a union member had been shot by an employee of the firm, the
Court found no Sherman Act liability. Id. at 822-24.
127. Professor Leslie points out that typically unions accomplish their objectives through
agreements with employers. Leslie, supra note 103, at 1203-04. While these agreements usually result from the threat or application of economic pressure, such independent union activity is generally insufficient to accomplish the union's goals. Id. For this reason, he concludes
that the Hutcheson immunity does not provide much protection for union activity. Id.
128. 381 U.S. 657 (1965).
129. Id. at 659-61. The United Mine Workers sued Pennington, the small operator, for
royalty payments due under the trust provisions of the National Bituminous Coal Wage
Agreement. The antitrust issue arose as Pennington's cross claim. Id. The Court reversed
judgment for Pennington because of erroneous instructions on the Noerr doctrine. Id. at 66970.
1986]
LABOR AND ANTITRUST
723
empt because the union had conspired with some employers to
eliminate their competitors. I30 Even though the subject of the conspiracy, wages, is the central focus of labor policy, the overall purpose of the alleged conspiracy in excluding competitors was to
restrain the product market.' 3 ' In addition, the Court suggested
that the union and large coal operators had violated labor policy. It
explained that "there is nothing in the labor policy indicating that
the union and the employers in one bargaining unit are free to bargain about the wages, hours and working conditions of other bargaining units or to attempt to settle these matters for the entire
industry."' 132 The Court suggested also that the large firms and the
union may have violated the NLRA by refusing to bargain in good
33
faith.'
In Amalgamated Meat Cutters & Butcher Workmen of North America v.
Jewel Tea Co.,' 3 4 a case decided the same day as Pennington, Jewel
Tea, a self-service market, sued a multi-employer bargaining unit'35
130. Id. at 658. The union agreed not to oppose mechanization and in return the large
operators promised to increase wages as productivity increased. Id. at 660. The Protective
Wage Clause of the collective bargaining agreement required the union to impose the higher
wages upon small operators regardless of whether operators could mechanize and thereby
afford to pay higher wages. Id. The UMW and large operators also took steps to exclude
nonunion produced coal; for example, the companies agreed not to lease coal lands to nonunion operators. Id. at 660-61.
131. Id. at 658. The Court split into three groups of three Justices, with Chief Justice
Warren and Justice Brennen joining Justice White's opinion. Justices Douglas, Black, and
Clark concurred injustice White's opinion but wrote separately that unions and employers
are liable when they agree on a wage scale that exceeds the level that some employers can
afford to pay with the intent to eliminate those employers. Id. at 672-73 (Douglas, J., concurring). Justices Goldberg, Harlan, and Stewart concurred in the reversal, because of the jury
instructions on the Noerr issue, but, in a companion case, dissented from Justice White's opinion on the labor exemption issue. Amalgamated Meat Cutters & Butcher Workmen of N. Am.
v.Jewel Tea Co., 381 U.S. 676, 697 (1965) (Goldberg, J., dissenting). They argued that any
agreement concerning a mandatory subject of bargaining was exempt absent union participation in a price-fixing or market allocation conspiracy and that under this test the agreement
was exempt. Id.
132. United Mine Workers v. Pennington, 381 U.S. 657, 666 (1965).
133. Id.
134. 381 U.S. 676 (1965).
135. A multi-employer bargaining unit is a group of employers that together bargain with
the union or unions that represent their employees. Such bargaining units are legal under the
NLRA. See Charles D. Bonnano Linen Serv. v. NLRB, 454 U.S. 404,414-15 (1982) (collective
bargaining agreement between truck drivers' union and association of employers formed to
negotiate with union); NLRB v. Brown, 380 U.S. 278, 280 (1965) (multi-employer bargaining
group composed of five retail food store operators); see also United Mine Workers v. Pennington, 381 U.S. 657, 664 (1965) (discussing bargaining units with apparent approval).
They are undoubtably legal also under the Sherman Act. See Volkswagenwerk v. FMC, 390
U.S. 261, 287 (1968) (discussing exempt status of agreement resulting from employers'joint
bargaining efforts); but cf. Campbell, supra note 31, at 1048-58, (suggesting that multiemployer bargaining facilitates product market collusion and that therefore its status should be
changed from legal to illegal).
The plaintiff inJewel Tea was part of the bargaining unit and hence had agreed to the restriction. This fact distinguishesJewel Tea from Penningtonwhere the union and favored employers
724
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[Vol. 35:699
and a butchers' union, challenging a collectively bargained provision forbidding meat sales after 6 p.m.13 6 The Court held the agreement exempt from antitrust scrutiny.1 3 7 Justice White, whose
plurality opinion commentators regard as the most influential expression of the case's reasoning, 38 emphasized that the union and
the employer bargaining unit had not conspired against Jewel Tea
and that the union had its own motives for desiring the restriction.
Thus, in contrast to the case in Pennington,Justice White viewed the
union in Jewel Tea as an independent actor. Moreover, he found
marketing hours so "intimately related to wages, hours and working
conditions" that the restriction fell "within the protection of the national labor policy" and was therefore exempt. 139 Justice White determined the restriction was intended as a labor market restraint: it
restrained the product market only as necessary to achieve a legitimate labor goal and was the least restrictive alternative available to
the union. 140
In the most recent major exemption case, Connell Construction Co.
v. Plumbers & Steamfitters Local 100,141 the union coerced the plaintiff,
a contractor with which it had no collective bargaining relationship,
into agreeing that the contractor would hire only subcontractors
that had signed collective bargaining agreements with the union. 142
The Court first stressed the independence theme by noting that the
Clayton and Norris-LaGuardia Acts do not "exempt concerted acagreed to impose the "ruinous" wages on other employers. United Mine Workers v. Pennington, 381 U.S. 657, 659-60 (1965).
136. Amalgamated Meat Cutters & Butcher Workmen of N. Am. v. Jewel Tea Co., 381
U.S. 676, 676 (1965). By the time the case reached the Supreme Court, there was no claim of
a union-employer conspiracy. Jewel Tea originally alleged that the unions had conspired with
small, less efficient retailers to restrain jewel and the other large retailers from providing meat
on a self-service basis at night. Id. at 681. The unions denied the conspiracy charge and
claimed that their only goal was to protect their members from night work. Id. at 682. The
trial court found no evidence of conspiracy and dismissed the complaint. Id. The Court of
Appeals reversed the decision without disturbing the trial court's finding of no conspiracy. Id.
at 683.
137. Id. at 697. The Court split into the same three groups as in Pennington. See supra note
131. Justices Goldberg, Harlan, and Stewart would have exempted the agreement because it
concerned a mandatory subject of bargaining. Amalgamated Meat Cutters & Butcher Workmen of N. Am. v.Jewel Tea Co., 381 U.S. 676, 697 (1965) (Goldberg,J., concurring). Justices
Douglas, Black, and Clark dissented inJewel Tea on the ground that the marketing hours restriction was an anticompetitive conspiracy. Id. at 737 (Douglas, J., dissenting).
138. Handler & Zifchak, supra note 1, at 484 n.142; Leslie, supra note 103, at 1210.
139. Amalgamated Meat Cutters & Butcher Workmen of N. Am. v. Jewel Tea Co., 381
U.S. 676, 689-90 (1965).
140. Id. at 691.
141. 421 U.S. 616 (1975).
142. The union picketed Connell until Connell signed. Id. at 620. The district court denied Connell's request for an injunction, holding that the construction industry proviso of
§ 8(e) exempted the agreement from antitrust scrutiny. Id. at 621. The Fifth Circuit affirmed,
holding the agreement exempt because the union acted to further its legitimate goals without
conspiring with employers. Id.
1986]
LABOR AND ANTITRUST
725
tion or agreements between unions and non-labor parties."' 143
Examining the agreement under the "limited nonstatutory exemption" for "union-employer agreements," the Court refused to
shield the agreement because it was a direct restraint on the business market with "substantial anticompetitive effects, both actual
and potential, that would not follow naturally from the elimination
of competition over wages and working conditions."' 14 4 For example, the Court concluded that the restriction could exclude nonunion firms that were more efficient for reasons other than their level
of compensation. 14 5 Besides stressing the product market/labor
market theme, the Court found the restriction inconsistent with labor policy: Connell and the union had no collective bargaining relationship and, as a result, the restriction violated the section 8(e)
secondary boycott prohibition. 146 Connell thus became the first postNorris-LaGuardia Act case in which the Court denied the exemption
to conduct that was free of any suggestion of an union-employer
conspiracy: in other words, not a Cartel Model case.
These Supreme Court exemption decisions define generally the
contours of the labor exemption and identify the major themes governing its application. The following sections apply these general
principles and other relevant case law and commentary to several
specific categories of labor restraints. In particular, the independence theme underlies the principle discussed in the next section
that a union is treated as a single entity rather than an illegal combination. The product market/labor market and labor law themes are
key elements of the nonstatutory exemption for union-employer
agreements, which is discussed in Section IV.
B.
The Section 6 Principle
Section 6 of the Clayton Act provides that "labor ... organizations, or the members thereof, shall not be held or construed to be
illegal combinations or conspiracies in restraint of trade, under the
antitrust laws."' 14 7 Section 20 of the Clayton Act and the NorrisLaGuardia Act effectuate this provision by prohibiting courts from
143. Id. at 621-22. The Court does not explain why it viewed Connell's coerced acquiescence to the agreement as a combination with the union. It may have recognized, as Professor
Leslie points out, that only by agreement with an employer (regardless of how it obtains the
agreement) can a union have much effect on either a labor or a product market. See supra note
127.
144. Id. at 625. The Court, however, failed to identify actual anticompetitive effects; it
listed merely several possible effects. Id. at 623-25.
145. Id. at 624-25.
146. Id. at 626-28.
147. 15 U.S.C. § 17 (1982).
726
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
issuing injunctions against specified unilateral labor union activities. 1 48 Taken together, these provisions mean that, for purposes of
the Sherman Act, a labor organization is treated as though it is a
single entity, rather than a collection of competing economic
49
actors.1
This "Section 6 principle" is implicit in every labor/antitrust case
for unilateral activity. 150 Indeed, even when the courts deny the
151
"statutory exemption," in reality, they apply it.
Confronted with
a challenge to an union-employer agreement, the courts do not suggest that the presence of a union, by itself, satisfies the concerted
action requirement. For example, one court concluded: "Since the
Union's activity is not unilateral, this court concludes that the Union
is not entitled to a statutory exemption." 1 52 This language is imprecise, for in fact the union's very existence was protected from antitrust challenge by "a statutory exemption." A more accurate
statement would be: "Since the union combined with a non-labor
148. Id. at § 52.
149. Thus, these provisions mean that a union is treated just like a corporation, which is
also a group of employees that work together, and unlike a trade or professional association.
150. It is obviously at the heart of the statutory exemption, which protects such activities
as strikes, picketing, and boycotts, that the Supreme Court first articulated in United States v.
Hutcheson, 312 U.S. 219, 232 (1941). See also Hunt v. Crumbach, 325 U.S. 821, 824 (1945)
(upholding unilateral union decision not to work for petitioner or accept petitioner's employees as members). Though the Court did not use the term, courts and commentators have
called this immunity the "statutory exemption," since in Connell the Court distinguished it
from the "nonstatutory exemption" for certain union-employer concerted activity. Connell
Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 622 (1975). Several preConnell cases granted the statutory exemption without so naming it. lodice v. Calabrese, 512
F.2d 383, 390-91 (2d Cir. 1975); Prepmore Apparel, Inc. v. Amalgamated Clothing Workers,
431 F.2d 1004, 1006-07 (5th Cir. 1970).
The statutory exemption has been at issue relatively infrequently, probably because its
scope is narrow and fairly clear. In some cases, however, it has been a primary ground for
immunizing activity from, or subjecting it to, antitrust scrutiny. E.g., Altemose Constr. Co. v.
Building & Constr. Trades Council, 751 F.2d 653, 658-59 (3d Cir. 1985), cert. denied, 106 S.
Ct. 15.3 (1986) (denial of statutory and nonstatutory exemptions); Mid-America Regional
Bargaining Ass'n v. Will County Carpenters, 675 F.2d 881 (7th Cir.), cert. denied, 459 U.S. 860
(1982) (statutory and nonstatutory exemptions applied); Home Box Office v. Directors Guild,
531 F. Supp. 578, 593-603 (S.D.N.Y. 1982) (statutory and nonstatutory exemptions applied),
aftd, 708 F.2d 95 (2d Cir. 1983); LK Prods., Inc. v. AFTRA, 475 F. Supp. 251, 266-73 (S.D.
Tex. 1979) (statutory exemption applied). See generally L. Gold, TheAntitrust ExemptionforJoint
Employee Activity, 21 Duq. L. REv. 343 (1983).
151. See, e.g., In re Bituminous Coal Wage Agreements Litig., 580 F. Supp. 670, 682-84
(W.D. Pa. 1984) (denying exemption to union that combined with nonlabor entity), vacatedon
other grounds, 756 F.2d 284 (3d Cir.), cert. denied sub nom., Duquesne Light Co. v. International
Union, United Mine Workers, 106 S.Ct. 180 (1985); Schnabel v. Building & Constr. Trades
Council, 563 F. Supp. 1030, 1043-46 (E.D. Pa. 1983) (denying statutory exemption to union
contractors that conspired with nonlabor groups to monopolize construction industry);James
Julian, Inc. v. Raytheon Co., 499 F. Supp. 949, 955 (D.Del. 1980) (denying exemption to
restriction not contained in collective bargaining agreement).
152. In re Bituminous Coal Wage Agreements Litig., 580 F. Supp. 670, 683 (W.D. Pa.
1984), vacated on other grounds, 756 F.2d 284 (3d Cir.), cert. deniedsub nom, Duquesne Light Co.
v. International Union, United Mine Workers, 106 S.Ct. 180 (1985).
1986]
LABOR AND ANTITRUST
727
entity, its statutory exemption is insufficient to shield the challenged
activity from antitrust scrutiny."
For the section 6 principle to apply, three requirements must be
met. First, there must be a bona fide labor organization and not
either an association of independent contractors or an employer
dominated union. Second, the organization must promote legitimate labor interests rather than entrepreneurial or other interests
unrelated to the employer-employee relationship. Third, the organization must act independently of any nonlabor group. 15 3 The following subsections consider these requirements in more detail.
1.
Bona fide labor organization
Though a party seeking the protection of section 6 must be a
bona fide labor organization, 154 the cases identify generally which
organizations are not genuine labor organizations rather than define
what is a true labor organization.
Moreover, an association of independent contractors may not
claim to be a union to secure a legally protected status and thereby
immunize efforts to reduce competition among its members. In Columbia River Packers Ass'n v. Hinton,155 the Supreme Court held that
an association of independent contractors cannot lawfully fix prices
by masquerading as a labor union.1 56 In determining whether so153. The first and second requirements flow from the Clayton and Norris-LaGuardia Acts'
requirements that the challenged activity involve a labor dispute. Infra note 154. See generally
P. AREEDA & D. TURNER, supra note 37, at 195-98 (discussing scope of labor exemption in
Clayton and Norris-LaGuardia Acts). Section 13 of the Norris-LaGuardia Act defines "labor
dispute" to include "any controversy concerning terms or conditions of employment, or concerning the association of representation of persons in negotiating, fixing, maintaining,
changing, or seeking to arrange terms or conditions of employment, regardless of whether or
not the disputants stand in the proximate relation of employer and employee." 29 U.S.C.
§ 115 (1982).
The third requirement-independent action-comes from judicial interpretation of the
statutory exemption. See Connell Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S.
616, 622 (1975) (Clayton and Norris-LaGuardia Acts do not "exempt concerted action or
agreements between unions and non-labor parties").
154. See H.A. Artists & Assocs., Inc. v. Actors' Equity Ass'n, 451 U.S. 704, 717 n.20 (1981)
(party seeking refuge in the statutory exemption must be a bona fide labor organization and
not independent contractor); P. AREEDA & D. TURNER, supra note 37, at 195 ("Whatever the
scope of the labor exemption, the focus of the Clayton and Norris-LaGuardia Acts on 'labor
disputes' implies that only bona fide labor organizations may take advantage of it.").
155. 315 U.S. 143 (1942).
156. Id. at 147. In that case, the Pacific Coast Fisherman's Union acted as a bargaining
agent for selling fish to packers and canners. Id. at 144. The Court held the joint sales arrangement not exempt because the fishermen were independent businessmen and the controversy involved the sale of fish rather than wages, hours, or other conditions of employment).
Id. at 147; see also Los Angeles Local 626 v. United States, 371 U.S. 94 (1962) (holding concerted activity between union and independent "grease peddlers" violative of § 1 of Sherman
Act); United States v. National Ass'n of Real Estate Bds., 339 U.S. 485 (1950) (finding real
estate board conspired to fix commission rates in violation of § 3 of Sherman Act); United
States v. Women's Sportswear Ass'n, 336 U.S. 460 (1949) (rejecting argument of independent
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[Vol. 35:699
called "union members" are really independent contractors or entrepreneurs, the courts have relied on principles of master-servant
law. For example, where "union members" have considerable control over their work, the courts have held them to be independent
15 7
contractors.
On the other hand, courts sometimes have treated independent
contractors as de facto employees because the contractors competed
with true employees. Typically, these cases involve two groups of
workers, one of which is clearly a union and a second competing
group which is less clearly so. For example, in American Federationof
Musicans v. Carroll,15 8 the court treated independent contractor
band leaders as a "labor group" involved in a "labor dispute" because there was "job or wage competition or some other economic
inter-relationship affecting legitimate union interests between the
union members and the independent contractors."' 59 Moreover, an
employer dominated, or "sham," union may not claim the exemp60
tion. In Carpenters District Council v. United ContractorsAssociation,1
for example, the court denied the exemption to a "union" whose
members were forced to join by their employers and whose funds
161
came from the employers.
2. Labor interest
Even a court that acknowledges that a union is a genuine associastitching contractors that inclusion of labor provisions made agreement immune from antitrust scrutiny); National Ass'n of Women's and Children's Apparel Salesmen v. FTC, 479 F.2d
139 (5th Cir.) (allowing FTC to rely on NLRB holding in collateral proceeding that association was not labor organization involved in bona fide labor dispute), cert. denied, 414 U.S. 1004
(1973).
157. International Ass'n of Heat and Frost Insulators v. United Contractors Ass'n, 483
F.2d 384, 390-91 (3rd Cir. 1973) (distinguishing independent contractors from union members based on measure of employer control); see, e.g., Taylor v. Journeymen Horseshoers
Union, 353 F.2d 593, 601 (4th Cir. 1965) (horseshoers that exercised control over work held
to be independent contractors).
158. 391 U.S. 99 (1968).
