When Corporate Mergers Hurt Workers, Europe Must Act

Competition on the labour market benefits both workers and the economy, driving higher employment, better wages, and the vital diffusion of ideas across industries. Yet many workers face severely limited options when seeking new employers—a constraint that suppresses their wages and stifles economic dynamism. One crucial lever for rebalancing this power asymmetry lies in scrutinising corporate mergers that would reduce labour market competition, just as regulators already do for product markets. While the United States has moved in this direction recently, Europe lags behind. The European Commission’s current revision of merger guidelines presents a critical opportunity to close this gap.

The monopsony trap

A concentrated local labour market emerges when a handful of employers dominate hiring within a specific industry and geographic area. With few alternative employers, workers lose bargaining power while companies gain what economists call “monopsony power”—the mirror image of monopoly, but applied to buying labour rather than selling products. Across the OECD, nearly one-fifth of workers find themselves trapped in at least moderately concentrated labour markets. The consequences extend beyond depressed wages: these markets suffer from lower employment levels and reduced worker mobility, which in turn hampers the cross-pollination of ideas that drives innovation.

Despite growing awareness of monopsony and labour market concentration, the European Union has taken remarkably little action. One promising approach would mirror existing product market protections: preventing mergers and acquisitions from creating excessive labour market power. The European Commission’s ongoing revision of merger guidelines could—and should—incorporate labour market impacts into its assessment framework.

As with product markets, most mergers pose no threat to labour competition. But when deals substantially increase market power within local labour markets, they can devastate wages and mobility prospects. Recent research reveals that mergers within already concentrated labour markets don’t just harm employees of the merging companies—they depress wages across entire local labour markets. Consider CVS Health’s acquisition of Target’s pharmacy business in the United States: this merger of two major competitors drove down retail pharmacist wages by four per cent in areas where both companies had operated. Workers with fewer alternatives—those with lower skills or highly specialised expertise—suffered even steeper losses.

Mapping concentration across Europe

Local labour markets typically encompass a commuting area combined with a specific economic activity from which workers cannot easily transition. Unfortunately, no comprehensive dataset tracks this across the EU, though some necessary information—firm identifiers, economic activities, workforce data, and regional markers—could possibly be gathered from within large surveys like the Structure of Earnings Survey and Structural Business Survey.

Eurostat has offered some insight through experimental statistics, computing concentration levels for occupations within functional urban areas using online job vacancy data. These revealed troubling patterns: 16 of the 20 most common occupations showed moderate concentration. Current data on employment concentration by industry, accounting for multinational companies, exposes severe concentration in sectors including tobacco manufacturing, petroleum refining, motor vehicle production, electricity and gas supply, and pharmaceuticals.

Drawing on broader OECD and US data reveals some consistent patterns. Concentration intensifies in rural and less urban areas, in jobs requiring non-transferable skills, in high-barrier niches dominated by a few large companies, and in sectors such as finance, IT, and care provision.

Some lessons to learn from the United States?

The United States has increasingly deployed antitrust measures against labour market monopsony. In December 2023, the Department of Justice and Federal Trade Commission released new merger guidelines explicitly addressing labour market impacts. Guideline 10 flags mergers that would substantially reduce “competition for workers, creators, suppliers, or other providers” as potentially problematic.

These weren’t empty words. In 2024, the FTC challenged Kroger’s acquisition of Albertsons, two supermarket chains, partly because the merger would erase “aggressive competition for workers, threatening the ability of employees to secure higher wages, better benefits, and improved working conditions”. The commission similarly opposed the merger of fashion houses Tapestry and Capri, warning it would “eliminate the incentive for the two companies to compete for employees” and harm wages and benefits”. In 2022, the Department of Justice scrutinised Penguin Random House’s proposed acquisition of Simon & Schuster, citing concerns that reduced competition would “decrease author compensation, diminish the breadth, depth, and diversity of our stories and ideas, and ultimately impoverish our democracy“. This regulatory vigour extends beyond mergers—the US has also moved to ban non-compete clauses entirely, although this is somewhat in limbo now.

Europe’s approach remains timid by comparison. Some member states have considered labour market impacts in merger reviews, as when Dutch authorities examined DPG Media’s merger with RTL Nederland, noting potential negative effects on journalists’ employment options (though ultimately approving the deal after concluding sufficient alternatives would remain).

The case for robust regulation rests on simple fairness: workers deserve the same competitive protections as consumers. The European Commission’s current revision of merger guidelines offers a pivotal opportunity to establish clear criteria that would flag horizontal mergers for review when they significantly reduce worker competition within local areas and defined economic activities.

Building a European framework

While the EU has taken tentative steps to preserve labour market competition—such as addressing non-poaching agreements in the deliveryHero and Glovo case—it lacks a more comprehensive approach. Based on international experience and mounting academic evidence, the following principles should guide European policy:

1. Labour market dominance operates differently from product market power. While product monopolies raise prices, labour monopsonies suppress wages—the price paid for labour.
2. The negative effects extend beyond individual firms. Wage suppression spills over into entire local labour markets, reducing compensation across the board and diminishing labour’s economic share.
3. Higher concentration correlates with reduced mobility and, over time, diminished innovation and productivity. The stagnation in worker movement stifles the cross-pollination of ideas essential for economic dynamism.
4. Labour market dominance requires separate assessment from product market power, as the two don’t necessarily coincide. A company might face fierce product competition while dominating local hiring.
5. Affected labour markets remain stubbornly local and activity-specific. Policymakers cannot assume workers will simply relocate for employment—family ties, housing costs, and community connections create powerful barriers to mobility.
6. Mergers prove particularly damaging in already concentrated markets where they further increase concentration. High-risk contexts include rural areas, positions requiring highly specialised or niche skills, and sectors such as healthcare, education, specialised manufacturing, repair services, and highly digitalised industries.

The European Commission now faces a clear choice: continue allowing corporate mergers to erode worker bargaining power, or protect competition on the labour market as arduously as on the product market. As merger guidelines undergo revision, incorporating robust labour market assessments isn’t just good policy—it’s essential for preserving the competitive dynamics that underpin Europe’s social market economy. Workers deserve the same vigilant protection from anti-competitive practices that consumers have long enjoyed. The time for Europe to act is now.

Acknowledgement: I want to thank Thaïs Sautereau du Part for research assistance and her contributions.