With the invention of gig-based platforms like Uber and SkipTheDishes, the gig economy has not just become an integral part of the labour industry, but also digital society as well.
Along with the meteoric rise in popularity of these platforms, many of these companies have “monopsonies” in their industries.
Businesses gain monopsony power in labour markets when workers lack meaningful outside options for employment. When workers have fewer options for where to work, they are forced to take on unstable, exploitative work for less pay to make ends meet.
Currently, government regulators have limited tools to address the market power of these gig-based platforms. Recent discussions on gig work in Canada have focused on benefits like reforming employment insurance and classification (seeking employee status), but have overlooked anti-competitive behaviour and the role of employer monopsony.
Gig work platforms as price-fixing schemes
Gig work — especially those housed on digital platforms — are at a greater risk of monopsony than other platforms because platform owners are also the regulators and collectors of user data. For instance, Uber acts like a monopsonist when it purchases all trips from riders before connecting them to drivers.
Some scholars have argued that gig work platforms are essentially price-fixing schemes between contract workers, which is yet another manifestation of monopsony power.
Gig platforms’ use of data may also further increase the monopsony power they wield against workers. For instance, carrot-and-stick incentives based on data collected, like rating systems, bonuses and the threat of being punished by management, can coerce workers into taking jobs they may not usually consider.
Given that technology trends are enhancing monopsony power through algorithms, regulators must examine the tools that they have to curb this power. They should also empower themselves with new ones built for modern markets, controlled by digital technologies and algorithms.
Our new working paper co-authored with Ana Qarri, a recent graduate of McGill University’s faculty of law, uses labour monopsony power as a case study to explore competition issues in data-driven markets.
Provincial legislation is needed
One of our recommendations to better address monopsony power in labour markets is to establish separate provincial competition legislation targeted specifically at employers.
Our analysis found that authorities traditionally focus on addressing the strategies companies use to exert their monopsony power, like wage-fixing and non-poaching agreements. However, they have done little to address monopsony directly, mainly because competition law does not provide many tools for tackling it at its root.
Even in instances where competition law does provide tools for protecting workers, it is likely that the federal Competition Bureau is not enforcing the law to the full extent. The most notable example is mergers and acquisitions that lead to monopsony power in some labour markets.
While the Competition Bureau has the power to investigate and even challenge mergers that lead to substantial monopsony power, we found no evidence that it ever has. A provincial authority may be better positioned to address competition issues in labour markets, given that labour law is generally under the purview of the province.
Such an authority could consider coercive contract terms that prevent workers and consumers from enforcing their rights under law and other anti-competitive tactics that entrepreneurs and small business owners may face.
Industry Minister François-Philippe Champagne recently announced that Canada’s competition law will be examined, specifically mentions addressing wage-fixing agreements, which is encouraging.
This update could also make it possible for Canada’s competition commissioner to pursue cases against digital platforms on the basis that they are price-fixing conspiracies for contractors operating on platforms, as some scholars have proposed.
Workers need protection
However, there has been little demonstrated awareness of the role of monopsony power in influencing worker welfare, both in the government and in competition and labour policy circles. The absence of a strong role for the provinces on competition issues may have contributed to the general lack of innovation on the topic.
Still, Ontario currently has a memorandum of understanding with the bureau that promotes co-operation and knowledge exchange. Last year Canada’s labour minister made Ontario the first province to ban non-compete agreements, which restrict workers’ abilities to change jobs freely.
Policy-makers should aim to prevent — and even reduce — monopsony power itself. Readdressing gig workers through the Employment Standards Act will not curb the monopsony power digital firms hold over workers.
While employee reclassification will unlock more benefits and worker rights, such as termination pay, minimum wage, minimum or core benefits, pay stubs and notice of termination, an entirely new legislative approach is needed to curb the profound and growing ability of gig platforms to obtain and exert monopsony power over workers in Canada.