159. Id. at 105-06. The Court, therefore, exempted union "regulations" that established
a minimum price of "club dates" because this minimum was necessary to protect the wages of
union members. Id. at 106. Although union members sometimes operated as independent
contractors, the union had not agreed on the minimum price with nonunion independent
contractors. Rather, the union promulgated this regulation unilaterally. Id. at 105; see also
H.A. Artists & Assocs., Inc. v. Actors Equity Ass'n, 451 U.S. 704, 720-22 (1981) (holding
licensing agreement between actors' union and independent agents exempt because agents
were within the "other economic inter-relationship" part of Carroll standard); Local 24, Int'l
Bhd. of Teamsters v. Oliver, 358 U.S. 283, 292-95 (1959) (finding minimum rental clause in
agreement between union and independent interstate motor carriers exempt using Carroll
test).
160. 484 F.2d 119 (6th Cir. 1973).
161. Id. at 125-26; see also International Ass'n of Heat and Frost Insulators v. United Contractors Ass'n, 483 F.2d 384, 390-92 (3rd Cir. 1973) (membership in employer association
meant automatically membership in alleged union).
1986]
LABOR AND ANTITRUST
729
tion of employees will deny the exemption if the union pursues what
the court regards as an illegitimate goal. 162 Because there have
been few cases on this point, it is impossible to articulate a test that
distinguishes between legitimate and illegitimate union activity.
One fairly clear rule, however, is that the exemption is unavailable'
when the union promotes entrepreneurial objectives. Thus, a union
that owned a store could not, with antitrust immunity, use its collective bargaining power to compel employers to deal exclusively with
16 3
that store.
On the other hand, courts have exempted joint employee conduct
in other disputes that only indirectly affected the employees' welfare. 164 Moreover, the Supreme Court recently held that the Norrisprotects a politically motivated union boycott of SoLaGuardia Act
65
viet goods.'
An open issue is whether the exemption applies if unilaterally the
union commits an unfair labor practice, such as violating section
8(b)(4) of the NLRA by engaging in secondary picketing. 166 Arguably, an objective that requires the union to commit an unfair labor
practice is illegitimate. Indeed, the Fifth and Eighth Circuits have
162. For example, one court denied the exemption to a union of film projector operators
that refused to show a film, reasoning that impeding only one transaction is not a normal
union objective and that the dispute did not involve the employer-employee relationship.
I.P.C. Distribs. v. Chicago Moving Picture Mach. Operators Local 110, 132 F. Supp. 294, 299300 (N.D. Ill. 1955).
163. Streiffer v. Seafarers Sea Chest Corp., 162 F. Supp. 602, 607 (E.D. La. 1958); accord
Thompson Newspapers v. Toledo Typographical Union No. 63, 387 F. Supp. 351, 355 (E.D.
Mich. 1974) (holding conspiracy between newspaper and union representing its employees to
drive competitor newspaper out of business not exempt from antitrust scrutiny).
164. For example, the Supreme Court exempted picketing by an association of black activists to induce a grocery company to hire black clerks because, although it did not involve
wages, hours, or working conditions, the dispute affected the employer-employee relationship. New Negro Alliance v. Sanitary Grocery Co., 303 U.S. 552, 559-61 (1938).
165. Jacksonville Bulk Terminals, Inc. v. ILA, 457 U.S. 702, 713 n.12 (1982). In that case,
the Court found that the dispute "concerned the interpretation of the labor contract." Id. at
713. In dictum, it added that even without the dispute over the scope of the no-strike clause,
the union's political "objections were expressed in a work stoppage by employees against
their employer, which focused on particular work assignments. Thus apart from the collective
bargaining agreement, the employer-employee matrix would be the matrix of the controversy". Id. at 713 n.12.
Previously, the First Circuit denied the statutory exemption to a union boycott of Soviet
cargo because the union's political motivation showed that it did not act in its "self interest."
Allied Int'l, Inc. v. International Longshoreman's Ass'n, 640 F.2d 1368, 1380-81 (1st Cir.
1981), cert. denied, 458 U.S. 1120 (1982). Even so, the court found no antitrust liability in the
absence of a restraint on commercial competition. Id. In didta, the court added that "it would
be a rare case when, absent a specific anticompetitive object or collaboration with non-labor
groups, a mere refusal to work by members of a labor union, even though the result of concerted action, would be held to violate the Sherman Act". Id. at 1381.
166. See infra notes 237-58 and accompanying text (discussing how status of activity as
unfair labor practice also may determine exemption status). This issue is probably of more
theoretical than practical importance since it would be difficult to characterize a unilateral
union unfair labor practice as an antitrust violation.
730
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
not found that a secondary boycott has grown out of a labor dispute
unless the primary employer and the secondary employer are economically aligned in a substantial matter, 167 i.e., unless the court
finds that a valid defense to a charge of illicit secondary activity is
present. The Ninth Circuit, however, has held that if there is a labor
dispute, the Norris-LaGuardia Act prevents the courts from enjoining even an illegal secondary boycott.' 6 8
3.
Unilateralactivity
Although section 6 protection is insufficient to protect a union
combination with a nonlabor group, 16 9 it does exempt combinations
among unions and other labor groups. The Supreme Court in Carroll, for example, accorded the statutory exemption to a union-imposed agreement that required orchestra leaders, who were
independent contractors, to charge a minimum price for certain
bookings because the orchestra leaders comprised a labor group. 170
If the orchestra leaders had been a nonlabor group, the agreement
would have been tested under -the narrower nonstatutory
exemption.
IV.
THE NONSTATUTORY EXEMPTION
This part focuses on the nonstatutory exemption because it is
most frequently at issue in labor/antitrust cases. Section A describes the traditional approach to the exemption, which relies principally on the product market/labor market theme. This approach
167. Ashley, Drew & N. Ry. v. United Transp. Union, 625 F.2d 1357, 1364-65 (8th Cir.
1980) (finding that injunction could issue against union when it failed to show substantial
connection between target of secondary picketing and primary employer); Brotherhood of
R.R. Trainmen v. Atlantic Coast Line R.R., 362 F.2d 649, 651 (5th Cir.) (refusing injunctive
relief to terminal operator picketed by union because terminal constituted "integral part" of
struck railroad's day-to-day operations), af'd by an equally divided court, 385 U.S. 20 (1966).
168. Smith's Management Corp. v. IBEW Local 357, 737 F.2d 788, 792 (9th Cir. 1984).
169. See Connell Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 622-23
(1975).
170. American Fed'n of Musicians v. Carroll, 391 U.S. 99, 102, 105-14 (1968); see also H.A.
Artists & Assocs., Inc. v. Actors Equity Ass'n, 451 U.S. 704, 720-22 (1981) (exempting agreement between actors' union and independent agents because agents satisfied Carroll standard); Local 24, Int'l Bhd. of Teamsters v. Oliver, 358 U.S. 283, 292-95 (1959) (relying on
Carrollto uphold minimal rental agreement between union and independent truckers); Milk
Wagon Drivers' Local 753 v. Lake Valley Farm Prods., Inc., 311 U.S. 91, 92-96 (1940) (finding
existence of bona fide labor dispute between unionized milk wagon drivers and cut rate vendors). In H.A. Artists, however, the Supreme Court struck down a system of franchise fees
imposed on the agent by the union while upholding the rest of the agency system. H.A.
Artists & Assocs., Inc. v. Actors Equity Ass'n, 451 U.S. 704, 713-22 (1981). The decision
regarding the franchise fees suggests that the statutory exemption is not automatically available whenever the union does not combine with a nonlabor group. A more complicated analysis along the lines of H.A. Artists, however, may be required only in industries with structures
resembling "the peculiar structure of the legitimate theatre industry." Id. at 720.
1986]
LABOR AND ANTITRUST
emphasizes the challenged restraint's purpose, likely product mar-
ket effects, and labor policy justifications. It denies the exemption
to activities that facilitate an employer cartel, a straightforward test.
Under a variety of guises, the traditional approach denies also the
exemption to activities that restrain the product market more than
necessary to accomplish legitimate labor objectives. Although this
test is imprecise, I demonstrate that labor law principles may allow
reasonable prediction of how the courts will apply it. Section B describes a newer approach that focuses on a challenged restraint's
legality under the NLRA: denying the exemption to illegal activities
and granting it to explicitly sanctioned activities. The new approach
may eliminate the need for the traditional, imprecise tests for noncartel cases. Section C discusses the costs and benefits of linking an
activity's exemption status to labor law principles.
A.
The "Traditional" Approach
Traditionally, the courts have looked to the purpose and effect of
a union-employer agreement in deciding whether the nonstatutory
exemption shielded it from antitrust scrutiny. Perhaps the most settled principle underlying the exemption is that a union may not facilitate an employer cartel. This principle is discussed in Section
IV.A.1. Absent such a conspiratorial purpose, the courts have attempted to apply the product market/labor market distinction, evaluate antitrust and labor policy interests, or both. In this regard,
courts generally employ balancing tests that are incapable of principled or precise application. Section IV.A.2 discusses these tests and
suggests some guidelines rooted in labor law and policy that may
make the analysis more precise when the challenged activity does
not facilate an employer cartel.
1.
Facilitationof employer cartels
Hutcheson suggests that a union forfeits the statutory exemption
whenever it "combines" with an employer. 17 ' But, because Congress desired clearly to promote collective bargaining, the cases
have created a nonstatutory exemption for most collective bargaining agreements. Allen Bradley and Pennington demonstrate, however,
that some collective bargaining agreements further classic employer
conspiracies in restraint of trade.' 7 2 In these situations, the courts
171. See United States v. Hutcheson, 312 U.S. 219, 232 (1941) (labor exemption protects
union activity so long as union acts in self-interest and does not combine with nonlabor
group).
172. See United Mine Workers v. Pennington, 381 U.S. 657, 668 (1965) (holding agreement to impose uniform high wages not exempt because union had conspired with employers
732
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
have refused consistently to hold the restrictive agreements exempt
or to shelter any union activity that furthers them.
In particular, the courts have denied the exemption to two types
of union-employer agreements designed to facilitate employer market power. One type of conspiracy involves an union-employer
agreement to fix prices, restrict output, divide markets, or exclude
competitors-a conventional antitrust conspiracy with union involvement. In the other type of conspiracy, the union is the key actor: it agrees to impose contract terms on some employers in order
to drive them out of business, thereby benefiting favored employers
who in turn share these benefits with the union or its key officials.
a. Conspiraciesto fix prices or exclude competitors
In Allen Bradley Co. v. Local No. 3, IBEW, 173 the Court held that the
labor exemption does not protect a union-employer combination to
fix prices or monopolize the product market even though the conspiracy helped achieve legitimate union goals. As the Court declared succinctly: "business monopoly is no less such because a
union participates."' 174 Many decisions following Allen Bradley have
condemned union-employer combinations that purposely exclude
the employers' competitors or fix product prices.' 75 Several courts,
however, have refused to follow Allen Bradley absent significant evidence that the union's purpose was to further an employer conspirto drive small operators from industry); Allen Bradley Co. v. Local No. 3, 325 U.S. 797, 810
(1945) (denying exemption to union-business group combination to fix prices and eliminate
competition).
173. 325 U.S. 797 (1945).
174. Id. at 811. The case involved secondary boycotts of nonunion manufacturers and
contractors. The Court indicated that although the boycotts clearly violated the Sherman
Act, they would have been exempt from antitrust liability had they not been part of an employer conspiracy. Id. at 807.
175. See, e.g., United States v. Employing Plasterers Ass'n, 347 U.S. 186, 190 (1954)
(agreement between union and contractors association to suppress competition among local
contractors and exclude nonlocal and new contractors); Brotherhood of Carpenters v. United
States, 330 U.S. 395, 411 (1947) (conspiracy among union, manufacturers, and dealers to
exclude nonlocal millwork manufacturers, prevent area dealers from handling nonlocal
goods, and fix prices through use of a required wage scale); Altemose Constr. v. Building &
Constr. Trades Council, 751 F.2d 653, 658 (3d Cir. 1985), cert. denied, 106 S.Ct. 1513 (1986)
(evidence of conspiracy between union and unionized contractors sufficient to deny summary
judgment motion); Philadelphia Record Co. v. Manufacturing Plate-Engravers Ass'n, 155 F.2d
799, 804 (3d Cir. 1946) (union-manufacturers association conspiracy to exclude plaintiff by
preventing night photo engraving work); Harlem Consumers Coop. v. Associated Grocers,
408 F. Supp. 1251, 1286 (S.D.N.Y. 1976) (finding evidence sufficient for jury to find conspiracy against cooperative supermarket by union representatives); United States v. Hamilton
Glass Co., 155 F. Supp. 878 (N.D. Ill.
1957) (denying motion to dismiss complaint alleging
conspiracy between union and glazing contractor). Cf. Ackerman-Chillingworth v. Pacific
Elec. Contractors Ass'n, 405 F. Supp. 99, 107 (D. Hawaii 1975) (union-employer agreement
to reduce competition held nonexempt but legal under rule of reason), aJ'd on other grounds,
579 F.2d 484 (9th Cir. 1978), cert. denied, 439 U.S. 1089 (1979); Anderson-Friberg Inc. v.
Justin R. Clary, 98 F. Supp. 75, 82 (S.D.N.Y. 1951) (denying preliminary injunction against
1986]
LABOR AND ANTITRUST
733
acy.' 7 6 Even under such a subjective standard, the proscription of
union participation in an employer cartel constitutes a major limitation on the labor exemption's scope, even though the union and
employer have a collective bargaining relationship 17 7 or an agreement on mandatory subjects of bargaining such as wages 178 or
17 9
hours of work.
b.
Conspiracies to impose ruinous wages
In United Mines Workers v. Pennington, 80 a small coal operator
claimed that the United Mine Workers (UMW) had agreed with the
large operators to impose high wages on smaller, more labor-intensive operators in order to eliminate those smaller rivals from the
market. Writing for the Court, Justice White acknowledged that a
union acting in furtherance of its own interests may negotiate wages
with a multi-employer bargaining unit and may seek the same terms
from other employers.' 8 ' A union, however,
forfeits its exemption from the antitrust laws when it is clearly
alleged conspiracy among union, dealers, and manufacturers to exclude nonlocal finished
granite).
Confronted with peculiar fact situations, occasionally the Court held exempt agreements
that effectively fixed product prices. These cases, however, did not involve union efforts to
create employer market power. See American Fed'n of Musicians v. Carroll, 391 U.S. 99
(1968); Local 24, Bhd. of Teamsters v. Oliver, 358 U.S. 283 (1959); see also text at notes 21019 infra.
176. See, e.g., National Constructors Ass'n v. National Elec. Contractors Ass'n, Inc., 498 F.
Supp. 510, 543 (D. Md. 1980) (collectively bargained agreement that union would require
contractors to contribute 1% of payroll to industry fund held nonexempt and per se illegal as
price fixing scheme), aftd as modified sub nom., National Elec. Contractors Ass'n v. National
Constructors Ass'n, 678 F.2d 492 (4th Cir. 1982), cert. dismissed, 463 U.S. 1234 (1983); Webb
v. Bladen, 480 F.2d 306, 308 (4th Cir. 1973) (finding no conspiracy when union acted unilaterally and in pursuit of legitimate union goals); Cedar Crest Hats, Inc. v. United Hatters
Corp., 362 F.2d 322, 328 (5th Cir. 1966) (ruling evidence insufficient to prove conspiracy
surrounding union threats to distribute leaflets urging customers to buy only union hats);
Weir v. Chicago Plastering Inst., 272 F.2d 883, 888 (7th Cir. 1959) (refusing to apply Allen
Bradley in absence of evidence that union refusal to work was result of conspiracy); Adams
Dairy Co. v. St. Louis Dairy Co., 260 F.2d 46, 54-55 (8th Cir. 1958) (affirming finding of no
conspiracy implicit injury verdict); Courant v. Int'l Photographers, 176 F.2d 1000, 1002 (9th
Cir. 1949) (finding no union-employer cartel when union acted in its self-interest without
intent to conspire), cert. denied, 338 U.S. 943 (1950).
177. See United States v. Employing Plasterers Ass'n, 347 U.S. 186, 190 (1954) (denying
exemption to collectively bargained agreement when union conspired with business contractors to suppress competition).
178. See Adams Dairy Co. v. St. Louis Dairy Co., 260 F.2d 46, 55 (8th Cir. 1958) (finding
question of conspiracy in labor contract setting wages properly submitted to jury to determine
if union joined with nonlabor group to restrict trade).
179. See Philadelphia Record Co. v. Manufacturing Photo-Engravers Ass'n, 155 F.2d 799,
803 (3d Cir. 1946) (granting preliminary injunction when facts evidenced unlawful combination of labor and business to set work hours); cf. Amalgamated Meat Cutters & Butcher Workmen of N. Am. v.Jewel Tea Co., 381 U.S. 676, 735 (1965) (finding union-employer agreement
restricting operating hours exempt in absence of employer cartel).
180. 381 U.S. 657 (1965).
181. Id. at 665.
734
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
shown that it has agreed with one set of employers to impose a
certain wage scale on other bargaining units. One group of em-
ployers may not conspire to eliminate competitors from the industry and the union is liable with the employers if it becomes a party
i8 2
to the conspiracy.
To reach this conclusion Justice White balanced labor and antitrust policies. Although acknowledging that wages are a mandatory
subject of bargaining and that labor policy favors negotiations between unions and multi-employer bargaining units, Justice White
concluded that an agreement to impose a specified wage scale on
nonparticipants to the negotiations contravened labor policy.' 8 3 He
asserted, although without substantial case authority, that the NLRA
mandates unit-by-unit bargaining. 184
With regard to antitrust policy, Justice White argued that the
harm of the Pennington agreement was eclipsed only slightly by the
harm that would be caused by a hypothetical agreement to impose
higher wages on rivals, an agreement with "obvious" anticompetitive
potential.' 8 5 Moreover, the Pennington agreement stripped the
union of its freedom to bargain independently and "such restraints
upon the freedom of economic units to act according to their own
choice and discretion ...
run counter to antitrust policy.' 8 6
The courts have applied the Pennington doctrine both within and
outside of the mining industry. Since Pennington, small mining operators have prevailed against the UMW on the same theory in three
of five attempts.' 8 7 The Pennington doctrine also has been applied to
182. Id. at 665-66. On remand, the district court found the evidence insufficient to establish plaintiff's claim that the union had acted with anticompetitive purpose. Lewis v. Pennington, 257 F. Supp. 815, 864 (E.D. Tenn. 1966), afd in part and revd in part, 400 F.2d 806
(6th Cir.), cert. denied, 393 U.S. 983 (1968).
183. United Mine Workers v. Pennington, 381 U.S. 657, 666-67 (1965).
184. Id. at 667. Justice White reasoned also that the union's obligation to its members is
best served if the union retains the ability to respond to each bargaining situation as the
individual circumstances warrant, unrestricted by some prior agreement with the favored employers. Id. at 666.
185. Id. at 668.
186. Id.
187. See South-East Coal Co. v. Consolidation Coal Co., 434 F.2d 767, 789 (6th Cir. 1970)
(affirming district court holding that UMW acted with purpose of eliminating small operators), cert. denied, 402 U.S. 983 (1971); Tennessee Consol. Coal Co. v. United Mine Workers,
416 F.2d 1192, 1204 (6th Cir. 1969) (affirming trial court verdict holding union liable), cert.
denied, 397 U.S. 964 (1970); Solar Fuel Co. v. United Mine Workers, 346 F. Supp. 789, 798
(W.D. Pa. 1972) (denying union motions for new trial orjudgement n.o.v.), a/d, 481 F.2d
1399 (3rd Cir. 1973), cert. denied, 416 U.S. 909 (1974).
In the other two cases, the plaintiffs failed to prove that the union and large operators
agreed to impose predetermined wages on the small operators. Smitty Baker Coal Co. v.
United Mine Workers, 620 F.2d 416, 438 (4th Cir.), cert. denied, 449 U.S. 870 (1980); Ramsey
v. United Mine Workers, 344 F. Supp. 1029, 1039 (E.D. Tenn. 1972), afd, 481 F.2d 742 (6th
Cir.), cert.
denied, 414 U.S. 1067 (1973).
1986]
LABOR AND ANTITRUST
735
activities by unions other than the UMW, 18 8 even when nonwage
terms of employment were imposed or when the union conspired
with only a single employer. 189
Despite some case law to the contrary,' 90 the prevailing authority
supports the position that the union must have had an exclusionary
purpose to lose the exemption because of an agreement to impose
wages on rivals.' 91 In Pennington, Justice White reaffirmed the principles of Allen Bradley, which he read as predicating liability on a
showing of an exclusionary purpose.192 Moreover, Justice Douglas's
concurrence in Pennington, which is premised on the existence of an
exclusionary purpose, must be considered persuasive because without the votes of the three Justices who signed the Douglas opinion,
Justice White would not have commanded a majority of the
Court. 193 Ultimately, however, the issue may be more of academic
than practical interest because even courts not requiring exclusionary intent for denial of the exemption94have held that such an intent
is required to find antitrust liability.'
In sum, Pennington denies the nonstatutory exemption to a union
that agrees with one or more employers to impose wages or other
employment terms upon rival employers when the goal is to drive
the rivals out of business and thereby reduce competitive pressures
on the favored employers. 19 5 Thus, under both Allen Bradley and
188. See, e.g., Pinter Bros. v. Fitzsimmons, 1979-2 Trade Cas. 62,840 (E.D.N.Y. 1978)
(denying union motion to dismiss challenge to agreement between union and freight carriers
to impose conditions of employers on other carriers); Morse Bros., Inc. v. International Union
of Operating Eng'rs, 1974-2 Trade Gas. 75,412 (D. Or. 1974) (holding that agreement that
required employer to subcontract only to contractors that have signed the agreement or
agreed to its terms was not exempt and violated § 1 although there was no evidence that
signatories intended to impose ruinous terms to drive other firms out of business); Iodice v.
Calabrese, 345 F. Supp. 248, 269 (S.D.N.Y. 1972) (union imposition of similar contracts on all
employers exempt absent proof of conspiracy), afd in part, 512 F.2d 383 (2d Cir. 1975).
189. See Embry-Riddle Aeronautical Univ. v. Ross Aviation, Inc., 504 F.2d 896, 902-03
(5th Cir. 1974) (finding evidence supported jury verdict holding union and employer liable
for wage agreement entered into with knowledge that higher wages would cause plaintiff to
default on contract when plaintiff assumed contract from employer).
190. See Smitty Baker Coal Co. v. United Mine Workers, 620 F.2d 416,437 (4th Cir. 1980)
(holding that union forfeits its exemption when it agrees to impose wage scale on other bargaining units, without regard to intent, but that union will incur antitrust liability only if it acts
with predatory intent); see also Morse Bros., Inc. v. International Union of Operating Eng'rs,
1974-2 Trade Gas. 75,412 (D. Or. 1974) (holding that no predatory intent need be shown).
191. See Embry-Riddle Aeronautical Univ. v. Ross Aviation, Inc., 504 F.2d 896, 903-04
(5th Cir. 1974) (evidence of conspiratorial intent insufficient to lose exemption; rather proof
of exclusionary purpose between union and favored employer must exist).
192. United Mine Workers v. Pennington, 381 U.S. 657, 662 (1965).
193. See Smitty Baker Coal Co. v. United Mine Workers, 620 F.2d 416, 425-29 (4th Cir.
1980) (discussing division of opinion in Pennington).
194. Id. at 431; see South-East Coal Co. v. Consolidation Coal Co., 434 F.2d 767, 783 (6th
Cir. 1970) (finding antitrust liability only when union and employer contract with conscious
intent to drive competitors out of business).
195. Similarly, anticompetitive intent must be shown to deny the exemption to "most fa-
736
THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 35:699
Pennington, unions cannot advance their own interests by helping
employers fix prices or exclude rivals. A union cannot obtain higher
wages by facilitating the achievement of supracompetitive profits.
Conduct that fits the Cartel Model of Part II, therefore, is not exempt from antitrust scrutiny.
2.
Other union-employer agreements
Allen Bradley and Pennington do not consider the limits of antitrust
scrutiny when the evidence does not establish a Cartel Model restraint. In these circumstances, the availability of the exemption depends upon the general criteria articulated inJewel Tea and Connell.
Unfortunately, these cases articulate somewhat different tests-the
"intimately related" test and the "follow naturally" test, respectively-which the courts have applied in somewhat dissimilar factual
contexts. Moreover, both formulations attempt to balance labor
and antitrust policy interests and to determine whether the primary
effect of a restraint is on the labor market or the product market.
Not only are both inquiries inherently inexact, but the Supreme
Court has not specified the precise operation of either test. As a
result, both tests appear to call for a nebulous and uncertain balancing exercise.' 9 6 The following subsections explore each test in
more detail. Moreover, they show how use of labor law principles
permits some reasonable predictions as to how the courts will apply
the tests.
a.
The "intimately related" test
Amalgamated Meat Cutters & Butcher Workmen of N. Am. v. Jewel Tea
Co. 1 9 7 involved a collective bargaining agreement between meat re-
tailers, including Jewel Tea, and butchers' unions which prohibited
the sale of meat from 6 p.m. to 9 a.m. Justice White's opinion stated
that the marketing hours restriction would fall within the protection
of national labor policy, and therefore would be exempt, if
the restriction, like wages, and unlike prices, is so intimately related to wages, hours and working conditions that the unions' sucvored nation" clauses (require the union to modify a collective bargaining agreement with
one employer to reflect any more favorable terms that emerge from later negotiations with
other employers). See Associated Milk Dealers, Inc. v. Milk Drivers Union, Local 753, 422
F.2d 546, 554 (7th Cir. 1970) (remanding case to give opportunity to prove anticompetitive
intent sufficient to establish antitrust violation). But cf Campbell, supra note 31, at 1064, (arguing that "most favored nation" clauses should receive no NLRA protection and, by inference, no antitrust exemption).
196. Professor Campbell observes that "[t]he uncertainty of terms like 'naturally' and 'intimately' . . . limits the predictability of both the Connell and Jewel Tea tests." Campbell,
supra note 31, at 1060.
197. 381 U.S. 676 (1965).
1986]
LABOR AND ANTITRUST
cessful attempt to obtain that provision through bona fide arms
length bargaining in pursuit of their own labor union policies and
groups, falls
not at the behest of or in combination with nonlabor
98
within the protection of the national labor policy.'
Thus, Justice White's test focuses on the relationship between the
challenged restriction and the labor market as well as on the independence of the union's activity.
Applying the test to the facts inJewel Tea, Justice White concluded
that the operating hours restriction was intimately related to employment hours and, therefore, as a mandatory subject of bargaining, 199 was exempt. He reasoned that: first, hours of work are
mandatory subjects of bargaining under section 8(d) of the
NLRA; 20 0 second, the marketing hours restriction had a real effect
on the market; third, the union members, however, had a "direct
and immediate" concern regarding their hours of work; 20 1 and
fourth, night operations were infeasible without night employment
20 2
of butchers.
Although the Court allowed the exemption, its decision in Jewel
Tea implies that a collective bargaining provision concerning even a
mandatory subject may be subject to antitrust scrutiny if it has a direct 20 3 effect on a product market that is broader than necessary to
effectuate the underlying labor interest. 20 4 Otherwise, Justice
198. Id. at 689-90.
199. Justice White stated that "the particular hours of the day and the particular days of
the week which employees shall be required to work are subjects well within the realm of
'wages, hours, and other terms and conditions of employment' about which employers and
unions must bargain." Id. at 691 (quoting NLRA § 8(d)). This conclusion, despite its apparent adoption by sixJustices, is not obviously correct. Although the NLRA requires bargaining
over employee work hours, the length of a firm's business hours need not affect a particular
employee's working hours. The conclusion, therefore, rests on the Court's judgment that a
firm's business hours would ordinarily affect its employees' work hours or responsibilities.
200. 29 U.S.C. § 158(d) (1982). Unions and employers are required to bargain over
"wages, hours and other terms and conditions of employment." Amalgamated Meat Cutters
& Butcher Workmen of N. Am. v.Jewel Tea Co., 381 U.S. 676, 691 (1965).
201. Amalgamated Meat Cutters & Butcher Workmen of N. Am. v. Jewel Tea Co., 381
U.S. 676, 691 (1965).
202. Id. The district court found that without butchers on duty at night, night operation
would increase butchers work load during the day by requiring them to prepare meat for
night sales and, in addition, would impinge upon the union's jurisdiction by requiring unskilled personnel to do the butchers' work at night. Id. at 694.
203. The requirement that there be a direct effect on the product market may exempt
agreements regarding permissive subjects that are related primarily to the labor market, e.g., a
demand that the size of the bargaining unit be expanded. The "direct effect" requirement
implied in Jewel Tea is expressly stated in Connell Constr. Co. v. Plumbers & Steamfitters
Local 100, 421 U.S. 616, 625 (1975). See Consolidated Express, Inc. v. New York Shipping
Ass'n, 602 F.2d 494, 516 (3d Cir. 1979), vacated, 448 U.S. 902 (1980), on remand, 641 F.2d 90
(3d Cir. 1981) (Vewel Tea test applies to agreements that are "restraints on the product
market").
204. There are no cases, however, involving a mandatory subject of bargaining that denied the exemption for this reason.
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
Goldberg, who would have exempted all mandatory subjects, could
have adopted the majority's test. 205 Jewel Tea, therefore, effectively
requires that the union and employers use the least restrictive alternative to accomplish their legitimate goals; otherwise, the "intimately related" test subjects the challenged activity to antitrust
scrutiny.
Generally, lower courts have exempted collective bargaining
agreements that incidentally restrained the product market, finding
that the agreements did not facilitate a cartel or constitute an unfair
labor practice. 2 06 These courts have interpretedJewel Tea in two distinct ways. Some have read Jewel Tea as holding that a collectively
bargained provision is exempt if it involves a mandatory subject of
bargaining or a permissive subject intimately related to a mandatory
subject. 20 7 Other courts have viewedJewel Tea as exempting collec205. In Justice Goldberg's view "Congress intended that collective bargaining activity on
mandatory subjects of bargaining under the Labor Act not be subject to the antitrust laws
....
" Amalgamated Meat Cutters & Butcher Workmen of N. Am. v. Jewel Tea Co., 381 U.S.
676, 732 (1965) (Goldberg, J., dissenting in part and concurring in part).
206. Most of the cases, although decided after Connell, used the "intimately related" formulation rather than Connell's "follow naturally" rubric, probably because the challenged restraint emerged from a collective bargaining relationship. See, e.g., Cannon v. Teamsters &
Chauffeurs Union, 657 F.2d 173, 178 (7th Cir. 1981) (exempting limitation on delivery hours
in unsafe areas as condition of employment); California Dump Truck Owners Ass'n v. Associated Gen. Contractors, 562 F.2d 607, 614 (9th Cir. 1977) (exempting collectively bargained
agreement setting minimum wage for subcontractor employees); Genser v. International Bhd.
of Elec. Workers, 522 F. Supp. 1153, 1155 (N.D. Ill. 1981) (exempting provisions relating to
seniority,joint arbitration board, apprentices, and overtime); LK Prods. v. American Fed'n of
TV & Radio Artists, 475 F. Supp. 251, 266 (S.D. Tex. 1979) (finding union placement of
employer's name on "unfair" list because of employer violation of collective bargaining
agreement did not constitute cause of action under antitrust laws); Murphy Tugboat v.Shipowners & Merchants Tugboat Co., 467 F. Supp. 841, 856 (N.D. Cal. 1979) (exempting clause
setting amount of extra compensation an employee could receive), afd on other grounds, 658
F.2d 1256 (9th Cir. 1981); Suburban Beverages v. Pabst Brewing, 462 F. Supp. 1301, 1310
(E.D. Wisc. 1978) (finding exclusion of independent nonunion distributor exempt because
collective bargaining agreement required brewer to give unionized sales office exclusive territory).
The pre-Connell cases are consistent with these decisions. One court exempted a requirement that longshoremen unpack and repack containers coming from or destined to points
within 50 miles of New York, finding that the requirement was intended to preserve jobs
rather than facilitate an employer cartel. Intercontinental Container Transp. Corp. v. New
York Shipping Ass'n, 426 F.2d 884, 888 (2d Cir. 1970). Conex effectively overruled the case by
relying on a finding that the requirement violated the NLRA, a finding subsequently overturned by the Supreme Court. Consolidated Express Inc. v. New York Shipping Ass'n, 602
F.2d 494, 519 (3d Cir. 1979), vacated and remanded, 448 U.S. 901 (1980); see note 244 infra
(discussing subsequent history of Conex); see also National Dairy Prods. Corp. v. Milk Drivers &
Dairy Employees Local 680, 308 F. Supp. 982, 986 (S.D.N.Y. 1970) (exempting agreement
prohibiting sale of nonlocally produced ice cream as legal work preservation contract).
207. See, e.g., California Dump Truck v. Associated Gen. Contractors, 562 F.2d 607, 614
(9th Cir. 1977) (interpretingjewel Tea as exempting all mandatory subjects of bargaining and
subjects intimately related); Bodine Produce, Inc. v. United Farm Workers Org. Comm., 494
F.2d 541, 553 (9th Cir. 1974) (discussingJewel Tea exemption for mandatory subjects of bargaining or those intimately related to such items); see also Feather v. United Mine Workers of
Am., 711 F.2d 530, 542 (3d Cir. 1983) (finding no antitrust liability because hot cargo clause
fell within labor exemption); Casey & Cozzillio, supra note 5, at 277-78 (discussing "intimately
1986]
LABOR AND ANTITRUST
739
tive bargaining agreements only if they show that the restraint involves a mandatory subject of bargaining and is no broader than
20 8
necessary to promote the union's interest in such a subject.
Under this latter interpretation, agreements that restrain the product market are subject to antitrust scrutiny if they involve permissive
subjects or if they involve mandatory subjects but affect the product
20 9
market more than necessary to promote the union's interest.
The Supreme Court has shielded from antitrust scrutiny even
agreements that fixed product prices when the agreements were
necessary to advance legitimate labor interests and when there was
no proof of a Cartel Model restraint. In Local 24, InternationalBrotherhood of Teamsters v. Oliver,2 10 the Court held that the NLRA preempted application of Ohio antitrust law to a collective bargaining
agreement that required independent contractor truckers to charge
customers at least the union wage scale for the driver plus a minimum rental for the truck.2 11 Although the agreement effectively
fixed the price of shipping by truck, it was a mandatory subject of
bargaining, and hence protected; its objective was to protect the
wage scale of the union members who were in direct competition
21 2
with the independent contractors.
In American Fed'n of Musicians v. Carroll,2 13 the Court reaffirmed the
limited exemption for price-fixing agreements necessary to prevent
independent contractors from undercutting union wage scales. The
agreement in Carroll required orchestra leaders, who were independent contractors, to charge a minimum price for club date
related" test ofJewel Tea). These courts appear to followJustice Goldberg's concurring opinion in Jewel Tea. See supra note 205 and accompanying text.
208. See, e.g., Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 517
(3d Cir. 1979) (interpreting Jewel Tea exemption as encompassing mandatory subjects that
impose restraints no broader than necessary), vacated and remanded, 448 U.S. 901 (1980); Ackerman-Chillingworth v. Pacific Elec., 579 F.2d 484, 503 (9th Cir. 1978) (Hufstedler, J., concurring and dissenting) (discussing least restrictive means approach of Jewel Tea); see also
Robertson v. National Basketball Ass'n, 389 F. Supp. 867, 890 nA1 (S.D.N.Y. 1975) ("Even if
the challenged practices were determined to be mandatory subjects, a court might nevertheless hold that they are not exempt"). These courts followJustice White's opinion in Jewel Tea.
209. Agreements that are broader than necessary to implement an agreement on a
mandatory subject are effectively agreements on nonmandatory subjects since they regulate
matters other than wages, hours, and working conditions.
210. 358 U.S. 283 (1959).
211. Id. at 297.
212. Id. at 296-97. Thus, the provision was analogous to a union standards clause rather
than a Cartel Model restraint. A union standards clause requires that an employer subcontract only with firms that pay union scale to their employees. Generally, such clauses are
protected by the NLRA and hence exempt from antitrust scrutiny. See supra notes 66-77 and
accompanying text (discussing unlawful secondary activity and union standards clause).
Moreover, such clauses do not limit typically competition with the agreeing employer nor
otherwise facilitate its achievement of supracompetitive profits.
213. 391 U.S. 99 (1968).
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THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
bookings. 21 4 The Court accepted the union's argument that absent
this provision each leader would have the incentive to play himself
rather than hire a musician. 2 15 The price floor thus prevented the
independent contractors from displacing union members by accepting lower compensation for their own services. 21 6 The Court
noted that "the price of the product-here the price for an orchestra
for a club-date-represents almost entirely the scale wages of the
sidemen [musicians] and the leader ....
[I]f the leaders cut prices,
21 7
inevitably wages must be cut."1
Carrollcame to a strange conclusion-that product price-fixing is
exempt-based on a unique fact situation. Nevertheless, the decision is defensible on several grounds. First, wages accounted for a
great proportion of the product price. Hence it seems likely that
courts will accept the argument that the challenged restraint is necessary to protect wage scales and invoke Carrollonly in this situation.
Second, the Court seemed to believe that agreement was the least
restrictive alternative. 218 Finally, Carroll, like Oliver, involved a restraint not calculated to enable the participating employers (here,
the parents of a bride, the chairman of a fundraiser, among others)
2 19
to earn supracompetitive profits.
b.
The 'follow naturally" test
The most recent Supreme Court nonstatutory exemption case is
214. Id. at 104.
215. Id. at Ill.
216. Id. at 108.
217. Id. at 112;see also H.A. Artists & Assocs. v. Actors Equity Ass'n, 451 U.S. 704, 720-22
(statutory exemption protects union's unilateral regulation of theatrical agents except for required contribution of franchise fees to union treasury). See generally P. AREEDA & D. TURNER,
supra note 37, at 198 (discussing product price as component of wages).
218. The dissent seemed to disagree, asserting that it is unnecessary to fix prices when the
leaders do not perform. American Fed'n of Musicians v. Carroll, 391 U.S. 99, 116 (1968)
(White, J., dissenting).
Moreover, the union might have imposed a less restrictive system. The union members
might have agreed that they have a direct employment relationship with the club date customers. For example, they might have agreed that the orchestra leaders would pick the union
members with whom he wished to play but that the union members would sign separate contracts with the club date customers. The separate contract would require that union members
pay the orchestra leader at the union scale. The union's unilateral decision to boycott any
club date customer that refused to sign such an agreement would be protected by the statutory exemption.
Although arguably somewhat less restrictive than the challenged agreement, it is unclear
that this system is substantially less restrictive, given the high proportion of the total price
accounted for by wages. Moreover, this approach seems more cumbersome than the challenged agreement.
219. Arguably, therefore, the restraint did not restrain commercial competition. Cf. Appex Hosiery Co. v. Leader, 310 U.S. 469, 504-05 (1940) (holding price restraint not shown to
have actual or intended effect on price).
1986]
LABOR AND ANTITRUST
Connell Construction Co. v. Plumbers & Steamfitters Local 100,220 in which
a union representing employees of plumbing subcontractors forced
Connell, a general contractor, to agree to subcontract to only union
firms. 221 The Supreme Court denied the exemption in a 5-4 decision. Writing for the majority, Justice Powell found that the agreement, which was negotiated outside of a collective bargaining
context, 22 2 directly restrained the product market and had both actual and potential anticompetitive effects. 2 23 Because these effects
did not "follow naturally" from the elimination of competition over
224
wages and working conditions, the agreement was not exempt.
The lower court post-Connell decisions fall into three groups. The
first group of cases interprets Connell as articulating a test consistent
withJewel Tea. 22 5 The second group has simply distinguished Connell
on its facts and held the agreement exempt without in-depth analysis. 2 26 The third group of post-Connell cases asserts that Connell
220. 421 U.S. 616 (1975).
221. Id. at 617.
222. The union represented none of Connell's employees, and therefore, could not bargain on their behalf. Justice Powell left open the possibility that the restriction might have
been exempt had it been part of a collective bargaining agreement. He stated "[t]here can be
no argument in this case, whatever its force in other contexts, that a restraint of this magnitude might be entitled to an antitrust exemption if it were included in a lawful collective
bargaining agreement." Id. at 625-26.
223. Id. at 625.
224. Id. The Court held also that the agreement did not come within the construction
proviso of § 8(e) of the NLRA. Id. at 633.
225. See Mid-America Regional Bargaining v. Will County Carpenters, 675 F.2d 881, 892
(7th Cir.) (interpreting Connell as adopting test similar to that articulated in Jewel Tea), cert.
denied, 459 U.S. 860 (1982); California State Council v. Associated Gen. Contractors, 648 F.2d
527, 536 (9th Cir. 1980) (Jewel Tea and Connell exempt only agreements on wages and working
conditions), revzd on other grounds, 459 U.S. 519 (1983); Berman Enters., Inc. v. Local 333,
United Marine Div., 644 F.2d 930, 935 (2d Cir. 1981) (jewel Tea and Connelldeny exemption to
agreements on nonmandatory subjects that restrain business market), cert. denied, 454 U.S. 965
(1982); Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 517 (3d Cir.
1979) (analysis in Connell is consistent withJewel Tea), vacated and remanded on other grounds, 448
U.S. 901 (1980); Ackerman-Chillingworth v. Pacific Elec., 579 F.2d 484, 503 (9th Cir. 1978)
(Hufstedler, J., concurring and dissenting) (Jewel Tea and Connell deny exemption to agreements that adversely affect product market where those effects are unrelated to legitimate
union goals); Commerce Tankers v. Nat'l Maritime Union, 553 F.2d 793, 801 (2d Cir.) (Connell indicates nonstatutory exemption turns on whether restraint flows naturally from elimination of competition), cert. denied, 434 U.S. 923 (1977); Mackey v. National Football League,
543 F.2d 606, 614 (8th Cir. 1976) (citing both Connell andJewel Tea for governing principles of
nonstatutory labor exemption), cert. dismissed, 434 U.S. 801 (1977); Schnabel v. Building &
Constr. Trades Council, 563 F. Supp. 1030, 1048 (E.D. Pa. 1983) (claiming Connell adopts
reasoning akin to that ofJewel Tea); Adams, Ray & Rosenberg v. William Morris Agency, 411
F. Supp. 403, 411 (C.D. Cal. 1976) (citing both Connell andJewel Tea as consistent authority on
nonstatutory labor exemption); see also Feather v. United Mine Workers, 711 F.2d 530, 542
(3d Cir. 1983) (dictum) (nonstatutory exemption applies when parties seek goals that are
mandatory or permissive subjects of bargaining, unless union acts with predatory anticompetitive purpose).
226. It is unclear whether these cases, all of which involve a collective bargaining relationship, interpret the Connell test as a replacement for, or consistent with, theJewel Tea test. See,
e.g., Trustees of Local 716 Pension Trust v. Na-Con, Inc., Civ. Action No. H-84-2940
742
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
posits a different test from that expressed in Jewel Tea. 22 7 These
cases applyJewel Tea and grant the exemption if there is a collective
2 28 If
bargaining relationship, distinguishing Connell on this basis.
there is no collective bargaining relationship, the cases apply Connell
to deny the exemption.229
c.
HarmonizingJewel Tea and Connell
In the absence of a Cartel Model restraint, the cases give little
guidance concerning which test to use-"intimately related" or
"follow naturally"-or how to apply it. The Court probably viewed
the tests as different; otherwise, it presumably would have applied
the Jewel Tea test to decide Connell.2 30 Nevertheless, both tests appear to deny the exemption to direct 2 3 ' product market restraints
(S.D.Tex., July 31, 1985) (court dismissed antitrust counterclaim in action for breach of collective bargaining agreement); A.L. Adams Constr. Co. v. Georgia Power Co., 557 F. Supp.
168, 175 (S.D. Ga. 1983), a~fd in part, 733 F.2d 853 (11th Cir. 1984) (prehire agreement
satisfies collective bargaining relationship test of Connell); LK Prods. v. American Fed'n of TV
& Radio Artists, 475 F. Supp. 251, 273-74 (S.D. Tex. 1979) (distinguishing Connell on its
facts); In re Bullard Contracting Corp., 464 F. Supp. 312, 316 (W.D.N.Y. 1979) (exempting
union security clause because Connell applied only in absence of collective bargaining agreement); Signatory Negotiating Comm. v. Local 9, Int'l Union of Operating Eng'rs, 447 F.
Supp. 1384, 1391 (D. Colo. 1978) (exempting union-only subcontracting by distinguishing
Connell).
227. Two recent law review articles suggest that the Court in Connell intended to replace
the Jewel Tea formulation with a more rigorous standard. Casey & Cozzillio argue that the
"follow naturally" test is difficult to satisfy because it focuses on the anticompetitive consequences of union activity and addresses the legitimacy of union concerns only as an afterthought. See supra note 5, at 247, 256. Professor Campbell asserts that in Connell the Court
abandoned theJewel Tea test. See supra note 31, at 1060. This view appears reasonable, but
the lower courts are focusing on the absence of a collective bargaining agreement and the
presence of an unfair labor practice as the key factors in Connell.
228. See Cannon v. Teamsters & Chauffeurs Union, 657 F.2d 173, 178 (7th Cir. 1981)
(applyingJewelTea to exempt agreement restricting hours of delivery); California Dump Truck
v. Associated Gen. Contractors, 562 F.2d 607, 613 (9th Cir. 1977) ("If Connell is not controlling, we must fall back to the nonstatutory exemption established in Jewel Tea"); Genser v.
International Bhd. of Elec. Workers, 522 F. Supp. 1153, 1160 (N.D. Ill. 1981) (exempting
union-employer agreement based on Jewel Tea without addressing Connell); Murphy Tugboat
v. Shipowners & Merchants Towboat, 467 F. Supp. 841, 856 (N.D. Cal. 1979) (applyingJewel
Tea to agreement concerning level of pilotage fees because of direct effect on wages); Suburban Beverages v. Pabst Brewing Co., 462 F. Supp. 1301, 1308-10 (E.D. Wisc. 1978) (discussing both Jewel Tea and Connell but distinguishing the latter based on presence of collective
bargaining relationship).
229. See Altemose Constr. Co. v. Building. & Constr. Trades Council, 751 F.2d 653, 65761 (3d Cir. 1985) (Connell precludes nonstatutory exemption absent collective bargaining
agreement); Larry v. Muko, Inc. v. Southwestern Pa. Bldg. & Constr. Trades Council, 609
F.2d 1368, 1374-75 (3d Cir. 1979) (en banc) (applying Connell to deny exemption where parties lacked collective bargaining relationship); James Julian, Inc. v. Raytheon Co., 499 F.
Supp. 949, 956-57 (D. Del. 1980) (applying Connell to deny exemption to agreement reached
outside scope of collective bargaining); Altemose Constr. Co. v. Atlantic, Cape May, 493 F.
Supp. 1181, 1189-91 (concluding that facts pleaded did not give rise to antitrust immunity
where, as in Connell, agreement arose outside context of collective bargaining).
230. See Campbell, supra note 31, at 1060.
231. The concept of a "direct" restraint on the product market is perhaps unavoidably
fuzzy, but the Court emphasized it in Connell Constr. Co. v. Plumbers & Steamfitters Local
19861
LABOR AND ANTITRUST
743
that are unjustified by labor policy interests. From a practical view23 2
point, therefore, the tests should reach generally the same result.
Despite the confusion that Jewel Tea and Connell have generated,
prevailing case law permits some reasonable predictions. First, the
courts are unlikely to exempt an agreement that directly and substantially restrains the product market absent a collective bargaining
relationship. Research has found no cases exempting such an
agreement reached outside a collective bargaining setting. Second,
when the challenged restraint does emerge from collective bargaining, the courts are likely to exempt it if it concerns a mandatory
subject.
Policy considerations argue against exempting collectively bargained agreements concerning permissive subjects that directly and
substantially restrain the product market. The NLRA requires bargaining on mandatory subjects but simply allows it on permissive
subjects. Hence, national labor policy does not necessarily protect
bargaining on permissive subjects. 23 3 Moreover, the distinction between mandatory and permissive subjects may help determine
whether an agreement affects primarily the labor market or the
product market. Mandatory subjects-wages, hours, and working
conditions-intimately affect the "price" of labor and, therefore, the
labor market. Permissive subjects, on the other hand, have a less
critical impact on the labor market and thus may be more likely to
have a disproportionate effect on the product market. Perhaps for
these reasons, at least some courts proclaim reluctance to exempt an
agreement concerning a permissive subject.23 4 There appear, how100, 421 U.S. 616, 623, 625 (1975). A direct product market restraint is one that, by its own
terms, relates to the output (product or service) of the firm. By contrast, a labor market restraint-which incidentally affects the product market-is one that relates to compensation
and primarily affects relations between the firm and its employees.
232. If the Court in Connell intended to narrow the Jewel Tea test, then the Connell test
should deny the exemption in more cases, but this proposition, given existing case law, seems
untestable.
233. Nevertheless, national labor policy strongly favors peaceful resolution of all industrial relations disputes and bargaining on permissive subjects may facilitate resolution of disputes on mandatory subjects. Hence, labor policy may implicitly sanction bargaining on
permissive subjects. For an overview of labor law and policy, see supra notes 9-77 and accompanying text.
234. See, e.g., Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 518
(3d Cir. 1979) (under either the "White or Goldberg formulations inJewel Tea, a finding that
the [challenged] Rules were not a mandatory subject of bargaining effectively undercuts any
contention that they so 'fall within the protection of national labor policy,' as to be completely
exempt from antitrust scrutiny"); Ackerman-Chillingworth v. Pacific Elec., 579 F.2d 484, 503
(9th Cir. 1978) (Hufstedler, J., concurring and dissenting) ("where an agreement has an immediate impact on the product market, federal labor policy is implicated sufficiently to prevail
and to protect the agreement from antitrust liability only when the agreement concerns directly a mandatory subject of bargaining"); Mackey v. National Football League, 543 F.2d
606, 614 (8th Cir. 1976) ("federal labor policy is implicated sufficiently to prevail only where
744
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
ever, to be no cases denying the exemption to a permissive subject
on the basis ofJewel Tea or Connell. 23 5 This fact suggests that the
mandatory/permissive distinction has more theoretical appeal than
practical applicability.
More significantly, the courts rarely, if ever, have denied the exemption absent a Cartel Model restraint, an unfair labor practice, or
the lack of a collective bargaining relationship. Moreover, the
courts' vague explanations for their exemption decisions are unlikely to assist in analysis of future cases. These factors suggest that
absent one of the three characteristics cited above (Cartel Model restraint, unfair labor practice, no bargaining relationship), the ex23 6
emption will likely apply.
B.
The Labor Law Status Approach
The previous discussion examined decisions stressing the independence and product market/labor market themes to determine
the applicability of the nonstatutory exemption. Experience suggests, however, that provable Cartel Model restraints are relatively
rare. Moreover, the diversity of lower court opinions attempting to
apply the Jewel Tea and Connell tests suggests that the product market/labor market distinction cannot provide by itself a principled or
predictable basis for denying the exemption. Although such factors
as the presence of a collective bargaining relationship and a
mandatory subject of bargaining make application of the Jewel Tea
and Connell tests less vague, their inherent imprecision remains.
Perhaps as a result, courts in the last decade have relied increasingly on the labor law theme. Although the decision in Connell did
not rely on the fact that the challenged conduct constituted a labor
law violation, lower courts have concluded that the Court's exemption decision rested heavily on the finding of an unfair labor practice. Consequently, courts in recent years have tended to deny the
exemption if they determine that the challenged activity is an unfair
labor practice, reasoning that national labor policy does not protect
the agreement sought to be exempted concerns a mandatory subject of collective
bargaining").
235. There are no cases granting the exemption to an agreement concerning a permissive
subject either. The paucity of cases challenging agreements on permissive subjects may indicate that such agreements are unlikely to restrain the product market.
236. This analysis suggests that absent one of those factors, restraints that fit the Suppression Model of Part II are likely to be exempt. Such restraints ordinarily concern a mandatory
subject of bargaining, since work preservation, the normal justification for most restraints on
innovation, is a mandatory subject. In addition, although some restraints on innovation may
constitute a secondary boycott in violation of § 8(e), work preservation is also a defense to
§ 8(e) charges. See supra notes 52-77 and accompanying text.
1986]
LABOR AND ANTITRUST
745
NLRA violations. Conversely, these courts have tended to provide a
blanket exemption for activities that the labor laws strongly
sanction.
Section IV.B. 1 considers the exemption status of challenged activity that is illegal under the NLRA. Section IV.B.2, on the other hand,
considers conduct that is protected by the NLRA. For conduct which
is only authorized by the NLRA (neither prohibited nor protected),
the courts will likely apply the generalJewel Tea or Connell tests, unless the challenged activity facilitates an employer cartel.
1.
Unfair laborpractices
The characterization of an activity as an unfair labor practice can
have one of three possible effects on the determination of the exemption issue. First, an activity can be judged under the tests established by Allen Bradley, Pennington, Jewel Tea, and Connell without
regard to the fact that it is an unfair labor practice; its labor law
status would be irrelevant to the exemption question. Second, the
fact that an activity is an unfair labor practice might be a factor in
applying the tests articulated in those cases; its labor law status
would be relevant to, but not determinative of, the exemption question. Third, an unfair labor practice might be the sole reason for
denying the exemption; its labor law status would be dispositive of
the exemption question. In the last decade, an activity's labor law
status has shifted almost the entire length of this spectrum.
a.
Connell and what followed naturally
Prior to Connell, courts did not consider generally the labor law
2 37
status of a challenged activity in deciding whether it was exempt.
In Connell, the Court denied the exemption because the restrictive
subcontracting clause did not "follow naturally" from the elimination of labor market competition. 23 8 In addition, the Court held the
clause violative of the section 8(e) secondary boycott prohibition;
the construction industry proviso to section 8(e) did not protect the
restriction because Connell and the union had no collective bargain237. See Prepmore Apparel, Inc. v. Amalgamated Clothing Workers, 431 F.2d 1004, 1007
(5th Cir. 1970) (affirming dismissal of complaint alleging that employer and another firm
combined to exclude a union because no restraint on commercial competition and finding
possible § 8(e)(5) violation irrelevant); National Dairy Prods. Corp. v. Milk Drivers & Employees Local 680, 308 F. Supp. 982, 987 (S.D.N.Y. 1970) (dictum) (presence or absence of an
unfair labor practice is irrelevant to exemption). But cf. United Mine Workers v. Pennington,
381 U.S. 657, 668 (1965) (relying on both labor and antitrust policy to deny exemption to
union-employer agreement).
238.
Connell Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 635 (1975).
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THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
ing relationship.28 9 Over the vigorous dissent of four Justices, the
Court rejected the argument that the NLRA provides the exclusive
remedy for a section 8(e) violation, in part because section 303 pro240
vides no private damage remedy for section 8(e) violations.
Apparently, the Court considered the exemption issue and section 8(e) issues separately; therefore, prior to 1982, courts were uncertain about the effect of a restriction's labor law status on the
exemption decision. 2 41 In KaiserSteel Corp. v. Mullins,24 2 however, in
dicta the Court clarified the relationship: "In Connell, we decided the
section 8(e) issue in the first instance. It was necessary to do so to
determine whether the agreement was immune from the antitrust
laws." ' 243 Seemingly, the Court has declared that the presence of a
section 8(e) violation is a major factor in Connell.
b.
Conex
The United States Court of Appeals for the Third Circuit has
gone further than the dicta in Mullins, holding that the presence of
an unfair labor practice is sometimes dispositive of the exemption
2 44
question. Consolidated Express, Inc. v. New York Shipping As'n
239. Id. at 633-34.
240. Id. at 634. Because the union had stopped picketing Connell, the Court could avoid
deciding whether the Norris-LaGuardia Act's ban on injunctions in labor disputes is applicable when the agreement sought by the union is illegal. Id. at 637 n.19.
241. See, e.g., Larry V. Muko, Inc. v. Southwestern Pa. Bldg. & Constr. Trades Council,
609 F.2d 1368, 1375 (3d Cir. 1979) (en banc) ("The fact that in ConnellJustice Powell considered the actual and potential effects of the agreement independently of the § 8(e) issue suggests that the presence of a § 8(e) violation may not itself decide the exemption issue"); In re
Bullard Contracting Corp., 464 F. Supp. 312, 316 (W.D.N.Y. 1979) ("Without consideration
of the possible effect of the § 8(e) proviso, the Supreme Court held that there could be no
immunity from the antitrust laws").
242. 455 U.S. 72 (1982).
243. Id. at 85. Even before Mullins, at least the Second Circuit was beginning to view the
labor law status of the challenged activity as relevant. In Commerce Tankers v. National Maritime Union, 553 F.2d 793 (2d Cir.), cert. denid, 434 U.S. 923 (1977), the court ordered a trial
on the plaintiff's antitrust challenge to a collectively bargained requirement that the employer
sell its ships only to a buyer that guaranteed that the crew would be union. Id. at 802. The
court said that its decision that the clause violated § 8(e) did not determine the exemption
question "although it lends support to" the argument that the exemption should be denied.
Id. Judge Lumbard dissented, arguing that the § 8(e) violation both eliminated immunity and
was itself a per se antitrust violation. Id. at 804 (Lumbard, J., concurring in part and dissenting in part); cf. Barabas v. Prudential Lines, Inc., 451 F. Supp. 765, 771 (S.D.N.Y.) (denial of
preliminary injunction against the transfer of ships pursuant to clause restricting sale of ships
without assurances of continued union representation; balance of hardships favored the transaction going forward despite likely Sherman Act violation), aff'd per curiam, 557 F.2d 184 (2d
Cir. 1978).
244. 602 F.2d 494 (3d Cir. 1979), vacated and remanded on other grounds, 448 U.S. 901
(1980). The Supreme Court vacated Conex when it reversed the NLRB's § 8(e) determination.
NLRB v. ILA, 447 U.S. 490 (1980) ("ILA I"), on remand, 266 N.L.R.B. 230, rev'd in part, 734
F.2d 966 (4th Cir. 1984), aftd, 105 S. Ct. 3045 (1985) ("ILA II"). On remand, the Third
Circuit stayed the trial pending resolution of the labor law issue by the NLRB using the
Supreme Court's new standard. Consolidated Express, Inc. v. New York Shipping Ass'n, 641
1986]
LABOR AND ANTITRUST
747
(Conex) involved a suit by freight consolidators against the ship owners and longshoremen's union. The plaintiffs challenged a collective bargaining agreement between the ship owners and
longshoremen that required containers originating or destined for
locations within fifty miles of port to be loaded and unloaded by
union labor at dockside.245 Later, the rules were tightened to fine
employer signatories one thousand dollars for each container provided to freight consolidators. 246 The NLRB found that these rules
247
violated section 8(e) and the Third Circuit affirmed.
The court reasoned that the Supreme Court decisions inJewel Tea
and Connell allowed denial of the nonstatutory exemption solely because the challenged activity was a section 8(e) violation. 248 First,
the court observed that the contract clause at issue clearly had an
"undisputed" and "uncontested" anticompetitive effect. 249 Second,
since the clause was illegal, it could not be the legitimate outcome of
bargaining on a mandatory subject nor could it serve a legitimate
labor interest. 250 Thus, the court reasoned that the restraint's "anticompetitive effects cannot now be justified by their advancement
of legitimate labor goals." 25 1 Third, Apex Hosiery and Allen Bradley
"indicate that illegal secondary activity of this kind is subject to
Sherman Act sanctions." 252 Two cases in the Third Circuit have
F.2d 90 (3d Cir. 1981). Since ultimately the Court held the rules lawfil, IM. II, 105 S. Ct. at
3045, it seems highly likely that Conex will be dismissed. Actually, dismissal on labor law
grounds will reinforce the Conex approach of tying the exemption status of a challenged activity to its labor law status.
245. Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 498-99 (3d
Cir. 1979), vacated and remanded on other grounds, 448 U.S. 901 (1980).
246. Id. at 499.
247. Id. at 499-50 1.
248. Id. at 519-20. Notably, however, the court held that parties could avoid treble damage liability if the illegality of the challenged conduct was unforeseeable and the challenged
conduct was "intimately related" to a legitimate object of collective bargaining and restrained
the market no more than necessary. Id. at 519-21.
249. Id. at 518.
250. Id.
251. Id.
252. Id. (citing Allen Bradley Co. v. Local No. 3, 325 U.S. 797 (1945) and Apex Hosiery
Co. v. Leader, 310 U.S. 469 (1940)). The court stated clearly its belief that the presence of an
unfair labor practice may be dispositive of the exemption issue: "Where an action seeks only
declaratory or injunctive relief, a finding that an agreement violates § 8(e) should always remove the antitrust exemption. Once it is clear that a § 8(e) violation has occurred no labor
policy is advanced by permitting ongoing operation of an illegal contract." Id. at 519. The
court did not say whether it was presuming that all secondary activities are significantly anticompetitive or whether, in the absence of a legitimate labor policy objective, even the potential for an anticompetitive effect is enough to warrant denial of the exemption. It stated,
however, that both the secondary boycott provisions and the Sherman Act are statutes reflecting the basic federal economic policy against restraints on competition. Id. at 512-13. This
would suggest that Congress believed that secondary activities are anticompetitive. See infra
note 255 (noting contrariety of views on this subject).
748
THE AMERICAN UNIVERSITY LAW REVIEW
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adopted the Conex approach. 2 53
The Third Circuit's opinion in Conex left at least two issues unresolved. First, no labor/antitrust case has considered denying the
exemption because of the presence of an unfair labor practice not
involving secondary activities proscribed under sections 8(b) (4) and
8(e). In fact, few antitrust cases have involved unfair labor practices
other than secondary activities. 25 4 The reasoning in Conex could apply in such a circumstance, however. Regardless of what the specific
unfair labor practice may be, it would not advance congressional labor policies.
On the other hand, although Congress recognized the competitive dangers of secondary activities, 25 5 other unfair labor practices,
such as refusals to bargain in good faith, may not pose a similar
threat to competition. Ultimately, the decision whether to deny au253. Feather v. United Mine Workers, 711 F.2d 530, 542-43 (3d Cir. 1983) (affirming
district court application of exemption because illegality was unforeseeable); In re Bituminous
Coal Wage Agreements Litig., 580 F. Supp. 670, 680-81 (W.D. Pa. 1984) (exemption unavailable because of § 8(e) violation and violation was forseeable), vacated on other grounds, 754 F.2d
284 (3d Cir.), cert. denied sub nom, Duquesne Light Co. v. International Union, United Mine
Workers, 106 S. Ct. 180 (1985). The Coal Wage.4greements case was vacated because the appeals court panel reversed the district court's § 8(e) determination.
Two other Third Circuit cases have sidestepped the approach, probably because the facts
paralleled so closely those in Connell that there was little need for additional analysis. Larry V.
Muko, Inc. v. Southwestern Pa. Bldg. and Construction Trades Council ("Muko 1"), 609 F.2d
1368 (3d Cir. 1979), involved a challenge to an agreement that a restaurant chain would use
only union labor to construct its restaurants. Id. at 1370-72. The facts in James Julian, Inc. v.
Raytheon Co., 499 F. Supp. 949 (D. Del. 1980), were very similar to those in Muko I, and the
district court followed the Muko I analysis in rejecting the defendants' motion to dismiss. Id.
at 958. Because Connell controlled their facts so clearly, neither Muko I orJuliansignal that the
Third Circuit believes the Conex approach is inappropriate in other contexts,
254. A significant, pre-Connell exception is Prepmore Apparel, Inc. v. Amalgamated Clothing Workers, 431 F.2d 1004, 1007 (5th Cir. 1970) (allowing exemption because no restraint of
commercial competition despite possible § 8(a)(5) violation). Two cases have denied the exemption to alleged employer conspiracies to boycott union firms but neither court considered
the possibility that the conduct violated the NLRA. Carpenters Local No. 1846 v. Pratt-Farnsworth, 690 F.2d 489, 530-31 (5th Cir. 1982), cert. denied, 104 S. Ct. 335 (1983); California
State Council of Carpenters v. Associated Gen. Contractors, 648 F.2d 527, 533 (9th Cir.
1980), rev'd on other grounds, 459 U.S. 519 (1983).
255. See Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 513 (3d
Cir. 1979) ("It must be kept in mind that §§ 8(b)(4) and 8(e), while housed in the National
Labor Relations Act, are, like the Sherman Act, statutes reflecting the basic federal economic
policy against restraints upon competition in the marketplace for goods and services as distinct from the labor market. Thus §§ 8(b)(4) and 8(e) reinforce rather than conflict with the
basic policy of the antitrust laws ...."),vacated and remanded on other grounds, 448 U.S. 901
(1980); see also National Woodwork Mfrs. Ass'n v. NLRB, 368 U.S. 612, 620-24 (1967) (discussing legislative history of §§ 8(b)(4) and 8(e)). But see Sun-Land Nurseries v. Southern Cal.
Dist. Council of Laborers, 769 F.2d 1381, 1386 (9th Cir. 1985) ("the secondary boycott provisions of section 8(e) and the antitrust laws do not have identical objectives"), withdrawn, 779
F.2d 1446 (ordering rehearing en banc), vacated, 793 F.2d 1110 (9th Cir. 1986); Leslie, supra
note 103, at 1227 ("If the antitrust laws and secondary boycott provisions of the labor laws
seek the same objectives, the existence of the labor laws describing the forbidden conduct
with considerable specificity, and providing carefully thought-out remedies, might preclude
application of the more generalized antitrust law with its quite different remedies.") (footnote
omitted).
1986]
LABOR AND ANTITRUST
749
tomatically the labor exemption to unfair labor practices other than
impermissible secondary activity is likely to depend on such factors
as the effectiveness of the labor law remedy, 256 the difficulty of distinguishing the practice from desirable conduct, and the practice's
2 57
competitive impact.
Second, both Connell and Conex involved agreements between unions and nonlabor entities. Thus, the defendants have invoked the
nonstatutory exemption, which represents a judicial accomodation
of the labor and antitrust laws. A union acting unilaterally, however,
can violate section 8(b) (4), which restricts picketing and boycotts for
secondary purposes. In general, unilateral union action is protected
by the statutory exemption, which rests on the explicit language of
the Clayton and Norris-LaGuardia Acts. Moreover, section 303 of
the NLRA provides a damage remedy for section 8(b)(4) violations.
Automatic denial of the statutory exemption on the basis of a sec2 58
tion 8(b)(4) violation, therefore, seems less appropriate.
2. Protected activities
A number of cases hold the exemption applicable to activity that
the labor laws protect, explicitly or implicitly. The courts seem to
accept this approach, which is well grounded in policy. Less clear is
when should the labor laws deem an activity to be protected and,
therefore, beyond the proper reach of the antitrust laws. This sec256. To date, the courts have refused uniformly to hold that the labor laws are the exdusive remedy for unfair labor practices. At least with respect to violations of § 8(e), therefore,
the courts have not considered the labor law remedies adequate. P. AREEDA, ANTITRUST LAw
229.2, at 88 (Supp. 1982); Handler & Zifchak, supra note 1, at 489.
257. See Scheinholz & Kettering, supra note 37, at 354 (suggesting that employer unfair
labor practices directed at unions ought not to result automatically in denial of the exemption,
but rather should be judged under Connell).
258. One commentator has said that "to allow antitrust suits whenever a union commits a
unilateral unfair labor practice seems to be pushing antitrust enforcement into areas more
appropriate for redress under the labor laws." VON KALINOWSKI, 16E BuSINESS ORGANIZATIONS: ANTITRUST LAWS AND TRADE REGULATION, § 48.03[2], at 48-44 to 48-45 (1983) (footnotes omitted).
In fact, one court has held that § 8(b)(4) preempts the Sherman Act. Schnabel v. Building
& Constr. Trades Council, 563 F. Supp. 1030, 1039 (E.D. Pa. 1983); see also Iodice v.
Calabrese, 512 F.2d 383, 391 (2d Cir. 1975) (exempting picketing to protest collective bargaining agreement violations and preserve work because no conspiracy with nonlabor group;
§ 8(b)(4) violation and § 303 liability established). But see C & K Coal Co. v. United Mine
Workers, 704 F.2d 690, 698 (3d Cir. 1983) (criticizing district court holding that § 8(b)(4)
preempts antitrust laws but applying exemption because of lack of agreement to restrain competition); Allied Int'l, Inc. v. International Longshoremen's Ass'n, 640 F.2d 1368, 1379 (Ist.
Cir. 1981) (denying exemption to § 8(b)(4) violation on basis of improper union objective
rather than a finding of unfair labor practice); cf.James Julian, Inc. v. Raytheon Co., 499 F.
Supp. 949, 956-57 (D. Del. 1980) (allowing trial of both Sherman Act and § 303 claims).
Justice Stewart's dissent in Connell argues that § 8(e) preempts the Sherman Act because, in
his view, there is a § 303 private remedy for § 8(e) violations. Connell Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 638-54 (1975) (Stewart,J., dissenting). The Connell majority rejected strongly Stewart's conclusion regarding § 303. Id. at 634 n.16.
750
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tion considers the authority for exempting protected activities and
distinguishes them from those whose labor law status is only authorized: that is, neither affirmatively protected nor affirmatively
prohibited.
a. The authorityfor exempting protected activities
With one recent exception, 25 9 courts have held that the labor exemption applies to secondary activity that Congress did not ban
when it enacted section 8(e), especially activity covered by the garment and construction industry provisos. 26 0 Connell supports this
result. Apparently, both the majority and minority opinions assume
that a restrictive subcontracting clause sanctioned by section 8(e) is
exempt. 26 1 Moreover, Congress was aware when it enacted section
8(e) that secondary activities typically restrict competition. 2 62 By extending section 8(e) to only certain of those activities, Congress may
have determined that other secondary conduct promoted the public
interest. To the extent Congress did consider both labor and antitrust interests in passing section 8(e), an antitrust challenge to sec259. A Ninth Circuit panel reached a contrary result, holding that a contract within the
construction proviso was not exempt automatically from the antitrust laws. Sun-Land Nurseries v. Southern Cal. Dist. Council of Laborers, 769 F.2d 1381, 1386 (9th Cir. 1985), withdrawn, 779 F.2d 1446 (ordering rehearing en banc), vacated, 793 F.2d 1110 (9th Cir. 1986). It
reasoned that the labor and antitrust laws have different objectives and,
[t]hus, even conduct that the labor statute permits, in a proper case, may subject the
parties to antitrust liability. For example, if hot cargo agreements like those in this
case were used to enforce a cartel's product market allocation plan, they would be
unlawful under the antitrust laws regardless of labor policy.
Id.
Although the court is correct that even activity sanctioned by the NLRA would be subject to
antitrust scrutiny if used to facilitate a cartel, its example is an extreme one. Moreover, the
construction industry proviso was a careful attempt to allow some types of restrictive secondary activity while prohibiting other types whereas clearly the NLRA was not designed to
facilitate any product market cartels. Accordingly, the Ninth Circuit, sitting en banc, vacated
the panel's decision and affirmed the district court's decision granting summary judgment.
Sun-Land Nurseries v. Southern Cal. Dist. Council of Laborers, 793 F.2d 1110 (9th Cir.
1986).
260. SeeJou-Jou Designs v. International Ladies Garment Workers Union, 643 F.2d 905,
911 (2d Cir. 1981) (applying nonstatutory exemption to agreement to use only union jobbers
based on garment industry proviso of § 8(e); picketing to enforce agreement exempt under
statutory exemption); In re Bullard Contracting Corp., 464 F. Supp. 312, 316 (W.D.N.Y. 1979)
(denying application to stay arbitration award enforcing requirement that subcontractors follow collective bargaining agreement and that their employees join union). Some cases have
exempted union-only subcontracting clauses because a valid § 8(f) prehire agreement created
a collective bargaining relationship. Adams Constr. Co. v. Georgia Power Co., 733 F.2d 853,
859 (1lth Cir. 1984), cert. denied, 105 S. Ct. 2155 (1985); Gigliotti v. Building & Constr.
Trades Council, 583 F. Supp. 396, 401 (E.D. Pa. 1984); Landscape Specialties, Inc. v. Laborers' Int'l Union, 477 F. Supp. 17, 22 (C.D. Cal. 1979). But see Morse Bros. v. International
Union of Operating Eng'rs, 1974-2 Trade Cas. 75,412 at 98,360-61 (D. Ore. 1974) (suggesting protected activities are not exempt automatically).
261. See supra notes 141-46 and accompanying text (discussing Connell).
262. See supra note 255 (discussing policy behind §§ 8(b)(4) and 8(e)).
1986]
LABOR AND ANTITRUST
751
ondary activities not banned by that section would contravene
congressional intent.
b.
Identifying protected activities
Identification of protected activities is an inexact science. At least
two activities or agreements, however, appear to merit the designation: bargaining over mandatory subjects and secondary conduct
permitted by the NLRA.
Of all of the activities allowed by the NLRA, Congress has sanctioned most clearly collective bargaining about "rates of pay, wages,
hours of employment, or other conditions of employment." 263 The
Supreme Court has underscored the importance of these subjects by
terming them "mandatory subjects" of bargaining. 26 Moreover,
the Court has suggested that an agreement simply fixing a
mandatory subject, such as the price of labor, is unlikely to offend
2 65
public policy.
There is little precedent, however, for a rule that agreements on
mandatory subjects are exempt from antitrust scrutiny, perhaps because antitrust cases have rarely challenged agreements concerning
mandatory subjects. 26 6 Although Jewel Tea supports denial of the
exemption to agreements concerning mandatory subjects that directly restrain the product market more than necessary, 267 jewel Tea
and subsequent decisions suggest also that this criterion will seldom
be satisfied. Therefore, absent a Cartel Model restraint or an unfair
263. 15 U.S.C. § 159(a) (1982).
264. NLRB v. Borg-Warner Corp., 356 U.S. 342, 349 (1958).
265. In Federal Maritime Comm'n v. Pacific Maritime Ass'n, 435 U.S. 40 (1978), the
Court stated:
It would be difficult to conclude that ordinary collective bargaining agreements establishing wages, hours, and working conditions in a bargaining unit could be or
would be disapproved as contrary to the public interest or detrimental to commerce.
Such contracts are the product of bargaining compelled by the labor laws ....They
are also the kind of contracts that the courts .. .in the main have declared to be
beyond the reach of the antitrust laws.
Id. at 57; see also Amalgamated Meat Cutters & Butcher Workmen v. Jewel Tea Co., 381 U.S.
676, 727-32 (1965) (Goldberg, J., concurring in part and dissenting in part) (favoring exemption for all mandatory subjects). Moreover, since the Clayton and Norris-LaGuardia Acts immunize expressly combinations of workers and their collective pressure on their employers, it
would be illogical to subject to antitrust scrutiny the agreements that result from such
pressure.
266. Some of the sports cases, however, have listed whether an agreement concerns a
mandatory subject of bargaining as one of three criteria for application of the exemption.
McCourt v. California Sports, Inc., 600 F.2d 1193, 1197 (6th Cir. 1979); Mackey v. National
Football League, 543 F.2d 606, 614-15 (8th Cir. 1976), cert. dismissed, 434 U.S. 801 (1977).
267. Indeed, the Supreme Court's rejection ofJustice Goldberg's approach inJewel Tea, in
which he argued that all agreements concerning mandatory subjects should be exempt, suggests that such agreements are not exempt categorically. Amalgamated Meat Cutters &
Butcher Workmen v.Jewel Tea Co., 381 U.S. 676, 727-32 (1965) (Goldberg,J., concurring in
part and dissenting in part).
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[Vol. 35:699
labor practice, a court is unlikely to expose to antitrust scrutiny an
agreement concerning a mandatory subject.
The second category of protected activity appears to be secondary
conduct permitted by the NLRA. As noted above, Congress considered the competitive impact of secondary conduct when it amended
the NLRA and probably determined that certain secondary activity
warranted neither antitrust nor labor challenges. The NLRA protects such activity through provisos to its secondary activity prohibitions. Section 8(b)(4)(B) states that its prohibitions do not apply to
so-called "primary" strikes and picketing. 268 Section 8(e) contains
269
the garment and construction industry provisos described earlier.
The courts have tended to exempt secondary conduct that falls
within any of these provisos. For example, based on a Supreme
Court ruling that agreements designed to preserve the work of employees are primary activity not prohibited by section 8(e), 27 0 two
cases have exempted restrictive subcontracting clauses on the
ground that they were intended to preserve work. 27 1 Moreover,
there is ample precedent for exempting secondary boycotts saved
from illegality by the section 8(e) construction or garment
provisos. 27 2 These decisions suggest that courts are likely to hold
that any secondary activity permitted by sections 8(b)(4) and 8(e) is
protected by the NLRA and therefore exempt from antitrust
scrutiny.
The courts, however, are unlikely to exempt protected activities
that are used to facilitate an employer cartel. 2 73 For example, a
268. 29 U.S.C. § 158(b)(4)(B) (1982). In the 1959 NLRA amendments, Congress stated
in the § 8(b)(4)(B) restriction on secondary union activity that "nothing contained in this
clause (B) shall be construed to make unlawful, where not otherwise unlawful, any primary
strike or primary picketing." Id. The Supreme Court has held that this exemption for "primary" activity also applies to § 8(e). National Woodwork Mfrs. Ass'n v. NLRB, 368 U.S. 612,
634 (1967). According to the Court, § 8(e) "simply closed" a "loophole" in what is now
§ 8(b)(4)(B) and prohibits only agreements that violate § 8(b)(4). Id.
269. 29 U.S.C. § 158(e) (1982).
270. National Woodwork Mfrs. Ass'n v. NLRB, 386 U.S. 612, 634 (1967).
271. Granddad Bread v. Continental Baking Co., 612 F.2d 1105, 1109-10 (9th Cir. 1979)
(contract clause prohibited employer from allowing nonunion delivery personnel to deliver
bread, even if they were employees of the employer's customer), cert. denied, 449 U.S. 1076
(1981); Falstaff Brewing Corp. v. Local 153, Int'l Bhd. of Teamsters, 479 F. Supp. 850, 856
(D.NJ. 1978) (requirement that union members deliver beer held exempt because of NLRB
determination that provision preserved work), ajfd, 609 F.2d 501 (2d Cir. 1979), cert. denied,
444 U.S. 1079 (1980).
272. See supra note 260 and cases cited therein.
273. See Allen Bradley v. Local No. 3, 325 U.S. 797, 807 (1945) ("[H]ad there been no
union-contractor-manufacturer combination the union's actions here, coming as they did
within the exemptions of the Clayton and Norris-LaGuardia Acts, would not have been violations of the Sherman Act."); see also Sun-Land Nurseries v. Southern Cal. Dist. Council of
Laborers, 769 F.2d 1381, 1386 (9th Cir. 1985) (holding that a contract within the § 8(e) construction proviso is not automatically exempt from antitrust liability), withdrawn, 779 F.2d
1446 (ordering rehearing en banc), vacated, 793 F.2d 1110 (9th Cir. 1986).
1986]
LABOR AND ANTITRUST
court would deny almost certainly the exemption to NLRA sanctioned union picketing if the union's purpose was to exclude a firm
from the market pursuant to an agreement with the firm's
competitor.
C. Linking the Exemption Issue to Labor Law Principles:
A Cost Benefit Analysis
The premise of this Article is that application of labor law principles is the most effective method of introducing rigor and predictability into the exemption analysis. Accordingly, this section
considers the policy arguments for and against that approach. The
discussion focuses on Conex because that case most clearly links the
exemption question to the labor law status of the challenged activity. The same considerations, however, would apply to the other
rules advocated herein, such as denial of the exemption to unionemployer agreements arising outside of a collective bargaining
relationship.
1.
Criticism of linkage
Actually, criticism of Conex has focused less on its particulars and
more on the proper scope of the antitrust laws. Conex purported to
change only the method of analysis, not the scope of the exemption.
The Third Circuit reasoned simply that underJewel Tea and Connell,
unfair labor practices would have little claim to an exemption since
they have little or no labor policy justification. 2 74 The critics' real
concern appears to be that this approach gives too much weight to
competitive interests.
The critics maintain that the NLRA represents a balance of all interests and policies involved in labor matters and that Congress intended the antitrust laws to intrude in only the most egregious
circumstances. 2 75 To date, however, the courts have disagreed with
this assessment of legislative intent, and Congress has not reversed
them.
Another criticism of Conex is that broad antitrust scrutiny of unfair
labor practices will increase the cost of violating the NLRA and thus
unduly and unpredictably might chill legal labor activities. There
274. The Conex court held that the agreement would not be exempt under the Jewel Tea
and Connell tests before considering the effect of the § 8(e) violation. Consolidated Express,
Inc. v. New York Shipping Ass'n, 602 F.2d 494, 512-18 (3d Cir. 1979), vacated and remanded on
other grounds, 448 U.S. 901 (1980).
275. E.g., P. AREEDA, supra note 256, at 87; Handler & Zifchak, supra note 1, at 497;
Zifchak, Labor-Antitrust PrinciplesApplicable to Joint Labor-Management Conduct, 21 Dug. L. REV.
365, 373 (1982).
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has been no analysis of this problem, however, and thus there is no
evidence that it is significant. In addition, the impact of antitrust
scrutiny is reduced by the forseeability test in Conex, which allows
damages only in cases where the parties should have known the activity was an unfair labor practice. Moreover, assessing the exemption's applicability is only the first step in the antitrust analysis. The
rule of reason 27 6 can take into account the overdeterrence concern,
as well as the related concern that the challenged practice might be
replaced by a legal but more restrictive alternative. 277 Finally, adding an antitrust remedy to the potential penalties for violation of
the NLRA may encourage greater compliance with it.
A third criticism of Conex is that the NLRA was not designed to
define the contours of the antitrust exemption. In particular, the
National Labor Relations Board does not evaluate competitive consequences when it decides unfair labor practice cases, with the possible exception of cases involving sections 8(b)(4) and 8(e). This
concern would not require dropping the Conex approach, however.
Rather, the courts could simply limit it to categories of unfair labor
practices with significant anticompetitive potential. 278
2.
Benefits of linkage
On the other hand, tying the exemption issue to labor law principles has three advantages. First, under theJewel Tea and Connell approaches, a court must consider the nature and magnitude of the
market restraint twice: first in deciding whether the exemption applies and then, if the exemption is denied, in evaluating antitrust
liability. 2 79 The Conex approach, on the other hand, considers the
effect of the restraint only after deciding the exemption issue, a benefit that one critic of the approach termed "one consolation. ' 280
Second, denying the exemption whenever the challenged conduct
is contrary to the NLRA harmonizes labor and antitrust interests.
276. See infra notes 290-99 and accompanying text (discussing the rarity cases in which
courts have condemned challenged conduct as per se illegal).
277. See infra notes 317-22 and accompanying text (discussing probability of "more restrictive alternative" defense).
278. In this regard, the Conex approach would be analogous to the traditional approach to
defining per se offenses, such as price-fixing, in which the courts determine whether experience suggests that the challenged practice is so likely to be anticompetitive that detailed analysis in a particular case is superfluous. See Broadcast Music, Inc. v. Columbia Broadcast Sys.,
441 U.S. 1, 19-20 (1978) (test for invoking a per se rule is "whether the practice facially
appears to be one that would always or almost always tend to restrict competition . . .")
279. In fact, the district court in Barabas not only considered the impact of the restriction
at both the exemption and substantive liability stages, but considered the labor interests only
at the liability stage. Barabas v. Prudential Lines, Inc., 451 F. Supp. 765, 768-72 (S.D.N.Y.),
afd per curiam, 557 F.2d 184 (2d Cir. 1978).
280.
Zifchak, supra note 275, at 374.
19861
]LABOR AND ANTITRUST
755
One commentator has suggested that a danger of the Connell "follow
naturally" test is that "a court could find union conduct that is law28
ful under the labor laws to be the basis of an antitrust violation." '
Exempting conduct protected by the NLRA would diminish this
danger. For example, the core of the NLRA is collective bargaining
over mandatory subjects. Absent a cartel agreement, such bargaining appears unlikely to violate the antitrust laws. Hence, automatic
exemption of agreements relating to mandatory subjects preserves
labor interests without sacrificing competition interests.
On the other hand, the labor interest in an union-employer agreement that does not arise from a collective bargaining relationship is
relatively small since collective bargaining between employers and
unions is the statutory method of achieving industrial peace.
Hence, antitrust scrutiny of agreements not collectively bargained
does not impinge on national labor policy. And, of course, the argument that there is a substantial labor policy interest at stake loses
considerable-if not all-force for activities that are unlawful under
the labor laws.
Finally, and perhaps most importantly, the Conex test and the
other rules discussed above seem significantly more predictable
than the vague balancing tests articulated by Jewel Tea or Connell.
Although the NLRA is difficult to interpret, 28 2 the precedent defining unfair labor practices, mandatory subjects of bargaining, and
other labor law concepts is more developed and definite than the
case law applying the Jewel Tea and Connell balancing tests. A rule
linking the exemption to labor law principles would allow the courts
to consult a sizable pool of labor law authority to guide their decisions. Moreover, because employers and unions must be conscious
of labor law in their daily operations, determining how to comply
with the antitrust laws using the proposed approach is unlikely to
place a significant additional burden on unions and employers.
No court outside of the Third Circuit has adopted Conex, and academics, judges, and practicing attorneys have criticized it. Never281. Casey & Cozzillio, supra note 5, at 261. Casey and Cozillio contend that the district
court opinion in Barabas "came precariously close to reaching such a result." Id. (citing
Barabas v. Prudential Lines, Inc., 451 F. Supp. 765 (S.D.N.Y.), aJ'dper curiam, 557 F.2d 184
(2d Cir. 1978)).
282. Indeed, the Conex approach may erode the NLRB's authoritative position as the interpreter of the NLRA by forcing antitrust tribunals to decide labor law issues that, because of
the NLRB's exclusive jurisdiction over unfair labor practices, traditionally the Board has resolved. Casey & Cozzillio, supra note 5, at 275-76; see.Larry V. Muko, Inc. v. Southwestern Pa.
Bldg. & Constr. Trades Council, 609 F.2d 1368, 1375 n.1 (3d Cir. 1979) (arguing that the
Conex approach "would lead to needless resolution of significant federal labor law questions
that ought to be decided in the first instance by the NLRB") (expressing view of ChiefJudge
Seitz only).
756
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theless, even critics acknowledge that courts are tending to link the
283
exemption to the labor law status of the challenged activity.
Moreover, the patterns discussed previously, including denial of the
exemption to noncollective bargaining agreements and application
of the exemption to mandatory subjects of bargaining, will probably
be followed by the courts. It is likely, therefore, that courts will consider labor law principles carefully in their exemption decisions.
V.
ANTITRUST ANALYSIS OF LABOR CASES
A court may deny the labor exemption and yet not find antitrust
liability. This part discusses the antitrust analysis that follows denial
of the labor exemption.2 84 Several courts have stated that nonexempt conduct receives ordinary antitrust scrutiny. 285 One might expect such scrutiny normally to result in a finding of liability, because
the conduct that is most likely to oust the exemption-Cartel Model
restraints or illegal secondary boycotts-is unlikely to have an efficiency justification. In practice, however, courts have been unable
to confine their antitrust analysis to conventional efficiency considerations. To the contrary, courts have tended to address a variety of
factors peculiar to the labor context, such as the promotion of national labor policy, the possiblity that the parties will turn to more
restrictive but protected alternatives, and the Apex Hosiery command
to find an effect on "commercial competition. ' 28 6 The following
sections examine how these factors are likely to alter traditional an283. P. AREEDA, supra note 256, at 82; Handler & Zifchak, supra note 1, at 490. Recently,
the Tenth Circuit reversed a district court's grant of summary judgment to a union on the
ground that genuine issues of fact existed regarding whether the union violated § 8(b)(4) or
§ 8(e). Frito-Lay, Inc. v. Retail Clerks Local No. 7, 627 F.2d 653, 659 (10th Cir. 1980). The
court added that if the challenged conduct was an unfair labor practice, it might be subject to
antitrust liability. Id. While not citing Conex, the court appeared receptive to its approach.
The Morse Bros. court, however, without much analysis, strongly rejected the notion of linking exemption status to labor law status, regardless of whether the conduct was protected or
illegal. Morse Bros. v. International Union of Operating Eng'rs, 1974-2 Trade Cas. 1 75,412
at 98,360-61 (D. Or. 1974); see also Sun-Land Nurseries v. Southern Cal. Dist. Council of Laborers, 769 F.2d 1381, 1386 (9th Cir. 1985) (rejecting principle that activity within construction industry proviso of § 8(e) was exempt automatically), withdrawn, 779 F.2d 1446 (ordering
rehearing en banc), vacated, 793 F.2d I110 (9th Cir. 1986).
284. I wish to thank John B. Kirkwood for his many insights on this difficult issue.
285. See, e.g., Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 522
(3d Cir. 1979) ("[IThe proper method of analysis is to determine the issue of nonstatutory
labor exemption separately... and then to proceed with conventional antitrust scrutiny of the
complaint."); Larry V. Muko, Inc. v. Southwestern Pa. Bldg. & Constr. Trades Council, 670
F.2d 421,427 (3d Cir.) (courts should apply traditional antitrust analysis to nonexempt union
activity), cert. denied, 459 U.S. 916 (1982); Morse Bros. v. International Union of Operating
Eng'rs, 1974-2 Trade Cas. 75,412 at 98,359-60 (D. Or. 1974) (Sherman Act should apply to
nonexempt labor agreements just as it did to agreements in nonlabor contexts). See generally
Kirkpatrick &Johnson, Antitrust Analysis of Non-exempt Employee or Employer Activities, 21 Duo. L.
REv. 401 (1983).
286. Apex Hosiery Co. v. Leader, 310 U.S. 469, 497 (1940).
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LABOR AND ANTITRUST
titrust analysis: first, in determining the appropriateness of per se
treatment and, second, in conducting a rule of reason analysis.
Throughout this part, it is assumed that the plaintiff is alleging a
violation of section 1 of the Sherman Act. A challenge to unilateral
union conduct under section 2 seems unlikely. First, the statutory
exemption for unilateral union conduct may immunize the union's
activity. 28 7 Second, the union's goal will ordinarily be to advance
the interests of its members. Its ultimate aim, therefore, will be to
monopolize the labor market, not the product market. As I discuss
below, the courts have been reluctant to find antitrust liability for
essentially a labor market restraint. 28 8 Moreover, Apex Hosiery suggests that restraints in the labor market are beyond the reach of the
Sherman Act. 2 89 Finally, the labor laws provide a private damage
remedy for unilateral union secondary activity that violates section
8(b)(4).
A.
The Appropriateness of Per Se Analysis
The great majority of cases have applied the rule of reason, rather
than the per se rule, to analyze labor related restraints. 290 For ex287. See supra notes 150-52 and accompanying text (discussing scope of statutory exemption for unilateral union activity).
288. In one case, the court noted that neither the defendant unions nor the defendant
restaurant chain had competed with the plaintiff contractor. Larry V. Muko, Inc. v. Southwestern Pa. Bldg. & Constr. Trades Council, 670 F.2d 421,432 (3d Cir.), cert. denied, 103 S.Ct.
229 (1982) ("Muko IF'). Judge Sloviter disagreed with this conclusion, arguing that the unions were "representatives of organized labor;, Muko, a non-union contractor, must be viewed
as the representative of non-union labor. Thus the parties represent two strong competitive
forces in the Pittsburgh area construction industry." Id. at 436 (SloviterJ., dissenting) (emphasis in original); see also Official Airline Guides v. FTC, 630 F.2d 920, 924 (2d Cir. 1980),
cert. denied, 450 U.S. 917 (1981) (holding firm cannot monopolize market in which it does not
compete). The holding in Official Airlines Guides suggests that a union cannot violate § 2 by
restraining a product market.
289. For a discussion of Apex Hosiery, see supra notes 110-15 and accompanying text.
290. See, e.g., Berman Enter., Inc. v. International Longshoremen's Ass'n, 644 F.2d 930,
936-37 (2d Cir.) (finding no violation under rule of reason), cert. denied, 454 U.S. 965 (1981);
Amalgamated Meat Cutters & Butcher Workmen v. Wetterau Foods, 597 F.2d 133, 139-40
(8th Cir. 1979) (using rule of reason to deny antitrust liability when wholesaler loaned employees to retailer during strike); Smith v. Pro-Football, Inc., 593 F.2d 1173, 1183-85 (D.C.
Cir. 1978) (using rule of reason to hold that 1968 football draft constituted restraint of trade);
Ackerman-Chillingworth v. Pacific Elec., 579 F.2d 484, 489-90 (9th Cir. 1978) (plaintiffs did
not assert per se rule was appropriate standard), cert. denied, 439 U.S. 1089 (1979); Commerce
Tankers v. National Maritime, 553 F.2d 793, 799 (2d Cir.) (suggesting that rule of reason
analysis would be applicable standard), cert. denied, 434 U.S. 923 (1977); Mackey v. National
Football League, 543 F.2d 606, 612-13 (8th Cir. 1976) (holding that unique nature of sports
joint venture and district court's extensive inquiry into effect of challenged restraint made
rule of reason appropriate test), cert. dismissed, 434 U.S. 801 (1977);James Julian, Inc. v. Raytheon Co., 593 F. Supp. 915, 928 (D. Del. 1984) (using rule of reason to determine that labor
related restraint did not curtail competition); In re Bituminous Coal Wage Agreements Litig.,
580 F. Supp. 670, 684-85 (W.D. Pa. 1984) (stating generally courts apply rule of reason to
labor restraints), vacated on other grounds, 756 F.2d 284 (3d Cir.), cert. denied sub nom. Duquesne
Light Co. v. International Union, United Mine Workers, 106 S. Ct. 180 (1985); Barabas v.
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ample, in Lary V Muko, Inc. v. Southwestern Pennsylvania Building and
Construction Trades Council 2 91 (Muko II), the union picketed a fast
food chain to force it to use union contractors to build future stores.
The court distinguished the resulting restraint from a classic boycott, finding that neither defendant "wished, through their concerted action, to gain an advantage over Muko [the excluded firm] in
an economic or competitive sense .... -292 On this and other grounds,
the court employed the rule of reason rather than the per se approach of Conex. 29 3 Although no court has held that every labor/antitrust case must be judged under the rule of reason, the
commentators have generally opposed per se treatment in a labor
29 4
context.
Though courts have applied the per se rule only three times,
these cases indicate that at least the Third and Fourth Circuits are
open to per se condemnation in appropriate circumstances. 29 5 For
instance, even though it did not follow Conex, the Third Circuit
panel in Muko I reaffirmed explicitly the per se approach, holding
that a union's participation in an illegal combination should not preclude necessarily a determination that the conduct is unreasonable
Prudential Lines, Inc., 451 F. Supp. 765, 771 (S.D.N.Y.) (court applied rule of reason without
stating it was doing so), affdper curiam, 557 F.2d 184 (2d Cir. 1978).
291. 670 F.2d 421 (3d Cir.), cert. denied, 459 U.S. 916 (1982).
292. Id. at 432 (emphasis in original).
293. Id. The court distinguished Conex by emphasizing that the union and employers in
Conex intended "to exclude from direct competition all the teamsters employed by the plaintiff
freight consolidators." Id. at 431-32. In both cases, however, the union intended to exclude
nonunion firms. From an efficiency standpoint, a more significant distinction is that in Conex
the union was attempting to destroy competitors using an innovation that would have reduced
substantially shipping costs (and hurt the union) where in Muko 11 the union was attempting
merely to exclude traditional, nonunion firms from a small portion of the market.
Also, the Muko 1H court distinguished Conex because of the limited nature of the restraint at
issue; because "the agreement did not have the necessary effect of destroying Muko's business;" and because "procompetitive effects were demonstrated." Id. According to the court,
by agreeing to the restraint, the restaurant chain "gained a position in the otherwise crowded
Pittsburgh-area fast food market." Id. at 432. The significance of these distinctions is discussed below.
294. See, e.g., P.AREEDA, supra note 256, at 85-87; Zifchak, supra note 275, at 375-76; Handler & Zifchak, supra note 1, at 510-13; Casey & Cozzillio, supra note 5, at 278-80.
295. Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 522-24 (3d
Cir. 1979) (holding that collective bargaining provision that prohibited signatories from dealing with companies who consolidated small shipments constituted group boycott of the consolidators), vacated and remanded on other grounds, 448 U.S. 901 (1980); National Constructors
Ass'n v. National Elec. Contractors Ass'n, 498 F. Supp. 510, 543 (D. Md. 1980) (holding that
collective bargaining agreement that forced all employers, whether or not members of principal industry trade association, to pay dues to the association constituted price fixing), modified,
678 F.2d 492 (4th Cir. 1982), cert. dismissed, 463 U.S. 1234 (1983); see also Morse Bros. v.
International Union of Operating Eng'rs, 1974-2 Trade Cas. 75,412 at 98,363 (D. Or. 1974)
(district court held illegal collective bargaining agreement requiring union-only and union
standards subcontracting).
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LABOR AND ANTITRUST
per se. 2 96
In general, however, the courts have been hesitant to invoke the
per se rule. Even the court in Conex, despite finding that the rules
created a classic group boycott with "horizontal, vertical, and coercive aspects," 297 looked for procompetitive justifications before settling on the per se rule. The court noted:
Nor is there any suggestion in the record that... the Rules will in
the long run have procompetitive rather than anticompetitive effects ....
Since the labor policy arguments advanced to support the application of the rule of reason do not relate to the procompetitive impact of the Rules... in the shipping market, they cannot remove
298
this boycott from the category of per se violations.
Given this unwillingness, a plaintiff should rely on a per se rule
only with evidence that the challenged restraint lacks justification
and has more than theoretical anticompetitive effects. 299 These requirements suggest that a plaintiff must do a rule of reason analysis
to invoke a per se rule. Although it is no longer enough to characterize an activity as a per se offense to dispense with proof that the
activity has anticompetitive effects, Conex illustrates that where the
plaintiff can show some evidence of harm, the courts will not require
elaborate proof. In Muko, in contrast, the plaintiff could show only
296. Larry V. Muko, Inc. v. Southwestern Pa. Bldg. & Constr. Trades Council, 670 F.2d
421, 426 (3d Cir.), cert. denied, 459 U.S. 916 (1982).
297. Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 522 (3d Cir.
1979), vacated and remanded on other grounds, 448 U.S. 901 (1980).
298. Id. at 523-24. Also, the court rejected explicitly the notion that the plaintiff must
show predatory intent to invoke the perse rule. Id. at 523. The court in James Julian, Inc. v.
Raytheon Co., 593 F. Supp. 915 (D. Del. 1984), explained that "Pennington has generally been
interpreted as requiring proof of predatory intent [only] when the challenged agreement concers 'subjects at the 'very heart' of the collective bargaining process.' " Id. at 926 (quoting
Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 516 (3d Cir.), vacated
and remanded on other grounds, 448 U.S. 901 (1980)).
299. The government's current approach to horizontal restraints appears consistent with
this caution. The Department ofJustice and Federal Trade Commission are increasingly feluctant to condemn practices as per se illegal based solely on their characterization as, for
example, price-fixing or a boycott. Instead, they have proposed a three step analysis.
First, the court (or the FTC) examines the challenged restraint to determine whether it is
inherently suspect because it tends to restrict output or increase price. A suspect restriction is
per se illegal unless it can be plausibly justified as ultimately procompetitive or efficiency enhancing. Second, if it has plausible justification, then the challenged restraint warrants further scrutiny. A court, however, rejects the justification, and condemns the restriction, if (a)
the justification essentially argues that the market will operate better with less competition;
(b) its asserted competitive benefits are unlikely; or (c) it does not reasonably depend on the
restraint (or the restraint is broader than reasonably necessary to achieve the procompetitive
objective). If the justification is rejected, then the restriction is condemned. This method of
analysis is sometimes termed the "abbreviated rule of reason." Third, if the conduct is not
inherently suspect or a plausible justification cannot be rejected on one of the grounds noted,
then a more extensive rule of reason analysis is undertaken. See Brief of the United States as
Amicus Curiae in National Collegiate Athletic Ass'n v. Board of Regents of the Univ. of Okla.
at 9-10 (January 1984).
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that it was harmed and thus the harm to consumers was more theoretical than real.
B.
The Impact of the Labor Context on the Rule of Reason
Once the labor exemption issue is decided, Conex and other cases
hold that the antitrust liability issue should be resolved solely on the
basis of the competitive effects of the challenged restraint; laborrelated justifications that do not promote efficiency are irrelevant.
Despite professing agreement, the courts tend to consider these justifications nonetheless. This section discusses the principal ways in
which the labor context tends to alter traditional antitrust rule of
reason analysis. It examines in turn: the necessity of a product market effect, labor policy as a justification for an anticompetitive restraint, the possibility that antitrust intervention will encourage a
more restrictive system, and the liability of coerced employers.
1.
Restraints solely in the labor market
Most labor/antitrust cases have focused on the effect of the challenged restraint on a product market, rather than on the labor market.3 00 Although traditional antitrust analysis would consider
anticompetitive effects at any stage of production, the labor context
seems different for several reasons. First, the Clayton and NorrisLaGuardia Acts immunize major restraints on the labor market.
Workers may combine into unions, fix wages, and restrict labor supply. These and subsequent enactments suggest that Congress has
sanctioned considerable union monopolization of the labor market.
So long as a union restrains the labor market without violating the
labor laws, it is unclear that a court can consider properly the effects
of the labor market restraint in its assessment of antitrust liability. 30 1
300. See, e.g., United Mine Workers v. Pennington, 381 U.S. 657, 665-68 (1965) (coal market); United Bhd. of Carpenters v. United States, 330 U.S. 395, 398-400 (1947) (market for
millwork patterned lumber); Allen Bradley Co. v. Local No. 3, 325 U.S. 797, 798 (1945) (electrical equipment and construction markets); Larry V. Muko, Inc. v. Southwestern Pa. Bldg. &
Constr. Trades Council, 670 F.2d 421, 426 (3d Cir.) (construction market), cert. denied, 459
U.S. 916 (1982); Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 518
(3d Cir. 1979) (shipping market), vacated and remanded on other grounds, 448 U.S. 901 (1980);
Commerce Tankers Corp. v. Nat'l Maritime, 533 F.2d 793, 799 (2d Cir.) (market for sale of
ships), cert. denied, 434 U.S. 923 (1977); National Constructors Ass'n v. National Elec. Contractors, Ass'n, 498 F. Supp. 510, 543 (D. Md. 1980) (electrical construction market), modified, 678
F.2d 492 (4th Cir. 1982), cert. dismissed, 463 U.S. 1234 (1983); Barabas v. Prudential Lines,
Inc., 451 F. Supp. 765, 770 (S.D.N.Y.) (market for sale of ships), afdper curiam, 557 F.2d 184
(2d Cir. 1978).
301.
In fact, the Supreme Court has indicated that the Sherman Act itself was not in-
tended to reach wage fixing and other pure labor restraints by unions. See, e.g., Apex Hosiery
v. Leader, 310 U.S. 469, 503-04 (1940) (stating that reduced competition over labor standards
is not the "kind of curtailment of price competition prohibited by the Sherman Act").
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LABOR AND ANTITRUST
761
Moreover, the nonstatutory exemption shields virtually all collectively bargained agreements between employers and unions concerning labor market conditions except when such agreements
threaten a substantial restraint of the product market.30 2 The most
test emphasizes the necessity
recent formulation of the exemption
303
of a "business market" impact.
For these reasons, the courts are very unlikely to hold that the
labor market effects of lawful union conduct are cognizable in an
antitrust analysis. 304 In addition, at least one court seemed uncomfortable including the labor market effects of unlawful union conduct
in its antitrust analysis.30 5 Consequently, to establish antitrust liability, it is highly desirable, if not mandatory, to demonstrate a substantial adverse impact on a product market, rather than on the
labor market.
In some cases, this showing may be difficult. To be sure, virtually
every nonexempt labor market restraint also restrains a product
302. Where only employers are involved, however, the courts have held consistently that
an agreement may be condemned because it restrains the labor market. The rationale appears to be that the restraint does not promote union organizing or collective bargaining and
that fixing one element of cost-albeit the cost of labor-tends to stabilize prices in the downstream product market. See, e.g., Anderson v. Shipowners Ass'n, 272 U.S. 359, 361-63 (1926)
(holding combination of shipowners operating to control employment aboard virtually all vessels along Pacific coast unreasonable restraint of trade); Nichols v. Spencer Int'l Press, Inc.,
371 F.2d 332, 335-36 (7th Cir. 1967) (stating that joint employer venture intended to restrict
employees from switchingjobs may well reduce competition); Cordova v. Bache & Co., 321 F.
Supp. 600 (S.D.N.Y. 1970) (stating that labor exemption encompasses organized labor activity, but not labor as service industry or employers' attempts to control it), dismissed sub nom.
Jacobi v. Bache & Co., 377 F. Supp. 86 (S.D.N.Y. 1974), afd, 520 F.2d 1231 (2d Cir. 1975),
cert. denied, 423 U.S. 1053 (1976).
303. See Connell Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 625
(1975): "This kind of direct restraint on the business market has substantial anticompetitive
effects, both actual and potential, that would not follow naturally from the elimination of
competition over wages and working conditions."
304. Although the Eighth Circuit has held that "restraints on competition within the market for players' services fall within the ambit of the Sherman Act," Mackey v. National Football
League, 543 F.2d 606, 618 (8th Cir. 1976), the case is analyzed best as a joint employer restraint with little, if any, union role. See id. at 618-21 (discussing club owners' interest in
preventing players from freely trading themselves in marketplace); see also Smith v. Pro Football, Inc., 593 F.2d 1173, 1183-86 (D.C. Cir. 1978) (stating that N.F.L. draft "had a severely
anticompetitive impact on the market for players' services" and went beyond any legitimate
business need). The other sports cases have found (or assumed) that the relevant market is
the sport itself rather than the market for players services and thus have analyzed the restriction in the context of a product market. Kapp v. National Football League, 390 F. Supp. 73,
81 (N.D. Cal. 1974); Robertson v. National Basketball Ass'n, 389 F. Supp. 867, 891-92
(S.D.N.Y. 1975); Philadelphia World Hockey Club, Inc. v. Philadelphia Hockey Club, Inc., 351
F. Supp. 462, 500-02 (E.D.Pa. 1972); Boston Prof. Hockey Ass'n v. Cheevers, 348 F. Supp.
261, 267 (D. Mass.), remanded on other grounds, 472 F.2d 127 (Ist Cir. 1972).
305. In Muko II, the court viewed the challenged conduct as essentially a labor market
restraint. Larry V. Muko, Inc. v. Southwestern Pa. Bldg. & Constr. Trades Council, 670 F.2d
421, 432 (3d Cir.), cert. denied, 459 U.S. 916 (1982); see infra notes 311-15 and accompanying
text (discussing how this view seemed to influence the court's liability decision, even though
conduct violated NLRA).
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market. The problem is in demonstrating substantial product market effects that would not result from lawful and exempt union conduct. The labor exemption immunizes some product market
anticompetitive effects: those resulting from the right of workers to
organize and collectively bargain. In Connell, the Court found that
the union-only subcontracting clause
indiscriminately excluded nonunion subcontractors from a portion of the market, even if their competitive advantages were not
derived from substandard wages and working conditions but
rather from more efficient operating methods .... Such control
could result in significant adverse effects on the market and on
consumers-effects unrelated to the union's legitimate goals of
organizing workers and standardizing working conditions. 3 06
Thus, Connell implies that denial of the labor exemption does not
expose to antitrust scrutiny all of the anticompetitive effects of labor
activity, but rather only those product market effects caused by the
nonexempt activity. 3 07
The problem, then, is to distinguish the effects of the nonexempt
restraint from the effects of a similar, exempt restraint. Demonstrating such additional effects is relatively straightforward in the case of
a Cartel Model restraint. No exempt conduct allows a union to create the supracompetitive profits that are the purpose of such a
restraint.
When a union-employer agreement excludes nonunion firms, as
in the case of a Exclusion Model restraint, demonstrating the additional effects may be more difficult. Unions have a legitimate interest in attempting to restrict, exclude, or organize nonunion firms.
Most pertinently, unions can require employers to restrict subcontracting to firms that pay union-scale wages and benefits. As noted
earlier, such "union standards" clauses are protected generally by
the labor laws, and thus exempt from antitrust scrutiny. To demonstrate additional, nonexempt effects, therefore, a plaintiff would
have to show that the excluded firms would have increased product
market competition even if they paid union-scale wages and fringes.
The Connell exemption test seems to call for even more rigorous
proof. It suggests that the plaintiff must show that some excluded
firms are more efficient than the union firms for reasons unrelated
306. Connell Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 623-24
(1975).
307. Distinguishing the impact of nonexempt conduct from that of exempt conduct is
particularly important when denial of the exemption is based upon an unfair labor practice,
because "such a denial does not reflect a judgment about the labor-antitrust balance in the
particular case." P. AREEDA, supra note 256, at 85.
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LABOR AND ANTITRUST
763
to worker compensation, such as lower nonlabor operating costs,
higher product quality, or special creativity. 30 8 In some cases, it may
be difficult to prove that the loss of such superior efficiency has been
substantial.3 0 9
2. Labor policy justifications
Conex and Muko II present contrasting approaches to antitrust
analysis of labor/antitrust cases. Conex condemns the challenged restraint per se, refusing to consider nonefficiency justifications because the case involved a union. In contrast, Muko II, though
rhetorically loyal to the Conex approach, suggests that, absent a Cartel Model restraint, a union can escape antitrust liability for nonexempt conduct if the union pursues labor objectives and has only a
310
minor effect on the product market.
In Muko II, the Third Circuit declared that " 'public interest' considerations, such as the advancement of labor policy, are not proper
subjects for examination under the rule of reason." 31 1 Neverthe308. An open question is whether nonunion firms that have less restrictive work rules
should be considered more efficient than unionized firms "for reasons unrelated to worker
compensation." The fact that such work rules are generally mandatory subjects of bargaining
suggests that work rules are an element of labor standards. On the other hand, work rules
affect firm efficiency so pervasively that considering them to be labor standards may make the
demonstration of nonlabor efficiencies much more difficult.
309. Earlier, I suggested that a Suppression Model restraint is likely to be exempt. See
supra note 236. If the exemption is denied, however, proof of an anticompetitive effect beyond that sanctioned by the exemption may be relatively easy. See, e.g., Consolidated Express,
Inc. v. New York Shipping Ass'n, 602 F.2d 494, 522-23 (3d Cir. 1979) (finding that challenged
Rules "wholly bar the consolidators from providing their lower cost services to the shipping
market.... Nor is there any suggestion in the record that the application of the Rules will in
the long run haver procompetitive rather than anticompetitive effects"), vacated and remanded
on other grounds, 448 U.S. 901 (1980).
310. The Conex approach finds support in the Supreme Court's declaration in Professional
Engineers: "Contrary to its name, the rule [of reason] does not open the field of antitrust inquiry to any argument in favor of a challenged restraint that may fall
within the realm of
reason. Instead, it focuses directly on the challenged restraint's impact on competitive conditions." National Soc'y of Prof. Eng'rs v. United States, 435 U.S. 679, 688 (1978). This language implies that nonefficiency labor policy considerations should have no weight in a rule of
reason analysis.
Some commentators have opposed this view, however, Handler and Zifchak suggest that in
a rule of reason analysis, "the broad objectives sanctioned by labor policy should be carefully
balanced against antitrust's concern with the preservation of market or product competition.
The adverse market effects of a restraint must be of serious dimension to outweigh the legitimate labor-related motives of a union in imposing the restraint." Handler & Zifchak, supra
note 1, at 512 (footnotes omitted). They acknowledge that the "unfortunate statement of the
rule of reason in Professional Engineers" may preclude "such a balancing of competing social
objectives .... Id. at 512 n.299. Professor Leslie of the University of Virginia suggests that
the breadth and vagueness of the Handler and Zifchak proposal may explain the courts' reluctance to state that labor policy considerations must be included in a rule of balance reason.
But see infra notes 311-15 and accompanying text (showing that Muko II actually seems to
follow Handler and Zifchak prescription).
311. Larry V. Muko, Inc. v. Southwestern Pa. Bldg. & Constr. Trades Council, 670 F.2d
421, 427 (3d Cir.), cert. denied, 459 U.S. 916 (1982).
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less, Muko I gives the distinct impression that a jury may weigh labor policy against antitrust interests in applying the rule of reason.
To be sure, the majority in Muko H denied that the agreement had
"significant anticompetitive effects." 3 12 Even if the majority was
correct that the restraint was limited, the clause probably had some
adverse product market effect. 3 13 Moreover, the majority's asserted
efficiency justification seems weak. 3 14 These factors suggest that labor policy in fact saved the restraint. After all, the court pointed out
that the union's intent was to eliminate competition over wages, not
to reduce competition in the product market.3 1 5
Of course, the court's finding in Muko H that the challenged
agreement had limited anticompetitive effects suggests that the
courts will not allow labor policy to justify a substantial restraint on
a product market. 316 The limited precedent to date, however, has
not ruled out the possiblity that labor policy may protect a limited
restraint.
312. Id. at 432. The court noted that "the 'refusal to deal' in this case involved only one
relatively small buyer." Id.
313. Judge Sloviter asserted that:
Arrayed on one side of the agreement were the Trades Councils representing all of
the construction unions in six Pennsylvania counties ....
On the other side of the
agreement was Silver's, which as of the trial date had constructed nineteen additional
restaurants in the Western Pennsylvania area. At stake . . . was the considerable
business represented by this construction.
Id. at 437-38 (Sloviter, J., dissenting). The restraint prevented plaintiff from competing for
this business. Id. at 438. If this exclusion had no efficiencyjustification, it likely raised Silver's
costs, even assuming plaintiff was willing to pay union-scale compensation.
314. The majority claimed the restraint was procompetitive because the restaurant chain
thereby "gained a position in the otherwise crowded Pittsburgh-area fast food market." Id. at
432. Judge Sloviter noted two problems with this thesis. First, "antitrust cases have always
rejected the premise that a procompetitive effect in one market will excuse an anticompetitive
effect in another." Id. at 439 (Sloviter, J., dissenting). Second, the chain's "self-interest in
avoiding union pickets and displeasure, is hardly synonomous with a 'procompetitive effect.'"
Id. More importantly, the chain had probably an alternative to capitulating to the unions: if
the unions violated the § 8(b)(4) prohibition on secondary picketing, as is likely, the chain had
a § 303 private damage remedy. While the second type of pressure employed by the unionshandbiling-is protected constitutionally, see Larry V. Muko, Inc. v. Southwestern Bldg. &
Constr. Trades Council, 609 F.2d 1368, 1375 (3d Cir. 1979), this pressure may not have been
sufficient to coerce the chain. See id. at 1371 (chain sought agreement with unions because it
was "fearful of new picketing" and faced with handbilling). Consequently, the chain may have
been able to remain in business without acceding to the union's demands.
315. Larry V. Muko v. Southwestern Pa. Bldg. & Constr. Trades Council, 670 F.2d 421,
432 (3d Cir.), cert. denied, 459 U.S. 916 (1982).
316. In addition, the Eighth Circuit's Mackey decision rejected two labor-related justifications in finding that a free agent compensation requirement unreasonably restrained trade.
Mackey v. National Football League, 543 F.2d 606, 621 (8th Cir. 1976), cert. dismissed, 434 U.S.
801 (1977). Both justifications, however, are arguably efficiency related. With respect to the
first-the need to recoup player development expenses-the Eighth Circuit agreed with the
district court finding "that these expenses are similar to those incurred by other businesses,
and that there is no right to compensation for this type of investment." Id. Regarding the
other justification, player continuity, the district court found no evidence that the loss of
player continuity would affect the quality of play and that even if so, that fact would not justify
the challenged restraint. Id.
1986]
3.
LABOR AND ANTITRUST
765
The probability of more restrictive alternatives
Because the labor exemption limits the scope of the antitrust laws,
a restraint that is subject to antitrust scrutiny sometimes may be less
restrictive than a restraint that is immune from such scrutiny. For
example, contract clauses limiting subcontracting to union firms are
by definition less restrictive than clauses prohibiting all subcontracting. Yet an order banning union-only subcontracting clauses could
result in the use of no-subcontracting clauses. Even though more
restrictive, these clauses are likely exempt from antitrust
17
challenge.
Professor Areeda is very troubled by this possibility, suggesting
that it is serious enough to limit the reach of antitrust scrutiny.3 18
Apparently no court, however, has used the possibility of a more
restrictive arrangement as an adequate justification for an otherwise
anticompetitive agreement. 3 19
Furthermore, there are several reasons for rejecting such a defense. First, its adoption would force the courts to make difficult
projections. For example, suppose that in an action challenging a
union-only subcontracting clause, the employer claimed that Without such a clause the union would have forced it to stop all subcontracting. To evaluate this claim, the court would have to determine
whether it was likely that the union would have the economic power,
negotiating skill, and incentive to force the employer to accept the
no-subcontracting clause despite the employer's strong incentive to
resist.3 20 Moreover, because much of the evidence on these issues
would be in the control of the union and the employer asserting the
justification, it may be difficult to obtain objective evidence. Finally,
the court could not easily forecast how changing economic conditions would affect its predictions.
Second, and more fundamentally, acceptance of a "more restrictive alternative" defense would contradict the antitrust tradition of
317. The NLRA protects probably most clauses barring all subcontracting but prohibits
generally union-only subcontracting clauses. See supra notes 60-77 and accompanying text
(discussing NLRA's prohibitions on secondary activity).
318. P. AREEDA, supra note 256, at 87. The Bituminous Coal Operators Association, as
amicus curiae in In re Bituminous Coal Wage Agreements Litig., 580 F. Supp. 670 (W.D. Pa.
1984), vacatedon other grounds, 754 F.2d 284 (3d Cir.), cert. deniedsub nom., Duquesne Light Co.
v. International Union, United Mine Workers, 106 S. Ct. 180 (1985), made this argument in
its brief to the Third Circuit.
319. In Muko II, though, the court cited a similar possibility as one reason for upholding
the restraint. See supra note 314 and infra note 325.
320. The existence of a private plaintiff or complainant suggests that the result would not
be the more restrictive clause. If such a victim is representative of similarly situated firms and
is seeking simply equitable relief, its action is likely to signal the probable impact of the proposed order.
766
THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 35:699
striking down restraints and allowing the market to determine
whether more restrictive alternatives arise.3 21 Of course, this approach risks that a court will enter an injunction that induces a
union and the employers to enter into agreements that are more
anticompetitive than the original restraint. In that case, however,
the enforcement agency can seek to modify the order, bring another
action (if the alternatives are illegal), or seek a change in the law. 32 2
4. Liability of coerced employers
In some cases, a union may force an employer to agree to a restrictive clause. To avoid punishing the coerced employer, a court
may decide that the clause itself is not illegal.3
23
This result seems
most likely when first, the union uses a form of pressure, such as
handbilling, that is protected under the labor laws, and second, such
pressure alone could ruin the firm. In these circumstances, Professor Areeda is reluctant to impose antitrust liability. In his view, it
would be "strange to extract treble damages from the victim of lawful union pressure who had no choice but to acquiesce in the
union's demand if he wished to survive. '32 4
No case, however, has allowed an employer to escape liability because it was coerced.3 25 Indeed, as one court explained, "that the
agreement, if any, may have been produced by coercion, does not
immunize it from antitrust liability."'3 26 Similarly, in Conex the court
321. See, e.g., United States v. Joint Traffic Ass'n, 171 U.S. 505, 577 (1898): "An agreement ... which directly and effectively stifles competition, must be regarded as one in restraint of trade, notwithstanding there are possibilities that a restraint of trade may also follow
competition that may be indulged in until the weaker roads are completely destroyed and the
survivor thereafter raises rates and maintains them."
322. Of course, as a matter of prosecutorial discretion, an enforcement agency may decide
against an action when the proposed remedy offers only slight benefits because the union and
employer(s) seem likely to negotiate a more restrictive system.
323. See Connell Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 638
(1975) (Douglas, J., dissenting) (concluding that because firm had been coerced into signing
subcontracting agreement, labor laws should provide exclusive remedy).
324. P. AREEDA, supra note 256, at 83.
325. Like Areeda, though, the court in Muko H seemed reluctant to impose liability in
these circumstances. The opinion describes the case as follows, "Simply put, a small retailer
has been picketed by a union. To preserve its business, the firm agrees to purchase union-made
goods or services in the future. We cannot agree.., that this is the type of behavior against
which the per se rule traditionally has been invoked." Larry V. Muko, Inc. v. Southwestern Pa.
Bldg. & Constr. Trades Council, 670 F.2d 421, 432 (3d Cir.) (emphasis added), cert. denied,
459 U.S. 916 (1982). Although the firm's plight was not the primary reason for the court's
rejection of antitrust liability, it seems to have been an augmenting factor. As noted above,
however, the court's factual premise may have been incorrect. The firm may have been able
to survive without capitulating to the unions. See supra note 314.
326. James Julian, Inc. v. Raytheon Co., 593 F. Supp. 915, 922 (D. Del. 1984). The court
went on to state, "The concept of a coerced agreement violating antitrust law is not peculiar
to the labor arena. It has long been held that group boycotts and vertical price restraints
imposed by manufacturers and suppliers on their retailers through threats or coercion may
constitute 'agreements' subject to antitrust attack." Id. at 922-23 n.9 (citing Monsanto Co. v.
1986]
LABOR AND ANTITRUST
767
held both the union and the coerced employers liable.3 2 7 In addi-
tion, a coerced employer may be content to accept a consent order
the restraint without provoking a confrontaas a means of escaping
3 28
tion with the union.
CONCLUSION
This part summarizes the above analysis and identifies union-employer conduct that is nonexempt and has a substantial anticompetitive effect. Section A details the criteria for such conduct. Section B
evaluates briefly the Cartel, Exclusion, and Suppression Model restraints against these criteria.
A.
Case Evaluation Criteria
The case evaluation criteria fall into three categories. The first
two categories consider whether the exemption applies and, if not,
whether the activity under scrutiny constitutes a violation of antitrust law. The third category suggests several additional factors
that, although not legally dispositive, might influence the strength
of a case.
1.
The labor exemption
This Article suggests a three step process to assess whether the
labor exemption applies. The first step considers whether the factual situation under scrutiny satisfies the threshold requirements for
the exemption. Assuming these requirements are met, the second
step considers whether the situation makes either grant or denial of
the exemption highly probable. For example, a Cartel Model restraint is almost certainly not exempt. For more ambiguous circumstances, the third step offers additional criteria.
Spray-Rite Serv. Corp., 104 S. Ct 1464 n.10 (1984)). Of course, since Monsanto reaffirmed
United States v. Colgate & Co., 250 U.S. 300 (1919), it left some room for manufacturers to
pressure dealers without creating an agreement.
327. Consolidated Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494, 520 (3d Cir.
1979), vacated and remanded on other grounds, 448 U.S. 901 (1980). The court explained that
while labor law and antitrust injunctive remedies "may provide strong incentives for unions
not to make excessive secondary demands, they provide very little incentive to employers to
Nor is there unfairness in requiring employers to resist excessive
resist such demands ....
union demands. Employers are not, after all, without remedies against illegal demands." Id.
Connell foreshadowed the Conex holding. It held the union subject to antitrust scrutiny for
coercing an agreement with a general contractor that it would subcontract only to union
firms. Connell Constr. Co. v. Plumbers & Steamfitters Local 100, 421 U.S. 616, 626 (1975).
In Connell, however, the coerced employer was the plaintiff, not the defendant.
328. Of course, such a consent agreement may be unattractive to private litigants whose
primary purpose is usually to obtain damages.
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[Vol. 35:699
a. Threshold issues
Unless the answer to both of the following conditions are met, the
exemption will not apply.
(1) True Union: The case must involve a bona fide organization of
workers.
(2) LaborIssue: The challenged activity must affect the employer-employee relationship.
b.
Settled exemption status
Assuming the threshold requirements are met, the availability of
the exemption in certain circumstances may be determined relatively easily.
(1) Statutory Exemption: The challenged activity is exempt if the
union undertakes it unilaterally or in concert only with other labor
groups.
(2) Protected Labor Activity: The challenged activity is exempt if it (a)
concerns a mandatory subject of bargaining and only indirectly restrains the product market, or (b) is dearly permitted by the NLRA
provisions that regulate secondary activity (sections 8(b)(4) and
8(e)).
(3) Unfair Labor Practice: The challenged activity is not exempt if
prior cases found it to be an unfair labor practice. 3 29 For antitrust
purposes, the most significant unfair labor practice is a secondary
boycott that violates section 8(e) of the NLRA. 3 30
(4) CartelModel Restraint:The challenged activity is not exempt if the
union is using it to promote an employer cartel or similar anticompetitive scheme.
c.
Criteriafor ambiguous cases
In ambiguous cases, the courts seem to balance several factors,
including whether the challenged restraint emerged from a collective bargaining relationship, whether it concerns a mandatory subject of bargaining, whether it directly affects the product market,
and whether it reasonably serves legitimate labor policy objectives.
Despite this general balancing, certain combinations of these factors
allow reasonable predictions regarding the challenged activity's exempt or nonexempt status.
329. Similarly, an activity that furthers an agreement concerning an illegal subject of bargaining, such as commission of an unfair labor practice, is almost surely nonexempt.
330. Such boycotts may restrain substantially a product market. In addition, because antitrust decisions have considered rarely other unfair labor practices, their exemption status is
less clear.
1986]
]LABOR AND ANTITRUST
769
(1) Mandatory Subject of Bargaining:If the activity results from a collective bargaining agreement regarding a mandatory subject of bargaining, it is likely exempt unless it restrains the product market
directly and more than necessary to achieve a legitimate labor
objective.
(2) Permissive Subject of Bargaining:If the activity results from a collective bargaining agreement regarding a permissive subject of bargaining (an issue other than wages, hours, and working conditions),
it is not exempt if it restrains the product market directly or is unnecessary to achieve a legitimate labor objective.
(3) No Collective BargainingRelationship: If the activity does not result
from a collective bargaining relationship, it is probably not
33
exempt. '
2. Antitrust violation
The courts universally refuse to find antitrust liability simply because they have denied the exemption. Additional analysis is required to determine that a nonexempt activity constitutes an
antitrust violation. To prevail on the merits, a plaintiff must satisfy
the first requirement and either the second or third requirement.
a. Agreement: The activity must constitute a contract, combination, or conspiracy.3 3 2 A collective bargaining agreement establishes the necessary concerted action.
b. Per Se Violation: If the parties fixed product prices, boycotted
competitors, divided markets, or otherwise engaged in an inherently
suspect activity without a plausible efficiency justification, the challenged activity is likely a per se violation.
c. Rule of Reason Violation: If the anticompetitive effects of the
challenged activity outweigh the proffered efficiency justifications,
the activity is unreasonably restrictive and thus probably illegal.
This traditional analysis requires some qualification in the labor
context.
(1) ProductMarket Impact: The courts appear reluctant to condemn a
restraint that does not adversely affect the product market beyond
331. Technically, the test is probably whether the activity restrains the product market
directly or is unnecessary to achieve a legitimate labor objective. If either condition is met,
the activity is likely subject to antitrust scrutiny. The test is thus similar to that for permissive
subjects of bargaining. As a practical matter, however, the courts always have denied the
exemption absent a collective bargaining relationship. In contrast, rarely, if ever, have the
courts confronted a restrictive agreement concerning a permissive subject. See supra notes
233-35 and accompanying text (policy considerations argue against exempting agreements
concerning permissive subjects).
332. This criterion appears warranted because a monopolization case against a union is
unlikely to succeed.
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THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 35:699
the impact of the permissible elimination of labor market
33 3
competition.
(2) Labor Policy: While denying that nonefficiency considerations can
justify a restraint, the courts may absolve a relatively minor restraint
on the product market if it was intended to advance labor interests.
3.
Otherfactors influencing the strength of a case
Any of the following criteria may indicate that the case is weak.
a. Consumer Injury: The challenged activity has a relatively small
3 34
effect on consumer welfare.
b. Intent of the Parties: The potential respondents appeared to be
acting in good faith.
c. Possibility of More Restrictive Alternatives: An injunction or a damage award will lead probably to more restrictive behavior that is immune from antitrust scrutiny.
d. Labor Law Remedy: An NLRB or private labor law remedy is
likely to be an adequate substitute for an antitrust remedy.
B.
Possible Areas for Antitrust Intervention
Part II of this Article introduced three types of union-employer
restraints that may warrant antitrust scrutiny: facilitation of an employer cartel, exclusion of nonunion firms, and suppression of innovation. Of the three, the Cartel Model is the most appropriate area
for antitrust intervention. First, preventing cartel activity is the
traditional, and least controversial, purpose of antitrust; few, if any,
commentators have argued that participation by a union should immunize a cartel. Second, the consumer welfare loss from a unionemployer cartel is likely to be greater than in the case of cartels without union participation if the union is an effective enforcer of the
anticompetitive consensus. Third, the basis for denying the labor
exemption is generally clear.3 35 Fourth, proof of a violation also is
likely to be straightforward.3 3 6 Finally, there is no labor policy in333. Employers, however, may be liable for restraints on the labor market imposed without union participation or provocation. See Scheinholz & Kettering, supra note 37.
334. In addition to affecting price or output, labor-related restraints may retard
innovation.
335. An exception is when the agreement concerns an arguably mandatory subject of bargaining that has a significant product market effect, as inJewel Tea. In such cases, absent proof
of specific intent to restrain the product market, denial of the exemption is uncertain.
336. Of course, proving cartel activity may be difficult absent direct evidence that the participants have communicated about prices, output levels, or other business decisions. See, e.g.,
Marks, Can Conspiracy Theory Solve the "Oligopoly Problem"?, 45 MD. L. REV. 387 (1986). In a case
based on Pennington, moreover, proof that the union and favored employers had an anticompetitive motive in imposing terms on the disadvantaged employers may be difficult.
19861
LABOR AND ANTITRUST
terest in supporting product market cartels and the NLRA does not
sanction such activity. The major problem with Cartel Model cases
is detecting them.
In contrast, Exclusion Model cases may be far easier to find because generally the exclusion is accomplished openly through a collective bargaining agreement. Moreover, if the exclusionary clause
violates section 8(e), the exemption is likely to be denied.3 3 7 Exclusion Model cases, however, have two major flaws. First, proof of a
violation may be difficult and expensive because of the courts' tendency to analyze such cases under the rule of reason. In particular,
it may be difficult to establish clearly that consumer welfare was substantially reduced beyond the level shielded from antitrust scrutiny
by the labor exemption. Absent such a showing of consumer injury,
338
a court may be reluctant to condemn an exclusionary restraint.
Second, even if the exclusionary clause violates the NLRA, a court
may be reluctant to interject antitrust scrutiny into what it may regard as basically a labor dispute. Again, a strong showing of consumer injury may be necessary to induce a court to overcome its
reservations.
Finally, a Supression Model case is likely to be detectable, cause
substantial consumer injury, and thus violate the antitrust laws.
Such a case, however, is most likely to be exempt as a valid work
preservation clause.3 3 ) A court may deny the exemption if convinced that the Suppression clause is part of a conspiracy to restrain
technological competition among employers.
337. On the other hand, if the court held that the challenged clause does not violate
§ 8(e), it will hold very likely the clause exempt.
338. The classic example is .Muko H. Larry V. Muko, Inc. v. Southwestern Pa. Bldg. &
Constr. Trades Council, 670 F.2d 421 (3d Cir.), cert. denied, 459 U.S. 916 (1982). See supra
notes 307-08 and 311-16 and accompanying text.
339. Conex, also an Exclusion Model case, is the classic example of an antitrust violation
that suppressed innovation but is nevertheless exempt as work preservation. Consolidated
Express, Inc. v. New York Shipping Ass'n, 602 F.2d 494 (3d Cir. 1979), vacatedand remanded on
othergrounds, 448 U.S. 901 (1980).